Refi boom boosts mortgage jobs
But increase in rates could cause employment figures to crumble
Monday, October 07, 2002
Inman News Features
<b.Mortgage industry employment has jumped 27 percent in the last two years, representing approximately 81,000 new jobs, according to the Mortgage Bankers Association of America, citing statistics released by the U.S. Department of Commerce.
Mortgage banking and broker companies in September employed 381,000 people, a 17 percent increase from January and a 13 percent increase compared with the same time a year ago, reported MBA.
Reuters Market News
Fannie Mae launches $2.5 bln 5-yr callable notes
Wednesday October 9, 1:33 pm ET
Homeowners plan to cash out debt
Mortgage refinancing money goes to saving, not spending
Monday, October 07, 2002
Inman News Features
Nearly one-third of American homeowners who refinanced their mortgages in the last two years or plan to do so in the next year expect use the extra money to increase their savings, according to the results of a nationwide survey by the Cambridge Consumer Credit Index.
Twenty-three percent of those surveyed plan to pay off non-credit card debt, including car loans, college loans and other bills. Twenty percent will use the savings to remodel their homes or purchase a vehicle. Fifteen percent plan to pay off credit card debt.
Twenty-four percent of homeowners who responded to the survey had refinanced their mortgages in the past two years and 16 percent expect to refinance in the next year.
The findings are the result of monthly nationwide telephone poll of more than 1,000 adults conducted by ICR/International Communications Research in the past week. The poll was sponsored by The Debt Relief Clearinghouse.
Jordan Goodman, spokesman for the index, said the "real surprise" is that only 20 percent of those who refinanced their mortgages are using the money for new spending.
"Most economists have been expecting the refinancing boom to stimulate a corresponding boom in consumer spending, and now we see why that has not been happening," he said.
The overall Cambridge Consumer Credit Index fell three points in October to 53, which implies consumers are sharply cutting back on their use of credit now because of fears about the economic outlook. The index is a forward-looking economic indicator that gauges consumer spending and debt.
The Cambridge Credit Counseling Corp. also released results of its monthly survey of people who called the organization for credit counseling services during the past month. Of the 154 people surveyed, 28 percent were "frustrated with high bank rates and fees," 23 percent said their income had been reduced from "a lower salary, less overtime or layoff," 13 percent wanted to improve their "ability to achieve future financial goals like buying a house or saving for retirement," 12 percent admitted they "got into too much debt by overspending," 10 percent said their "lack of financial education" caused they them "to take on too much debt," 6 percent cited large medical expenses as a trigger for too much debt, 5 percent cited other reasons and 3 percent attributed their debt problem to "recent divorce or widowhood."
NEW YORK, Oct 9 (Reuters) - Fannie Mae (NYSE:FNM - News) said on Wednesday that it launched $2.5 billion in new five-year callable benchmark notes to be priced Thursday.
The notes, due Oct. 15, 2007, are callable one time after two years on Oct. 15, 2004.
Goldman, Sachs & Co., Morgan Stanley and UBS Warburg are the joint lead managers on the sale.
Settlement is Oct. 15.
Reuters Market News
TRADE IDEA-Buy 2-year Treasuries, sell Ginnie Maes-Lehman
Tuesday October 8, 3:45 pm ET
NEW YORK, Oct 8 (Reuters) - Investors should sell 7-percent
coupon Ginnie Mae mortgage-backed securities and buy two-year
Treasury notes (US2YT=RR) because Ginnie Mae MBS have become
very expensive, Lehman Brothers analysts said.
Investors have scooped up Ginnie Mae mortgage-backed
securities, driving their prices higher than those on MBS
backed by mortgage finance giant Fannie Mae (NYSE:FNM - News) and Freddie
Mac (NYSE:FRE - News).
Ginnie Mae MBS are explicitly backed by the U.S.
government, while MBS backed by U.S. mortgage finance
agencies do not carry a government guarantee.
"Yes, we understand the arguments around limited supply and
better credit characteristics (of Ginnie Maes), but we are
unwilling to pay such a lofty premium for that," Lehman
Brothers analyst said in a Monday research report.
Right now, prices on 30-year, 7-percent Ginnie Mae MBS were
quoted about 105, near 1-1/2 points more than prices on similar
Fannie Mae and Freddie Mac mortgage bonds.
With MBS and Treasuries carrying the full faith and credit
of the U.S. government, Treasuries offer an interest rate hedge
for investors in cases of safe haven demand due to sharp stock
losses and fear over a U.S. military strike against Iraq, the
analysts said.
The trade "provides cheap insurance against a flight to
quality scenario," Lehman analysts said.
Lehman Brothers said higher-coupon Ginnie Mae MBS are not
offering adequate return to investors to compensate for their
high prepayment risk, as a result of heavy refinancing driven
by the lowest mortgage rates at 36 year lows.
Prepayment risk is unique to bonds like MBS when the
underlying collateral, in this case mortgage loans, are prepaid
early as interest rates fall, resulting in bondholders losing
expected interest income and reinvesting in bonds that offer lower
yield.
"In this rate environment, their superior credit is tainted
by the negative convexity/prepayment risk," Lehman analysts
said.
U.S. mortgage prepayments rose in September from their
August levels, but at a slower pace than what the market had
predicted, according to data released on Monday.
To illustrate this trade, the analysts recommended selling
$100 million 30-year, 7-percent Ginnie Mae MBS and buying $30
million in two-year Treasury notes that carry a coupon of 1.875
percent and mature on September 2004.
Ginnes are secure they are government backed they are at a premium. Risk does pay more but risk is only good when the future is very promising. You could not stimulate Japan no matter what you did because part of secure and taking risk is feeling comfortable that you can create an income. That means your business is prospering or your job is secure.
Growth in employment contributed to increase of private load is not the growht we need. |
