We find it rather insulting that some of the CEOs of the too-big-to-fail banks have been boasting about their profitability for the first two months of this year

By
Mortgage and Lending with John Tuggle, Senior Mortgage Loan Originator, Envoy Mortgage, Ltd. NMLS# 211187

This past week the mortgage market continued to tradewithin a very tight range. Refinancing programs are beginning to take shape and investors are beginning to gain more confidence in investing in the MBS market. 3.00% on the 10-year note yield is where we find solid support. This in turn has kept interest rates in the low 5.0% range as well as dipping into the high 4.0% range. In normal markets, mortgage rates set at about 150 basis points above the 10-year note yield. Since the collapse of the credit markets and ensuing asset repricing, mortgage rates have remained about 250 basis points above the 10-year note yield. We are seeing the credit markets heal somewhat as we are down to about a 200 basis point difference. Efforts by our government as well as our friends across the pond have helped keep interest rates low despite our huge financing needs.  

We find it rather insulting that some of the CEOs of the too-big-to-fail banks have been boasting about their profitability for the first two months of this year. It is not the profitability that bothers us as much as their thanklessness over who was responsible for their gains. Had the government not stepped in to ensure their success and stability, they would have certainly failed and taken much of the world with them. If things are rosy, then why does the government have to employ a public private facility to take toxic assets off of their balance sheets. Also, why then should there be a change in mark-to-market accounting if they have a grip on the value of those toxic assets and remain well capitalized? The people of this country deserve to be recognized and thanked while we work our butts off to pay for their follies not to mention those of our future generations. We do not bank with the big boys and now you can bet that we will not in the foreseeable future. 

We vehemently defend the honest mortgage broker who tried to make a decent living in the mortgage business against those that are seeking to assign blame to anyone but themselves. Are we missing something? Who was it that created the products that infected the universe? Who was it that underwrote the loans and approved borrowers for those insane loans? Obviously, Barney Frank does not understand the mortgage business as he joined the blame game again and attacked the mortgage broker while being courted by banking industry lobbyists. His pals, B of A's Lewis and JP Morgan Chase's Dimon do get it, but want the blame to be deflected away from themselves. How convenient as they sit in their ivory towers while many homeowners are losing their jobs and their homes.

We are sad to see two more mortgage warehouse lenders close their doors in an already scarce industry. Guaranty Bank, Dallas, one of the nation's largest warehouse lenders to non-banks, is reportedly telling customers that it will not renew their lines. PNC, owner of National City has pulled the plug on National City's warehouse lending operation, giving non-banks that borrowed from the unit 12 to 18 months to find new lenders. No word however, whether PNC is pulling out. They were one of the biggest warehouse lenders during the day. As usual, banks seem to always go in the wrong direction. We do not understand with all the tight underwriting and much higher quality loans being generated, why they would not continue their operations and tryto rebuild their client base with those left standing.

 The week ahead is not expected to bring us any surprises. Home buying remains deeply depressed so housing starts and building permits will continue to suffer as we expect to see on Tuesday and in the coming months. The Fed will keep interest rates between 0.00% and 0.25% until the financial industry truly stabilizes as we will see on Tuesday when the FOMC releases their policy statement. Two months of bank profits does not a recovery make. Interest rates will likely remain in their tight range with the 10-year note yield ranging from 2.80%-3.00% give or take a few basis points.

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John F Tuggle

Certified VA Expert Renovation Program Specialist
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