December 10, 2009
December 10, 2009 by admin
Stocks moved higher today following a strong day of news and testimony from Secretary Treasury Timothy Geithner on the hotly contested repayment of TARP funds. The stock market has been moving significantly higher following last weeks news of the improving job picture. The finance markets have been mixed with news that Bank of America, Citigroup and Wells Fargo looking to repay their TARP funds. The early repayment of monies to the government is being viewed with mixed results from analyst, investors and the general public. Perception that the worlds largest banks are hoping to escape the scrutiny of the government so they can enhance their pay packages and issue new bonuses is drawing heavy criticism. The perception that these companies have magically fixed their balance sheets and core capital ratios, despite a continued stream of rising unemployment is a major red flag for critics of the move. The companies decision to repay borrowed TARP funds comes at a time when the companies have seen a health bounce to their share prices from early March lows, upwards of 300% for each company have provided them with some cushion to dilute common shareholders through new equity offerings.
The banking industry is drawing further criticism from the government today as results from the making home affordable program have been extremely disappointing. Despite promises to modify hundreds of thousands of distressed mortgage loans, banks and lenders have fallen short of their goals. The lenders have quickly piled up extra revenues with huge surges in volume in their lending departments thanks to government aided low mortgage rates. These same companies have performed poorly in helping existing homeowners restructure their loans to avoid home foreclosure, despite promises to the contrary. Renewed discussion today from Congress could further pressure lenders to step up their aid to homeowners. There are two areas the government is looking to become involved with including allowing judges to modify mortgages through bankruptcy as well as exploring principal balance write downs with delinquent mortgages. The latter seems to be the most logical battle against new foreclosures as a good percentage of property owners simply are walking away from properties that are tens to hundreds of thousands of dollars underwater.
Home loan interest rates have moved up since the release of the non farms payroll report. Fixed loan rates for thirty year home loans are being marketed at or above five percent with major national lenders. The yield on the ten year Treasury bond is hovering just below 3.5%, closing at 3.49% on Thursday a key thirty day moving average that the mortgage industry should be closely following. All indications in the near term are that December mortgage rates have little opportunity to move lower and the possibility of higher rates is significantly larger.