First time home buyer tax credit

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update October 30, 2009***

First time homebuyer tax credit update: The tax credit has been included as an amendment to a bill extending unemployment benefits. The proposed amendment will extend the credit thru April 30, 2010, reduce it to max of $6500 but expand it to more buyers and increase income limits. The Senate is expected to consider it early next week. 

 

Interest Rates

This week the Fed made its last purchase of $300 Billion in Treasuries as part of its effort to keep mortgage rates down. Rates were again fairly stable for the week but the impact of lack of Fed purchases is expected to be felt soon and reflected in higher rates.

 

When	Rate
This Week	5.03
1 Month Ago	4.94
1 Year Ago	6.46
2 Years Ago	6.26

 

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

·         In recent speeches the Commissioner of the FHA has said that he expects ongoing changes to FHA underwriting policy. FHA has also indicated that it will revisit the two appraisal requirement.

·         Foresight Analytics estimates that the total delinquency for first mortgages increased to 11% in the third quarter final data will be released in late November.

·         On October 10^th in a Federal Bankruptcy court in the Southern District of New York a judge ruled that PHH Mortgage had not proved its claim of delinquency by the borrower and ordered the debt discharged……….wiped out.

 

Good News

·         Third quarter GDP grew 3.5% versus forecast of 3.2%. Housing contributed to growth for the first time in four years with +.53% growth. However, if you exclude autos driven by the Cash for Clunkers program GDP growth was actually 1.9%.

·         September durable goods up 1.0% which was in line with forecast.

·         Case-Shiller home price index declined in August 11.3% from a year ago but improved 1.2% from July.

·         Median home prices rose in September to $204,800 from $199,900 in August.

 

Statistics of Interest/Concern

·         Moody’s Investment Services said Monday that the bank charge off rate has exceeded the rate in the early years of the Great Depression. About $116 Billion has been written off so far.

·         Consumer confidence for September was 47.7 well below forecast of 53.5.

·         Oxford Analytics study suggests that home prices will fall another 10% nationally in 2010.

·         Consumer spending was down .5% in September.

·         New home sales fell 3.6% in September after five consecutive months of increases while months of inventory shrank to 7.5 months compared to 12.4 in January.

·         S&P has downgraded seven mortgage insurance companies including Radian and MGIC.

 

Foreclosure Headlines

·         The Census Department reported that in the third quarter 18.8 million homes were vacant up slightly from the second quarter.

 

Job Market Headlines

·         Initial weekly jobless claims came in at 350,000 flat from previous week.

·         The National Association of Business Economists forecast only 12,000 additional jobs per month in the first quarter of 2010.The economy needs at least 150,000 new jobs per month to keep up with population growth. The group estimates it will be 2012 before the economy reaches the 150,000 level. The consensus on unemployment was that it would peak in the summer of 2010.

 

 

Commentary/Observations

In Florida hundreds of complaints have been filed against Bank of America for loan modification related problems including lack of communication and other issues.

 

Auto analyst Edmunds.com has calculated that Cash for Clunkers cost to the tax payer per car sold was $24,000. They also added that there were few marginal sales. The government disputes the claim.

 

The Iranian regime has said it is unwilling to accept a deal that would have the country ship 70% of its enriched Uranium out of the country according to the International Atomic Energy Agency.

If you have any mortgage or related questions please contact me at (602) 803-9660 or by e-mail at burt@gosfm.com.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First time home buyer tax credit

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update October 23, 2009***

First time homebuyer tax credit update: Well the battle rages on in D.C. on this controversial topic. The rhetoric heated up late this week with the Inspector General for Tax Administration reporting that nearly 74,000 individuals who claimed the credit do not appear to qualify. Can you say fraud? The IRS said that they have opened 107,000 civil claims and have identified 167 “criminal schemes”. So far the number of tax payers that have filed to take the credit is estimated at 1.4 million. Next the Brookings Institute reported that the $8000 credit will cost the government $43,000 for each person taking the credit. They estimate that only 15% of those applying for the credit purchased because of the credit and that the remaining 85% would have purchased without it. Really?

 

Finally, if you are trying to close a loan before the existing deadline to get the credit you may want to have your complete loan file submitted by November 30^th at the absolute latest. Remember we have a big holiday at the end of November.

 

HVCC Update: The House Finance Committee has included an amendment to HR 3126 that would effectively KILL this disaster of government think by allowing lenders, loan originators, etc to order appraisals again. Anyone ordering an appraisal would have to be a licensed mortgage professional under new SAFE guidelines.

 

Interest Rates

Interest rates for the week remained essentially flat but change is a coming. The Treasury Department announced that next week it will auction off a record $123 Billion in Notes to fund the country’s operation. Note that this amount will only last two weeks! The upward pressure on rates will increase as government Treasuries compete with Mortgage Backed Securities (MBS) for investor dollars. If Treasury yields move higher MBS will have to follow to be competitive thus pushing mortgage rates upward. Also, long term Treasuries are growing weaker as the Fed buying program winds down this month. We should see a similar situation in the MBS world as the Fed slows it purchases of MBS. Also, as if this was not enough Moody’s said Thursday that the U.S. needs to get its deficit reduced in the next 3-4 years or risk its triple A rating. This is a big one folks and with the deficit in the trillions of dollars and the economy struggling to recover a reduction in this rating will raise our costs to finance government spending resulting in………..you guessed it higher rates. All of this combined means higher rates are on the horizon.

 

When	Rate
This Week	5.00
1 Month Ago	5.04
1 Year Ago	6.09
2 Years Ago	6.33

 

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

·         John Burns Real Estate Consulting survey said that of all NEW homes purchased 59% were FHA, VA or Rural all loans requiring 3.5% or less for down payment. The FHA disputes the report and says that about 75% of FHA buyers put more than the minimum 3.5% down. Really?

·         Freddie Mac reported it September delinquency increased to 3.33% up from August 3.13% and much higher than September 2008 1.22%.

 

Good News

·         September sales of existing homes were up 9.4% in September and the inventory declined to 7.8 months the lowest level since March 2007.

·         The median home price for September was $174,900 down 8.5% from a year ago and down from August $177,300.

·         September housing starts were up .5% in September which was in line with forecast.

·         The Labor Department reported that the Producer Price Index (PPI) fell .6% in September which was on target with the forecast.

·         Leading economic indicators rose for the sixth consecutive month according to the Conference Board a private research firm.

 

Statistics of Interest/Concern

·         The National Association of Home Builders (NAHB) housing index expressing builder sentiment fell to 18. Forecast was for 20. This is first decline in 3 months.

·         Construction permits declined 1.2% in September which was below forecast.

 

Foreclosure Headlines

·         In testimony before the House Oversight Committee a Treasury official confirmed that they were developing a plan for foreclosure alternatives using TARP funds. The plan would be called the Foreclosure Alternatives Program and would include incentives for short sales and deeds in lieu of foreclosure. No timing was discussed.

·         Fiserv a financial information and analysis firm predicts that home prices nationally will decline another 11.3% by June 2010. They forecast for the Phoenix area the decline will be 23.4% by June 2010 with a slowing decline of 5% in 2011.

·         The charts below illustrate a couple of things we probably already know. First, the more expensive homes are not selling. Second, homes priced under $150,000 are where the action is at. [Data from ARMLS]

 

 

 

 Job Market Headlines

·         Weekly initial jobless claims rose to 531,000 up from previous week revised number of 520,000.

·         The four week moving average of initial jobless claims came in at 532,000 which is flat from previous week.

·         Continuing claims fell to 5.9 million from the previous weeks 6.0 million. Note that some observers think the decline is due to those no longer looking for work and/or whose benefits have expired.

 

Commentary/Observations

The focus this week is on the commercial market since it is likely the next big financial challenge that we will face. There are at least three signs to watch for that could indicate the collapse of the commercial market. First, an increase in activity at so called “special servicers” who handle troubled loans. From April to August these special servicers saw their volume double to $50 billion according to Trepp a firm that tracks the commercial market. Second, the failure of big projects involving big dollars. For example, the Stuyvestant Town project in East Manhattan we discussed previously has lost a court case where they would have been able to raise rents. This is just another step toward default on the projects multi-billion dollar debt. Third, the performance of community banks as they manage their portfolio of commercial loans.

 

As part of this potential crisis the President announced this week that the administration will start using left over bailout funds to help community banks by incenting them to lend to small businesses. Not surprisingly the National Federation of Independent Business said they would prefer lower taxes and less government intervention. And a final thought on coming commercial loan crisis. In 2006 the FDIC failed to enforce its own guidelines to control excessive commercial lending by 20 banks that, you guessed it, ultimately failed according to the FDIC’s own Office of Inspector General. Are you thinking what I’m thinking?

 

If you have any mortgage or related questions please contact me at (602) 803-9660 or by e-mail at burt@gosfm.com.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First time home buyer tax credit

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update July 17, 2009***

Format update! You will notice that two new topics have been added to the newsletter: Foreclosure Headlines and Job Market Headlines. This was done to emphasize the importance of and focus on both as they are critical to the economic recovery we all want so badly. The addition of two new topics will not diminish the emphasis on brevity. Toward that end also starting this week you will find in BOLD portions of the commentary. Hopefully if just the bold is read you will get the essence of the comment. As always if you have any feedback, comments, ideas or topics please let me know.

 

Interest Rates

Rates moved up early this week driven primarily by the stock market and some good earnings reports. However, by the end of the week rates had moved back down to last week’s levels. So where does that leave us? Since the first of the year mortgage rates have been in the mid to low 5.00% range and a few times below 5.00%. I would say it’s a reasonable guess that rates this low cannot continue forever. My advice is ACT NOW!

·         If you or anyone you know is thinking about buying a home call me and get Pre Qualified NOW.

·         If you or anyone you know wants or needs to refinance call me NOW. Remember, the new max Loan to Value(LTV) under the President’s housing plan has been increased to 125%.

·         Also, if you or anyone you know needs some help with a loan modification call your lender TODAY or call me with questions.

 

 

 

When	Rate
This Week	5.14
1 Month Ago	5.38
1 Year Ago	6.42
2 Years Ago	6.69

 

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

·         Chris Dodd and Barney Frank have sent a letter to bank regulators calling for action on second lien modifications. The problem they say is second lien holders refuse to participate in the Hope for Homeowners program because they believe those second liens may be worth more in reality.

·         The State of Massachusetts has introduced a program to loan first time buyers up to $8,000 toward the purchase of a home. The loan would be repaid from the Federal tax credit. There are several other states with similar programs.

·         The Century 21 FHA Housing Act of 2009 (HR 3146) would require HUD/FHA to review new mortgages that become 60 days delinquent within the first 90 days of origination. The goal is to identify lenders with a high delinquency rate. FHA is going to hire 90 people to administer this program if it becomes law.

·         As of April 37% of Option Arms are 60+ days delinquent and 19% are in foreclosure. Compare this to sub-prime loans which are 33% 60+ day delinquent and 14.5% are in foreclosure according to First American CoreLogic.

·          

 

Good News

·         Retail sales were up .6% in June which was higher than forecast. However, excluding autos and gas the number was fourth monthly decline in a row.

·         Inventories were down 1.0% for the month the ninth consecutive decline in a row.

·         Home prices were up nationally by 1.6% in May according to Integrated Asset Services. This was biggest monthly increase since July 2005.

·          Housing starts for June were up 3.8% and exceeded expectations.

 

Statistics of Interest/Concern

·         For the first 9 months of FY 2009 ended June 30 the U.S. Governments budget deficit was $1.09 Trillion compared to $285.9 Billion in June of 2008.

·         According to trulia.com one fourth of homes sold had price reductions of 10% or more. In Phoenix the average reduction was 13%.

·         Producer Price Index (PPI) was up 1.8% in June double the forecast.

·         Consumer Price Index was up .7% in June.

·         Commercial Mortgage Backed Securities (CMBS) could hit 5-6% delinquency by the end of 2009 according to Moody’s. The current delinquency rate is 2.67%.

 

Foreclosure Headlines

·         Foreclosure starts could be declining according to the Federal Housing Finance Agency (FIFA). April foreclosure starts were 85,938 down from the previous month’s total of 88,491.

·         Foreclosures rose 15% in the first half of 2009 impacting 1.5 million homes according to RealtyTrac. In addition foreclosures in June increased 5% from May. RealtyTrac also said June was the fourth consecutive month of 300,000+ foreclosure notices.

·         For the first half of 2009 Arizona was #2 in foreclosures behind Nevada.

 

Job Market Headlines

·         Initial jobless claims were down 47,000 to lower than expected 522,000 (the lowest level since January 2009).

·         Continuing jobless claims fell to 6.2 million.

·         Michigan unemployment rate hit 15% in June the highest rate for a state since early 1984.

·         Every quarter since March 2006 bankruptcies have increased. In the month of March 2008 there were 245,000 and a year later there were 330,000 in March.

 

Commentary

According to a report entitled “Red Light States-Who Buys Adult Entertainment” published in the Journal of Economic Perspective Utah was declared number one.

 

Under the category of OPPS! It seems that Wells Fargo has sold $600 million in Sub Prime loans to Arch Bay Capital for 35 cents on the dollar. This was a private sale so there is not much information available on it.

 

More on Sub Prime loans from Atlanta. During the fourth quarter 2008 and first quarter 2009 Sub Prime foreclosures in Atlanta sold at more than twice the rate of prime foreclosures says Data Intelligence. The reason is that the investors in those Sub Prime loans were more interested in moving the properties in bulk to reduce costs rather than modify the loans one at a time. Deutsche Bank estimates that these Sub Prime sales are yielding only 26% of the original loan amount.

 

For more information on mortgages or related contact me at (602) 803-9660 or burt@gosfm.com.

 

Burt Carlson