Well, there is an agreement reached by congressional leaders and the White House that raises the debt limit and has roughly $1 trillion in spending cuts over 10 years. Another $1.5 trillion worth of deficit reduction would be based on recommendations of a new bipartisan committee. Under the deal, the special bipartisan panel would recommend steps to reduce the deficit. Any impasse by the panel or rejection of its recommendations by Congress would automatically trigger a round of spending cuts, like in defense or Medicare. Today will be spent by the Senate and House of Representatives arguing and then voting on it. The details have not been released, so specifics that deal with the housing-related items such as the mortgage interest rate deduction are not known. (More on market reaction below.)
Fannie Mae told the industry that, “As of September 30, 2010, Republic Mortgage Insurance Company (RMIC) fell below the minimum policyholders’ position required by its domiciliary state of North Carolina. RMIC received waivers from this requirement from its regulator, the North Carolina Department of Insurance (NC DOI), and thereby was temporarily allowed to continue writing new business. The recent extension of the waiver granted by NC DOI expires August 31, 2011, with no indication that any further extensions will be granted under RMIC’s current circumstances. It is Fannie Mae’s understanding that NC DOI will prohibit RMIC from writing any new mortgage insurance policies in North Carolina on or after September 1, 2011. In response to NC DOI’s action, Fannie Mae is suspending nationwide both RMIC and its affiliate, Republic Mortgage Insurance Company of North Carolina (RMIC-NC), as approved mortgage insurers effective immediately” Here is the announcement: FannieRMIC.
The markets are tentatively happy with the debt deal – not so much the specifics, but more the belief that there has been at least some progress. Looking back to Friday, Q2 GDP came in well below expectations, and Q1 was revised from +1.9% to 0.4%. The US economy now, and previously, was weaker than data had suggested was the case. The 10-yr Treasury Note rallied 1.25 points down to a yield of 2.81%, a new low for 2011
On Friday 3.5% MBS’s improved by about a point (1.0) – throw the value of servicing in there, and suddenly 4 – 4.125% 30-yr mortgages are back in style. Suddenly “R-E-F-I” is back in vogue and small originators are checking early pay-off penalties from investors while secondary marketing managers are worried about pull through percentages and renegotiation policies.
This week could be quite the week for volatile interest rates – not that I am any good at forecasting things. After Friday’s rally we have mortgage rates at the lowest point they’ve been all year. We still have the US debt passage vote, along with all the troubles in Europe. And for weekly & monthly US economic news, we have a full platter. Today we have one of the ISM indexes, and Construction Spending, at 9AM CST. Tomorrow we have Personal Income & Consumption, and some PCE price numbers. Wednesday is the always-questionable ADP employment numbers, along with Factory Orders and another ISM number. Thursday we take a breather with “only” the weekly Jobless Claims number. And then on Friday we have all the employment numbers – remember, jobs and housing, jobs and housing are going to be the cornerstones to push the economy. The market is roughly unchanged from Friday’s levels, with the 10-yr at 2.81%.
