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MBA – mortgage down

Mortgage applications decreased 4.9% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 22, 2018. The Market Composite Index, a measure of mortgage loan application volume, decreased 4.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6% compared with the previous week. The Refinance Index decreased 4% from the previous week. The seasonally adjusted Purchase Index decreased 6% from one week earlier. The unadjusted Purchase Index decreased 7% compared with the previous week and was 1% higher than the same week one year ago. The refinance share of mortgage activity increased to 37.6% of total applications from 36.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.5% of total applications. The FHA share of total applications increased to 10.2% from 10.1% the week prior. The VA share of total applications increased to 10.7% from 10.2% the week prior. The USDA share of total applications increased to 0.8% from 0.7% the week prior.

Supreme Court case may cripple public sector labor unions

The US Supreme Court on Wednesday ruled in favor of non-union workers in a case that some believe could have a significant impact on the influence of public-sector labor unions. Known as Janus vs. American Federation of State, County and Municipal Employees, the court determined it is unconstitutional to require government workers to pay a “fair share” fee to unions for the coverage and protection afforded to them under collective bargaining if they choose not to be members. As a result, public unions stand to lose out on fees from some individuals who may choose not to join but still want the benefits, also known as “free riders,” which could cost the groups a lot of money. The plaintiff in the case, Mark Janus, a child-support specialist at the Illinois Department of Healthcare and Family Services, argued that non-members are forced to pay a fee to support union’s increasingly politically-focused causes that they do not support. The high court agreed the procedure was a violation of free speech. Janus said on Wednesday before the press that 5 million non-union members would now be free “to make their own choice.” “I don’t want to be forced to pay something to somebody just to hold a government job,” Janus told FOX Business’ Stuart Varney. “I want to make my own decision and I shouldn’t have to pay a fee just to do something that I like to do.”

Only 22 states allowed unions to collect fair-share fees. The unions in these states that benefited from collecting the money argue it is just because the employees who are not direct members, but are covered by collective-bargaining agreements, still benefit from their efforts. Union membership is on the decline, specifically in the private sector, where fair-share fees are already prohibited in most states. The overall rate of union membership was 10.7% last year, compared with 20.1% in 1983, according to the Bureau of Labor Statistics. In 2017, 6.5% of private-sector workers belonged to a union, while 34.4% of public-sector workers were members. The decline in membership is not a death knell for unions, just a call for them to restructure, according to Ilya Shapiro, a senior fellow in constitutional studies at the Cato Institute. “It’s not like public sector unions have disappeared in the other [28] states … they operate differently … their operations are more efficient,” he told FOX Business. “The shape of the unions, the way they operate, will change.” The loss for public-sector unions may serve to curtail their involvement in non-labor-related efforts because they will have significantly less money to spend on politics, according to Shapiro. “It will erode unions’ electioneering and politicking, and involvement in issues that are unrelated to workers’ interests, like abortion or gun control, or things that are political issues that have nothing to do with the unions themselves or the workers they are representing,” he said. An earlier Supreme Court case on union fees, Friedrichs vs. California Teachers Association, ended in a   4-4 stalemate after Justice Antonin Scalia died.

NAR – pending home sales inch back 0.5% in May

Pending home sales decreased modestly in May and have now fallen on an annualized basis for the fifth straight month, according to the National Association of Realtors®. A larger decline in contract activity in the South offset gains in the Northeast, Midwest and West. The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.5% to 105.9 in May from 106.4 in April. The lackluster spring has primarily been a supply issue, and not one of weakening demand. If the recent slowdown in activity were because buyer interest is waning, price growth would start slowing, inventory would begin rising and homes would stay on the market longer. Instead, the underlying closing data in May showed that home price gains are still outpacing income growth, inventory declined on an annual basis for the 36th consecutive month, and listings typically went under contract in just over three weeks. Lawrence Yun, NAR chief economist, now forecasts for existing-home sales in 2018 to decrease 0.4% to 5.49 million – down from 5.51 million in 2017. The national median existing-home price is expected to increase around 5.0%. In 2017, existing sales increased 1.1% and prices rose 5.7%. The PHSI in the Northeast increased 2.0% to 92.4 in May, but is still 4.8% below a year ago. In the Midwest the index rose 2.9% to 101.4 in May, but is still 2.5% lower than May 2017. Pending home sales in the South declined 3.5% to an index of 122.9 in May (unchanged from a year ago). The index in the West inched forward 0.6% in May to 94.7, but is 4.1% below a year ago.

Westinghouse emerging from bankruptcy, will pursue foreign sales

The US nuclear company Westinghouse will target Saudi Arabia and India for nuclear reactor sales once it emerges from bankruptcy, with sufficient equity in the coming weeks. Brookfield Asset Management in January agreed to buy struggling Westinghouse from Toshiba for $4.6 billion. Cost overruns at US reactors pushed the once iconic industrial giant into bankruptcy. Westinghouse CEO Jose Gutierrez told Reuters that the Brookfield deal would close as soon as it had been approved by US and British nuclear regulators and the Committee on Foreign Investment in the United States (CFIUS). “We are confident we will get those approvals in the next few weeks, we don’t see any roadblocks,” he said. When the deal is closed the company will emerge from bankruptcy and Brookfield will recapitalize the firm. Gutierrez said that Westinghouse didn’t lose a single contract during its bankruptcy to sell services, fuel and spare parts to almost 80% of the world’s 450 reactors and that the company will immediately pursue additional business. It is also resuming talks with India on the sale of six reactors, Gutierrez told Reuters. China also holds major opportunities for the company. It plans to start-up the first of four long-delayed AP1000 reactors this year. Projects for six more are pending and Westinghouse expects China will build a fleet of at least 20 additional in the coming decade. A US-India agreement 10 years ago set a project in the country in motion, and now with the company emerging from Chapter 11, Gutierrez said that they will resume conversations with India. Westinghouse is also waiting for Saudi Arabia to decide on a shortlist of bidders to build two nuclear plants.

MBA – commercial/multifamily mortgage debt outstanding posts largest q1 increase since before great recession

The level of commercial/multifamily mortgage debt outstanding increased by $44.3 billion in the first quarter of 2018 as all four major investor groups increased their holdings.  That is a 1.4% increase over the fourth quarter of 2017. Total commercial/multifamily debt outstanding rose to $3.21 trillion at the end of the first quarter.  Multifamily mortgage debt outstanding rose to $1.3 trillion, an increase of $19.3 billion, or 1.5%, from the fourth of quarter of 2017. “During the first three months of 2018, commercial and multifamily mortgage debt outstanding increased more than during any other Q1 since before the Great Recession,” said Jamie Woodwell, MBA Vice President of Commercial Real Estate Research. “Interestingly, Q1 holdings grew more slowly this year than last among the three largest investor groups: banks, life insurance companies, and the GSEs. This year’s increase was driven by the CMBS market, which added $6 billion of mortgages to its balances. This is a sharp contrast to the $21 billion decline over the same period in 2017. “For the first time since 2007, CMBS has seen three straight quarters of increase,” Woodwell continued.

The four major investor groups are: bank and thrift; federal agency and government sponsored enterprise (GSE) portfolios and mortgage backed securities (MBS); life insurance companies; and commercial mortgage backed securities (CMBS), collateralized debt obligation (CDO) and other asset backed securities (ABS) issues. The analysis summarizes the holdings of loans or, if the loans are securitized, the form of the security.  For example, many life insurance companies invest both in whole loans for which they hold the mortgage note (and which appear in this data under Life Insurance Companies) and in CMBS, CDOs and other ABS for which the security issuers and trustees hold the note (and which appear here under CMBS, CDO and other ABS issues). Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.3 trillion, or 40% of the total. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages, holding $617 billion, or 19% of the total.  Life insurance companies hold $471 billion, or 15% of the total, and CMBS, CDO and other ABS issues hold $446 billion, or 14% of the total.  Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues.  These loans appear in the “CMBS, CDO and other ABS” category.

Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $617 billion, or 48% of the total multifamily debt outstanding.  They are followed by banks and thrifts with $411 billion, or 32% of the total.  State and local government hold $96 billion, or 8% of the total; life insurance companies hold $74 billion, or 6% of the total; CMBS, CDO and other ABS issues hold $41 billion, or 3% of the total, and nonfarm noncorporate business holds $14 billion, or one% of the total.

In the first quarter of 2018, banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $14.7 billion, or 1.2%.  Agency and GSE portfolios and MBS increased their holdings by $10.8 billion, or 1.8%, life insurance companies increased their holdings by $9.2 billion, or 2.0%, and CMBS, CDO and other ABS issues increased their holdings by $5.6 billion, or 1.3%. In percentage terms, other insurance companies saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 4.9%.  State and local government retirement funds saw their holdings decrease 1.7%. The $19.3 billion increase in multifamily mortgage debt outstanding between the fourth quarter of 2017 and first quarter of 2018 represents a 1.5% increase.  In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt, an increase of $10.8 billion, or 1.8%.  Commercial banks increased their holdings of multifamily mortgage debt by $7.1 billion, or 1.8%.  Life insurance companies increased by $1.4 billion, or 2.0%.  CMBS saw the largest decline in their holdings of multifamily mortgage debt, by $1.7 billion, or down 4.0%. In percentage terms, finance companies recorded the largest increase in holdings of multifamily mortgages, at 5.0%.  Private pension funds saw the biggest decrease at 4.8%.

Posted by: pharbuck on June 27, 2018
Posted in: Uncategorized