More economic updates

Banks did their fair share of stated income loans, and are paying the price. But last week the commentary discussed how well banks are mortgage companies are doing, and as a follow up I received this note taken from the FDIC press release: "Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $37.6 billion in the third quarter of 2012, a $2.3 billion (6.6%) improvement from the $35.2 billion in profits the industry reported in the third quarter of 2011. This is the 13th consecutive quarter that earnings have registered a year-over-year increase. Increased noninterest income and lower provisions for loan losses accounted for most of the year-over-year improvement in earnings. Also noteworthy was a decline in the number of banks on the FDIC's "Problem List" from 732 to 694. This marked the sixth consecutive quarter that the number of "problem" banks has fallen, and the first time in three years that there have been fewer than 700 banks on the list. Total assets of "problem" institutions declined from $282 billion to $262 billion. 'This was another quarter of gradual but steady recovery for FDIC-insured institutions,' said FDIC Chairman Martin J. Gruenberg. 'Signs of further progress were evident in a number of indicators, such as loan growth, asset quality and profitability.'" Over 57% of all institutions reported improvements in their quarterly net income from a year ago. Also, the share of institutions reporting net losses for the quarter fell to 10.5 percent from 14.6 percent a year earlier. The average return on assets (ROA), a basic yardstick of profitability, rose to 1.06 percent from 1.03 percent a year ago.

 
Last week the commentary discussed some of the differences between state and federal mortgage laws, and my cat Gusto and I received this note: "Creating a uniform foreclosure code sounds like handing the problem to the Federal government to fix. Based upon how they 'fix' other industries, no thanks.  It is one thing for states to work together to create an improved business environment, it is another to give the Feds control.  By the way, have you noted how 'messed up' California is? Maybe I am the last one to read about the 'Homeowners Bill of Rights' that takes effect of 1/1/13, but the rest of the nation hopes it doesn't spread."

 

The markets are still ruminating on Friday's unemployment data - it was a "head-scratcher" once again.  The Bureau of Labor Statistics (BLS) reported that employers added 146,000 new jobs in November, well above the 90,000 that was expected, while the Unemployment Rate hit 7.7%, the lowest since December of 2008.  The Bond markets plunged after the data, but thanks to QE3 soon came back. Hourly earnings grew by 0.2% while the Average work week was unchanged at 34.4.  The fall in the Unemployment Rate was due in part to 350,000 people dropping out of the workforce.  And that big drop is the reason why the "Labor Force Participation Rate" fell by 0.2% to 63.6%, the lowest reading in over 31 years. So as we dig into the numbers, yes, the headline number was solid, but there is still some trouble in the labor markets. And lock desks and astute LO's will tell you that home loan rates ended the week about where the closed the Friday before.

 

 

It's a new week, and since the press can't drone on about the election they will focus on the fiscal cliff and its impact on us. Globally, news to watch will be the fiscal cliff, the two day FOMC meeting (expectations for the Fed to announce they will be purchasing Treasuries once "op-twist" ends later this month), Treasury supply (3s, 10s, 30s), Europe (two day summit Thursday and Friday), and five Fed operations buying agency MBS. As I mentioned, last week, when all was said and done, mortgage rates ended about where they started. But this is a new week, with a new set of wonderful, exciting economic nuggets. Actually there isn't much scheduled to really move rates: today is zip, tomorrow is the Trade Balance, Wednesday is Import & Export prices along with the FOMC rate decision (my bet is that overnight rates remain near unchanged), Thursday is Jobless Claims and Retail Sales, and then Friday is the Consumer Price Index and the Industrial Production and Capacity Utilization duo.) The 10-yr closed Friday at 1.63%, but this morning is back down to 1.60% and we can look for a slight improvement in rate sheets.