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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