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Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage & Business Update March 26, 2010***

HEADLINE: New foreclosure prevention plan announced by the government today details can be found at www.makinghomeaffordable.com or contact me for information.

 

Interest Rates

Retail rates moved up toward the end of the week to just over 5%. Expectations for much better jobs numbers and a weak Treasury auction pushed the stock market and Treasury yields higher at mid week. There is growing sentiment that the Fed will have to sell the Mortgage backed securities (MBS) it owns which will put upward pressure on mortgage rates. Remember the Fed purchased $1.25 Trillion of these MBS and hold them on its balance sheet.

 

When	Rate
This week	4.99
1 Month Ago	5.05
1 Year Ago	5.07
2 Years Ago	6.24

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

·         Effective April 5, 2010 up front mortgage insurance on FHA loans increases from 1.75% to 2.25%.

·         The USDA or Rural loan program is close to running out of funding and only Congress can authorize additional funding.

·         Details are now starting to emerge on the $1.5 Billion program to help underwater homeowners in AZ, CA, NV, MI and FL. It looks like Arizona will get $125 million for the Arizona Housing Department to hand out. According to the Department’s Director he will take the approach known as “earned forgiveness”. This is where the state and banks promise to forgive debt later but only if the homeowner/borrower who stays in their home, makes payments and still has a job. The Director is not inclined to help out those who overspent on their homes or took out equity lines during the boom.

·         Chase Bank has finally agreed to sign up for HAMP2 the government’s second mortgage modification program. Chase joins Wells Fargo and Bank of America as program participants. Citi also announced it would participate in the program. Together the four big banks hold about $442 billion in second mortgages.

·         Fannie Mae revised its first quarter funding estimate downward from plus 2.8% to minus 17.2%. In addition it downgraded its funding estimate for the entire year from $1.97 Trillion to $1.31 Trillion a reduction of over 30%.

 

Good News

·         Commercial real estate prices improved 1% in January according to Moody’s/REAL Commercial Property Price Index. This was the third consecutive monthly increase in prices.

·         The Commerce Department reported that durable goods were up .5% in February the third consecutive monthly increase.

·         Consumer sentiment for March was 73.6 unchanged from February according to the Thomson Reuters/University of Michigan survey.

 

Statistics of Interest/Concern

·         Mortgage delinquency was nearly 14% at the end of 2009 according to the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). The increase was due mainly to a 21% increase in 90 day plus delinquency.

·         Existing home sales declined .6% in February the third consecutive monthly decline.

·         New home sales declined 2.2% in February for the fourth consecutive monthly decline and yet another low for annualized sales according to the Commerce Department.

·         Chase Bank said Monday that its losses from the Wamu mortgages it acquired could be as much as $40 Billion plus another $3-4 Billion in the quarter from the Wamu credit card portfolio.

·         The New York Federal Reserve says that as much as 40% of FHA mortgages are upside down.

 

Foreclosure Headlines

·         According to Zillow the number of cities experiencing a “double dip” in home prices increased from 5 in December to 12 in January. They also identified 10 other markets that “seemed poised for a double dip”. These cities included Boston and Denver. No Arizona cities were mentioned by Zillow.

·         The Financial Times says the average cost of foreclosure to a lender is about 50% of the outstanding loan balance.

·         Strategic Defaults are on the rise according to Amherst Mortgage Insight. In their report issued this week they show these defaults increasing along all types of loan classes and accelerating as negative equity increases. The report observed that if the various loan modification schemes incent borrowers to default in order to qualify look for a further increase in Strategic Defaults.

 

Job Market Headlines

·         The jobless rates in four states (FLA, NV, GA & NC) hit record levels in February. Also, 27 states saw unemployment rates higher in February than in January according to the Department of Labor.

·         Initial weekly jobless claims were down 14,000 to 442,000.

·         The four week moving average for weekly claims was down 11,000 to 453,750 the lowest since September 2008.

·         Continuing claims fell 54,000 to 4.65 million the lowest since December 2008.

·         Congress went on its two week spring vacation without extending unemployment benefits again. Up to 750,000 could lose their benefits by the end of April if Congress does not act. Republicans argued the $9.2 billion cost should come from the Stimulus funds but Democrats said that would hurt the job creation effort. The Stimulus bill was for $787 billion.

 

Comments/Observations

The government has controlled the housing market for the last 18 months or so thru the GSE’s (Fannie Mae and Freddie Mac) and FHA. Collectively they own or control more than 50% of all mortgages and by some estimates 70% of mortgages done in 2009. There is increasing conversation about doing something for our national housing market the question is what and when. Do we privatize or nationalize? Do we find some sort of middle ground solution? How do we make the transition from what we have today to whatever solution is agreed upon? These are difficult decisions and ones that will impact our lives and our economy for years to come.

 

One of the elements of this housing reform will be the mechanism by which capital is raised. What will that process look like in the future? Clearly some portion of the funding will come from overseas investors. Perhaps the recent statements by David Stevens the FHA Commissioner will shed some light on the challenges associated with relying on foreign bankers and investors. In a recent speech Mr. Stevens said when referring to some conversations he had with international bankers about how these bankers/investors saw triple A rated securities turn to junk “We are at the point right now where no one trusts the American housing finance system”. If what he says is true one can only observe how far we have fallen in such a relatively short amount of time.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update March 19, 2010***

Editor’s note: If you are interested in the latest results on loan modifications check out the Mortgage Industry Update section.

 

Interest Rates

Retail mortgage rates declined slightly this week so pricing remains very attractive for home buyers and others.

Meridith Whitney a well respected analyst said this week that the housing market will likely do a “double dip” when the Fed stops buying Mortgage Backed Securities (MBS) later this month. She also fears that the re-defaulting on many loan mods will bring more foreclosures to the market as well. Others have a different view since the Fed has said it is prepared to start the MBS purchase program again if necessary and has pledged to keep rates low for “an extended period of time”.

The head of FHA told Congress that he anticipates a .25% to .75% increase in mortgage rates as the result of the Fed ending its MBS purchasing program. He also said that increasing the minimum down payment to 5% would not provide much risk protection and would cause an estimated 40% drop in FHA loan volume at a time when the housing market needs the support.  You might want to check out this link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner and read my article “Is FHA too big to fail? “. By the way, FHA loan volume is off substantially so far this year.

Overnight Fed Funds rates have risen to their highest level since last September and the 3 month T Bill rose last week to its highest since last August. These and other signs point to the Federal Reserve laying the foundation for increasing longer term rates.

 

 

When	Rate
This week	4.96
1 Month Ago	4.93
1 Year Ago	4.98
2 Years Ago	5.87

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 results of the Making Home Affordable loan modification program thru February were released by the Treasury Department. The top three servicers for active trial mods plus permanent mods were GMAC 53%, Citi 52% and Chase 39%. The bottom three servicers were Bank United 22%, Litton 23% and Bank of America 24%. The top servicers for Permanent Loan Mods were GMAC 22%, US Bank and Aurora Loan Services 10% and Bank United 8%. Bank of America was 2%, Chase 4.5%, Citi 6% and Wells Fargo 6.5%. Seems they can get them into trial mods fairly well but are having a problem getting conversion into permanent loan mods.

·        More on loan mods as of February 2010 an estimated 1.8 million homeowners are eligible but as delinquency increases this number is sure to grow. According to the treasury report almost 28% had some form of “principal forbearance” and 57% cited loss of income as the reason for loan mod request.

·        The Hope Now Alliance announced that in January loan mods done outside of the government program (HAMP) were at 99,499 nearly double the HAMP mods. The mods were done by private lenders who have more flexibility than the HAMP allows. The Alliance noted that 74% of the mods involved principal and interest reductions.

·        Wells Fargo said this week it will finally participate in the government’s plan to modify second mortgages. Bank of America joined the program in January. The two mortgage giants account for 25% of all second mortgages. Wells Fargo itself has about $124 billion of them. The government plan was announced last summer by the Treasury Department.

 

Good News

·         Industrial production (factories, mines & utilities) rose .1% in February for the eighth consecutive month. Manufacturing output declined by .2% due to bad weather and the Toyota recalls.

·         Credit card delinquency at Capital One and Bank of America declined in February but charge offs rose at Discover, American Express and Bank of America.

·         The Producer Price Index (PPI) a good gauge of wholesale inflation fell .6% in February the sharpest decline since July 2009 according to the Commerce Department. The year over year PPI was 4.4%.

·         The University of Michigan Consumer Sentiment survey for March was down to 72.5 from 73.6 in February but still at the six month average. In March 2009 the index was 57.9.

·         The Consumer Price Index (CPI) rose .1% in February further supporting the belief that inflation is not an issue for now.

·         The Conference Board’s index of leading economic indicators was up .1% in February. This was the 11^th consecutive monthly increase in the index.

 

Statistics of Interest/Concern

·         The U.S. government extended its monthly budget deficit streak in February to 17 months according to the Treasury Department.

·         The NAHB/Wells Fargo Home Builders Confidence Index fell to 15 in March down 2 points from the previous month.

·         New housing starts fell 5.9% in February and new building permits were down 1.6% according to the Commerce Department.

 

 

Foreclosure Headlines

·         Lender Processing Services reports that in January mortgage delinquency hit 10.25% and that while slowing delinquency was still at an all time high. If you add in the 3.3% that are in foreclosure total delinquency is just over 13.5%. They also note that 31% of the loans more than six months delinquent had NOT yet entered foreclosure proceedings. In addition 22.8% of loans one year delinquent had not entered into foreclosure proceedings. “The nations pool of problem loans continues to grow and stagnate” said the report.

 

Job Market Headlines

·         Initial weekly jobless claims were down 5,000 to 457,000.

·         The four week moving average of weekly jobless claims was down slightly to 471,250 but still up 30,000 since the beginning of the year.

·         Continuing jobless claims rose slightly to 4.58 million.

·         The President signed jobs bill Thursday giving companies that hire unemployed workers a “tax holiday” thru the end of the year. Employers will not have to pay the 6.2% Social Security tax for the new workers. However, the workers will have to reimburse Social Security at some point for “lost revenue”. In addition funds were set aside for highway and transit programs.

 

Comments/Observations

This week both Moody’s and Fitch said that the U.S. has moved substantially closer to losing its triple A credit rating. In a related story Fitch said that hotels loan delinquency could double between now and 2012 to 30%. Hotels are currently running the highest delinquency of any commercial real estate asset class at 17%.

 

It is hard to see how we avoid a “double dip” in the housing market. The reasons are plentiful but include mortgage rates moving higher soon, the end of the first time home buyer credit in June, the ongoing stagnant jobs market, the modest at best success of government efforts to slow foreclosures and the re setting of Option Arm and interest only loans in the next year or so. While there are bright spots in the economy we need more of them and soon.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage & Business Update Maech 12, 2010***

Interest Rates

Retail mortgage rates remained in the same narrow range they have been in for the last few weeks at around 5%. More on rates…………In a speech on February 23 former head of the Federal Reserve Alan Greenspan said that the 10 year Treasury yield is the “one statistic that I watch every morning and afternoon” and  the National Association of Business Economists (NABE) forecasts that the Fed will increase its benchmark rate by .25% to .50% within six months.

 

When	Rate
This week	4.95
1 Month Ago	4.97
1 Year Ago	5.03
2 Years Ago	6.13

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 said this week that thru February there have been 170,000 permanent loan modifications or about 15.5% of those eligible. In addition another 91,800 have been approved by lenders but are just waiting to be accepted by homeowners. There are also 835,000 in trial modification.

·         In mid February the President announced a plan to help underwater homeowners in the five states where the foreclosure crisis has hit the hardest. The states are CA, FL, MI, NV and AZ. The state’s Housing Finance Agencies must submit a proposal to the Treasury Department for using the funds. The program targets reducing loan balances, second liens and people out of work.

·         The state of Pennsylvania has a program that provides emergency assistance funds to homeowners with financial hardships, job loss, medical issues or even divorce. The program will loan up to $60,000 for maximum 36 months for homeowners in their primary residence. Last year several thousand people took advantage of the program administered by the state’s Housing Finance Agency. The program was started in 1983.

 

Good News

·         In a Reuter’s poll of economists most believe the economy will grow at a 2.9% rate in 2010 which is less than fourth quarter 2009 growth. One benefit will be that the Fed will likely keep rates low.

·         The Bloomberg Professional Global confidence Index fell to 53.8 in March from 54.9 in February but the index was over 50 for the eighth consecutive month. Anything over 50 indicates optimism for the economy.

·         Retail sales increased .3% in February according to the Commerce Department but the prior two months figures were adjusted downward. February forecast was for a decline of .2%.

 

Statistics of Interest/Concern

·         The National Federation of Independent Businesses (NFIB) said its small business optimism index was 88 in February down slightly from January and below 90 for the 17^th consecutive month.

·         The Commerce Department said wholesale inventories fell by .2% in January compared to the forecast of an increase of .2%.

 

Foreclosure Headlines

·         RealtyTrac reported there were 308,524 foreclosure notices in February down 2.3% from January but still up 6% from February 2009. Nevada led the nation with one foreclosure per 102 homes Arizona was second with one per 163 homes.

·         A Washington Post story today estimated that 5 to 7 million properties are at risk for foreclosure and the number could grow as more homeowners become distressed. For example, Chase estimates while foreclosures fell steadily last year the bank expects an increase this year that could possibly double in fourth quarter 2010. The story cited RealtyTrac’s data that shows 75% of homeowners more than 90 days delinquent are prime borrowers and most of them have not made a payment in six months.

·         A group called the Mortgage Investors Coalition (MIC) recently submitted a proposal to Congress to overhaul the refinancing of underwater mortgages by writing down loan balances on first and second mortgages. The plan proposes that the loan to value be capped at 96.5 and that a new FHA loan be used to provide new financing.

 

Job Market Headlines

·         Initial weekly jobless claims were 462,000 forecast was for 460,000.

·         The four week moving average for weekly initial claims was 475,500 up 5,000 from previous week.

·         Continuing jobless claims were up 37,000 to 4.5 million with the states reporting that an additional 5.6 million were collecting extended unemployment benefits.

·         The jobless rates increased in 30 states during January down from 43 in December according to the Labor Department.

·         According to the Department of Labor at the start of the recession 146.2 million Americans were working compared to 138.6 million as of February 28, 2010. If employers added 29,000 jobs per week starting March 11 it would take five years to get back to 146.2 million.

·         Manpower a global employment services firm said U.S. employers are slightly less willing to hire workers in the coming quarter than three months ago.

 

Comments/Observations

The Center for Budget & Policy Priorities released a report saying that states took in $87 billion less in revenue during the period from October 2008 to September 2009 than the previous 12 months. This was the steepest decline in state revenues on record. Also, Arizona announced this week it was borrowing $250 million from the federal government to replenish its unemployment fund so it can pay its unemployment claims.

 

The city of Kansas City’s school district to avoid filing bankruptcy is closing almost half of its schools due to a lack of funding and declining student population.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Mortgage Industry Update: Rates, News & More

                                           ***Smart Financial Weekly Mortgage Update July 10, 2009***

Interest Rates

Rates were down sharply mid week as the stock market weakened and demand for 10 Year Treasuries was higher than expected with some of our sources offering 30 year fixed rates just below 5.00%! In spite of an upward adjustment Thursday rates were back to just below 5.00% Friday. The head of Interest Rate Strategy for Morgan Stanley said this week that he expects the 10 Year Treasury Yield to “grind” lower by late September then finish the year at about 4.25%. Also this week a Wells Fargo economist predicted that the 10 Year Yield will be about 4.00% by the end of this year. The 10 Year Treasury Yield finished the week at 3.29%. If these predictions are true we can expect mortgage rates to increase about .50% or more by the end of 2009.

 

 

When	Rate
This Week	5.20
1 Month Ago	5.59
1 Year Ago	6.37
2 Years Ago	6.73

 

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

·         Late last week we received word that there had been a significant change in the Your Way Home AZ program. You may recall that this program is designed to help home buyers purchase foreclosures. The original guideline on appraised value required the Seller accept a 5% discount off of the appraised value if selling to a program participant. The new guideline has been reduced to 1%. For information on the program go to ww.yourwayhomeaz.com or contact me.

·         FHA/VA loan applications in June were 36% of total applications the highest level since 1990.

·         Making Home Affordable Update: In a report released by the Boston Federal Reserve this week the Fed said lenders are not modifying loans because they lose money on modifications. The report specifically said that the Making Home Affordable program is “not likely to work”. The report covered over 665,000 loans originated between 2005 and 2007 and followed 150,000 thru the end of 2008. The Treasury responded with a statement that more than 240,000 have had their loans modified under the President’s plan and that the pace of modifications was increasing. One of the co authors of the report who is a Senior Economist for the Boston Fed said that the government would be better off just giving the money directly to homeowners.

·         More Making home Affordable News: Today the government announced it would begin authorizing lenders to modify second mortgages specifically Home Equity Lines of Credit. The process could start as early as the end of this month!

 

Good News

·         Initial weekly jobless claims of 565,000 were below forecast and the lowest level since January this year.

·         ISM Services Index of which gauges the health of the service sector improved in June to 47 up from May’s 44.

 

Statistics of Interest/Concern

·         Continuing jobless claims were up 159,000 to 6.88 million a new record and almost double from a year ago.

·         New hiring level in May was the lowest level in 9 years. Since May 2008 the number of job openings has declined by 1.5 million!

·         $108 Billion in commercial loans as of June are now in default, foreclosure or bankruptcy according to Real Capital Analytics Inc. This represents 5315 properties double the number of properties from the end of 2008!

·         Home Equity Lines of Credit (HELOC) delinquency of 30 or more days past due for Q1 2009 rose to a record 3.52%.

·         Credit card delinquency of 30 days or more past due was 3.23% in Q1 2009 the highest since 1974.

·         Consumer Confidence for June was 64.6 down from May’s 70.8 and below forecast.

 

Commentary

Folks, it is all about jobs. Unless and until the job market gets better and people get back to work, or if they are working and not feeling good about their long term job security, the recovery is going to be slow. If you want to watch one statistic watch the continuing job claims number. When that number starts going down from 6.88 million for more than one month then we will see more good news. Here is an interesting job related stat. Did you know that from March 2008 thru March 2009 Phoenix metro lost as many jobs as Detroit metro? Yes it is true.  According to Arizona Magazine’s July edition each metro area lost 135,000 jobs in that period.

 

Finally, on an international note, late this week the Egyptian’s seized about 1500 pounds of explosives in a mountainous area near the Israeli border. Apparently the plan was to attack the Suez Canal and disrupt shipping through it. 26 people have been arrested so far. For more information on home loans and related I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.

Burt Carlson

 

 

 

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MORTGAGE INDUSTRY UPDATE: RATES, NEWS & MORE

***Smart Financial Weekly Mortgage Update June 26, 2009***

Interest Rates

In last week’s Update I said “My guess is we will see rates move up next week”. So much for my forecasting skills! L Rates remained essentially flat for the week with a slight downward pattern at the end of the week. The Federal Reserve made it know after their meeting mid week that they had no plans to buy more Treasuries and they are still committed to buying $1.25 Trillion in Mortgage Backed Securities (MBS) in 2009. They will “continue to evaluate timing and amounts” of any future increases in purchases. This statement helped keep the market calm which will hopefully be the case for the near term. We do NOT need any surprises!

 

 

Date	Rate
6/26/09	5.42
6/19/09	5.38
6/12/09	5.59
6/5/09	5.29
6/26/08	6.45
6/28/07	6.67

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

·         There has been some discussion in D.C. about increasing the Making Home Affordable Refinance limit from 105% LTV to as much as 125% LTV.

·         In March FNMA said they would not guaranty loans in condo communities with fewer than 70% sold up from the previous guideline of 51%. Some Senators including Barney Frank have asked FNMA to “make some adjustments” to their guidelines.

·         The National Association of Home Builders (NAHB) wants the condition of the home to be taken into consideration for home valuation. They argue that distressed homes are typically not as well maintained or damaged compared to others. They have suggested extending the geographical area for comps and/or the time frame for recent sales.

·         The Home Valuation Code of Conduct (HVCC) is getting a lot of attention from the mortgage and housing industry and it is not positive. There are many problems with the process which basically uses a centralized clearinghouse or management company to do appraisals. A big problem is there cannot be ANY communication between the lender, Realtor, Seller, etc and the actual person doing the appraisal. There are many groups actively seeking to lobby for changes in the process. One of these is Think Big Work Small. They have developed a petition which we have signed and recommend interested parties also sign. If you are interested their e-mail address is tbwsdaily@thinkbigworksmall.com

·         Reminder: Smart Financial will pay for the appraisal on your first loan with us!

 

Good News

·         Existing home sales for May were up 2.4% to 4.77 million just below expectations.

·         Existing home inventory for May was at 9.6 months down from 10.2 months in April.

·         Median home price for May was $173,000 down almost 17% from May 2008.

·         Durable goods were up 1.8% compared to forecast of down .9% (even with the increase in May year over year durable goods are down almost 27%).

·         Continuing unemployment claims were up slightly to 6.74 Million.

·         New home inventory was at 10.2 months down slightly from 10.4 months.

 

Statistics of Interest/Concern

·         The Government said this week that it had raised 80% of the funds it needs for FY 2009.

·         The Securities Industry and Financial Markets Association (SIFMA) says Q3 2009 GDP will grow .8%.

·         The Labor Department said that mass layoffs (50 or more employees from single company) increased in May and were the highest since 1995.

·         Quarterly CEO Economic Outlook Index was 18.5 for Q2 2009 compared to -5 for Q1 2009 (above 50 indicates expansion in the economy).

·         Weekly jobless claims were up slightly to 627,000.

·         New home sales market share of 7.45% in May was the lowest since 1968.

 

Commentary

The Harvard University Joint Center for Housing Studies issued a report that said the housing recovery will be slow due to job losses and continued foreclosures. I wonder how much that study cost?

 

 If you have any mortgage related questions please contact Burt Carlson at (602) 803-9660 or at burt@gosfm.com.