Rain or shine, whether or not the US government is closed or open, the US Treasury will be open next week to auction off $32 billion in 3-yr notes, $21 billion in 10-yr's, and $13 billion in 30-yr's.
But in the event of a shutdown, what about the rest of government? A LO from Michigan wrote, "I can't believe this. First the comp thing, and now our entire government may take a break. No wonder folks are making jokes like, 'Ruger is coming out with a new pistol in honor of Obama. It will be named the 'Union Worker.' It doesn't work and you can't fire it." If the government shuts down today, every non-essential government employee should wake up really late and smile. After all, they are lucky. When private companies have budget problems, the people on the non-essential worker list don't get a three-day weekend. They get a six-month "vacation" of filling out resumes, eating Ramen noodles, worrying about their mortgages, and looking for a job. In comparison, the furloughed government workers will get an extra day to enjoy the Cherry Blossom Festival in D.C."
Caroline Baum wrote a notable blurb, "What if the U.S. government shut down and no one noticed? Even worse (or better, depending on one's point of view), what if all federal workers went on furlough and the public realized there were benefits, not just costs, to smaller government? Essential services will be maintained, including the distribution of Social Security checks. Employees involved in the military, national security and law enforcement will stay on the job. Non-essential workers will be furloughed. President Barack Obama says a shutdown would further reduce confidence in government. Guess what? It can't go much lower. The approval rating for Congress dropped to 18 percent last month, near the lowest in the Gallup poll's 37-year history of tracking the trend."
Word has it that since it doesn't rely on Congressional funds, the Federal Reserve (central bank) would remain open for business as usual, with normal staffing levels. The Fed would therefore be able to continue with its day-to-day operations. The SEC is expected to continue operations as well. But lenders and vendors were out warning originators about possibilities. CoreLogic told clients that, "If the government does a shutdown, the last date of service for 4506-T and SSA-89 orders would be this Friday April 8...We will make every effort to transmit orders to the IRS and SSA as quickly as possible once received. All SSN orders will be processed during standard business hours and may not be affected by the shutdown. In the event of a shutdown, we will still continue to submit all 4506-T Direct and SSN orders but service time is expected to be affected due to the IRS and SSA being unavailable to respond."
For licensing, "Since CSBS is the nationwide organization representing state banking regulators, a shutdown of federal government agencies will not have an immediate impact on day-to-day operations. NMLS offices will remain open during any government shutdown and NMLS staff will continue to report to work...Test candidates should not expect their appointments to be cancelled or be affected by a shutdown of federal government agencies."
Franklin American suggested clients, "Run CAIVRS' checks immediately on all loans that you want to close in the next week or two in case the shutdown does occur. A CAIVRS' problem is likely the most immediate impediment to obtaining insurance once the loan the program is reinstated. Remit any collected MIP as FHA Connection will not be available if a shutdown occurs. Complete the insuring of any closed FHA loans. If the government does shutdown, we expect FHA to publish a FAQ and answers on their website to address program operations. However, we wanted to give our lenders some notice of items they could do to avoid any penalties or process interruption of their government loan production."
Plaza Home Mortgage told producers, "We have been advised that VA will continue business as usual during the shutdown. Therefore, we anticipate that the WEB LGY (formerly TAS) system used to order VA Case numbers and Appraisals will be available, and so will the issuing of VA Loan Guaranty Certificates. Plaza will send out additional communications should we learn anything new about how the VA will be handling loans during the furlough."
Stearns Wholesale warned brokers, "To best prepare in the event the government moves to enforce a temporary shutdown, Stearns strongly recommends that any pending Case Number, LDP, GSA, CAIVRS, 4506T, and SSI Validation be ordered as soon as possible. If a shutdown does occur, FHA Connection and VA Information Portal may or may not be available, 4506T, IRS Transcript processing and SSI Validation will not be available. To avoid any delay in closing your loans, we strongly recommend you ordering any pending FHA, VA, IRS, or Social Security items today."
Independent of the government shut-down, Wells Fargo gave 1,900 mortgage employees their notice. The cuts add up to about 3% of Wells Fargo's mortgage staff, including interim positions that are tied directly to origination volumes. Most of the layoffs are these interim employees, who were told when hired that their position could be short term." Wells Fargo's overall headcount was 272,200. WellsCuts
BlackRock, best known for being the world's largest asset manager and its huge institutional bond accounts & iShares exchange-traded funds, is planning a massive expansion in old-fashioned mutual funds and related retail offerings. BlackRock wants to double its $300 billion U.S. retail business by the end of 2014, with the managing director saying, "The firm has identified U.S. retail as a strategic priority. We think we can double our business from where it is now." BlackRockonaRoll
Wednesday HUD issued a memorandum (APM 11-04) that is not a surprise, but turned some investor heads. Ginnie Mae will change its policy with regards to the delinquency status of loans being pooled into their MBS. "Effective for single-family securities with an issue date of June 1, 2011 and later, all loans pooled into Ginnie Mae single-family securities may not be delinquent by more than the monthly installment of principal and interest that is due on the issue date." In other words, the loan being pooled would need to be current till the month prior to the issuance of the MBS pool - no more allowing new up-to-60-day delinquent loans to be pooled into Ginnie securities. Ginnie Mae was already requiring "re-performing" loans to be current at the time of the issuance. The impact on the market and investors is not huge, as analysts estimate that at most 0.5% to 1% of loans being securitized into Ginnie Mae MBS were delinquent at issuance.
Fitch Ratings downgraded Republic Mortgage Insurance Company's (RMIC)'s "Insurer Financial Strength" (IFS) rating to 'BB' from 'BBB-'. "The downgrade of the IFS rating is driven primarily by RMIC's comparatively weak capital levels, continued operating losses and uncertain business prospects." RMIC's weak capital ratios are reflective of Fitch's view that the insurer's delinquent risk-in-force is currently greater than its total capital resources (comprised of policyholders' surplus, contingency reserve and loss & loss adjustment expense reserve).
GMAC Bank passed on the word to its correspondents, and brokers in the wholesale channel, that "all Jumbo loan appraisals must now be ordered through the Veros Appraisal Management platform provided by GMACB. This includes Jumbo loans underwritten by the Client under delegated authority as well as those underwritten by GMACB. GMACB's Valuation Team, comprised of licensed and certified appraisers, will conduct a due diligence on every appraisal ordered through the Veros platform" to check items including value validation, appropriateness of the comparable selection, adequacy of the market adjusters and individual adjustments to comparable sales, dates of sales, application of appraisal principles, etc. "GMACB clients will benefit on Jumbo loans where the appraisal is ordered through the Veros Appraisal Management Service, as loans will not be denied for purchase or returned for repurchase solely because the value of the collateral is not sufficient or the appraisal does not meet investor guidelines."
Flagstar let its
clients know that, "The FHA continues to require lenders to underwrite FHA
loans using the original appraisal performed for a case number, regardless of
whether the lender and or borrower(s) on the loan change...In no circumstances
will Flagstar accept an appraisal transferred or uploaded to Flagstar by the
loan originator or any employee of the originating lender." And starting
in 10 days, "The FHA will limit the maximum LTV and loan purpose for
borrowers who re-occupy their investment property less than 12 months prior to
the application date of the refinance transaction. To determine the maximum
allowable LTV and loan purpose, refer to the matrix in the memo."
In the markets on Thursday, MBS volumes were anemic, as opposed to Wednesday
when they were decent. 10-year notes were worse by a smidge and closed with a
yield of 3.55% while current coupon MBS prices were slightly better than
Wednesday's close. Rates were pushed around a little by the .25% rate hike by
the ECB, another strong earthquake in Japan, more hawkish comments from a Fed
official, and the potential for a government shutdown as Republicans and
Democrats are unable to reach an agreement on the budget.
The week closes out with gold marching toward $1,500 per ounce, oil over $111 per barrel, and another day of no substantive scheduled economic news (unless one counts Wholesale Trade for February later today). Even though the markets assume a shutdown will be averted, these factors have served to push rates higher, and the 10-yr yield is up to 3.61% and MBS prices worse by .250.
On a transatlantic flight, a plane passes through a severe storm. The turbulence is awful, and things go from bad to worse when one wing is struck by lightning. One woman in particular loses it.
Screaming, she stands up in the front of the plane. "I'm too young to die," she wails. Then she yells, "Well, if I'm going to die, I want my last minutes on earth to be memorable! Is there anyone on this plane who can make me feel like a WOMAN?"
For a moment there is silence. Everyone has forgotten their own peril. They all stare, riveted, at the desperate woman in the front of the plane. Then a cowboy from Wyoming stands up in the rear of the plane. He is handsome: tall, well built, with dark brown hair and hazel eyes. He starts to walk slowly up the aisle, unbuttoning his shirt.
One button at a time.
No one moves.
He removes his shirt. Muscles ripple across his chest.
She gasps.
He whispers in her ear:
"Iron this...then get me a beer."
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