‘Mortgage Demand Cools’: Fannie Mae

Home prices are ‘weighing on affordability and constraining sales.’ Here’s another piece of an incomplete behind-the-scenes puzzle of the housing market that has surged to new record highs. Fannie Mae – one of the Government Sponsored Enterprises (GSE) that guarantee eligible mortgages and package them into mortgage-backed securities that are then sold to institutional investors – had some disconcerting words in today’s Mortgage Lender Sentiment Survey for Q2:
More mortgage lenders say they have eased credit standards recently and expect further easing in the coming months.
Why? Cooling demand for mortgages. Mortgage lenders in the survey include banks of all sizes, specialized non-bank mortgage lenders (they don’t take deposits), and credit unions.
The net percentage of mortgage lenders that reported having eased credit standards over the past three months has been rising since Q4 2016. And the net percentage of lenders that expect to ease credit standards over the next three months for all three types of mortgages – GSE eligible, non-GSE eligible, and government loans such as FHA and VA insured mortgages – ‘reached or surpassed survey highs this quarter.’

This post was published at Wolf Street on Jun 26, 2017.

Dudley in a Good Place

Crashing Unemployment
Dear Mr. Dudley, Your recent remarks in the wake of last week’s FOMC statement were notably unhelpful. In particular, your explanation that further rate hikes are needed to prevent crashing unemployment and rising inflation stunk of rotten eggs. Quite frankly, crashing unemployment is a construct that’s new to popular economic discourse, and a suspect one at that. Years ago, prior to the nirvana of globalization, the potential for wage inflation stemming from full employment was the main concern.

This post was published at Acting-Man on June 27, 2017.

2 troubled Italian banks failing, to face insolvency

The European Central Bank has pulled the plug on two troubled Italian banks, sending them into insolvency proceedings as it pushes ahead with efforts to clean up weak banks holding back the economy.
The two banks, Veneto Banca and Banca Popolare di Vicenza, have struggled to overcome high levels of loans that were not being paid back.
The ECB said Friday it had given the banks time to raise more capital but the banks had not been able to offer credible solutions. It ruled they were “failing or about to fail,” and they will now face insolvency proceedings in Italy.
The Italian Economy and Finance Ministry said the government would meet over the weekend to “adopt the necessary measures to keep the banks fully operative, protecting all account holders, depositors and senior creditors.”
Shareholders and holders of the bank’s junior bonds, however, face being wiped out.

This post was published at ABC News

What Is the Fundamental Gold Price? Precious Metals Supply and Demand [extended version]

Fundamental Drivers of Gold Prices [Ed. note by PT: we believe there is a lot less disagreement with Steve Saville’s approach than Keith assumes – we are adding comments in the chart captions below as well as an addendum and footnotes to illustrate what we mean – all our comments are marked with [PT] below – we have essentially made a discussion out of this week’s supply-demand report, as we believe these issues are of interest to all gold aficionados] Steve Saville wrote a post this week, in which he proposed a model that indicates the fundamentals of gold. According to him, these are: (1) the real interest rate, (2) the yield curve, (3) credit spreads, (4) the relative strength of the banking sector, (5) the US dollar’s exchange rate, (6) commodity prices, and (7) the bond/dollar ratio.

This post was published at Acting-Man on June 27, 2017.