Morning Report: Mark Calabria out at FHFA.

Vital Statistics:

 LastChange
S&P futures4,25423.8
Oil (WTI)72.66-0.44
10 year government bond yield 1.4%
30 year fixed rate mortgage 3.23%

Stocks are higher this morning on overseas strength. Bonds and MBS are up.

The Supreme Court ruled yesterday that the President could fire the Director of the FHFA without cause, and Joe Biden immediately let Mark Calabria go. He has named Sandra Thompson as interim director.

The immediate question revolves around the limits put in place during the waning days of the Trump Administration, especially the limits on investment properties and high LTV / low FICO products. The politics of removing the high LTV / low FICO limits are a no-brainer, however the optics of helping landlords are a touch more difficult. We could see some changes rolled back, while others stay.

Rescinding the limits will be relatively straightforward – the only other condition is that Treasury Secretary Janet Yellen agree, which is a formality. Suffice it to say that increasing the size of the credit box to the low income and first-time homebuyers is the biggest priority. Since NOO loans subsidize those products, we could see those go as well.

The Supreme Court also rejected the shareholder lawsuit regarding the net profit sweep. Fannie and Freddie stocks were down something like 40% on the news. It is critical to understand that the only reason why these stocks trade is because the government doesn’t want to consolidate Fannie and Freddie debt on its balance sheet. If that wasn’t an issue, then they would have been wiped out when Fannie and Freddie failed in 2008. These stocks always were a litigation lottery ticket, and it looks like it didn’t pay off.

New Home Sales fell 6% MOM to a seasonally-adjusted annual pace of 769,000. This was a YOY increase, however last year’s numbers were depressed by COVID. There were 330k homes for sale, which represents a 5.1 month supply at the current sales pace.

Durable Goods orders rose 2.3% last month, while core capital goods orders (kind of a proxy for business capital investment) fell 0.1%.

Initial Jobless Claims fell slightly to 411,000 last week, which was above expectations. It remains a mystery why we have elevated claims in the context of record job openings.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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