Loan Think

Here are some indicators to watch in the months ahead: Oil is now at $32.65 a barrel, and the 10-year Treasuryis at 4.05%. Mortgages are tied to the 10-year. Goods and products -- including lumber and gypsum board which gointo new homes -- are shipped via rail and truck. If oil keeps rising can U.S. home buyers (potential mortgageapplicants) anticipate a rise in new home prices? If yes, the average new mortgage will rise in terms of dollars.The stock market was off to a roaring start on January 2 which means bonds went the other way. Of course, overthe past three years most rallies have turned out to be nothing more than "bear" traps...

The Federal Reserve thinks MBS issued by Fannie Mae and Freddie Mac are consideredto be "of high credit quality" but still, the central bank, doesn't want to invest much of its moneythere. According to a recently released study by the Fed, Alan Greenspan and crew are concerned that ifthe Fed starts loading up on GSE debt and MBS it would have the effect of "inappropriately" fosteringFannie and Freddie's ability to expand their operations. "This expansion could further affect creditallocation and increase systemic risk," the Fed writes. The study was released before Christmas butwas actually penned two years ago when the Fed was concerned that there might not be enough Treasury instrumentsaround for it to purchase. Now that the economy is in the tank and the Federal government is back to runninghuge deficits (which means it will be issuing more Treasury bonds) the whole point is moot. (It's unclearwhy the report was released two years after being circulated internally at the Fed.) The Fed report notes thatat September 30, 2000, the GSEs, along with the Government National Mortgage Association had outstandingdebt of $1.575 trillion. The Federal government, today, has about $6 trillion in outstanding debt, and growing...

Look for the Lehman Brothers-owned Aurora Loan Services of Colorado to ramp up wholesale subprimeproduction in 2003 and to add quite a few people...

The 19 or so Capital Hill staffers who were paid $200 each (for one hour of work) giving their opinions on FannieMae ads are now being asked to give the money back. Duff Stewart, evp of GSD&M, Fannie'sad agency, told National Mortgage News that he and his client were concerned enough about the matterthat he telephoned the House Ethics Committee to get its opinion on whether accepting the $200 for servingon a focus group violated House rules. It seems unclear whether a Hill staffer who serves on a focus group andis paid for his/her time is in violation of House rules. Whether a violation occurred will be determined by whois ultimately paying for the focus group (in this case Fannie) and whether the one paying the money (Fannie throughresearch group OMR) has any business before Congress. NMN first wrote about the matter in its December9 issue. More to come on MortgageWire this week...

Based on some of the bigger "stock-related" stories of thepast week, it appears as though mortgage rates will stay at their current low levels for at least the first quarter,probably longer. Bad news for stocks means good news for low rates. Among the negative reports: Ford Motorreporting a 17% drop in sales, AOL reporting a weak online ad market, and retail holiday sales looking decentbut soft. Late last week, the 10-year (which mortgages are pegged to) was yielding 4.11%...

Mortgage Scene

The M&A market for "name" mortgage firms has been mostly dead of late (everyone's too busy makingloans to even ponder the thought of selling) but one investment banker said recently that "there's a ton ofsmall firms" out there available for purchase. This year, according to the Quarterly Data Report, theindustry will fund $2.5 trillion in loans, but next year looks like a $1.5 trillion to $1.8 trillion year, whichis still darn good. Many mortgage professionals think the good times will last for another year. If you're lookingto sell, it's always best to sell now, while volumes stay high...

In the mortgage industry, it doesn't get any better than this. Then again that's what we were hearing last year. According to the brand new third-quarter issue of the Quarterly Data Report, residential funders originated almost $730 billion worth of loans in the three-month period ending Sept. 30. Leading the pack was Wells Fargo Home Mortgage with $89 billion in total production (retail, wholesale, correspondent). Washington Mutual ranked second with $75 billion, and Countrywide third with $63.6 billion...

UBS Paine Webber has been quietly building a retail mortgage effort to provide residential loans to its brokerage customers. The investment banker declined to discuss details of its plans, but may open up about it next year. Merrill Lynch operated a mortgage affiliate in Florida that did the same, but it is now outsourcing the business through Cendant Mortgage...

Refis forever? Some days lenders scratch their heads wondering just when -- if ever -- the refi boom will end. On Wed. November 6 the Federal Reserve will meet to discuss lowering the overnight Fed funds rate. A handful of economists, including MBA's Doug Duncan, think a 50 basis point cut could be in the cards. Stay tuned...