The last week in October ... It begins with the Dow at 4794.86 after a 7.59-point drop on Friday, October 20 ... It also begins with the yield on the 30-year T-bond at 6.35 percent and the yield on the 10-year T-note below 6 percent ... The week also begins in San Diego where 5,500 mortgage industry professionals and spouses have gathered for the annual Mortgage Bankers Association of America national convention ... This is where the new week began ...
An auspicious start to the week ... Industry leaders had something to gab about Monday in San Diego ... Barron's reported that NationsBank and BankAmerica are in talks to merge and create the nation's largest commercial bank and the world's ninth largest banking power ... Barron's, however, quoted no sources from either bank, and most industry observers in San Diego who were queried about the possibility of such a deal furrowed their eyebrows and suggested they don't believe the merger rumor ...
Top 1995 originators ... Inside Mortgage Finance has released its listing of top originators for the first nine months of 1995 ... According to the publication, Norwest Mortgage is tops with 7.9 percent of the origination market on volume of $22.99 billion ... Second is Countrywide Funding with a 7.6 percent share on volume of $22.18 billion ... And third is Prudential Home Mortgage with a 3.8 percent share on volume of $10.99 billion ...
Fleshing out the top 10 ... The rest of IMF's top 10 are as follows: Fleet, 3.5 percent share on $10.29 billion; Chase, 3.3 percent on $9.65 billion; Chemical, 3.2 percent on $9.20 billion; NationsBanc, 2.8 percent on $8.09 billion; GMAC, 2.5 percent on $7.35 billion; BankAmerica, 2.5 percent on $7.17 billion; and Great Western, 1.9 percent on $5.64 billion ...
Origination observations ... Inside Mortgage Finance offered seven observations about the third quarter numbers: The publication notes that government-insured mortgage business rose sharply in the third quarter ... That conventional mortgage originations also surged in the third quarter ... That private mortgage insurance rode a healthy home purchase market to a strong third-quarter showing ... That big lenders gained the most -- the top 25 lenders witnessed a combined 63 percent surge in originations from the second to third quarters ... That the jumbo market is in recovery ... And that total originations are, as projected, on track to reach $625-$650 billion in 1995 ...
Consolidation's impact ... The top 30 mortgage originators so far in 1995 have accounted for about 40 percent of total origination volume, according to IMF ... That's up from a concentration of 33 percent in 1994 ... Clearly, the industry has dealt with some of its overcapacity, although industry experts agree there are likely to be many more significant mergers ...
Tuesday, October 24
Merger in the making ... Regions Financial of Birmingham, Alabama, on Monday said it will buy First National Bancorp, Georgia's second-largest bank ... It is reported the buyout will be a stock deal valued at about $650 million ...
Raise the ceiling, says Rubin ... Several news sources are reporting that Treasury Secretary Robert Rubin this week will ask House Speaker Newt Gingrich for a temporary increase in the debt ceiling ... Rubin has been warning that without such an increase in the debt ceiling, the U.S. government will top its current legal borrowing limit of $4.9 trillion by month's end ... Gingrich had threatened to let the government go into default until a balanced budget agreement is reached ...
Mr. Reid's top priorities ... Paul Reid, the MBA's new president, officially took the helm on Monday and proclaimed two issues as having the most importance to the MBA's membership heading into 1996 ... Issue No. 1: The FHA ... Reid says the MBA will work hard in 1996 to preserve full insurance on FHA loans ... Issue No. 2: The mortgage interest deduction ... Reid says eliminating or capping the tax deduction would be a serious blow to homeowners and the single-family residential housing industry ...
Bringing AU to new markets ... Freddie Mac and Standard & Poor's have formed an alliance to introduce automated underwriting to the subprime and nonconforming loan markets ... The loans will be underwritten by Freddie Mac's Loan Prospector, and S&P's Levels program will produce an automated rating which helps determine which sector of the investor market will likely buy the loan... The alliance will reduce the time it takes to underwrite jumbo and nonconforming loans and increase their securitization ...
Leach eyes agencies in bailout bill ... Rep. Jim Leach is willing to yank a $16 billion thrift fund bailout obligation from his Glass-Steagall repeal package and place it on the secondary market agencies ... Leach surprised everybody when he announced a new thrift insurance fund recapitalization package that would essentially shift the burden from banks and thrifts to Fannie Mae and Freddie Mac, American Banker reports ...
Why the move? ... Leach is trying to save his beleaguered Glass-Steagall repeal bill ... He has the support of bankers, who appear ready and willing to lobby hard for the cause even though they admit it will be a real uphill battle ... Kenneth Guenther, executive vice president of the Independent Bankers Association of America, told American Banker: "This will set off a royal war ... Fannie Mae and Freddie Mac are very powerful in Washington" ... Earlier, Leach unbundled CRA reform provisions from his Glass-Steagall package and said he will place them in the budget reconciliation bill as a way to garner more big bank support for Glass-Steagall reform ...
Monday's Wall Street Report ... The Dow on Monday lost 39.38 points to finish at 4755 ... Most analysts poo-pooed the rumor that NationsBank and BankAmerica are talking merger because they didn't see the opportunity for cost savings ... Both stocks notched moderate gains ... Meanwhile, in the bond market, the yield on 30-year Treasuries gained another four basis points to 6.39 percent ...
Wednesday, October 25
Talk have ended ... The Associated Press, quoting a BankAmerica official who spoke on condition of anonymity, reports that BankAmerica and NationsBank discussed a merger earlier this year ... However, the bank official said the talks were merely exploratory and have ended ...
Poorer quality with TPOs ... Fannie Mae's Jim Johnson and Freddie Mac's Leland Brendsel both told lenders gathered at the MBA convention on Tuesday that third-party originations are going delinquent more frequently that other originations ... How much more frequently? ... Mr. Johnson reports a TPO delinquency rate that is 150 percent higher than the delinquency rate other originations are seeing ...
"B&C" loans originated as "A" paper? ... It's happening ... Borrowers with poor credit histories are obtaining "A" mortgages at higher-than-standard interest rates when, really, they should be grade "B" or "C" investments ... Freddie Mac's Brendsel told reporters at a press conference on Tuesday that his agency won't approve of those types of loans ... "There are channels in place for 'B&C' lending and there are channels in place for 'A' lending," he said ...
Freddie wants better credit quality ... And the agency is taking steps to get it, too ... Brendsel points to Freddie Mac's new Gold Measure Worksheet as a key step in the right direction ... It "is another excellent tool that helps improve the consistency and objectivity of lending decisions while creating opportunities to qualify more borrowers. The worksheet helps evaluate and balance risk factors to objectively assess a borrower's ability to manage mortgage debt," Brendsel told lenders at the MBA convention ...
Buyback controversy ... American Banker reported earlier this month that Freddie Mac was asking some lenders to repurchase loans due to low credit scores ... Now the paper quotes Fannie Mae's Johnson as saying, "We won't go back and second-guess loans you have already made and ask you to buy them back if they don't match up to a new way of assessing risks" ...
Tuesday's Wall Street Report ... The Dow on Tuesday gained 28.18 points to close at 4783.66 ... The yield on benchmark 30-year T-bonds fell to 6.32 percent after Fed Vice Chairman Alan Blinder said "real short-term interest rates are too high" ...
Thursday, October 26
MBA applications indices ... Not adjusted for seasonal effects, the MBA's refinancing applications index rose 26.4 percent to 246.1 in the week ended October 20, while the MBA's purchase index gained 11.8 percent to 153.9 ... Clearly, the MBA reports, falling interest rates are stoking volume ... Adjusted for seasonal effects, the refi applications index increased 27.5 percent to 213.7, and the purchase applications index surged 12.3 percent to 165.4 ... The MBA reported an average effective rate of 7.77 percent with 1.33 points ...
J.P. Morgan indices ... Not adjusted for seasonal effects, J.P. Morgan's index of refi applications jumped 24 percent to a three-month high of 324.4 in the week ended October 20 ... In the same week, J.P. Morgan's purchase applications index gained 10 percent to a three-week high of 114.2 ...
Economic blackmail? ... That's what President Clinton is calling GOP threats to let the nation go into default unless deep federal budget cuts are made ... "If the Republicans plunge ahead and pass this budget, I will veto it and demand a budget that reflects our values," the President said, according to the Associated Press ...
Budget cuts, lower rates ... If Congress and the President can agree on a plan to balance the budget or at least offer deep budget cuts, then expect interest rates to keep falling, Fed Governor Lawrence Lindsey said ... "Given the diminution of inflation pressures, and what I hope will be a successful completion of the budget, I see no reason why. in the future, we could not continue to lower rates," said Lindsey, as quoted by Bloomberg Business News ...
Fannie, Freddie fees face foes ... "No one voiced any support for it whatsoever" ... That is what one Congressional staffer told Bloomberg Business News when asked what House Banking Committee Republicans felt about Chairman Jim Leach's plan to impose fees on Fannie and Freddie securities issues ... In addition to GOP leaders, Democrats are not showing support for Leach's surprise announcement ... The only supporters so far are banks ...
Brokers looking for referral fees? ... Maybe so, according to American Banker ... The paper reports that lenders may soon be approached by real estate agents who want fees in exchange for the potential borrowers they send lenders ... If this happens, it would be the offshoot of Congress' failure to clarify a key section of RESPA, the MBA's Brian Chappelle says ... MBA members attending this week's convention said they don't want to get into the business of paying referral fees ...
Not-so-bad earnings ... Just before the recent spate of third-quarter earnings announcements, several analysts said they feared the worst -- that most companies' earnings would not meet analysts' projections ... In retrospect, however, most companies did meet the projections or didn't miss by much, Investor's Business Daily reports ... The newspaper says that Zacks Investment Research is reporting 32.5 percent of third-quarter earnings reports missed analysts' estimates ...
Wednesday's Wall Street Report ... The Dow on Wednesday resumed its fall, shedding 29.98 points to close at 4753.68 ... Bonds were little changed after an up-and-down session ... The bellwether 30-year Treasury yielded 6.32 percent ...
Friday, October 27
Trying to repeal Glass-Steagall ... House Banking Committee Chairman Jim Leach on Thursday continued to strip from his Glass-Steagall repeal package all controversial items that are stalling it in committee ... First it was CRA, then the $16 billion burden on thrifts and banks -- which will likely die a swift death -- and now it's the ban on national bank insurance powers expansion ...
Insurance ban not dead ... Leach will try to tuck the five-year moratorium on expanding national bank insurance powers into a separate bill ... He'll probably stick it in a bill that's likely to die ... Leach has never supported the ban, but GOP leaders wanted him to include it in his Glass-Steagall bill ...
GOP budget will pass ... Republican leadership in Congress says it has the votes needed to pass breakthrough budget-balancing plans in both chambers ... Though details weren't available when Weekly Wrapup went to press, The House late Thursday approved the GOP budget bill, but fell short of the two-thirds majority needed to override a presidential veto ... The Senate was scheduled to vote on Friday ...
Contract With America? ... Will the GOP uphold its Contract With America if the Senate passes the budget? ... No, according to the Wall Street Journal ... The GOP budget will allow for $245 billion of tax cuts, well short of the $354 billion over seven years the "contract" called for ...
Budget cuts deep ... When the dust settles and the GOP budget lands on President Clinton's desk, we will find less federal financial support for health, farm and education programs ... The budget proposes to cut $1 trillion in projected spending over seven years, Bloomberg Business News reports ... House Speaker Newt Gingrich says the House's passage of the budget "absolutely sets the path for the next generation" ... That path could be vetoed by the President ... White House Chief of Staff Leon Panetta says, "The President will continue to insist that Congress pass a balanced budget that protects seniors and working families" ...
Rates rise in the week ... Freddie Mac reports the average 30-year mortgage rate rose to 7.45 percent in the week ended October 20 ... The rate was at 7.38 percent in the prior week, its lowest level since February 25, 1994 ...
GDP report ... The government reports that Gross Domestic Product grew at a stronger-than-expected 4.2 percent annual pace in the third quarter ... The average forecast of economists surveyed by Bloomberg Business News was 2.6 percent ... The news of unexpectedly strong growth sent bond yields to their highest level in more than two weeks ...
Thursday's Wall Street Report ...The Dow was pounded on Thursday ... The index shed 49.86 points and closed at 4703.82 ... Weakness in the Mexican peso and selling by nervous investors triggered the decline ... The yield on 30-year Treasuries rose six basis points to 6.38 percent ... 10-year T-notes stayed below 6 percent, yielding 5.91 percent ...
That is the news of the week ...