Mortgage Applications Spike to Record

So here is the game plan - take a society mired in debt, and jump start it by lowering rates to the point the sheep will take on more debt. Or put more simply - turn back on the house ATM. The solution to a problem caused by Americans living off the house ATM is.... to allow them back to said ATM. Sounds about right. Actually it says all you need to know about the greater US economy as a whole when this is the "solution". But this is what you are forced to do when 70% of your GDP is "consumerism". When drowning in debt, encourage consumers to take on more debt to spur economy, by making money as cheap as possible. I will have more on this in my 2009 Outlier Predictions I am working on, but this is definitely the master plan. It's not a healthy plan but it's the plan. It's yet another in our series of "kick the can" down the road solutions. Because if we dared to go to a place of 7-9% national savings for 3-5 years, we'd truly have Great Depression 2.0. The economy is not built for Americans looking out for themselves and acting responsibly. Too many businesses would shut down and unemployment would skyrocket....

Now we do have some problems with above thesis because to refinance nowadays you actually have to have decent credit as opposed to the 2005-2007 time frame where the number one criteria for a loan was: "applicant appears to be breathing" (however, we did not verify this). Further, you need to have EQUITY in your home to refinance - and with home prices faltering so badly, many are underwater. But - this is what the bulls will cling to as bringing us out of the shadows and taking us into the "2nd half 2009" recovery (along with low gas prices). Malls will be teaming with shoppers who extracted money out of their homes, just like the good ole days! Party like 2005!

One interesting name if you want to game this thesis is Bankrate.com (RATE) which is a site I like to use myself - it is a comparative tool for mortgages, credit cards, et al. There is a catch 22 there though because advertising is one thing that gets cut very heavily in a recession and this site is based on advertising revenue - but traffic should be hopping with all these people who can pray to re-open their personal ATM.

One last point - APPLICATIONS are different from APPROVALS. (I would LOVE to know the rejection rate on these applications!) But we have record breaking applications last week after the Federal Reserve announced they will be buying huge amounts of mortgage backed securities thereby interfering with free markets :). And, I believe, they are just getting started. Oh... can you smell the mustard seeds of the 2nd half 2009 recovery everywhere?

• U.S. mortgage applications surged by the largest amount on record last week as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years, data from an industry group showed on Wednesday.
• "This clearly was an early holiday gift from the Federal Reserve to mortgage holders and home shoppers," said Mike Larson, a real estate and interest rate analyst at investment firm Weiss Research in Jupiter, Florida.
• "But, the MBA's data is only for submitted applications, not closed loans, so a good amount may get rejected because qualifying standards are tighter and many applicants will probably find they do not have the equity to refinance given the decline in home prices," he said. (thank you Mr Larson for talking some sense - please send that fact over to CNBC as they were orgasmic in joy about this turn of events this morning)
• As long as unemployment is climbing and the economy is weakening, the impact on the home purchase market should be much more muted than the refinance market, he said. (let them know that as well)
• The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Nov. 28 soared a record 112.1 percent to 857.7, the highest reading since the week ended March 21 when it reached 965.9.
• Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.47 percent, down a whopping 0.52 percentage point from the previous week, the largest drop since 1990 when the MBA started conducting the weekly survey. Interest rates are at their lowest level since the week ended June 24, 2005, when they reached the same level. (as I said, the mad plan solution to problems born of cheap money, is to create the same environment and encourage the same bad behavior)