Good Morning
Everyone-
I went looking around some websites and found some interesting numbers on 2012.
The Federal Housing Administration (FHA) insured over 242 billion in mortgages
last year and VA insured 128 billion. This accounted for 20 percent of the
total 1.8 trillion origination mortgage market for 2012. Fannie Mae and Freddie
Mac accounted for 73 percent of the market at roughly 1.3 trillion. So what
this shows is that the mortgage market was thriving in 2012. 2013 is expected
to be a rebuilding year for many companies. Some companies are poised to grow
and expand, other companies have such large portfolios that they are just
looking to retain servicing.
More rules of Basel III are coming out. Basel III are rules and regulations
that are being put forth on banks to improve/limit risk regulation and
supervision. With Basel III there will be tougher capital requirements for
banks (stress test). So what that means is that companies with a 2 trillion
dollar servicing portfolio, such as Wells Fargo, are going to have to make sure
they have enough cash on hand to meet requirements set forth in the new laws.
Many of the laws in Basel III have to be fully complied with by early 2014.
So with the purchase market right around the corner, this is primetime to grow.
PNC is well capitalized and ready to lend. Were other companies are just
looking to maintain and raise cash to meet new requirements, we can look
forward to being able to go out and sell a bank that wants to lend.
So what is going on with our rates? The sequester is big news that is going on
right now. If a deal is not reached by Friday, then 85 billion in automatic
spending cuts will take place. On top of the social security tax increase we
all felt starting January 1, the total we would have had the Fed’s take from
the economy is 200 billion with increases in taxes and cuts. We have also had
some other issues going on. The United Kingdom’s debt problem was recently
downgraded and we had a crazy Italian Election. All of these items in some degree
do affect our mortgage rates. Ben Bernanke (Chairman of the U.S. Federal
Reserve), Mario Draghi (President of the European Central Bank), and Haruhiko
Kuroda (the head of the Asian Development Bank) all drive our interest rate
market in some form or another. Rates are predictable to some degree, however
when one of the people above make a statement on monetary policy,
predictability gets thrown out the window. The main thing we know is inflation
is tame (the nemesis of bonds) but as we are slowly starting to improve our
economy, rates will creep up.
We have had some decent and promising economic data come out. The Case-Shiller
Home Price Index was released Tuesday. It came in at 6.8% increase. Existing
Home Sales units for January came in at 437K instead of the expected 385K.
These are signs of a housing recovery.
How do we tackle this market? We just do. We know these low rates will not hold
for much longer. So if people are on the fence about refinancing they shouldn’t
be. If people are waiting for prices to go lower on that home, they won’t be.
The data does not show that things are getting worse. Things are starting to
improve…..modestly. That is all this market needs to truly rally…just a little
sign of hope. We are starting to see it, so let’s be ready to harness it.
Be aware of your market, educate your clients and let's close some deals.
Josh
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