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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.