The Exploding Federal Deficit - by Donald Marron - has explanation of components

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J.P. Morgan to Send Warrants to Market - By DEBORAH SOLOMON and ROBIN SIDEL - Several Wall Street firms seeking to buy back warrants held by the government as part of the $700 billion financial bailout are complaining that the Treasury Department is demanding too high a price, according to people familiar with the matter. …  J.P. Morgan Chase & Co. Chief Executive James Dimon raised the issue directly with Treasury Secretary Timothy Geithner, disagreeing with some of the valuation methods that the government was using to value the warrants. … - Wall Street Journal

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Treasury sold warrants below market value: panel - he U.S. Treasury Department allowed 11 smaller banks to repurchase stock warrants at only 66 percent of their market value, passing up about $10 million of taxpayer profits from government bailouts, a U.S. watchdog panel said on Friday. - Wall Street Journal
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No audit for FED? - Fed official warns against government audits - Federal Reserve deputy chairman Donald Kohn on Thursday defended the US central bank’s independence, saying congressional oversight could interfere with monetary policymaking.  If the Government Accountability Office (GAO), the investigative arm of Congress, were authorized to audit the Fed, that “could cast a chill on monetary policy deliberations,” Kohn told a House of Representatives committee. - Reuters

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Ron Paul: Audit the Federal Reserve: HR 1207 and S 604 - Ron Paul’s bill to audit the Federal Reserve (HR 1207) now has 254 co-sponsors, and the numbers keep growing! HR 1207’s companion bill in the Senate, S 604, has already attracted 6 co-sponsors- RonPaul.com

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The Fed Under Increasing Fire - A must watch introductory clip by the American News Project which summarizes well the current push to unmask the inner workings of the Federal Reserve, the urgency of increasing transparency and the groundbreaking nature of Ron Paul’s HR 1207 bill. - Zero Hedge

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Fed Chair Bernanke to Hold Town Hall on Economy - Posted by: Jane Sasseen - We are a long way from the days of Alan Greenspan’s finely-tuned obfuscations. … he had a legendary ability to take a straightforward question and answer in a way that none but the most sophisticated market watcher could understand — and even they often had trouble.  But no more. Since taking over as chairman of the Fed, Ben Bernanke has championed a more plain-speaking, transparent approach…. — that Bernanke will participate in a town hall meeting in St. Louis in late July. - BusinessWeek

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The Dicey Politics of a Second Stimulus - Posted by Brian Montopoli - Since President Obama signed the $787 billion stimulus package in February, more than two million jobs have been lost and unemployment has hit its highest rate in a quarter century, 9.5 percent.  For Republicans, who have been seeking a message that will help the party regain some momentum, that’s the sort of bad news that comes with a silver lining. Members of the GOP have been harshly attacking the opposition party as wasteful spenders whose expensive programs have had little positive impact. - CBS News Blogs

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FHFA Five-Year Plan – No Changes! - Bruce Krasting -  The FHFA released its five-year plan today. There are no surprises in this report. There are no innovative plans to change the troubled mortgage giants FNM and FRE. The five-year plan by FHFA calls for them to do what they have been doing for the past year as FHFA and for the past decade as OFHEO. Not much in the way of supervision or control. Just business as usual.  … I did like the cover and all the other pictures of the happy home owners. .. 

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Barney Frank wants to steal our TARP repayments for deadbeats and ACORN - Examiner.com

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A Second Stimulus Package? Yikes! - Alan Reynolds  - India, Japan and the U.S. repeatedly deliver unaffordable and ineffective spending proposals - Forbes

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Obama Administration To Buoy S.B.A. With T.A.R.P. Money? - By ROBB MANDELBAUM - The Obama Administration is considering diverting some of the $700 billion in bank bailout money to the Small Business Administration’s 7(a) loan program, according to a report published Friday evening by the Washington Post … . It is unclear, for instance, how much money is at stake — the Post reports “billions.” That would dwarf the S.B.A.’s entire budget, let alone the money that covers borrower losses. … - NY Times

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TARP mission creep watch, SBA edition - Posted by: Felix Salmon - Reuters

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Freddie Buys in its Sub Debt – Heinous! - Bruce Krasting Blog  -  After the bell on Friday (ahem) Freddie Mac announced that it would buy in $4.4 billion of its Sub Debt. This deal is another coup for our pals at Goldman Sachs who got the Lead Manager slot on the deal. … (another example of contract law being sidestepped - has details) 

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Geithner: Move Derivatives on to Exchanges - Ken Sweet - Treasury Secretary Timothy Geithner said Friday said over-the-counter derivative contracts must be tracked by regulatory authorities and be traded on an exchange similar to the New York Stock Exchange or the Chicago Board Options Exchange - FOXBusiness

worth reading - The Black Swan of Jeane Dixon - about the success of Nassim Taleb - Author: Walter Kurtz - Riskcenter.com
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Summary and book download: A Quantitative Look to Energy Sustainability - Booz, Inc’s strategy + business has an interview with Cambridge University’s David MacKay about his recent book taking a quantative approach to energy sustainability:  “There is more than enough analysis and positing these days about energy costs and policies, the impact of global warming, cap and trade, sustainability, alternative sources, and the like.”  “Fed up with the cacophony, MacKay assembled a rational, non-political, “pro-arithmetic” analysis of what can be done to wean energy users (businesses and individuals) away from fossil fuels by the year 2050 — an ambitious goal he strongly believes is technically feasible. - Research Recap

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Leo Melamed: It will take another year or more for U.S. economy to recover - by Hu Guangyao, Han Wanning - Although the U.S. economy has recovered from the worst of the crisis, there is still a long way to go, according to Leo Melamed, who is recognized as the founder of financial futures markets.     In an exclusive interview with Xinhua on Wednesday at his office in downtown Chicago, Melamed, Chairman Emeritus and a board member of Chicago Mercantile Exchange (CME) Group, Inc., said: “Today most people agree with Chairman (Chairman of the Federal Reserve) that the economy is bottoming out and we’ll see recovery in the second half of the year. I don’t think that.” - Xinhua 

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Fear, Cash Hoarding, and Inventories Key to Recovery - Dr. John Rutledge blog 

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El-Erian Says Geithner Shares an ’A’ With Bernanke for Effort - By Sree Vidya Bhaktavatsalam - Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., gives Timothy Geithner and Ben S. Bernanke an “A” for their efforts to revive credit markets.  Geithner, the U.S. Treasury secretary, and Bernanke, the Federal Reserve chairman, deserve just a “B” for results because “it’s very difficult to get it right,” - Bloomberg

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Excellent - about oil “speculation” - Now I Know How Sisyphus Felt - The Professor - Almost exactly a year ago, I testified before the House Ag Committee and wrote an op-ed for the WSJ on the effect–or lack thereof–of speculation on oil prices.  The issue was high on the political agenda at the time, as oil prices hit $147/bbl, and gas prices were above $4/gal.  The collapse in prices during the financial crisis put the issue on the backburner, but it is back with a vengeance.  To loud Congressional hosannahs, the CFTC has announced its intent to impose a far reaching regime of position limits on energy and other commodities “in finite supply“–pray tell, what traded commodities are in infinite supply?  So, I guess I have to roll that rock up the hill, yet again.  - Streetwise Professor

American jobs data are worse than we think - By Mohamed El-Erian - What if the US unemployment rate rises above 10 per cent and stays there for an extended period? This is a question that is not being asked enough, even though it entails yet another historical anomaly that will further complicate policy formulation and open it up to greater political interference. - FT.com Opinion

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Yes, The Jobs Losses Hurt … - Brian S. Wesbury and Robert Stein - … But the recovery is still on track. - Forbes

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The Mother of All Jobless Recoveries - David Rosenberg speaks about the dismal state of the economy.
- Sustained high unemployment…even during a recovery
- Consumers aren’t spending tax cuts
- ‘Real’ unemployment far higher than reported unemployment
- Infrastructure spending helps, but some will be dissappointed in its effect-
watch video at plan B economics

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worth reading - about unemployment - HARD TIMES - …  We expect three major policies by the end of the year:  First, there will be another massive stimulus for job creation; second, there will be another round of quantitative easing from the Federal Reserve to finance the job creation stimulus; and third, expect a major devaluation of the dollar to encourage exports and discourage imports.  God help the Federal Deficit and the saver because printing money like crazy, and devaluing the dollar, will only get inflation started.  … - Benson’s Economic & Market Trends
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China May Keep Interest Rates Low to Cement Recovery - By Bloomberg News - China may keep interest rates unchanged for the rest of this year to cement a recovery in the world’s third-biggest economy. The key one-year lending rate will stay at 5.31 percent and the deposit rate at 2.25 percent, according to the median estimate of 15 economists surveyed by Bloomberg News. Reserve requirements for banks will also be unchanged 

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Have you seen M3 lately? - Tim Iacono - … Then again, maybe this is what the central bank didn’t want people to see. What was it, about three years ago that the Fed discontinued reporting of the broadest measure of the money supply and conspiracy-minded folks thought it was going to go to the moon? … - themessthatgreensapnmade

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Video-o-rama: Fresh wave of risk aversion - Posted by Prieur du Plessis - … This week’s somewhat shorter-than-usual edition of Video-o-rama includes interviews with the likes of Oliver Blanchard, Jim Bianco, Puru Saxena, Roger Altman, Peter Peterson, Wilbur Ross, Allen Sinia, Jeff Saut and Boone Pickens. … - Investment Postcards from Cape Town

Women and cats will do as they please, and men and dogs should relax and get used to the idea. Many believe that Fannie and Freddie will do as they please, and everyone else had better relax and get used to the idea. What did I learn at the Western Secondary conference here in San Francisco? Well, F&F set the guidelines, but besides them there are five primary investors, in alphabetical order: Bank of America, Chase, CitiMortgage, GMAC, and Wells Fargo. (GNMA, of course, doesn’t buy loans, but insures them – see note below.) And, aside from a few exceptions, other lenders ranging from Taylor Bean, Flagstar, AmTrust, Franklin American, etc., down to small brokers, sell to them or directly to Freddie & Fannie, using the Fannie/Freddie guidelines. That about sums it up!

In an effort to save some trees, and maybe make some money, next week Flagstar “for all eligible refinance loans that close…will begin charging a $50 Paper Handling Fee to help offset some of the cost associated to traditional closings.”

According to the MBAA, the government-insured (FHA and VA loans) share of mortgage applications was nearly 36% last month, the highest level since November 1990, and accounted for almost 40% of purchase applications. Could it be because these loans require a lower down payment? Of course - and it is easy to see why many are hoping that they aren’t the next subprime nightmare:http://www.mbaa.org/NewsandMedia/PressCenter/69541.htm

The Fed purchased $17.05bn net in agency MBS over the past week, bringing its total net purchase to $638.6bn. “What happens when they run out of money?” my 86-year old Dad asked me yesterday. (He grew up during the Depression, and visits his savings in the safe deposit box every few weeks.) I replied, “Dad, you obviously don’t know anything about high level finance. They’ll just print more!”

This, no doubt accounted for the strong performance recently of mortgage securities, relative to Treasury prices. Wall Street traders say that buyers from Asia, money managers, and the Fed have all been in buying MBS’s – even the higher coupon mortgage product. And yesterday was another light news day, with initial Jobless Claims being much lower than expected at 565K, but continuing Jobless Claims were much higher than expected at 683K. The 30-yr auction of $11 billion was pretty good (4.30% yield, 50.2% indirect bids), for lack of a better term, but the market is glad to have the auctions behind it. Ahead of the open the stock market appears to be heading for negative territory. We will have some trade data this morning, but for now the yield on the 10-yr is 3.34% and mortgages are roughly unchanged – again. It has been a quiet week.

For today’s joke, go to:  http://www.robchrisman.com/

Rob

(For archived commentaries, check www.robchrisman.com,

or to subscribe/unsubscibe write to rchrisman@robchrisman.com)

Interest Rates go Negative: Compare Riksbank (Sweden) with our Federal Reserve - David Kotok, Chairman & Chief Investment Officer - Negative nominal interest rates are very hard to understand intuitively.  That said, we now have a central bank using them. … Sweden’s reserve deposit rate was set a -0.25%.  That’s right.  A negative interest rate is now at work in one of the G-10 countries.  This rate means a penalty is charged against a deposit placed in the central bank under the reserve deposit rules.  The banking institution that deposits with its central bank will receive an actual deduction from the deposit account.  It will get back less money than it puts in. - Cumberland Advisors

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US lurching towards ‘debt explosion’ with long-term interest rates on course to double - By Philip Aldrick, Banking Editor - The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank - Telegraph.co.uk

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Is this the beginning of another big market decline? - Scott Grannis - Markets are in a tizzy of late, as the assets that rose in price from early March through early June now head south (e.g., equities, oil, gold). Treasury bond prices are doing just the opposite, a natural reaction from a market that views economic weakness as a source of deflationary pressures. Hopes of a recovery are now being called into question. Governments are threatening to pile on more regulations and more taxes in an effort to fix the mess. These are times that try men’s souls, especially those who are optimistic. - good reading - Calafia Beach Pundit

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BofA, JPMorgan move cardholders to variable rates - By Jonathan Stempel – Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N) are switching some customers who have fixed-rate credit cards to potentially higher variable rates, acting before a new law takes effect that limits what card issuers can charge.   The largest U.S. banks, which are also the largest card issuers, plan to tie more cardholders’ rates to the prime rate, a benchmark that is traditionally 3 percentage points above the Federal Reserve’s key lending rate, the federal funds rate. - Reuters

SoberLook - The Risks of Holding on to TARP Money - Author: Walter Kurtz - (using CDS) … But there is another effect in financials’ credit risk. The banks that are still TARP banks have widened much more than the non-TARP (the banks that paid off the TARP money): … - riskcenter.com
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good commentary - Ten Thousand Commandments - “The government’s reach extends even beyond the taxes Washington collects and the deficit spending and borrowing now surging.” Clyde Wayne Crews Jr.  - Casey’s Charts

PPIP has arrived - JOINT STATEMENT BY SECRETARY OF THE TREASURY TIMOTHY F. GEITHNER, CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM BEN S. BERNANKE, AND CHAIRMAN OF THE FEDERAL DEPOSIT INSURANCE CORPORATION SHEILA BAIR - Legacy Asset Program - FinancialStability.gov
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Pimco leaves Wall St. asking why it nixed toxic-asset plan - Why did bond titan Pimco suddenly pull its application to join the Treasury’s long-awaited program to buy toxic mortgage securities from banks and other investors?  The government on Wednesday named nine money managers for the program, and Pimco wasn’t among them — even though the firm’s well-known bond guru, Bill Gross, was in the New York Times just last month detailing how the program structure “puts the odds in your favor” as an investor in the securities. - LA Times Money and Company Blog

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Press Release - SIFMA SUPPORTS IMPLEMENTATION OF PPIP 

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Fed should quit consumer protection - Mishkin - The U.S. Federal Reserve should relinquish its consumer protection powers in order to do a better job of combating systemic risk, a former Fed policy-maker told Congress in testimony released on Tuesday. - Reuters

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Treasury Works on ‘Plan C’ To Fend Off Lingering Threats - Troubling Issues in Lending Could Still Disrupt Economy - By David Cho and Binyamin Appelbaum - the Treasury Department has assembled a team to examine what could yet bring it down and has identified several trouble spots that could threaten the still-fragile lending industry. … The officials in charge of Plan C — named to allude to a last line of defense — face a particular challenge in addressing the breakdown of commercial real estate lending. … - Washington Post 

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Let’s Treat Borrowers Like Adults - The problems with a financial products safety panel. - By TODD J. ZYWICKI - … They have also led the Obama administration to propose creating a consumer financial product safety commission to protect homeowners from dangerous loans. The premise of this proposal is that the financial crisis was created by predatory lenders taking advantage of hapless borrowers. … Treating all consumers as hapless victims rather than recognizing that many consumers rationally respond to incentives is a recipe for unintended consequences. It can lead to counterproductive regulation that makes loans more expensive and harder to get. … - Wall Street Journal Opinion

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In making it hard for private equity investors to enter the banking business, Sheila Bair isn’t doing the FDIC or the federal government any favors - Bair: Banks Should Have Inside Track On Deals - Really? What good does that do the FDIC? - Thomas Brown  - bankstocks.com 

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Maine Shuts Out 15 Mortgage Rescue Companies - By AUSTIN KILGORE - Regulators in Maine ordered 15 so-called “mortgage rescue” companies to stop doing business in the state because they took advanced fees from homeowners but did nothing to help their clients. - housingwire.com 

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Before school ended, I noticed that one of my daughter’s homework assignments (in “Romance Languages”) was not turned in. When I asked her what happened to it, she replied, “Canis meus id comedit.” (“My dog ate it.”) For more handy phrases (like “I never received that buy-back request!”) check out http://www.baetzler.de/humor/handy_latin.html.

When things are slow in the mortgage banking world, I dig out my old mortgage banking texts. Why aren’t we in the “first trust deed banking” business instead of the mortgage banking business? Did you know that “in the old days” the borrower deeded his property outright, as security, to the lender, who thereafter was its legal owner? The owner could take back the property if the borrower defaulted. The borrower kept the right to be given back his property if they fully satisfied the terms. In some states this system is still used, except that until a default occurs the borrower retains possession of the property. In many states a mortgage is not an actual transfer of title, but only creates a lien, under which in case of default the lender may proceed to collect from the property. Under this system the mortgage is actually personal property and not a transfer of title and therefore it may be passed by assignment, and upon the lender’s death goes, not to his heirs as if real property, but to his executors or administrators. Since it is only a lien, there may be a first, second, third or as many mortgages on the property as its owner can procure, each being subject or subordinate to all prior mortgages.

How about those great rates? Gosh – you mean the economy is not doing as well as analysts thought a month ago? For an interesting side note, consumers appear to be saving money: personal income is up slightly, personal consumption is down. What are folks doing with their money? Keeping it in the bank. And what are the banks doing with the cash? Uh, how about investing it in safe Treasury securities?

Not only did the 3-yr auction go well on Tuesday, but yesterday’s $19 billion 10-yr auction exceeded all expectations. The “bid to cover” ratio, which is a measure of demand, was 3.28, basically meaning that for every note purchased there were over 3 bids. And the “indirect” bid, typically from foreign entities and non-primary dealers, was 44%: a very high level. After the auction the yield, which was at 3.42% prior to the sale, dropped to a low of 3.29%, representing a 1 point rally? (Remember that the recent high yield on the 10-yr was in early June at 4.01 %.) Mortgages tagged along for the ride. Today is Thursday, which means Jobless Claims. And the 30-yr auction. The yield on the 10-yr is at 3.37% and mortgage prices are slightly worse than yesterday afternoon, but better than yesterday morning.

Mortgage fraud continues to make the headlines. Apparently there is not much else going on in mortgage banking - or at least that is what the public may think. The latest story heralds from the NY area - see this NY Times story.:

Occasionally I am asked about good places for charts and graphs, especially for ARM rates. I will typically direct the person to Mortgage-X

CitiMortgage, which, as I have mentioned, is rolling along again, reminds me that “as a result of Citi’s correspondent reengineering program”, they have not “cut off” a single lender during their hiatus nor given deadlines to fund out pipelines. My apologies if my comments yesterday were confusing.

Freddie Mac came out with their requirements for higher-priced mortgage loans (HPMLs). HPML’s, in case you’ve lost track of all the abbreviations out there like I have, are mortgages secured by primary residences that (for first-lien mortgages) have an annual percentage rate (APR) that is at least 1.5 percentage points higher than the average prime offer rate (APOR) for a comparable transaction. After 10/1 (although look for investors to put this in place sooner, of course) Freddie deems the following products as eligible for purchase as HPMLs: fixed-rate mortgages, 7/1 or 10/1 ARMs, or 7/6-month or 10/6-month ARMs, and 7-year Balloon/reset mortgages. Freddie Mac will not purchase HPMLs that are prepayment penalty mortgages, streamlined refinance mortgages, Freddie Mac Relief Refinance Mortgages, ARMs with an Initial Period or Interest Only Period less than seven years, or 5-year Balloon/reset Mortgages.

Reverse mortgages are in the news quite a bit. World Alliance Financial, which operates Senior Lending Network but is owned by KBC Group, has stopped taking applications. Their statement read, in part, “To be clear, this decision will have no impact on our current borrowers, holders of GNMA securities that we’ve issued and our partners in the Senior Lending Network. We will continue to service outstanding loans, as well as fulfill all of our other obligations. Our core infrastructure will remain fully intact while we seek other opportunities.” KBC Group has received government to the tune of $41.5 billion in financing and guarantees. Tax money at work!

A woman was sitting at a bar enjoying an after-work cocktail with her girlfriends when an exceptionally tall, handsome, extremely sexy, middle-aged man entered. He was so striking that the woman could not take her eyes off him.

The young-at-heart man noticed her overly attentive stare and walked directly toward her. (As men will.) Before she could offer her apologies for staring so rudely, he leaned over and whispered to her, “I’ll do anything, absolutely anything, that you want me to do, no matter how kinky, for $20.00…on one condition.”

Flabbergasted, the woman asked what the condition was.

The man replied, “You have to tell me what you want me to do in just three words.”

The woman considered his proposition for a moment, and then slowly removed a $20 bill from her purse, which she pressed into the man’s hand along with her address. She looked deeply into his eyes, and slowly and meaningfully said, “Clean my house.”

Rob

(For archived commentaries, check www.robchrisman.com,

or to subscribe/unsubscibe write to rchrisman@robchrisman.com)

   and  

worth reading - Signs of life in jumbo lending - Big banks compete with credit unions, community banks - BY MATT CARTER - Inman.com

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lots of good comments and color - Securing a Jumbo: No Small Task - BOB TEDESCHI -  EVEN as the federal government works to help loosen consumer credit, one home loan product is becoming more expensive and difficult to obtain: the nonconforming “jumbo” mortgage.  - NY Times  
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Securitization Games? - Banks reinvent securitisation to cut capital costs - By Patrick Jenkins in London -  Investment banks, including Goldman Sachs and Barclays Capital, are inventing schemes to reduce the capital cost of risky assets on banks’ balance sheets, in the latest sign that financial market innovation is far from dead.  The schemes, which Goldman insiders refer to as “insurance” and BarCap calls “smart securitisation”, use different mechanisms to achieve the same goal: cutting capital costs by up to half in some cases, at the same time as regulators are threatening to force banks to increase their capital requirements.  BarCap’s structures involve the pooling of assets from several clients into a secured financial product that can be sold to other investors and rated by a credit rating agency, potentially reducing the capital allocated against the assets by between 10 per cent and 50 per cent. - FT.com  
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Lenders avoid redoing loans, Fed concludes - Study cites lack of profit in aiding the distressed - By Jenifer B. McKim - Mortgage lenders don’t try to rework most home loans held by borrowers facing foreclosure because it would probably mean losing money, a study released yesterday by the Federal Reserve Bank of Boston concludes.  The Boston Fed’s findings suggest the Obama administration’s major effort to solve the foreclosure crisis by giving the lending industry $75 billion to rewrite delinquent loans to more affordable levels is not likely to work.  One of the study’s coauthors, Boston Fed senior economist Paul S. Willen, said the government would be better off giving the money directly to struggling borrowers to help them with their payments, rather than to lenders that are averse to working out the troubled loans. - Boston Globe

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Retired Teachers Seek Mortgage Servicer - By DIANA GOLOBAY - The California State Teachers’ Retirement System (CalSTRS) is hiring, and only qualified mortgage servicers need apply.  CalSTRS said late last week it is looking to hire a firm to act as master servicing agent of its steadily expanding home loan program, which for 25 years has provided its members with mortgage products at reasonable current market values, with options like down payment assistance and reverse mortgages available, according to a statement - housingwire

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What money doesn’t buy: Luxury home market stalls - By Adrian Sainz, AP Real Estate Writer - In the affluent village of Bronxville, N.Y., where residents of million-dollar homes have an easy half-hour commute into Manhattan, selling a house has become a whole lot harder.  Larry Brocchini put his four-bedroom Colonial on the market in late May, with a price tag of  $969,000. He and his wife, who want to move closer to their son’s private school, have hosted open houses and showed the home by private appointment about 10 times, but they have yet to receive a bid. - USA Today

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Protecting Borrowers from Themselves - … legislation that would create a new Consumer Financial Protection Agency (CFPA). … Wayne Abernathy, executive director of the American Bankers Association, predicts that this scenario will lead most big banks to stop offering alternative options to avoid risking a run-in with the CFPA. “You end up with two classes of financial institutions,” he says. On the one hand, you would have behemoth financial institutions that operate like utilities. “They get a steady return offering the standardized product, but they aren’t going to introduce anything new, … he says. On the other hand, you would have “small boutique financial-services firms that cater to the very wealthy. Everybody else gets driven out of the banking business.”… - National Review
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Big Deal? - Senior Lending Network Halts Applications, Looks For Buyer or Additional Capital - World Alliance Financial Corp., a reverse-mortgage lender that operates the Senior Lending Network announced today that it will no longer accept new loan applications, and will begin scaling back its operations effective immediately. - Reverse Mortgage Daily

U.S. Bancorp eyes western growth, no warrants - U.S. Bancorp (USB.N), which last month repaid $6.6 billion of federal bailout money, is eyeing expansion in the western United States, as it prepares to soon extinguish the government warrants to buy its stock, Chief Executive Richard Davis said - Reuters

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World’s 50 Safest Banks: Global Finance World’s Rankings - While this list was released back in March 0f 2009, we wanted to publish it up as we forgot to at the time. Global Finance World publishes a list of the World’s 50 Safest Banks and they edited it mid-year which reflects the turmoil within the financial markets worldwide. Interesting tidbits regarding the list: Only 4 American banks make the list, none of which are in the top 10. The closest is Wells Fargo (WFC) at 21st. - Market Folly  -  has list

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RBC Capital Markets to Become a Primary Dealer - … The designation becomes effective on Wednesday, enabling RBC to participate in the New York Fed’s open-market buying and selling of securities, the key component to the Federal Reserve’s setting of target rates for overnight bank loans. RBC will also participate in Treasury auctions and provide market information to the New York Fed - NY Times Dealbook

USA Today says that Chrysler is trying to make its cars more appealing by painting them in bright colors like orange and lime green. They’re also trying to make them more appealing by painting the name “Toyota” on them.

Knowing the right name is important. What is the difference, in government securities, between a “bill”, a “note”, and a “bond”? Usually “bills” are anything with a maturity of 1 year or less, a “note” matures between 1 year and 10 years, and a bond is longer than 10 years. Yesterday we had the Treasury auction off $35 billion of 3-yr notes. Simply put, it went well. On top of that, the government was in buying their usual amount of $4-5 billion a day of mortgage origination. And today we have $19 billion of 10-yr notes to buy.

Prepayment “speeds” were announced, and interestingly enough the higher mortgage rates are prepaying at a slower rate than was expected. As an investor this is good news (since no one wants to have their higher-rate mortgages prepaying too fast, and then have to invest the money at a lower rate). And if it is perceived that mortgages, in general, are going to prepay at slower rates (even if it is due to many folks already having a low rate, and those with higher rates don’t have the FICO, the value, or can’t qualify), and borrowers are making their payments, look of investor interest to pick up a little, helping mortgage prices relative to Treasury prices. See how simple this is?

Is your lock desk a little busier these days? Everyone’s is: mortgage applications filed last week were up almost 11% from the week before, according to the MBAA. Refinancing was up over 15% prior to the 4^th of July weekend, and purchases were up 6.7%. And, in a statistic similar to that of Jobless Claims, the “four-week moving average” for all mortgages as tracked by the MBAA was down a seasonally adjusted 5.6%. Other than that, there is little in the way of news, and careful observers will note that the 10-yr has broken out of the 3.50% range and is now yielding 3.44%. Mortgage prices are also slightly better than yesterday afternoon.

GMAC Bank Correspondents found out that “after further consideration, GMAC Bank has decided not to offer the purchase of a first-time homebuyer tax credit as an acceptable source of assets. GMAC Bank will still offer the tax credit in the form of a second lien.” FHA introduced the measure as a way of promoting home ownership. GMAC stated that “The tax credit available for use with an FHA loan may be provided in the form of a second lien.”

After their lock hiatus, Citi continues to roll along. Through their re-engineering, CitiMortgage has reviewed some marginal sellers, and from what I have heard warehouse banks are welcoming them back as a key investor.

A helpful person from Freddie Mac wrote to me to remind me that Freddie’s closing cost allowances have been increased to the lesser of 4% or $5,000 - definitely a positive. Freddie had come out with a statement revising their requirements for Relief Refinance Mortgages giving guidance on eligibility and delivery requirements, and permit refinancing of an existing junior lien serviced by the seller of the Relief Refinance Mortgage simultaneously with the refinancing of the first lien Mortgage, subject to certain conditions.

StoneWater Mortgage re-launched their government lending program for FHA and VA loans. Apparently their service levels are back up to snuff.

Today’s joke, … Is this really how men think? is at http://www.robchrisman.com/

Rob

(For archived commentaries, check www.robchrisman.com,

or to subscribe/unsubscibe write to rchrisman@robchrisman.com)