Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update December 24, 2009***

Editor’s note: In next week’s update we will offer up some thoughts for the outlook in 2010.

 

Interest Rates

It would appear that our historic low rate world is slowly coming to an end. This week retail mortgage rates pushed a little deeper into the 5% range as the market responded to less support from the Federal Reserve. In addition, there was less demand for government bonds which put pressure on 10 Treasury yields and has pushed them to 3.80%. It wasn’t very long ago that the 10 year yield was below 3.50%. Remember, a general rule is that when the economic news is good (or perceived to be good) bond yields will move up normally taking mortgage rates with them but when the news is not so good the reverse takes place.

 

 

When	Rate
This Week	5.05
1 Month Ago	4.78
1 Year Ago	5.14
2 Years Ago	6.17

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

·         According to the National Association of Realtors (NAR) 40% of existing home purchases in November were FHA loans.

·         HUD has issued FHA Mortgagee Letter 2009-52 stating that borrowers are not eligible for an FHA loan if the did a short sale to take advantage of reduced prices or the declining market. However, this is the best part, if the short sale proceeds covered the loan balance (isn’t a short sale done because a regular sale would not clear the balance?) AND if the borrower is current on their mortgage and other debts at the time of the short sale they are eligible.  Also, this means that if the borrower is eligible for a short sale under HAFA (the new short sale program for the government) the borrower will not be eligible for FHA loan to purchase a home for three years.

 

Good News

·         Existing home sales were up 7.4% in November from October.

·         Median home price for November was $172,600 down 4.3% from one year ago the smallest decline in two years.

·         Existing home inventory for November was 6.5 months down from 7 months in October.

·         The University of Michigan/Reuters consumer sentiment index rose to 72.5 in December just short of the expected 73.5 but up from 67.4 in November.

·         Durable goods orders were up 2.0% in November higher than forecast of 1.0% and up from October decline of .7%.

 

Statistics of Interest/Concern

·         The Commerce Department revised third quarter GDP down to a final 2.2% from a previous estimated 2.8%. Economists are estimating fourth quarter GDP to be in the 4 to 4.5% range.

·         New home sales fell in November by 11.3% to the lowest level in 7 months the forecast was for an increase in sales.

·         The number of new homes on the market in November was 235,000 the lowest since 1971.

 

Foreclosure Headlines

·         According to First American Core Logic the “Shadow inventory” grew to 1.7 million thru September 30, 2009 up from 1.1 million a year ago. Shadow inventory is defined as homes owned by lenders and other homes 90 days or more delinquent.

·         A report by the Office of the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS) showed that 60 day plus delinquency increased 20% from the second quarter to the third quarter to 3.6% of all prime loans.

 

Job Market Headlines

·         Initial weekly jobless claims were 452,000 down 28,000 from previous week.

·         Continuing jobless claims came in at 5.076 million down from 5.203 million the previous week.

·         4.7 million workers were collecting extended unemployment benefits at the end of the year according to the Labor Department.

 

Commentary/Observations

Late this week Arizona Governor Jan Brewer issued a statement “Arizona Crisis of Unparalleled Dimension” in which she points out this year’s budget deficit is $1.5 billion and that next year’s budget which starts in just six months has projected deficit of $3.4 billion. Note that California’s current year budget deficit is $21 billion.

 

Fannie Mae and Freddie Mac CEO’s will each receive $6 million in base pay and deferred compensation as a result of their company’s stellar performance this year.

 

Thursday the Senate approved an increase in the national debt limit from $12.104 TRILLION to $12.394 TRILLION.

 

Treasury Secretary Geithner said Wednesday “we are not going to have a second wave of financial crisis” in the country. Wow, I feel better already.

If you have ay mortgage or related questions please give me a call at (602) 803-9660 or e-mail me at burt@gosfm.com.

 

 

  

Mortgage Industry Update: Rates, News & More

*** Smart Financial Weekly Mortgage Update December 18, 2009***

Reminder: If you or anyone you know is interested in getting FREE assistance with a loan modification please let me know or have them contact me.

 

Interest Rates

Retail mortgage rates maintained their sub 5% position for the week. In a statement after its meeting this week the Federal Reserve made it a point to reiterate that its MBS program (to support keeping mortgage rates low) will end as scheduled on March 31, 2010. There had been some chatter in the market that the Fed would extend the program and that does not seem to be the case. This came after Moody’s comments on Monday saying the sovereign debt risk is rising globally and especially in the U.S. They predicted long term rates will increase globally in 2010 and may increase more rapidly than expected. Moody’s added that the U.S. will have to put in place a “credible plan to address the problems of large debt”. Absent a strong policy response the U.S. triple A credit rating will be under threat in two to three years. So, gentle reader, as we have said for many weeks now the specter of increasing rates looms large on the horizon.

 

When	Rate
This Week	4.94
1 Month Ago	4.83
1 Year Ago	5.19
2 Years Ago	6.14

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

·         Bloomberg reported this week that Fannie Mae and Freddie Mac are in discussions with the Treasury Department to increase their $400 billion lifeline before the end of the year. Between the two they represent the largest sources of mortgage financing in the country. They have used $111 billion of the $400 billion in less than a year.

 

Good News

·         Conference Board index of leading economic indicators was up .9% in November above forecast of .7%.

·         Industrial production rose .8% in November after being flat in October.

·         Housing starts rose 8.9% in November the biggest increase in six months according to the Commerce Department.

 

Statistics of Interest/Concern

·         FDIC head Shelia Baer said that in 2010 bank failures will peak.

·         The Consumer Price Index (CPI) rose .4% in November after a .3% increase in October the Labor Department said.

·         Producer Price Index (PPI) rose 1.8% in November up from an increase of .3% in October. Forecast was for increase of .8%. Note that the Labor Department said the year over year increase was 2.4%.

·         The New York Empire State index of business conditions fell 2.55 in November.

·         Capital One at 9.6% and Discovery at 8.98% reported charge off’s on credit cards rose in November. A charge off is debt that the creditor does not believe can be collected. Both reported 60 day plus delinquency near 6%.

·         The National Association of Home Builders sentiment index declined slightly in November. The decline was mostly due to concerns about the weak job market.

Foreclosure Headlines

·         In testimony before the House Financial Services Committee Laurie Goodman veteran MBS analyst and Senior Managing Director of Amherst Securities said that her analysis led her to conclude that negative equity was the biggest driver in foreclosures and that employment was a catalyst. Her research further caused her to conclude that reducing loan balances would be a more effective way to reduce foreclosures than reducing monthly payments.

 

Job Market Headlines

·         The House approved a $155 billion job creation bill this week that the Senate is expected to consider shortly after the New Year begins. Among its provisions is an extension of unemployment benefits for an additional six months. In a separate but related action the House attached an extension of two months unemployment benefits to a mandatory military spending bill.

·         Weekly initial jobless claims were 480,000 up 7.000 from the previous week and above forecast of 465,000.

·         The four week moving average came in at 467,500 down 5250 from previous week.

·         Continuing jobless claims were up slightly to 5,186 million.

·         The Labor Department reported that in November more states had a decline in the unemployment rate than had an increase. Compared to October’s data which showed 29 states had an increase the November data is an improvement.

 

Commentary/Observations

Moody’s Delinquency Tracker of commercial mortgages (CMBS) reports that in November delinquency was 4.47% up .46% from October and that the total of delinquent loans was about $30 billion. This is considerably higher than the December 2008 total of $6.7 billion. Four states had delinquency above 10% one was Michigan another was…………………..Arizona.

 

According to a USA Today analysis of federal salary data the number of employees making $100,000 per year increased from 14% to 19% in the recession’s first 18 months. Also in the period from December 2007 until June 2009 the number of Defense Department employees making $150,000 per year increased from 1868 to 10,100. But wait there is more. At the Department of Transportation only one person was making $170,000 or more in late 2007 but in mid 2009 that number had increased to 1690. Finally, the average federal employee salary BEFORE overtime is now $71,206.

 

Iranian forces entered Iraqi territory yesterday at dawn. They occupied a well about 280 miles south of Baghdad. This could be part of the ongoing border dispute between the two countries or something else. Iranian officials were unavailable as Friday is a weekend day in Iran.

 

The Washington Post reported late this week that Citigroup will not have to pay billions in taxes as part of their deal to repay the TAPR money we provided to keep them from being broken up or worse.

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 December 4, 2009***

Interest Rates

Retail mortgage rates closed the week about .25% higher than what we started the week with. Could this be the beginning of a more regular uptick in rates? Conventional wisdom has it that the rates will move higher but the move up will be bumpy. Stay tuned.

 

When	Rate
This Week	4.81
1 Month Ago	4.91
1 Year Ago	5.47
2 Years Ago	6.11

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

·         An amendment to HR 4173 the Wall Street Reform and Consumer Protection Act allows bankruptcy judges to modify mortgages. These are a number of big time sponsors for this amendment which could light a fire under banks to move the loan modification process along more quickly. In the past the banking lobby has been able to get similar legislation defeated.

·         A new Hope Now Alliance website lets HUD approved counseling agencies in certain markets submit loan modification applications on behalf of certain distressed borrowers. The program is called Hope Loan Port and GMAC, Chase, Sun Trust, PNC and Saxon Mortgage are part of the pilot program. In a related note Chase Bank says that it has been more successful with its own internal loan modification process than with the Making Home Affordable program. It said that 31% of homeowners offered Trial Modifications under the government plan never sent in a single payment.

·         GMAC announced underwriting changes for buying a home after foreclosure. The timeframe is 5 years with a minimum down payment of 10% and minimum credit score of 680. The minimum timeframe from Chapter 7 bankruptcy is 4 years and Chapter 13 bankruptcy is 2 or 4 years depending on the disposition.

·         Last week one of our sources AmTrust Bank was taken over by the FDIC then quietly but quickly acquired by New York Community Bancorp. So far this year 130 banks have failed compared to 25 in all of 2008.

 

Good News

·         U.S, households wealth rose $2.7 Trillion in the third quarter the second quarterly increase in a row according to the Federal Reserve.

·         Zillow says homeowners will lose about $500 billion in value this year a big improvement from 2008 when $3.6 Trillion was lost.

·         The Business Roundtable said its CEO Economic Outlook Index moved strongly positive to 71.5 from 44.9 in the third quarter.

·         Freddie Mac said that its Home Price Index increased .9% in the third quarter following a 2.0% increase in the second quarter.

·         The Commerce Department reported that wholesale inventory increased by .3% in October the first increase in more than a year. The forecast was for decline of .5%.

·         Retail sales were up 1.3% in November much higher than the forecast of .6%.

·         University of Michigan consumer sentiment index for November increased to 73.4 from 67.4 in October the forecast was for 68.8.

 

Statistics of Interest/Concern

·         Lender Processing Services reported that the combined delinquency and foreclosure rate for all loans thru October was 12.6%.

·         Mortgage Bankers Association said this week that MBS (Mortgage Backed Securities) delinquency (30 days or more late) reached 4.06% in the third quarter.

·         The FDIC said that on loans held by them the 90 day or more delinquency rate was 3.43% in the third quarter up by .51% from the second quarter.

·         According to Real Estate Econometrics LLP unpaid loans on commercial property were 3.4% at the end of the third quarter and could go as high as 5.3% in two years. Of the 35 biggest regional lenders that got TARP money commercial construction loans are 37% of the group’s total loans outstanding.

·         U.S. consumer spending fell by $3.5 billion in October according to the Federal Reserve. The decline was the ninth consecutive monthly decline.

·         A Bloomberg national poll revealed that Americans have become gloomier about the direction of the nation than three months ago.

 

Foreclosure Headlines

·         Foreclosure filings fell 8% in November to 306,627 (ninth consecutive month of 300,000+ filings) according to RealtyTrac. However, this was the fourth consecutive monthly decline in filings. RealtyTrac said they thought the decline was “artificially induced” due to mediation programs that likely postponed the inevitable. Nevada again led the nation with one filing per 119 households Arizona came in at one per 186 households. RealtyTrac said further it estimates a record 3.9 million foreclosures in 2009.

·         According to a study by Experian 18% of foreclosures are “Strategic Defaults”. A Strategic Default is when a homeowner who is current on all of their debt but is upside down in their home walks away.

·         The Treasury Department reported that thru November 30^th Permanent Loan Modifications had increased to 30,650 from 2711 on September 1 this out of 697,026 homeowners in Trial Modification.

·         This week Standard and Poor’s said that MBS (Mortgage Backed Securities) performance continued to deteriorate in October which they think means more foreclosures in the future.

·         The U.S. Court reported that in fiscal year 2009 bankruptcy filings were up over 100% from 2007.

 

Job Market Headlines

·         Initial weekly jobless claims increased by 17,000 to 474,000 while forecast was for 455,000.

·         Four week moving average of weekly claims was 473,750 down slightly from previous week.

·         Continuing jobless claims came in at 5.157 million down 303,000 from previous week.

·         The labor Department reported that job openings in the second quarter were down 26% from a year ago and that layoffs were up slightly in October.

 

Commentary/Observations

Dr. Jay Butler of ASU said in November that previously foreclosed property accounted for 41% of the traditional sales. So I guess the question is are we just churning foreclosed property and if so what does that say about the housing recovery in Arizona?

 

In the November 4^th minutes of the Federal Reserve’s last ten members believe it will be 5 to 6 years before the economy returns to growth, employment and inflation levels consistent with the Boards objectives.

 

In New York a new foreclosure tactic has been noticed. It seems that second mortgage holders are selling the debt to collection firms who are able to freeze bank accounts and/or garnish wages in their efforts to collect.

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 December 4, 2009***

FHA Update: The noise is becoming more frequent and intense about changes to FHA. Clearly new guidelines and changes are nearly upon us. Look for the minimum credit score to increase, bigger down payment, lower closing costs paid by the Seller (currently maxed out at 6% some think the new limit could be as low as 2%), possible increases in mortgage insurance premiums (monthly payments just went up) and tighter underwriting guidelines (less flexibility with credit history). For FHA buyers out there who may be on the margin the time is NOW!

 

Interest Rates

Last Friday two days after Dubai World the financing arm of Dubai reported it was postponing repayment of $60 billion in debt Treasury yields fell quickly as investors sought safety in U.S. debt. Guess what? Mortgage rates moved down as well. Since then things have calmed down some and rates have returned to pre Dubai crisis levels for now. Today the government released the November jobs report and the news was unexpectedly good (see Job Market Headlines below for details). This news sent Treasury yields higher pushing up mortgage rates. So in the last week Treasury yields have increased about 25 basis points or .25%. The point here is that we never know what is going to influence the markets and rates so it is wise to be and stay informed. Finally, the average 30 year fixed rate for the week was a new record low!

 

When	Rate
This Week	4.71
1 Month Ago	4.98
1 Year Ago	5.53
2 Years Ago	5.96

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 said this week that their data showed that borrowers with credit scores below 620 were NINE times more likely to default than those with scores above 620 therefore the recent change in the minimum score.

·         Wells Fargo announced this week that is was lowering its debt to income ratio’s on conventional loans from to 45 on loans with LTV’s below 80 and to 41 for loans above 80 LTV.

 

Good News

·         Pending home sales rose 3.7% in October this was ninth straight monthly increase.

·         The ISM business barometer increased in November to 56.1 the highest level since August 2008. Anything above 50 indicates expansion in the economy.

·         The Labor Department said that non-farm productivity rose 8.1% in the third quarter the quickest pace since third quarter 2003.

·         Commerce Department reported that factory orders rose .6% in October expectation was flat.

 

Statistics of Interest/Concern

·         The Commerce Department said that consumer spending was flat in October and it revised its September numbers from up .8% to down 1.6%.

·         In the third quarter banks had to repurchase $7.1 billion in defaulted single family home loans this compared to $1.9 billion in the second quarter. Most of the repurchases were by Bank of America and Chase.

·         ISM manufacturing index was 53.6 in November down from 55.7 in October. Anything above 50 indicates expansion in the economy.

·         An ABC News consumer comfort index after “Black Friday” came in at -45. This put the index on a path for its worst year in 23 years. The index ranges from +100 to -100.

 

Foreclosure Headlines

·         Treasury announce this week that it was going to lean on lenders and servicers to do a better job of converting Trial Period loan modifications to Permanent modifications. Treasury threatens actions including the possibility of fines against those who don’t live up to Treasuries expectations. My question is what is the purpose of the Trial Payment period? Either a borrower can make the lower, modified payment or not. It seems to me they could have simple eliminated the Trial Payment period and gone straight to Permanent Modification.

 

Job Market Headlines

·         The November jobs report had unemployment at 10.0% down from the previous months 10.2% and below forecast of 10.2%. Only 11,000 jobs were lost compared to forecast of 125,000. In addition, the previous two months job loss numbers were revised downward. The 11,000 jobs lost is the lowest number since the recession began in December 2007. All of this good news must be tempered with the fact that millions of Americans are not able to find work or cannot find the full time job they want or need. Finally, the 5.9 million out of work in November represents the biggest number on record.

·         Weekly initial jobless claims fell to 457,000 a 15 month low. Forecast was for 480,000.

·         The four week moving average for jobless claims was 481,250 down 14,250 from the previous week.

·         Continuing jobless claims were 5.46 million up 28,000 from previous week.

·         Challenger, Gray and Christmas Inc said that in November planned firings declined 72% from a year ago to 50,349.

 

Commentary/Observations

The U.S. is financing more than one TRILLION dollars a year in borrowing at historical low interest rates. So what happens when rates go up? The interest payments on this debt go up and by some estimates it will be $700 billion per year. In addition, a lot of the borrowing has been short term at rates near zero. In the months ahead this borrowing will be rolled over (refinanced) into more short term financing or longer term financing. Either way it is likely that rates will be higher and the interest will grow. Some experts believe the Fed will start pushing rates up by mid 2010. It should be an interesting summer.

 

The top Moody’s Economist Mark Zandi said that home prices will resume their decline in 2010 as foreclosures pick up again. He also said the lull in foreclosure sales recently had resulted in the modest gains of the last few months. He forecasts 4.8 million foreclosures from 2009 to 2011 and that the unemployment rate will peak at 10.7% in the third quarter of 2010.

 

Our Iranian friends announced plans this week to start building TEN Uranium enrichment facilities within the next two months in defiance of U.N. demands. The move was condemned by the Obama administration and France called the move “infantile”. You gotta love the French! The U.K. said Iran had chosen to “provoke” the international community. The question is what is the international community going to do about it?

 

This Saturday is the 76^th anniversary of the ratification of the 21^st Amendment which repealed prohibition nationwide. Have a cold one on me!

 

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