Last week’s highlights for mortgage REITs
Last week didn’t have much in the way of important economic data. However, the annual Mortgage Bankers Association conference was held in Las Vegas. FHFA Chairman Mel Watt discussed ways to increase access to credit, particularly for the first time-homebuyer. Probably the biggest one was a proposal to allow 3% down Fannie Mae loans, targeted to the first-time homebuyer. This move would help increase the supply of MBS (mortgage-backed securities), which is still an issue for REITs, given that new purchase business hasn’t yet replaced the refinance boom of last year.
A mixed bag for commercial REITs.
Can the year for originators turn out okay?
As we’ve seen in Market Realist coverage previously, interest rates drive mortgage REITs like Annaly Capital Management (NLY) and American Capital Agency (AGNC). You can read more about this relationship in our series called Mortgage application reviews: Key points for REIT investors.
Mortgage REITs that focus on origination will notice the Mortgage Bankers Association’s mortgage applications index finally began to reflect the bond market rally. This year has been dismal for originators. Mel Watt’s proposals to increase access to credit was certainly welcome news to the originators. However, the regulatory state continues to pound the industry and as long as that continues, originators will be in a defensive crouch.
Is the FHFA going to rescue the builders?
We heard from PulteGroup (PHM) last week, and it pretty much continued the story we’ve been seeing from the builders—a modest increase in revenues driven by a big increase in average selling prices and a drop in deliveries. The builders had a mixed view on Mel Watt’s proposals to increase credit. PulteGroup was enthusiastic, while Bob Toll, founder and CEO of Toll Brothers (TOL), had some choice words regarding the proposals.