December 11th, 2013 9:20 AM by Mel Samick
Amsterdam has instituted a new program that truly re-defines social welfare. The Rainbow Foundation, a private but mostly government funded organization, is trying to help citizens with a drinking problem by giving them a job cleaning the streets and paying them with beer. The brand of beer depends on which brewery is offering the best price, so one can't be picky. In addition to beer, they also get half a packet of rolling tobacco, free lunch and about $13.55 a day. One worker described his day as starting at 9 am with two cans of beer, then he gets another two cans for lunch, and then ends his shift with another can or two. While the program has been criticized by some, the Foundation points to the success of the program. It has raised the workers self-esteem, kept them out of trouble, and has reduced the amount of alcohol they drink. Instead of drinking in the park and being a nuisance, they are now cleaning the park, which seems to be a win for everyone that uses the park. I doubt this policy is coming to U.S. shores any time soon.
As we approach the New Year, many changes are coming for our industry. Many of the changes will make everyone in the industry, except for compliance and legal people, less profitable. The Mortgage Bankers Association reported that Independent mortgage bankers made half the profits they did in the second quarter, due to rising production costs, decreasing volumes, and reduced secondary marketing income. The average production profit was 38 basis points. Total loan production average expenses increased to $6,368 per loan in the third quarter, an increase of $550. To further complicate matters, the market is transitioning from a refinance market to a purchase market as rates keep rising. To summarize the challenges that are facing the industry in the upcoming year; costs are rising, regulation is ramping up, rates are rising, credit is getting tighter, and we are going from a refinance market to a purchase market.
It seems that the problems that caused the 2007 crash are not the issues that this particular reform is addressing. Thus, the industry is becoming more complicated for lenders while not necessarily assisting consumers. All of the new regulation will no doubt make it more difficult for once credit-worthy borrowers to qualify for a mortgage.
Some good news is that New-Home Sales rose 25.4 percent in October. On a year-over-year basis, sales were up 22 percent. Nationwide, the government reported that there is enough new home inventory to last 4.9 months. The median sales price of a new home was $245,800 in October and the average sales price was $321,700.
U.S. Manufacturing increased to 54.7, a ten-month high, in November, according to the Purchasing Managers Index released by Markit. Readings above 50 indicate growth. While manufacturing is up worldwide, the United States is leading the way.
The Federal Housing Finance Agency announced last week that they have overhauled the mortgage insurance master policy. The main changes include Loss Mitigation, Claims, Assurance of Coverage, and Enhanced Communication.
Other news this week:
· ADP reported that the Private Sector added 215,000 jobs
· The U.S. trade deficit decreased 5.4 percent
· The number of U.S. Banks fell to its lowest level since the Great Depression
This week is a fairly light news week. The following reports are due to be released: Household Debt, NFIB Small Business Index, Job Openings, Wholesale Inventories, Federal Budget, Weekly Jobless Claims, Retail Sales, Import Price Index, Business Inventories, and Producer Price Index.
I'm deeply saddened, along with many in the world, by the passing of Nelson Mandela last week. I will leave you with this quote from Mandela, "I have fought against white domination, and I have fought against black domination. I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities. It is an ideal which I hope to live for and to achieve. But if needs be, it is an ideal for which I am prepare to die for.”
Information provided by NYCB Capital Markets