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Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage & Business Update January 29, 2010***

SHORT SALE/FORECLOSURE WARNING! N If you have done a short sale or foreclosure, are thinking about it or know someone who is consider the following. Banks have become increasingly aggressive in collection efforts against borrowers who do a short sale or foreclosure where a balance remains. The primary targets so far seem to be borrowers who did a strategic default (walked away from the home even though they could afford it). The banks are converting the secured debt to unsecured and then pursuing the borrower. According to the FDIC from January 2009 thru September 2009 banks collected $1.01 Billion or 48% more than the same period a year earlier. This is all bottom line profit folks! The banks are being very careful in the short sale agreements to preserve their rights. The good news is that Arizona and California have anti deficiency laws that protect the homeowner from collection activity but only on a primary residence. Given the huge number of dollars involved and the related risk if you are considering a short sale or foreclosure get the best advice you can.

 

Loan Modification Help: For homeowners with a Freddie Mac loan they can contact the City of Phoenix NHS office at (602) 258-1659 for assistance with their loan modification, debt counseling and other mortgage related matters. The service is new and it is free!

 

More Loan Modification: The Hope for Homeowners program is back in the news this week. Apparently the Treasury Department has finally figured out that lowering payments is fine but reducing loan balances is even better. Some 15 million homeowners are upside down in their homes and the concern is an increasing number of them may throw in the towel and move on. Yah think!

 

Interest Rates

At the Federal Reserve Board meeting this week the Board said it will maintain its position on rates for the foreseeable future. However, with respect to mortgage rates and its support of them since early last year which ends at the end of March, the Board said “it is prepared to modify those plans if necessary to support financial stability and economic growth”. Meanwhile retail rates hovered around 5% for most of the week. More and more analysts are suggesting that maybe we will not have the anticipated increase in rates and even if it happens it will not be as severe as previously thought.

 

 

When	Rate
This week	4.98
1 Month Ago	5.14
1 Year Ago	5.10
2 Years Ago	5.68

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 is working to help clear up the backlog of about 450,000 loan modifications that are in the Trial period and moving them to Permanent status. The Department issued new guidelines this week that it says will help speed up the modification process. In a novel approach Treasury is going to require that borrowers provide all forms and documents up front! Previously they had given servicers the ability to decide how they wanted to get the information. The new rule is effective June 1. Many of the homeowners in the Trial period have completed the required payments and are simply waiting to be notified that their loan has been permanently modified but servicers are still chasing paperwork.

·         FHA has announced an update to its loan modification program by expanding it to include homeowners that are current or just 30 days delinquent (Mortgagee Letter 2010-004). A loan can be temporarily modified by verbal agreement with the servicer for up to 90 days or in writing for longer under the FHA-HAMP.

 

Good News

·         Fourth quarter 2009 GDP was 5.7% the highest since third quarter 2003. Forecast was for 4.6%. Note that without a sharp liquidation in inventory the number would have been 2.2%. For the full year 2009 GDP was down 2.4% the deepest annual decline since 1946.

·         The National Association of Business Economists survey showed 61% expect gain in 2010 GDP of 2% or more.

·         The University of Michigan Consumer Sentiment survey for January was 74.1 up from 72.5 in December and the highest since January 2008. Also, the Conference Board’s Consumer Sentiment Index increased to 55.9 in January from 53.6 in December. This was the highest number since September 2008.

·         The ISM Midwest Index of business activity rose to 61.5 in January from 57.4 in December.

·         The National Retail Federation forecast retail sales to grow 2.5% in 2010 compared to a decline of 2.5% in 2009.

·         Durable goods increased .2% in December but well below forecast of a 2.0% increase.

 

Statistics of Interest/Concern

·         The Congressional Budget Office (CBO) estimates that FY 2010 deficit will be $13.5 TRILLION and that a new jobs bill and war funding requests could push the number higher.

·         December existing home sales fell 16.7% in December the steepest monthly decline on record according to the NAR. For the year sales increased 4.9% while the average price fell 12.4% from 2008.

·         Case-Shiller reported that home prices declined by .2% in November the first decline in 7 months. This is an improvement from a year ago when prices declined by 5.8%. Phoenix prices in November were up 1.1%.

·         The Commerce Department reported new home sales were down 7.6% in December and finished 2009 down 22.9%.

 

Foreclosure Headlines

·         The Orange County Register (California) reports that foreclosures notices in December were 10,513 which is double the total from March of 2009.

 

Job Market Headlines

·         Initial weekly jobless claims fell 8,000 to 470,000 which were higher than the expected 450,000.

·         The four week moving average of initial weekly claims rose 9,500 to 456,250.

·         Continuing claims (measures only those on 26 week benefits) fell by 57,000 to 4.6 million however if you add in workers on extended benefits the total number of workers collecting benefits is 10.2 million!

·         According to Fortune magazine the 22 best companies to work for have 87,500 job openings to fill.

 

Commentary/Observations

The International Monetary Fund (IMF) said this week in its updated Global Financial Stability Report that the global financial system remains “fragile” and that banks need to increase their capital and emerging economies need to be concerned about asset bubbles.

 

Wednesday the Greek 10 year bond yield surged to 10 year high of 6.7% (our 10 year yield is 3.60%) and the World Stock Index declined for the sixth day. The concern is that sovereign debt will derail the world economic recovery.

 

Japan’s bond issuance may climb in FY 2011/2012 from an already record amount planned for FY 2011. The increase is to fund rising welfare costs and off-set declining tax revenue. S & P has said that unless Japan produces a credible plan to control its debt and grow the economy it faces a downgrade in its credit rating. This of course would increase the country’s cost to borrow only adding to the problem. Currently Japans debt is about 200% of its GDP but the good news is that because of its huge domestic savings it should be OK for a few years at best. After that the risk of default becomes very real says S & P. Does any of this sound somewhat familiar?

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