Monday Morning Cup of Coffee takes a look at news coming across HousingWire's weekend desk, with more coverage to come on bigger issues.
How does it look on the mortgage bond investment front? Well, June has been a rough month for fixed income, with yields and spreads moving higher, according to Chris Flanagan at Bank of America/Merrill Lynch.
In a client note, Flanagan says that although poor liquidity is cited by many as an emerging problem for fixed income, those concerns are probably overblown.
“We stay neutral on agency MBS and securitized product credit; CLOs and non-agency MBS still look relatively attractive,” he writes.
On agency mortgage backed securities, his team offers this rundown:
“1H:15 MBS performance matches Treasuries led by UIC conv, DIC G2 and 15s,” they write. “Specs are directional. IOS have underperformed. Countering strong housing data is low turnover. Recent observations have been biased higher due to seasonals and low rates. Leveraging our turnover views, we find value in IOS 3s and loan balance 3s.”
Over at Bloomberg, Jody Shenn reports that the U.S. Department of Agriculture is increasing the cost of guarantees for 0% down mortgages.
“The U.S. Department of Agriculture’s Rural Housing Service is raising the cost of its home-loan guarantees that enable borrowers to purchase homes in certain areas without down payments,” he reports. “On Oct. 1, the upfront fee paid by buyers under the USDA program will rise to 2.75%, from 2%...”
The National Association of Exclusive Buyer Agents filed an amicus curiae brief on behalf of the plaintiff in a case currently before the California Supreme Court.
In the suit Horiike v. Coldwell Banker, plaintiff Hiroshi Horiike contends that even though the listing agent was originally contracted by the seller, because the listing agent was an agent of the same broker and in the same brokerage as his buyer agent, the listing agent also owed him, the buyer, representation as well.
The California Second District Court of Appeal agreed stating, “When a broker is the dual agent of both the buyer and the seller in a real property transaction, the salespersons acting under the broker have the same fiduciary duty to the buyer and the seller as the broker.”
According to NAEBA President Chris Whitehead, “The seller had a contract with the broker through one agent. The buyer had a contract with the same broker through another agent creating a dual agency situation. In reading California law, it would appear that because the broker represented both the buyer and the seller, the agents working under that broker also represented both the buyer and the seller, which means that the seller’s agent should have protected both the seller’s interests and the buyer’s, which is an impossible situation.
“That is why NAEBA has long spoken out against dual agency. It’s not good for buyers or sellers, but only for the real estate licensees who will be able to collect both sides of the commission,” Whitehead said.
NAEBA says it chose to submit a brief because the organization sees potential ramifications for the real estate industry not only in California, but throughout the United States.
The implications of the Supreme Court decision to allow claims of “disparate impact” in Fair Housing Act lawsuits is still being measured and processed. Last week HousingWire provided the perspective of fair housing advocates on what they say are the benefits, and now here’s an equally strong opinion on the issue from those opposed.
Now, plaintiffs do not need to show there was actual racial discrimination, or an intent to discriminate. Instead, they can just point to the racial makeup of a neighborhood and infer that discrimination must have happened in order to bring a lawsuit and force communities to re-engineer themselves.
The Court comforts itself by claiming that racial quotas still cannot be used to integrate communities. In fact, it has weaponized racial quotas in the hands of the federal government.
It is perhaps just a coincidence that the Texas Housing decision comes as the Department of Housing and Urban Development has announced a policy designed to pressure wealthy communities to build “affordable” housing in their midst.
The dissent, written by Justice Samuel Alito, points out the absurdity of using “disparate impact” as a measure of racial discrimination. By the same logic, he writes, minimum wage laws must be racist, because they can be shown to have a disproportionately negative effect on young black males, who are priced out of the labor market. Alito also notes that neither the 1968 Fair Housing Act, nor its 1988 amendments, allowed “disparate impact” to be evidence of racial discrimination.
The Court has now affirmed one of the federal government’s most abusive tactics: the threat of racial discrimination lawsuits. And the biggest losers, Alito points out, are the poor, because now local efforts to improve poor neighborhoods can be blocked by lawsuits alleging racial discrimination when the rent is raised.
On Monday, the pending home sales index from the National Association of Realtors comes out. Pending home sales are expected to offer a leading indication of building strength for the housing sector, specifically final sales of existing homes which last week showed strong gains for May. A fifth straight gain is expected for pending sales, at plus 0.6%.
The S&P/Case-Shiller home price index arrives on Tuesday morning. The S&P Case-Shiller home price index is closely watched as a key measure for home prices, but perhaps less so with the latest report. Home sales in May shifted sharply higher which will limit the impact of Case-Shiller's April data. The April forecast, nevertheless, is solid at plus 5.4% year-on-year.
Construction spending will report on Wednesday. Construction spending in May is expected to add to April's 2.2% jump. Watch the residential construction component, up 0.6% in April, for signs on the new home sector.
Finally, the all-important employment situation will come in Thursday, since Friday will begin the weekend for everyone to celebrate a little birthday party we call the 4th of July.
The employment situation report is not expected to report with the fireworks that will light the sky for Independence Day. Analysts expect a modest 200,000-230,000 rise in nonfarm payrolls. The unemployment rate, which ticked 1 tenth higher in May, is expected to tick 1 tenth lower in June to 5.4%.
No banks were closed the week ending June 26, according to the FDIC.