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Opinion, commentary, and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
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Monday Morning Cup of Coffee: Is Fed, housing policy at a crossroads?

Plus why private investors don’t want to buy mortgages, TRID and more

October 12, 2015

Monday Morning Cup of Coffee takes a look at news coming across HousingWire's weekend desk, with more coverage to come on bigger issues.

Today we celebrate Columbus Day, marking the brave journey of explorer Christopher Columbus to the West. Sure, he was looking for a quicker route to the spice markets of the Far East, and he didn’t exactly land in North America, but it’s the thought that counts.

Also what counts is that he opened up the New World to explorers, pioneers and settlers, which in itself changed the whole of the world in a way that wouldn’t happen again until 1776.

Banks will be closed but markets will be open. Italian Americans will be just beaming.

Speaking of sailing without a map, Federal Reserve Vice Chairman Stanley Fischer spoke Saturday at the Group of Thirty International Banking Seminar in Lima, Peru, and here’s what he had to say about the Fed’s interest rate policy.

A great deal of market attention has focused on the exact timing of our first increase in the funds rate, but what matters for overall financial conditions is expectations for the entire trajectory of short-term interest rates. In that regard, most members of the FOMC anticipate that economic conditions are likely to warrant raising short-term interest rates at a gradual pace over the next few years.

However, that is an expectation, not a commitment. Both the timing of the first rate increase and any subsequent adjustments to the federal funds rate target will depend critically on future developments in the economy. For example, it is conceivable that inflation may rise more slowly or rapidly than we currently anticipate. Should such developments occur, we would adjust the stance of policy in response.

Considerable uncertainties also surround the outlook for economic activity. For example, we cannot be certain about the pace at which the headwinds still restraining the domestic economy will continue to fade. Moreover, net exports have served as a significant drag on growth over the past year and recent global economic and financial developments highlight the risk that a slowdown in foreign growth might restrain U.S. economic activity somewhat further.

A shorter, more candid version of this might be, “We’re flying blind and winging it like crazy.”

So it’s been a week and a couple of days since the TILA-RESPA Integrated Disclosure rule went into effect. How are you doing?

Here’s one voice. Dave Jacobin, president of 1st Mariner Mortgage, answered a couple of questions on the topic for us.

Is the new TILA-RESPA Integrated Disclosure rule easier than previous rules?

Dave Jacobin: The form layout is better. The formulas used and the visual layout is much easier to digest. Simply put, everything fits on the form in a better looking way than it was formatted before. At a glance, it is easy to see the estimated closing costs and cash to close figures. It’s good to have those numbers easily accessible to see what exactly needs to happen in order to do the deal from start to finish.

The information that is now included makes more sense. The current Good Faith Estimate does not show the total monthly payment or the total amount of cash you need to complete the transaction (including down payment, closing cost, prepaid costs, etc.). The TRID rule is basically adding those elements to the form.

The newly included items are broken down. The new form clearly states what each total is comprised of to ensure that the elements all add up to match what the total cost should be. The new rule is basically an attempt to improve or correct any faults with the current regulations.

How is mortgage bond investment coming? A client note from Interactive Data sums it up briefly:

Ahead of the long weekend Agency MBS regains its stride as basis tightens. CMO trading is muted. Non Agency RMBS supply falls sharply in P&I but derivatives are active. New issue LSTRZ deal gets Px guidance. Much quieter in Consumer ABS, with Autos in focus. Volume drops in CMBS, but spreads hold steady...

…mortgages are only outperforming benchmarks by a modest margin, with spreads currently unchanged to -1 tick tighter. Belly coupons are leading the way thus far, with 30yr 4% the star of the stack as of noon. Dealers are once again reporting net buying of MBS overnight from foreign investors, with demand seemingly concentrated in GNMA 30yr 3.5%.

The Urban Institute's Housing Finance Policy Center has just released a new blog: “Why you should care that private investors don't want to buy your mortgage anymore.”

Center Director Laurie Goodman explains that the demise of the private label securities market has locked some borrowers out of mortgages — specifically, those who don't meet government lending guidelines and have imperfect credit.  She also warns that if securitization remains a government-only activity, even borrowers with high net worth and perfect credit might begin to find it hard and expensive to obtain a mortgage. 

What’s it like to live in a city where almost two-thirds of the homes are worth more than $1 million? Trulia looked at the Golden Gate city, San Francisco, where amongst the largest metros, San Francisco metro has the highest share of million dollar homes in the country at 58%.

And not surprisingly, the other two Bay Area metros rank No. 2 (San Jose) and No. 3 (Oakland). Within the city of San Francisco itself, more than 63% of homes are valued above the $1 million mark. Trulia drills down to the neighborhood level and looks back at the growth of this seven-figure phenomena. Check it out.

This week, presidential candidates from both parties will join New Hampshire officials and national experts for a major housing summit on Friday, Oct. 16, at the New Hampshire Institute of Politics at Saint Anselm College in Manchester, N.H.

The event is hosted by the J. Ronald Terwilliger Foundation for Housing America’s Families and the Bipartisan Policy Center. HousingWire is the trade media partner for the event.

The Foundation is making a push to put housing policy front and center in the 2016 political campaign.

Presidential candidates Chris Christie, Lindsey Graham, Mike Huckabee, Martin O’Malley and George Pataki are scheduled to participate in the summit, where they, along with New Hampshire officials and national housing experts, will tackle what has been called the “silent crisis” of rising rents and diminished access to homeownership.

U.S. Sen. Kelly Ayotte, former Sen. Scott Brown, former HUD Secretary Henry Cisneros and Manchester Mayor Ted Gatsas are among the public figures pitching in to help find solutions to these worsening problems.

Leading voices from the real estate and finance industry will also be involved, including the Mortgage Bankers Association, American Bankers Association, Zillow, realtor.com, the National Association of Realtors, Moody’s Analytics and the Urban Institute.

No banks closed the week ending Oct. 9, according to the Federal Deposit Insurance Corp.

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