August 22nd, 2012 9:22 AM by Mel Samick
"Mom." "Mom!" "MOOOOMMMM!" If this is what your house has sounded like the last three months, don't fret... It's almost time for the kids to start school again. This may be every parent's (especially those that are home for the majority of the day) favorite time of year. As nice as it is to have the kids at home and not have to worry about homework and lunches, it's also nice to have a few peaceful moments during the day to actually get something done. According to an article by CNBC, the National Retail Federation indicates that the average family will spend an average of $688 this year, which is up 14-percent from last year. Retailers are certainly happy as it is the second busiest time of the year for sales.
Of course, part of the increase in school costs could be due to inflation. Contrary to the Consumer Price Index, which was unchanged in July, it seems everything is more expensive these days. An index of energy prices was down .3 percent (this is certainly not reflected at the pumps) and the food index was up .1 percent. The core CPI, which excludes energy and food, was also up .1 percent. The severe drought that has gripped the Midwest is expected to cause the food prices to rise; that increase, though, is not expected for months. However, wholesale corn prices are up 34.5 percent. Within the Energy report, gas prices increased while home energy costs fell.
There is additional worry that the slowdown in manufacturing is going to last longer than first expected. The Empire State Index dropped below zero, dropping to -5.9 percent in August. This is the first negative report since October 2011. This was much worse than the market expected (+6.0). This, however, contradicts the Federal Reserve report which shows that Industrial production increased in July. Compared to the same period in 2011, production increased 4.4 percent. Capacity utilization was at 79.3 percent, up from 78.9 percent in May. Since both output and capacity levels were better, the Fed may wait to start another round of Quantitative Easing.
Mortgage originations were up 48.7 percent from a year ago, according to a report published by Mortgage Daily. The dollar volume of originations was estimated to be $403 billion in which Wells Fargo, JP Morgan Chase, US Bank, and Bank of America accounted for over half that volume. Wells Fargo's holdings concern lawmakers and regulators. They represent over 33 percent of the volume of new originations for the first half of 2012 and over 18 percent of the servicing.
Ginnie Mae has been overwhelmed by the number of requests from small mortgage banks to become issuers of its mortgage- backed securities. As fewer banks agree to purchase these loans, small mortgage banks are turning to Ginnie Mae. However, Ginnie is reluctant to take on more lenders, especially if they do not have the capital to share the risk of loan defaults. The agency, therefore, is considering raising their minimum net worth requirements. One proposal is to raise it from $2.5 million to $3.5 to 5 million. This is important for the agency because at the end of June, 9 percent of FHA loans were 90 days delinquent or had foreclosing proceedings starting.
In other mortgage news, the National Association of Home Builders/Wells Fargo housing market index rose 2 points to 37, the best reading since February 2007. A reading of 50 indicates good conditions. While the reading is still far from being considered "Good", the continuing rise is a strong sign of an improving housing market.
Another rule has been proposed for "higher-risk" mortgages. Six federal regulatory bodies have proposed that these mortgages require a creditor to use a licensed or certified appraiser who writes a report based on the inspection of the property's interior. The creditor would also need to disclose the purpose of the appraisal and provide them with free copies of the appraisals.
Information Provided by NYCB Capital Markets