Fear, loathing, forgiveness and more

Markets: first fear, then loathing 
US Treasury yields finished today's session higher by 2 bp to 4 bp after dropping earlier in the day after news of bombings in Brussels. Yields on 5-year notes dropped from 1.38 percent to a session low near 1.34 percent in London trading before starting to climb higher at noon in the US and finishing above 1.41 percent. Spreads on benchmark investment grade corporate default swaps widened by 2 bp today while nominal spreads to the Treasury curve in MBS tightened by 1 bp. (Milepost).

Markets: forgiveness, but not for MBS investors 
Federal Housing Finance Agency Director Mel Watt said today that he'll announce within 30 days if Fannie Mae and Freddie Mac will start forgiving principal on loans where the balance exceeds the value of the property, a plus for borrowers but a negative for MBS. Former Director Ed DeMarco rejected principal forgiveness in 2012, but calls for mercy have continued. The Wall Street Journal reported on Tuesday that the FHFA is considering a plan that could make up to 50,000 homeowners eligible. Assuming an average balance of $250,000, that would qualify $12.5 billion in MBS principal. Although that's a drop in the $5.4 trillion MBS market, the eligible loans likely are concentrated in a narrow range of MBS trading at high prices, where a small rise in prepayments could sting. (Milepost)

Economics: home prices keep rising
US home prices increased 0.5% MoM and 6% YoY in January, according to the Federal Housing Finance Agency’s monthly Home Price Index released today. Seasonally adjusted monthly price changes ranged from a 1% loss in the Middle Atlantic to a 1.7% gain in the South Atlantic. Yearly changes ranged from a 1.7% gain in the Middle Atlantic to an 8.9% rally in the South Atlantic. Standard & Poors recently projected home prices would rise this year by approximately 5%. (S&P).  

Banking: CFPB makes mortgage lending a little easier for littler banks 
Smaller banks will now have an easier time offering mortgages with balloon payments. The Consumer Finance Protection Bureau today issued a rule that will allow smaller lenders to offer balloon loans as long as the lender makes at least one mortgages in a rural or underserved area. Before this revision, a lender had to make at least half of its mortgage loans in rural or underserved areas. Under the CFPB rules, a small creditor is one that makes no more than 2,000 loans. The new rule takes effect March 31. (CU Insight)

Banking: Wells Fargo tops CRE debt originators
Wells Fargo ended up at the top of the stack last year in total commercial real estate debt origination, according to figures released today by the Mortgage Bankers Association. But others took the lead in different market niches. For commercial bank CRE: JP Morgan, Bank of America and PNC. For private CMBS: Eastil Secured, Deutsche Bank and JP Morgan. For life insurance CRE: MetLife, HFF and Prudential. For Fannie Mae CMBS: Wells Fargo, Walker & Dunlop and Berkadia. For Freddie Mac CMBS: Berkadia, CBRE and Walker & Dunlop. And for FHA/Ginnie Mae CMBS: Berkadia, Red Mortgage and Wells Fargo. (Bloomberg).