Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update October 30, 2009***

First time homebuyer tax credit update: The tax credit has been included as an amendment to a bill extending unemployment benefits. The proposed amendment will extend the credit thru April 30, 2010, reduce it to max of $6500 but expand it to more buyers and increase income limits. The Senate is expected to consider it early next week. 

 

Interest Rates

This week the Fed made its last purchase of $300 Billion in Treasuries as part of its effort to keep mortgage rates down. Rates were again fairly stable for the week but the impact of lack of Fed purchases is expected to be felt soon and reflected in higher rates.

 

When	Rate
This Week	5.03
1 Month Ago	4.94
1 Year Ago	6.46
2 Years Ago	6.26

 

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

·         In recent speeches the Commissioner of the FHA has said that he expects ongoing changes to FHA underwriting policy. FHA has also indicated that it will revisit the two appraisal requirement.

·         Foresight Analytics estimates that the total delinquency for first mortgages increased to 11% in the third quarter final data will be released in late November.

·         On October 10^th in a Federal Bankruptcy court in the Southern District of New York a judge ruled that PHH Mortgage had not proved its claim of delinquency by the borrower and ordered the debt discharged……….wiped out.

 

Good News

·         Third quarter GDP grew 3.5% versus forecast of 3.2%. Housing contributed to growth for the first time in four years with +.53% growth. However, if you exclude autos driven by the Cash for Clunkers program GDP growth was actually 1.9%.

·         September durable goods up 1.0% which was in line with forecast.

·         Case-Shiller home price index declined in August 11.3% from a year ago but improved 1.2% from July.

·         Median home prices rose in September to $204,800 from $199,900 in August.

 

Statistics of Interest/Concern

·         Moody’s Investment Services said Monday that the bank charge off rate has exceeded the rate in the early years of the Great Depression. About $116 Billion has been written off so far.

·         Consumer confidence for September was 47.7 well below forecast of 53.5.

·         Oxford Analytics study suggests that home prices will fall another 10% nationally in 2010.

·         Consumer spending was down .5% in September.

·         New home sales fell 3.6% in September after five consecutive months of increases while months of inventory shrank to 7.5 months compared to 12.4 in January.

·         S&P has downgraded seven mortgage insurance companies including Radian and MGIC.

 

Foreclosure Headlines

·         The Census Department reported that in the third quarter 18.8 million homes were vacant up slightly from the second quarter.

 

Job Market Headlines

·         Initial weekly jobless claims came in at 350,000 flat from previous week.

·         The National Association of Business Economists forecast only 12,000 additional jobs per month in the first quarter of 2010.The economy needs at least 150,000 new jobs per month to keep up with population growth. The group estimates it will be 2012 before the economy reaches the 150,000 level. The consensus on unemployment was that it would peak in the summer of 2010.

 

 

Commentary/Observations

In Florida hundreds of complaints have been filed against Bank of America for loan modification related problems including lack of communication and other issues.

 

Auto analyst Edmunds.com has calculated that Cash for Clunkers cost to the tax payer per car sold was $24,000. They also added that there were few marginal sales. The government disputes the claim.

 

The Iranian regime has said it is unwilling to accept a deal that would have the country ship 70% of its enriched Uranium out of the country according to the International Atomic Energy Agency.

If you have any mortgage or related questions please contact me at (602) 803-9660 or by e-mail at burt@gosfm.com.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update October 23, 2009***

First time homebuyer tax credit update: Well the battle rages on in D.C. on this controversial topic. The rhetoric heated up late this week with the Inspector General for Tax Administration reporting that nearly 74,000 individuals who claimed the credit do not appear to qualify. Can you say fraud? The IRS said that they have opened 107,000 civil claims and have identified 167 “criminal schemes”. So far the number of tax payers that have filed to take the credit is estimated at 1.4 million. Next the Brookings Institute reported that the $8000 credit will cost the government $43,000 for each person taking the credit. They estimate that only 15% of those applying for the credit purchased because of the credit and that the remaining 85% would have purchased without it. Really?

 

Finally, if you are trying to close a loan before the existing deadline to get the credit you may want to have your complete loan file submitted by November 30^th at the absolute latest. Remember we have a big holiday at the end of November.

 

HVCC Update: The House Finance Committee has included an amendment to HR 3126 that would effectively KILL this disaster of government think by allowing lenders, loan originators, etc to order appraisals again. Anyone ordering an appraisal would have to be a licensed mortgage professional under new SAFE guidelines.

 

Interest Rates

Interest rates for the week remained essentially flat but change is a coming. The Treasury Department announced that next week it will auction off a record $123 Billion in Notes to fund the country’s operation. Note that this amount will only last two weeks! The upward pressure on rates will increase as government Treasuries compete with Mortgage Backed Securities (MBS) for investor dollars. If Treasury yields move higher MBS will have to follow to be competitive thus pushing mortgage rates upward. Also, long term Treasuries are growing weaker as the Fed buying program winds down this month. We should see a similar situation in the MBS world as the Fed slows it purchases of MBS. Also, as if this was not enough Moody’s said Thursday that the U.S. needs to get its deficit reduced in the next 3-4 years or risk its triple A rating. This is a big one folks and with the deficit in the trillions of dollars and the economy struggling to recover a reduction in this rating will raise our costs to finance government spending resulting in………..you guessed it higher rates. All of this combined means higher rates are on the horizon.

 

When	Rate
This Week	5.00
1 Month Ago	5.04
1 Year Ago	6.09
2 Years Ago	6.33

 

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

·         John Burns Real Estate Consulting survey said that of all NEW homes purchased 59% were FHA, VA or Rural all loans requiring 3.5% or less for down payment. The FHA disputes the report and says that about 75% of FHA buyers put more than the minimum 3.5% down. Really?

·         Freddie Mac reported it September delinquency increased to 3.33% up from August 3.13% and much higher than September 2008 1.22%.

 

Good News

·         September sales of existing homes were up 9.4% in September and the inventory declined to 7.8 months the lowest level since March 2007.

·         The median home price for September was $174,900 down 8.5% from a year ago and down from August $177,300.

·         September housing starts were up .5% in September which was in line with forecast.

·         The Labor Department reported that the Producer Price Index (PPI) fell .6% in September which was on target with the forecast.

·         Leading economic indicators rose for the sixth consecutive month according to the Conference Board a private research firm.

 

Statistics of Interest/Concern

·         The National Association of Home Builders (NAHB) housing index expressing builder sentiment fell to 18. Forecast was for 20. This is first decline in 3 months.

·         Construction permits declined 1.2% in September which was below forecast.

 

Foreclosure Headlines

·         In testimony before the House Oversight Committee a Treasury official confirmed that they were developing a plan for foreclosure alternatives using TARP funds. The plan would be called the Foreclosure Alternatives Program and would include incentives for short sales and deeds in lieu of foreclosure. No timing was discussed.

·         Fiserv a financial information and analysis firm predicts that home prices nationally will decline another 11.3% by June 2010. They forecast for the Phoenix area the decline will be 23.4% by June 2010 with a slowing decline of 5% in 2011.

·         The charts below illustrate a couple of things we probably already know. First, the more expensive homes are not selling. Second, homes priced under $150,000 are where the action is at. [Data from ARMLS]

 

 

 

 Job Market Headlines

·         Weekly initial jobless claims rose to 531,000 up from previous week revised number of 520,000.

·         The four week moving average of initial jobless claims came in at 532,000 which is flat from previous week.

·         Continuing claims fell to 5.9 million from the previous weeks 6.0 million. Note that some observers think the decline is due to those no longer looking for work and/or whose benefits have expired.

 

Commentary/Observations

The focus this week is on the commercial market since it is likely the next big financial challenge that we will face. There are at least three signs to watch for that could indicate the collapse of the commercial market. First, an increase in activity at so called “special servicers” who handle troubled loans. From April to August these special servicers saw their volume double to $50 billion according to Trepp a firm that tracks the commercial market. Second, the failure of big projects involving big dollars. For example, the Stuyvestant Town project in East Manhattan we discussed previously has lost a court case where they would have been able to raise rents. This is just another step toward default on the projects multi-billion dollar debt. Third, the performance of community banks as they manage their portfolio of commercial loans.

 

As part of this potential crisis the President announced this week that the administration will start using left over bailout funds to help community banks by incenting them to lend to small businesses. Not surprisingly the National Federation of Independent Business said they would prefer lower taxes and less government intervention. And a final thought on coming commercial loan crisis. In 2006 the FDIC failed to enforce its own guidelines to control excessive commercial lending by 20 banks that, you guessed it, ultimately failed according to the FDIC’s own Office of Inspector General. Are you thinking what I’m thinking?

 

If you have any mortgage or related questions please contact me at (602) 803-9660 or by e-mail at burt@gosfm.com.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update October 16, 2009***

Interest Rates

Rates moved up slightly during the week between .125% and .250% but were still at 5.00% when the week ended. I don’t mean to be redundant but if possible take advantage of these rates before they go up.

 

When	Rate
This Week	4.92
1 Month Ago	5.04
1 Year Ago	6.46
2 Years Ago	6.40

 

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

·         The Treasury Department issued its monthly report on the status of loan modifications this week. There are 487,081 Trial Modifications in progress (this is where a homeowner is given a new payment for 3 or 4 months depending on their situation). To date only 1711 homeowners have had their loans formally modified under the President’s plan. Selected lender statistics for percentages of loan modifications in progress thru September are shown below;

1.      Saxon 41%

2.      Citi 33%

3.      Aurora 33%

4.      Nationstar 28%

5.      Chase 27%

6.      GMAC 26%

7.      Wells 20%

8.      Bank of America 11%

9.      National City 9%

·         FHA boss David Stevens said this week he is against increasing the down payment to 5%.

 

Good News

·         NAR says the number of existing homes for sale in August was 3.6 million down from 4.3 million a year ago.

·         The National Association of Business Economists (NABE) survey reported that 80% of its economists said that the recession is over after four consecutive quarters of negative growth. The September survey predicted the economy would grow about 2.6% in 2010 compared to contraction of 2.5% in 2009.

·         Industrial production was up .7% in September which was .1% above forecast.

·         New York Manufacturing Index rose to 34.57 well above forecast of 17.25 and the highest number in five years.

 

Statistics of Interest/Concern

·         Venture capital fund raising dropped to its lowest level in six years during the third quarter according to the National Venture Capital Association.

·         Retail sales for September were down 1.5% compared to forecast of down 2.1% said the Commerce Department.

·         Moody’s Delinquency Ticker (DT) for September shows U.S. Commercial Mortgage Backed Securities (CMBS) delinquency at 3.64% a 310 basis point increase from a year ago. This means that the delinquency a year ago was .24%.

·         Major credit card companies reported defaults fell in September but delinquency climbed at all the major card issuers. Bank of America is the worst performer with a default rate of 14.25% and delinquency of 7.53%.

·         Consumer Price Index (CPI) rose .2% in September said the Labor Department. Consumer prices have been falling on an annual basis since March of this year.

·         Consumer sentiment for September came in at 69.4 below forecast of 73.5.

 

Foreclosure Headlines

·         According to Zillo 30% of the foreclosures in June involved the top one third in home values (price) this is a 16% increase from three years ago. At the lower end of value (price) one third of the homes had 36% of the foreclosures down 55% from three years ago. In other words, the more expensive homes are foreclosing at a faster rate and the lower priced homes the foreclosure rate appears to be slowing down.

·         RealtyTrac reported that in August there were 358,471 foreclosure filings. This number includes default notices, auction sales notices and bank repo’s). They also reported the  third quarter was the WORST ever for foreclosures with 937,840 filings!

·         A report from W.O. Carey School of business at ASU said that two thirds of the homes sold in Arizona thru September were either foreclosures or the resale of home recently foreclosed.

 

Job Market Headlines

·         Initial weekly jobless claims were 514,000 below forecast of 520,000.

·         Continuing jobless claims were 5.99 million the lowest level since March.

·         The last time the unemployment rate reached 9.8% was the period from July 1982 thru June 1983.

 

 

 

 

Commentary/Observations

The Federal government finished fiscal year 2009 with a $1.42 TRILLION deficit the largest since WWII. The OMB estimates that the deficit will hit $9 TRILLION in the next ten years which would mean that the debt held by the public would be 82% of GDP up from a previous record set in 2008 of 43%. For you non economists out there GDP (Gross Domestic Product) is the total output of our ENTIRE economy. This is not good news.

 

The Dow index reached 10,000 during the week which was the same level it was at in 1999.

 

The Administration announced Thursday that $16 Billion in Stimulus money had been contracted out to firms and $2.2 Billion of that had actually been paid out creating 30,383 new jobs. Friday it was disclosed that there appears to be some reporting errors in the data.

If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update October 9, 2009***

Interest Rates

The historic rate train just keeps chugging along as rates were essentially flat for the week. However, on Thursday night Fed Chairman Bernake made remarks that suggested the Fed was closer than previously thought to raising short term interest rates. This led to higher Treasury yields Friday and a slight increase in mortgage rates. The last time the Federal Reserve raised short term interest rates was June 2006! During the week Australia became the first major economy to raise its interest rates. The country has a 5.8% unemployment rate and its economy is doing fairly well compared to many others.

 

 

 

When	Rate
This Week	4.87
1 Month Ago	5.08
1 Year Ago	5.94
2 Years Ago	6.40

 

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

·         Representative Scott Garrett of New Jersey introduced HR 3706 which raises the FHA minimum down payment from 3.5 % to 5% AND eliminates financing closing costs. Fed Chairman Bernake supports the legislation.

·         Fannie Mae and Freddie Mac are prepared to introduce a program to help independent mortgage bankers acquire short term credit. This is good news as it will allow more competition for mortgages.

 

Good News

·         The ISM Services Index expanded for the first time since September 2008 to 50.9 up from August’s 48.4. Anything over 50 indicates expansion in the service sector.

·         Retailers on E-Bay saw sales increase in August and September which were the first increases since July 2008.

·         Wholesale inventories fell 1.3% in August which was the 12^th consecutive monthly decline and below the 1.0% that was forecast.

·         Retail sales rose for the first time in 13 months in September by 1.1%.

 

Statistics of Interest/Concern

·         61% of the Mortgage Backed Securities (MBS) between 2005 and 2007 that were rated AAA by Standard & Poor’s have been downgraded to BBB or lower.

·         Total U.S. consumer debt fell by $11.98 Billion in August much more than was expected according to the Federal Reserve. This was the seventh consecutive month of declining consumer debt.

·         U.S. office vacancy rose to five year high of 16.5% said REIS Inc. a property research firm.

 

Foreclosure Headlines

·         According to the Center for Responsible Lending there are 6600 foreclosure filings per day. I did the math and that’s 2.4 million foreclosures in a year.

 

Job Market Headlines

·         Initial weekly jobless claims came in at 521,000 which is the lowest since January and was below expectations of 540,000.

·         Continuing jobless claims were 6.04 million down 72,000 from the previous week.

·         The four week moving average of weekly claims was 539,750 down slightly from the previous week.

·         1.4 million is still the forecast number of people who will lose their unemployment benefits by the end of 2009 unless emergency legislation extending benefits is passed.

·         26% of employers who have laid off employees in the past year reported they are planning on bringing some workers back according to a Career Builder/USA survey.

 

Commentary/Observations

The UN Development Program announced its annual Human Development Index (best countries to live in) and the winner was Norway. Australia was second and the U.S. came in 13^th. Niger on the African continent finished last at 182^nd.

 

As of September 30^th in California more than 300 hotels were in foreclosure or in default on their loans. This is a fivefold increase since January.

If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.

 

 

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update October 2, 2009***

Interest Rates

Our good fortune on rates continues as they declined slightly during the week to below 5.00%! These rates cannot last forever so I urge you to take advantage of them while you can. The Fed has been purchasing MBS every week but starting now will buy every other week so with this rationing expect volatility in rates (translation: expect rates to move up as Treasuries will have to stand on their own more than in the past few months).

 

When	Rate
This Week	4.94
1 Month Ago	5.08
1 Year Ago	6.10
2 Years Ago	6.37

 

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

·         Fannie Mae announced it has raised its minimum credit score to 620 on all loans it guaranty’s or insures including VA and FHA. The new guideline is effective November 1 for manually underwritten loans and December 12 for Automated Underwriting System (AUS) reviewed loans.

·         Delinquency on Freddie Mac loans hit record high in August reaching 3.13%. In August 2008 the delinquency rate was 1.11%.

 

Good News

·         Pending home sales increased 6.4% in August the seventh consecutive monthly increase and way above expectations of a 1.0% increase.

·         S&P Case-Shiller home price index rose 1.6% in July from June and the year over year decline was 13.3% which was lower than forecast of 14.2%.

·         The Commerce Department said construction spending increased .8% in September but inside this number residential construction was up 4.7% the biggest monthly increase since November 1993.

 

Statistics of Interest/Concern

·         Conference Board’s Consumer Confidence Index fell to 53.1 for September from an upwardly revised 54.5 in August and was below forecast of 57.

·         The Chicago Purchasing Managers index for September fell to 46.1 which was below forecast of 52 and down from August’s 50.

·         Second quarter GDP was revised upwards from -1.0% to -.7% according to the Commerce Department.

·         The ISM Manufacturing Index for September was 52.6 down slightly from August 52.9.

·         The IMF World Economic Outlook is now forecasting a world output of 3.1% for 2010 compared to its forecast of 2.4% back in July.

·         Bankruptcy filings for the year passed one million in September. September filings were up 4% from August and up 41% for September 2008.

 

Foreclosure Headlines

·         HOPE Now reports that foreclosures starts were down 21% to 224,000 in August.

·         Bank of America suspended its current commitments to ACORN housing this week. They had worked together on foreclosure prevention.

·         In their second quarter 10 Q reports Fannie Mae and Freddie Mac had a combined REO inventory of 100,000.

 

Job Market Headlines

·         September unemployment rate was 9.8% the highest since July 1983. The economy lost 263,000 jobs in September compared to 201,000 lost in August and above forecast of 180,000. There are now 15.1 million out of work.

·         Initial weekly jobless claims jumped to 551,000 versus expectations of 530,000. The four week moving average declined to 548,000 the lowest number since January of this year.

·         Continuing jobless claims remained above 6 million at 6.09 million which was down from previous week’s revised number of 6.16 million.

·         The number of metropolitan areas with unemployment rates at or above 10% declined in August from 139 to 129 according to the Labor Department.

·         The Business Roundtable CEO Economic Outlook index rose to 44.9 in the third quarter up from 18.5 in the second quarter. Note that the first quarter number was 5. Anything above 50 indicates growth. The roundtable survey of CEO’s found that 40% are expected to cut jobs in the next six months.

·         Some fun facts from the Bureau of Labor Statistics: Permanent layoffs reached a record 53.9% of the unemployed in August; 33% have been out of work for 27 weeks or more; 59.2% of Americans are employed the lowest number in 25 years; since 2001 the private sector has lost 839,000 jobs. Or so says the Bureau of Labor Statistics.

 

Commentary/Observations

In a Bloomberg story this week it was noted that the city of Phoenix commercial loan delinquency has increased five times since March of this year. The area has the second highest commercial delinquency in the country behind Detroit. The vacancy rate including leased space that is not occupied may exceed 30%. Finally, the Congressional Oversight Panel says that in the U.S. commercial and construction loan losses could reach $80 BILLION.

 

Five months ago as part of swine flu prevention Egyptian President Mubarak ordered 300,000 pigs destroyed. Since then the organic waste the pigs devoured has been piling up on Cairo’s streets. The city produces 14,000 TONS of trash each day. The problem has been compounded because International Environmental Services suspended its contract to collect trash a month ago. Now there is no one to haul away any waste in large parts of the city whose population is 17 million.

 

The non partisan Tax Policy Center estimates that in 2009 47% of households will not owe any Federal income taxes.

If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.