Hope Now Alliance new pilot program

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update December 4, 2009***

Interest Rates

Retail mortgage rates closed the week about .25% higher than what we started the week with. Could this be the beginning of a more regular uptick in rates? Conventional wisdom has it that the rates will move higher but the move up will be bumpy. Stay tuned.

 

When	Rate
This Week	4.81
1 Month Ago	4.91
1 Year Ago	5.47
2 Years Ago	6.11

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

·         An amendment to HR 4173 the Wall Street Reform and Consumer Protection Act allows bankruptcy judges to modify mortgages. These are a number of big time sponsors for this amendment which could light a fire under banks to move the loan modification process along more quickly. In the past the banking lobby has been able to get similar legislation defeated.

·         A new Hope Now Alliance website lets HUD approved counseling agencies in certain markets submit loan modification applications on behalf of certain distressed borrowers. The program is called Hope Loan Port and GMAC, Chase, Sun Trust, PNC and Saxon Mortgage are part of the pilot program. In a related note Chase Bank says that it has been more successful with its own internal loan modification process than with the Making Home Affordable program. It said that 31% of homeowners offered Trial Modifications under the government plan never sent in a single payment.

·         GMAC announced underwriting changes for buying a home after foreclosure. The timeframe is 5 years with a minimum down payment of 10% and minimum credit score of 680. The minimum timeframe from Chapter 7 bankruptcy is 4 years and Chapter 13 bankruptcy is 2 or 4 years depending on the disposition.

·         Last week one of our sources AmTrust Bank was taken over by the FDIC then quietly but quickly acquired by New York Community Bancorp. So far this year 130 banks have failed compared to 25 in all of 2008.

 

Good News

·         U.S, households wealth rose $2.7 Trillion in the third quarter the second quarterly increase in a row according to the Federal Reserve.

·         Zillow says homeowners will lose about $500 billion in value this year a big improvement from 2008 when $3.6 Trillion was lost.

·         The Business Roundtable said its CEO Economic Outlook Index moved strongly positive to 71.5 from 44.9 in the third quarter.

·         Freddie Mac said that its Home Price Index increased .9% in the third quarter following a 2.0% increase in the second quarter.

·         The Commerce Department reported that wholesale inventory increased by .3% in October the first increase in more than a year. The forecast was for decline of .5%.

·         Retail sales were up 1.3% in November much higher than the forecast of .6%.

·         University of Michigan consumer sentiment index for November increased to 73.4 from 67.4 in October the forecast was for 68.8.

 

Statistics of Interest/Concern

·         Lender Processing Services reported that the combined delinquency and foreclosure rate for all loans thru October was 12.6%.

·         Mortgage Bankers Association said this week that MBS (Mortgage Backed Securities) delinquency (30 days or more late) reached 4.06% in the third quarter.

·         The FDIC said that on loans held by them the 90 day or more delinquency rate was 3.43% in the third quarter up by .51% from the second quarter.

·         According to Real Estate Econometrics LLP unpaid loans on commercial property were 3.4% at the end of the third quarter and could go as high as 5.3% in two years. Of the 35 biggest regional lenders that got TARP money commercial construction loans are 37% of the group’s total loans outstanding.

·         U.S. consumer spending fell by $3.5 billion in October according to the Federal Reserve. The decline was the ninth consecutive monthly decline.

·         A Bloomberg national poll revealed that Americans have become gloomier about the direction of the nation than three months ago.

 

Foreclosure Headlines

·         Foreclosure filings fell 8% in November to 306,627 (ninth consecutive month of 300,000+ filings) according to RealtyTrac. However, this was the fourth consecutive monthly decline in filings. RealtyTrac said they thought the decline was “artificially induced” due to mediation programs that likely postponed the inevitable. Nevada again led the nation with one filing per 119 households Arizona came in at one per 186 households. RealtyTrac said further it estimates a record 3.9 million foreclosures in 2009.

·         According to a study by Experian 18% of foreclosures are “Strategic Defaults”. A Strategic Default is when a homeowner who is current on all of their debt but is upside down in their home walks away.

·         The Treasury Department reported that thru November 30^th Permanent Loan Modifications had increased to 30,650 from 2711 on September 1 this out of 697,026 homeowners in Trial Modification.

·         This week Standard and Poor’s said that MBS (Mortgage Backed Securities) performance continued to deteriorate in October which they think means more foreclosures in the future.

·         The U.S. Court reported that in fiscal year 2009 bankruptcy filings were up over 100% from 2007.

 

Job Market Headlines

·         Initial weekly jobless claims increased by 17,000 to 474,000 while forecast was for 455,000.

·         Four week moving average of weekly claims was 473,750 down slightly from previous week.

·         Continuing jobless claims came in at 5.157 million down 303,000 from previous week.

·         The labor Department reported that job openings in the second quarter were down 26% from a year ago and that layoffs were up slightly in October.

 

Commentary/Observations

Dr. Jay Butler of ASU said in November that previously foreclosed property accounted for 41% of the traditional sales. So I guess the question is are we just churning foreclosed property and if so what does that say about the housing recovery in Arizona?

 

In the November 4^th minutes of the Federal Reserve’s last ten members believe it will be 5 to 6 years before the economy returns to growth, employment and inflation levels consistent with the Boards objectives.

 

In New York a new foreclosure tactic has been noticed. It seems that second mortgage holders are selling the debt to collection firms who are able to freeze bank accounts and/or garnish wages in their efforts to collect.

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