Monday Morning Cup of Coffee takes a look at news across HousingWire's weekend desk, with more coverage to come on bigger issues.
Sometime this morning the Supreme Court of the United States will announce whether it is within the bounds of the Fair Housing Act to employ the legally questionable doctrine of “disparate impact” – wherein government would assume even if there is no intent to discriminate, if the numbers don’t come out just right, then it must have been discrimination.
The case in question is Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc.
A good look at an informed cross-section of opinions is hosted here by the Urban Institute.
Two opinions that definitely merit a look are Laurie Goodman’s from the Urban Institute and David Stevens from the Mortgage Bankers Association.
“I strongly believe intentional discrimination is terrible, businesses should be required to treat all similarly situated applicants equally, and to the extent they don’t they should be vigorously prosecuted to the full extent of the law. But the issue is always, “who is similarly situated?”” Goodman asks. “You can only hold a business responsible for what they can control. For example, if a lender applies uniform underwriting standards to all applicants, it will likely result in more mortgage denials for black and Hispanic applicants than for white applicants, because there is a difference in income, wealth and credit experience between the groups. Businesses certainly have a responsibility to support, and at the minimum, not to stand in the way of government programs that push for greater equality of opportunity.
“But that is different than the disparate impact doctrine, which could hold the private sector guilty of discrimination if their policies resulted in a differential impact on different racial and ethnic groups, despite the fact that these groups have differences in income, wealth and credit experience,” Goodman said.
Stevens goes further.
“The concern with applying disparate impact theory to mortgage lending is that it allows the mere existence of a statistical variance to make a discrimination claim, exposing every lending decision to a legal challenge, even if that lending decision is based on sound underwriting and/or compliance with federal regulations,” Stevens writes.
Al the perspectives are worth a look, but with any luck for the industry, the court will drive a stake in the effort to apply “disparate impact” to housing and that will be it.
The past week’s sharp move higher in bund yields is directly impacting the mortgage market, as higher volatility and longer mortgage durations are leading to underperformance for the sector, says Bank of America/Merrill Lynch in a client note. They say that given the trend reversal to the upside on bund yields and treasury yields in recent weeks, they grow more concerned about a disorderly move higher in rates, which would result in wider securitized products spreads.
It’s in their chart. Comparison of the BofAML total return index values for governments, mortgages, high grade and high yield since May 12 shows high yield as the strongest performer and high grade as the weakest performer, with mortgages and governments in the middle of the pack.
“At this juncture, we wait for some rate stability and spread tightening to emerge before potentially moving to an underweight on mortgages,” says Chris Flanagan and his team at BAML.
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“The move higher in US yields, driven by the spike in bund yields, has directly impacted the duration of the BofAML mortgage index. In the past week, the index duration has increased by roughly a half year, from 4.1 to 4.6,” he says. “One week ago, the index duration was right at the 200-day moving average. Now, it is well above trend and the sharp rise seems powerful enough to have triggered a trend change for mortgage durations – to the upside. Duration extension generally resulted in wider MBS spreads this week, although the trend for the current coupon spread is still fairly flat, and showing few to no signs of sustainably changing direction to the upside.
“As concerned as we are with the upward trends for many other metrics in rates markets, this trend stability for MBS spreads bolsters our confidence that a neutral view of the market is still warranted,” Flanagan says. “We will be monitoring this and other trends over the near term to determine if a change in view to an underweight is warranted. For now, we remain neutral.”
There’s not really any such thing as too much safety for Realtors and real estate agents.
Realtor Magazine has the story of two agents who were held at gunpoint by a man during showings in St. Petersburg, Florida within an hour of one another. The suspect is still at large.
In one incident, the real estate agent says she was showing a home to a man who was wearing a straw hat when he pulled out a handgun and then bound her with zip ties. The man called the agent's husband and demanded a ransom, police say. He then left the house and, shortly after, reportedly pointed a gun at another real estate agent, whom he also then robbed.
"Neither one of them was injured, although they were pretty shaken up, as you can imagine," says St. Petersburg police spokeswoman Yolanda Fernandez.
The man "has been calling REALTORS® asking to see properties,'' a bulletin from the Pinellas REALTORS®' organization read. The man has used the name "Robert Evans" and the bulletin also lists a phone number he has called from. Police are asking for real estate professionals' assistance in catching the man, saying in their alerts that if any agent is contacted by "Robert Evans" or the phone number provided to arrange a meeting with him and then contact the police department immediately. The bulletin warns: "DO NOT GO TO THE PROPERTY THAT HE IS REQUESTING TO SEE.''
Last week's very strong employment report should give a lift to the labor market conditions index that comes out on Monday, which has been lagging far behind other employment readings, especially jobless claims and the unemployment rate.
The U.S. labor market is large and multifaceted. Often-cited indicators such as the unemployment rate or payroll employment, measure a particular dimension of labor market activity.
The Fed’s research department has created a labor market conditions index based on 19 labor market indicators.
It is not an official report but it’s an important one for the real estate space because the monthly publication is carefully noted by Federal Reserve Chair Janet Yellen and has gained market attention.
On Thursday at 10 a.m. ET, the House Financial Services Committee will hold a hearing entitled “The Future of Housing in America: Oversight of the Department of Housing and Urban Development.”
Details haven’t been released but the title gives you an idea of the content. HousingWire will provide coverage.
Another subtle indicator real estate and mortgage finance should watch is the National Federal of Independent Business’ small business optimism index. Small businesses are the bulk of the nation’s employers and jobs are critical to housing.
Until the last few months, the small business optimism index had been lagging behind but then sent out a very strong signal in April. For May, forecasters are looking for a solid increase from April's 96.9 to 97.2.
The index is a composite of ten seasonally adjusted components based on questions on the following: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.
No banks were closed the week ending June 5, according to the FDIC.