General

Mortgage Industry Update: Rates, News & More

                                           ***Smart Financial Weekly Mortgage Update July 10, 2009***

Interest Rates

Rates were down sharply mid week as the stock market weakened and demand for 10 Year Treasuries was higher than expected with some of our sources offering 30 year fixed rates just below 5.00%! In spite of an upward adjustment Thursday rates were back to just below 5.00% Friday. The head of Interest Rate Strategy for Morgan Stanley said this week that he expects the 10 Year Treasury Yield to “grind” lower by late September then finish the year at about 4.25%. Also this week a Wells Fargo economist predicted that the 10 Year Yield will be about 4.00% by the end of this year. The 10 Year Treasury Yield finished the week at 3.29%. If these predictions are true we can expect mortgage rates to increase about .50% or more by the end of 2009.

 

 

When	Rate
This Week	5.20
1 Month Ago	5.59
1 Year Ago	6.37
2 Years Ago	6.73

 

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

 

Mortgage Industry Update

·         Late last week we received word that there had been a significant change in the Your Way Home AZ program. You may recall that this program is designed to help home buyers purchase foreclosures. The original guideline on appraised value required the Seller accept a 5% discount off of the appraised value if selling to a program participant. The new guideline has been reduced to 1%. For information on the program go to ww.yourwayhomeaz.com or contact me.

·         FHA/VA loan applications in June were 36% of total applications the highest level since 1990.

·         Making Home Affordable Update: In a report released by the Boston Federal Reserve this week the Fed said lenders are not modifying loans because they lose money on modifications. The report specifically said that the Making Home Affordable program is “not likely to work”. The report covered over 665,000 loans originated between 2005 and 2007 and followed 150,000 thru the end of 2008. The Treasury responded with a statement that more than 240,000 have had their loans modified under the President’s plan and that the pace of modifications was increasing. One of the co authors of the report who is a Senior Economist for the Boston Fed said that the government would be better off just giving the money directly to homeowners.

·         More Making home Affordable News: Today the government announced it would begin authorizing lenders to modify second mortgages specifically Home Equity Lines of Credit. The process could start as early as the end of this month!

 

Good News

·         Initial weekly jobless claims of 565,000 were below forecast and the lowest level since January this year.

·         ISM Services Index of which gauges the health of the service sector improved in June to 47 up from May’s 44.

 

Statistics of Interest/Concern

·         Continuing jobless claims were up 159,000 to 6.88 million a new record and almost double from a year ago.

·         New hiring level in May was the lowest level in 9 years. Since May 2008 the number of job openings has declined by 1.5 million!

·         $108 Billion in commercial loans as of June are now in default, foreclosure or bankruptcy according to Real Capital Analytics Inc. This represents 5315 properties double the number of properties from the end of 2008!

·         Home Equity Lines of Credit (HELOC) delinquency of 30 or more days past due for Q1 2009 rose to a record 3.52%.

·         Credit card delinquency of 30 days or more past due was 3.23% in Q1 2009 the highest since 1974.

·         Consumer Confidence for June was 64.6 down from May’s 70.8 and below forecast.

 

Commentary

Folks, it is all about jobs. Unless and until the job market gets better and people get back to work, or if they are working and not feeling good about their long term job security, the recovery is going to be slow. If you want to watch one statistic watch the continuing job claims number. When that number starts going down from 6.88 million for more than one month then we will see more good news. Here is an interesting job related stat. Did you know that from March 2008 thru March 2009 Phoenix metro lost as many jobs as Detroit metro? Yes it is true.  According to Arizona Magazine’s July edition each metro area lost 135,000 jobs in that period.

 

Finally, on an international note, late this week the Egyptian’s seized about 1500 pounds of explosives in a mountainous area near the Israeli border. Apparently the plan was to attack the Suez Canal and disrupt shipping through it. 26 people have been arrested so far. For more information on home loans and related I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.

Burt Carlson