Mortgage rate update – Scott Grannis -…As the second chart shows, the fundamentals driving these rates (i.e., 10-year Treasury yields and the spread between MBS and Treasury yields that investors demand in order to compensate them for the prepayment risk of mortgage-backed securities) suggest that we are unlikely to see rates go lower than they are now. Treasury yields are quite low from an historical perspective, and spreads are about as tight as they have ever been. … – Calafia Beach Pundit
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Is the Carry Trade Unwinding? – … By definition, the whole concept of “carry trade”, as it has come to be known, entails the heavy use of leverage. … However, leverage removes patience from the investment equation. … While many commentators predicted that there would eventually be a rally in the dollar—even if it were nothing more than a “dead cat bounce”—that rally, which began in mid-November, intensified this week. … more – The Razor’s Edge at Ockham Research
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Sell High Coupons – Bet Against Some Fannie Mae Debt, Declaration Says – By Jody Shenn Investors should bet against some Fannie Mae and Freddie Mac securities because of the prepayment risk for those trading above par, said Jim Shallcross, who oversees $12 billion at Declaration Management & Research LLC. … Securities to “short” with contracts to sell them in future months include 30-year Fannie Mae mortgage bonds with coupons of 5.5 percent, 6 percent or 6.5 percent, said Shallcross, who is based in McLean, Virginia. … – Bloomberg
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Real estate bottoming? – Scott Grannis – … Note that the rise in commercial real estate lagged the rise in residential. CRE rose a bit less than residential during the heydays, but it has declined by much more. The commercial real estate market has been crushed. Both indices now are showing signs of having bottomed … – Calafia Beach Pundit
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Stop Whining and Hold on to Your House – By Marc Roth – Millions of homeowners are underwater. But don’t sell your house—when the market turns, property will rise in value again, writes Marc Roth – BusinessWeek
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attn math freaks: Andrew Davidson Insights – Does MBS Diversification Exist? – by Alex Levin – RiskCenter.com
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Underwater, but Will They Leave the Pool? – By RICHARD H. THALER – … the most interesting question may be this: Why is the mortgage default rate so low? After all, millions of American homeowners are “underwater,… In Nevada, nearly two-thirds of homeowners are in this category. Yet most of them are dutifully continuing to pay their mortgages, despite substantial financial incentives for walking away from them. … Eric Posner, a law professor, and Luigi Zingales, an economist, both from the University of Chicago, have made an interesting suggestion: Any homeowner whose mortgage is underwater and who lives in a ZIP code where home prices have fallen at least 20 percent should be eligible for a loan modification … – NY Times
and here is their plan –
The Better, Cheaper Mortgage Fix – How to renegotiate all those bad loans at no cost to the taxpayer. – By Eric Posner and Luigi Zingales – Slate
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new type of fraud being ignored: hide payments to second lien holders in short sales. … Fraud Is Alive, Well And Flourishing In The Real Estate Industries – By Tom Lindmark – … The real kicker is that the subordinate lenders perpetrating this scam aren’t some penny ante actors but appear to be the big banks. … – BUT THEN WHAT
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prediction: To the reverse mortgage survivors go the spoils – by Neil Morse – … One of those, prolific in his comments but shy about being identified, sees opportunity ahead – at least for those still in business. “As many originators leave reverse mortgages, those that remain stand to benefit increasing their market share,” he says. “This means despite falling home values and rising interest rates, hard-working, professional originators should be able to not only survive 2010, but make modest gains in market share and overall loan originations.” … – Reverse Mortgage Daily
Eliminate Fannie Mae? The Impact on the Reverse Mortgage Industry – … While there is no easy answer to Fannie Mae, RMD looked into what sort of impact the elimination would have on the reverse mortgage industry. At one point Fannie Mae was the only investor purchasing HECMs and its market share of the total market of outstanding reverse mortgage loans was approximately 90% as of December 31, 2008 according to an SEC filing. After a drastic change in pricing strategy, lenders turned to Ginnie Mae for execution and for the most part haven’t looked back. According to its 3Q filing, Fannie Mae saw its market share of HECM acquisitions fall to 20% during the quarter and to 10% in September 2009. … Reverse Mortgage Daily
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Paul Jackson – What if We Let Foreclosures Happen? Would the World End? – … But at least one study is turning conventional wisdom on its head, suggesting that economic recovery will largely proceed with or without a housing rebound. In a report released last Friday, a cross-functional research team at FTN Financial took a look at key regional U.S. economies in the second half of 2009, and asked whether consumer spending was held back in those states with horrid housing credit. Their findings? Housing performance was completely uncorrelated with consumer spending. … – HousingWire
DBRS Expects Re-Defaults to Drive Principal Forgiveness – by DIANA GOLOBAY – With more than half of all modified loans expected to re-default in 2010, servicers are likely to increase the use of principal forgiveness, as an option to bring these continually distressed mortgages current, rating agency DBRS said in commentary yesterday. – HousingWire
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MERS Cases: The Good, The Bad & The Ugly – BY T. ROBERT FINLAY & NICHOLAS G. HOOD – … In fact, many defaulted borrowers continue to allege that the MERS system permitted numerous lenders and investors to play “hot potato” with their subprime loans, which they naively believe caused the nation’s current housing crisis. Finding MERS’ nominee relationship incomprehensible, many defaulted borrowers filing lawsuits today, in an attempt to thwart, or at least delay, foreclosure, allege that MERS’ role as nominee illegally splits the loan from its security instrument, rendering the loan unsecured…. – MortgageOrb