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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.