MBA Residential Mortgage Application Index Hits Highest Level Since May 2010 .. And It Is Only April!!

As mortgage interest rates hit a new 2017 low, we now see mortgage purchase applications rising to its highest level since May 2010.

This new level is in spite of mortgage originations for borrowers with credit scores under 620 playing a lesser than during the financial crisis. Although mortgage originations for borrowers with credit scores under 620 are at their highest level since March 2010. So both mortgage purchase applications (SA) and under 620 credit score mortgage borrowers are at their highest levels since 2010.

With the worst wage recovery after a recession in modern history, expanding the “credit envelope” is about the only way to expand mortgage lending.

In other words, mortgage credit for borrowers under 620 FICO score is expanding at the fastest pace since Dodd-Frank and The Consumer Financial Protection Bureau were created in 2010.

Elizabeth Warren, architect of the Consumer Financial Protection Bureau.


Cohn Said to Back Wall Street Split of Lending, Investment Banks

Former Goldman Sachs executive Gary Cohn said he supports breaking up the too-big-to-fail (TBTF) banks that have grown to be behemoths through acquisitions.

In a private meeting with lawmakers, White House economic adviser Gary Cohn said he supports a policy that could radically reshape Wall Street’s biggest firms by separating their consumer-lending businesses from their investment banks, said people with direct knowledge of the matter.

Cohn, the ex-Goldman Sachs Group Inc. executive who is now advising President Donald Trump, said he generally favors banking going back to how it was when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup Inc. primarily issued loans, according to the people, who heard his comments.

The remarks surprised some senators and congressional aides who attended the Wednesday meeting, as they didn’t expect a former top Wall Street executive to speak favorably of proposals that would force banks to dramatically rethink how they do business.

Yet Cohn’s comments echo what Trump and Republican lawmakers have previously said about wanting to bring back the Glass-Steagall Act, the Depression-era law that kept bricks-and-mortar lending separate from investment banking for more than six decades.

In the years after the law’s 1999 repeal, banks such as Citigroup, Bank of America Corp. and JPMorgan Chase & Co. gobbled up rivals and pushed into all sorts of new businesses, becoming one-stop-shopping financial behemoths.

How true. Here is a chart of bank aggregation which resembles an economic version of the Bruce Willis film “Last Man Standing.” Call it Last Bank Standing.

It will not be easy to break up the TBTF banks, of course. Other nations have similar banks that are broad- based in terms of merging lending banks with investment banks (and insurance companies). And they have been unsuccessful, for the most part, in breaking up big banks.

And remember, The Federal Reserve approved of the massive bank aggregation. Depository concentration be damned. 

In 1994, Congress prohibited any bank holding company from making an interstate acquisition of a bank if it would result in the acquirer controlling 10 percent or more of the total insured deposits in the United States. The 10 percent deposit cap was not binding on any firm when it was imposed in 1994, but acquisitions by large commercial banks brought three firms up to the cap, and acquisitions of institutions not covered by the deposit cap put Bank of America above the cap. Growth of deposits generally, as well as each firm’s internal growth, could affect these calculations over time.

Dodd-Frank is merely one impediment to shrinking the TBTF banks. The Consumer Financial Protection Bureau (CFPB) is helping to grow the shadow banks (e.g., non-depository financial institutions) such as Quicken through regulation.

Freddie Mac Serious Delinquencies Fall To Lowest Since June 2008 As Home Prices Grow At 5.87% YoY Clip

Freddie Mac reported that the Single-Family serious delinquency rate in February was at 0.98%, down from 0.99% in January.  Freddie’s rate is down from 1.26% in February 2016.  That is the lowest reading since June 2008.

Notice how tame serious delinquencies were during the housing/credit bubble. The US seems to be repeating the housing bubble in terms of house price growth and low serious delinquencies, but without the higher levels of mortgage originations to borrowers with credit scores less than 620.

Bear in mind, the Case-Shiller reading is for January and it is almost April. Be that as it may, home price growth is at 5.73% YoY versus wage growth at 2.3% YoY, over 2x. And yes, Seattle, Portland and Denver lead the nation in YoY growth in home prices. The slowest growing cities? New York City and Cleveland (the Shooting Guards JR Smith/Iman Shumpert effect having been traded from the Knicks to the Cavaliers).

It says here that when home prices are growing at two times wage growth it would mean we have a housing bubble … again.




Schrute Bucks: C&I Loan Growth Slowest Since 2011 As Interest Rates Rise (LIBOR 3Mo Surge)

Loan growth in the US is falling and the lowest since 2011.

The 3-month London Interbank Offered Rate (LIBOR) has been rising since The Federal Reserve raised The Fed Funds Target Rate in December 2015.

And bank credit creation YoY has been tumbling recently.

Commercial and industrial loans have been declining YoY since late 2014.

And the lowest YoY growth rate since 2011.

Auto loans have been declining YoY since mid 2016.

Commercial real estate loans? They too have been declining YoY since mid 2016.

The bright spot is the 1-4 unit mortgage loans outstanding have been increasing YoY as of Q2 2016.

Of course, the economy has been slowing for some time now, but rising interest rates aren’t helping.

Meanwhile, consumer purchasing power continues to decline YoY.

Well, those US Schrute Bucks just keep on getting worth less and less.




New Afforable Housing? The $10,000 3D House Built In 24 Hours

Several companies have produced single-family detached homes for around $10,000 and can be built in 24 hours.

Here is a 3D house printed in Russia.


And here is China’s version of 3D house construction.


Of course, this is yet another example of killing wage growth for some labor along with the automation of fast food restaurants.


So why are groups like The Urban Institute still focused on expanding credit in the name of home affordability? Primarily because lowering the cost of housing is not really what some are interested in. Just more credit expansion.

Here is actor Amy Adams from “The Arrival” showing her patented “shocked” expression at the chance of actually achieving affordable housing without expanding credit. The same expression as seeing an alien aircraft and gigantic octopus-like creatures.




Twisted! LIBOR 3M Hits Highest Level Since End Of The Great Recession (Treasury Curve Twisted Since 06/30/09)

The London Interbank Offered Rate (LIBOR) has now reached its highest level since the end of The Great Recession in June 2009. LIBOR is important since many contract are indexed to it.


I guess we can say the same thing about The Fed Funds Target Rate (UB) — it too is at its highest rate since June 2009 with only two rate increases.


How has the US Treasury yield curve shifted between June 30, 2009 and today? The 1 year Treasury yield is 44 basis points higher today while the 10 year Treasury yield is around 100 basis points lower. Essentially, the Treasury yield curve has been twisted since the end of The Great Recession.


This is a character from the PlayStation game Twisted Metal, NOT Fed Chair Janet Yellen. Yellen’s hair is white and shorter.


Roll Out The Barrel: Real Personal Spending Lowest Since September 2009 As Fed Rate Hike Probability Hits 82%

Today’s economic news feed should be of interest to the The Federal Reserve.

Core Personal Consumption Expenditures (sans food and energy) for January were +0.3% MoM and +1.7% YoY, below The Fed’s target inflation rate of +2.0%.


Of particular note is Real Personal Spending for January 2017. It fell -0.3% from December and is the lowest since September 2009, just after the end of The Great Recession in June 2009.


And Real Disposable Personal Income YoY has been dropping steadily since January 2015.


Inflation under 2% and declining Real Disposable Income YoY. Not pretty.

So, of course, the market is betting on The Fed RAISING rates at the March 15 FOMC meeting. In fact, the current implied probability of a rate hike in the range of 0.75-1% is 82%.


Yes, there is little doubt that the Fed Funds rate will be rising over time.


I guess it is time to Roll Out The Barrel and play the Beer Barrel polka!