If you want a job, should you go to The Great State of Texas? (Unofficial motto: "So what if it's a little hot?") Maybe: ButItsADryHeat

Think about it. The yield on the US 10-yr is 2.50%. Sometimes I have to be reminded that this means only earning 2.50% for the next ten years. So if a 70-yr old retiree saved up $1 million in her nest egg, and bought a 10-yr risk-free T-note, she'd earn $25,000 per year in income until she was 80 years old - a little over 2 grand a month - after saving $1 million during her life.

Will PMI follow RMIC? PMI warned clients that it may be unable to continue selling new policies and could shut down. The stock is already a penny stock - the company has posted more than $3.5 billion in losses since 2007 as it paid out claims on foreclosed homes. Now, the company's main subsidiary, PMI Mortgage Insurance Co., or MIC, doesn't have enough money on hand to meet the requirements of regulations in Arizona, where it is based. "The company said the state's insurance department may as a result move to stop it from selling new policies in all states and move to rehabilitate or liquidate the unit. PMI has known such action was a possibility for some time, and as a backup plan it set up another subsidiary, called PMI Mortgage Assurance Co., that could sell mortgage insurance in certain states. However, the company warned Thursday that the approval to sell policies on mortgages backed by Fannie Mae and Freddie Mac depends upon MIC continuing operations. For details go to WSJPMI. 

What do mortgage investors think about these low rates? Many believe that 30-year mortgage rates will need to drop below 4% and establish new record lows to really pump up the refi market for some of the lower coupon mortgages that were originated in 2010/2011. There are still underwriting and equity issues, and the economic hurdles that were introduced due to higher MI for FHA loans and higher LLPA for agency loans have to be crossed. It is also important to note that some of the higher balance loans will not have the economic incentive to refinance as GSE loan limits are scheduled to be lower effective Oct 1, 2011. Lastly, at this point higher LTV loans originated under HARP will not be eligible to participate in this potential refinancing mini-wave.

And as the commentary mentioned yesterday, a move in Treasury or MBS prices may not directly translate into rate-sheet pricing for loan reps & borrowers - it depends on profit margins and hedging costs at the company level. But compared to previous big moves down, lower 10-year rates are translating into lower mortgage rates in this rally faster - perhaps companies are going after market share. As one trader put it, "the market feels very despondent right now, realizing that fiscal policy is now more restrictive, Fed QE policies have not flowed through to the consumer, confidence is dropping over European situation, and so on."

Pssst - wanna buy Saxon? Morgan Stanley has reportedly contacted potential buyers of Saxon Capital which it bought in 2006 for $706 million. Later, in the fourth quarter of 2008, Morgan Stanley took a $700 million write down in large part due to Saxon-related charges. Maybe MS is following Goldman Sach's lead when it sold Litton to Ocwen in June.

Recently the commentary noted that Fannie is scaling back origination and home price appreciation estimates for 2011 and 2012, and received this note: "As you pointed out, Fannie expects that home prices are expected to decline further this year and next.  Why would this be a surprise to anyone when the crushing regulatory environment and unforgiving underwriting standards make it difficult or impossible for many deserving folks to obtain financing?  Every constriction of DTI and LTV will cause home prices to fall.  And while nobody disputes that the standards were too loose during the housing bubble, many people who could afford the homes they purchased will be hurt if this inanity (or insanity, if you prefer) continues."

"In Congress, there is a room where legislators are meeting to try to come up with ways to get the housing market moving again.  Down the hall, in another room, other legislators are meeting to try to find ways to make it even more difficult to get mortgage financing.  Our government doesn't understand that, every time it meddles or manipulates one area of the economy, there are unintended consequences in another area."

The residential mortgage REIT sector of companies has made a renewed name for itself by being an active buyer of mortgages and paying good dividends (and, according to Bloomberg, raising more than $14 billion in secondary equity sales and IPO's). But lately REIT stock prices have been very volatile - mostly on the down side. The potential US default pushed values down dramatically, sometimes as much as 10% in one trading day. Another reason was when the cost of overnight repurchase agreement, or repo, financing for government-backed mortgage securities jumped. REIT's such as Invesco Mortgage, Hatteras Financial, and American Capital Agency got hit since repo rates were climbing, the gain was modest and so-called haircuts, or the down payments required for the loans, weren't changing. (In repo financing, securities such as Treasuries and mortgage bonds are sold to a lender with an agreement by the borrower to buy them back later. Haircuts protect lenders against price declines in the collateral, in the event the borrower defaults.)

Flagstar alerted its brokers that, "The American Reinvestment and Recovery Act (ARRA) was signed into law in February of 2009, temporarily increasing the maximum conforming loan limits. Mortgages with note dates on or after October 1, 2011, will no longer be eligible for these higher loan limits. Loans with a mortgage note date on or after October 1, 2011, will be subject to the permanent high-cost area loan limits determined according to the Housing and Economic Recovery Act of 2008 (HERA).  Regardless of the area median home price, the loan limit cannot, in general, exceed $625,500 for a 1-unit property. All loans using the ARRA loan limits but be locked on or before Thursday, September 15, 2011.  These loans must be closed and funded no later than Friday, September 23, 2011. There are no further delivery requirements. Loans not meeting the above requirements must use the HERA loan limits."

Starting today "Flag" will be changing the price adjustments on all investment properties for Agency products excluding the Fannie Mae DU Refi Plus, Freddie Mac Relief Refi and Freddie Mac Open Access products - making NOO prices worse by 0.5. Lastly, its delegated underwriting customers learned that it updated the requirements for transactions that require an appraisal from an AMC. "An appraisal from a Flagstar-approved AMC is no longer required for new construction purchase and construction to permanent transactions (including construction products) in the following states with an LTV of 70% or greater: Arizona, California, Florida, Georgia, Ohio, Michigan, and Nevada."

Bank of America notified correspondent clients that it issued a disaster declaration for Montana due to the flooding.

When I was a kid, I would take care of neighbor's yards when they went on vacation. If you're doing that while servicing a Fannie Mae loan, you'd better make sure you follow the rules and allowable maintenance costs: CuttingLawnsPays. 

Obviously we can't see huge drops in rates every day, and besides, most in the mortgage industry would rather see gradual trends than large spikes. MBS volumes have picked up as rates have dropped, and yesterday we saw another: 10-year Treasury prices were better by another 1.25 (2.46%). Since last Friday, 10's have gained 3 points and the yield has plunged roughly .375! As the DOW lost over 500 points (more than 4%), MBS prices were better by .750 - not all of that being reflected on rate sheets.

(Next week we have another FOMC meeting. In their last FOMC statement in June, the Committee said "Information received since the Federal Open Market Committee met in April indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly than the Committee had expected. Also, recent labor market indicators have been weaker than anticipated." In light of the recent events, it will be interesting to hear what is released Tuesday.)

This morning we learned that the employment numbers were slightly better than expected. Non-farm Payrolls were up 117k vs, calls for +85k. The Unemployment Rate came in at 9.1% (versus June's 9.2%). May & June's numbers were revised by 56k. That does it for economic news of consequence for the week - and what a week it's been.

(Parental discretion very much advised!)

Ben Bernanke gets drunk and tells all? This was too good to not share: Jobs?WhatJobs?