Hopefully, everyone got through Tax Day with only minor anxiety and pocketbook damage. Here are a few things I found interesting over my morning coffee. How do you think these issues will impact the mortgage industry or the ways you serve your mortgage clients?
Bank Stress Test Results
Bank Stress Testing is front and center on most of the daily financials. The main discussion is how will the results be released and how to manage market interpretation of the tests. Bloomberg reports that US bank regulators intend to inform with a paper detailing the testing methods in detail, ahead of any stress test results being released. The New York Times indicates that there is much back-room preparation afoot to manage the release of the testing results. According to the NYT, although all are expected to pass some will be healthier than others.
The Treasury is anticipated to be preparing TARP funds to immediate shore up confidence in the poor performers. The Washington Post raises the concern that, depending on the overall health of the banks tested, TARP funds could be significantly strained.
However, Nouriel Roubini, aka Doctor Doom, over at Forbes is contending that the bank stress test “spin-machine” is in full tilt. Meanwhile, the Financial Times reports White House Press Secretary’s assurance of “transparency.”
On a somewhat related angle: If you are trying to keep track of all this bank bailout news and information this is a great resource: ProPublica
How is all of this bank stress testing and hefty government bank bailout impacting the way you think about your mortgage business?
Treasury Current Approach to Banks Will Fail
I very much enjoy Yves Smith of Naked Capitalism (someone you should have in your RSS reader), and this morning she does a nice analysis of Financial Times commentary from Willem Buiter. His contention is that the US Treasury is going to have to rethink their approach to a multitude of banking issues.
If the Treasury does make adjustments to their approach with banks in the light of bank stress test results or cross-border banking regulation, how will your mortgage lending be impacted?
Is Hyper-Inflation on the Horizon?
Henry Blodget on The Huffington Post feels like Ben Bernanke is unlikely to react effectively in preventing the whipsaw affect of hyper-inflation when the Federal Reserve stops their ravenous buying of MBS and treasuries.
Are you thinking about and integrating this knowledge into your discussions with your mortgage client?
More Topics to Think About:
- Appraisal Inflation (Mortgage Insider)
- Post-Consumer Real Estate (AgentGenius)
- When Did Your Local Jobs Disappear (Slate)
- Changing Jumbo Mortgage Market (BlownMortgage)
- P2P Lending-Prosper Files with Sec (P2PLendingNews)
Related articles by Zemanta
- U.S. planning some disclosure on bank results (financialpost.com)
- Banks Feel Heat to Pay Back Bailout Billions (abcnews.go.com)
- Fed mulling regular press conferences (money.cnn.com)
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Exactly the question I asked Robert Ashby couple of weeks back on one of his Monday posts – what happens when the FED stops buying the MBS? That’s like morphine keeping the pain away, but when you cut it off, it’s going to hit home real bad.
Surely there’s going to be some panic, but hopefully, they have some kind of a plan to stop the slide.
Bill,
You hit some great points, especially touching on the impact on mortgage rates once the Fed stops their market manipulation. I coined the term “mortgage rate bubble” several months back as I feel that is exactly what the Fed is setting up with their actions.
@Ling – I am not sure I ever answered that question back then as my schedule gets rather hectic at times. My apologies if I didn’t, and let me touch on my sentiment on where mortgage rates are headed when the Fed’s lifeline runs out.
First, the good news. The Fed with their latest “upping” of the pocketbook will be able to manipulate the markets and keep rates from climbing, or at least slowing their climb. Additionally, we can likely count on them adding more to their MBS purchasing power if needed.
The bad news is that once the Fed pulls out of the market, the market will naturally drive mortgage rates higher, just as they have tried to do in recent months. I have been talking about hyper-inflation on my blogs for quite some time as well, and feel it will likely occur by the end of the year due to uncontrolled spending and the unstoppable printing presses that Bernanke and the rest of the government have set in motion. Hopefully you caught my post on “lethargic rabbits” a while back.
The bottom line, in my opinion, is that once the Fed stops and inflation (if not hyper-inflation) kicks in, we will be looking at double digit mortgage rates, possibly even reaching those 18% rates or higher. Just how bad things will get will depend on how well the Feds can “reel in” the money they have thrown into the system, and I don’t think they will be able to react fast enough.