Taylor Bean Whittaker

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update August 7, 2009***

Interest Rates

For the week rates rate’s moved up about .25% as the lower than expected jobs report helped move the stock market and Bond yields higher. On a historical note on September 30, 1981 the 10 year Treasury Yield was 15.84% last week it closed at 3.48% compared to this week’s close at 3.84%. Wednesday Treasury Yields moved up as the U.S. announced its plans to sell $75 Billion in Notes and Bonds next week plus Goldman Sachs raised its forecast for second half GDP from +1.00% to +3.00%.

 

When	Rate
This Week	5.22
1 Month Ago	5.32
1 Year Ago	6.52
2 Years Ago	6.68

 

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

·         Taylor Bean Whittaker Mortgage Corporation (TBW) the 12^th largest mortgage originator in the country for the first half of 2009 (mostly FHA) was ordered by the government to suspend its funding of FHA loans. This will likely result in loan backlogs building and processing times being extended. Only Bank of America and Wells Fargo have done more FHA loans this year.

·         The Treasury released a report on the progress of loan modifications under the President’s plan. Thru July only 9% of targeted loans had been modified. Among the best performers were Saxon, Aurora, GMAC and Chase all with 20% plus. The worst performers were Wells (6%), Bank of America/Countrywide (4%), Wachovia (2%) and PNC/National City ZERO! Of an estimated 2.7 million eligible homeowners only 235,000 modifications are actually in progress.

·         The government said details on second mortgage modification will be announced next week.

 

Good News

·         ISM index for manufacturing for June came in at 48.9 compared to forecast of 46.5.

·         Construction spending was up 3%.

·         Pending home sales for June rose 3.6% compared to expectations of .7% increase. This was fifth consecutive monthly increase.

·         Consumer spending was up in June .4%.

·         The number of homes listed for sale where the asking price was reduced fell in July by 2.8% according to Zip Realty in California. The average price reduction was 10% with Las Vegas the highest at over 25%.

 

Statistics of Interest/Concern

·         Core PCE (The Federal Reserve’s favorite gauge on inflation) was up 1.5% year over year in May.

·         ISM index for non manufacturing (service sector) for July came in 46.4 down from June’s 47.

·         Between June 2007 and December 2008 the U.S. lost 22.8% of personal wealth (adjusted for inflation) the largest loss on record.

 

 

Foreclosure Headlines

·         A CNN Money story Thursday about foreclosures addressed how the increasing demand and reduction in inventory has impacted the market. Citing stories from around the country of multiple full priced offers. Obviously a big factor is the rock bottom prices. In Sacramento, for example, there is less than 30 days of inventory. According to the California Association of Realtors inventory of homes at $300,000 or below has shrunk from 10 months a year ago to 3.5 months today. Nationally the bank owned inventory has shrunk 26% from June 2008. The bad news is that it looks like there will be another foreclosure wave starting in the fall according to foreclosure.com. One of the reasons given was the re defaults on loan modifications.

 

Job Market Headlines

·         July unemployment rate dipped to 9.4 from June’s 9.5.

·         July job losses came in at 247,000 down from previous month and well below forecast of 320,000. Also, May and June job losses were revised downward.

·         Initial weekly jobless claims were 550,000 down from previous week’s revised 580,000. The four week moving average was 555,250 down for the sixth consecutive week.

·         Continuing jobless claims for the week rose 63,000 to 6.3 million.

·         Global Insight estimates that in more than half of the states it will be 2013 before jobs are back to pre recession levels.

·         Challenger the outplacement firm said that in July firms plan on increasing job cuts 31%.

·          ADP report shows that thru June we have experienced 18 consecutive months decline in hiring by small business (50 employees or less).

 

Commentary

The Treasury will borrow less in fourth quarter 09 and first quarter 10 than expected but also expects to provide less assistance to Fannie Mae and Freddie Mac than previously forecast. The government announced it was looking into remaking these two entities probably splitting each into a good bank and a bad bank. The bad bank would hold all of the bad loans. Fannie Mae lost almost $15 Billion for the quarter ending June 30, 2009 while Freddie Mac posted its first profit in two years.

 

Look for Guaranty Bank in Texas to be seized soon by the FDIC says the Wall Street Journal. The cost to tax payers is expected to be $5.3 Billion and the bank is in such bad shape it cannot be sold.

 

For more information on mortgage or related topics I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.