Tuesday, November 17, 2009

Mortgage Update for November 17th, 2009

Stock Market Up, Mortgage Rates Down

Several Fed officials spoke up last week indicating that a solid majority of Fed officials feel that the economy is still too fragile and the labor market is too weak to begin to raise rates. Fed Chief Bernanke joined the band wagon yesterday by assuring investors in a speech that the Fed intends to keep rates at low levels. Confirmation that rate hikes are a long way off has encouraged investors to purchase stocks and mortgage-backed securities (MBS), and both the stock and bond markets have had a great week as a result. In fact, since the first Fed official comments last Wednesday, mortgage rates have improved a little each day. The stock and bond markets normally move in opposite directions, so to have a week where they both have healthy gains is great news!

Also, worth noting, October Retail Sales rose 1.4%, above the consensus forecast of 0.9%. Retail Sales minus autos, however, increased by only 0.2%, which was well below expectations. Investors will be closely watching the level of spending by consumers during the holiday season to help determine the strength of the economy.

Two Important HUD Announcements

On January 1, 2010, HUD will require that mortgage lenders provide consumers with a new standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. Closing agents will also be required to provide borrowers with a new HUD-1 Settlement Statement that clearly compares consumers' final and estimated costs. This much has been known for some time, but HUD announced last week that for the first four months of 2010, they have instructed regulators to exercise restraint in enforcing the new RESPA GFE and HUD-1 regulatory requirements for those lenders who have made a good faith effort to comply with RESPA's new requirements. As long as the lender is moving forward with an investment and commitment in technology, training, and quality control designed to comply with the new rule, then they now have until May 2010 to proceed with the new law.
In a second HUD announcement last week, we learned that FHA capital reserves have fallen well below the required minimum level of 2% of loans. Just two years ago, FHA accounted for less than 2% of all loans originated. However, over the last year FHA has become the star of the show and now accounts for over 25% of all new mortgage loans. This low capital ratio is due to FHA having a lot of bad loans on its books. FHA has already taken significant action to improve the quality of its portfolio by increasing the down payment to 3.5%, increasing mortgage insurance to 1.75% up-front and .55% per month, implementing new condo rules, implementing new appraisal rules similar to HVCC set to take effect in January, and requiring higher net worth requirements for lenders. With this said, there is going to be more political pressure on FHA to increase its capital reserves and we should all expect more FHA changes in the days ahead. Possible changes are a higher minimum credit score, an increased down payment to 5%, or higher mortgage insurance premiums.

Sales Tip

You will never be able to do everything you have to do. You will never be caught up. You will always be behind in some of your tasks and responsibilities. With so much to do, you have to pick and choose what you do each day. Your key to reaching high levels of performance and productivity is to develop the habit of tackling your biggest, most important task first each day. Prioritize your tasks and then identify the most important one. Learn to begin the task immediately without delay or procrastination. Be determined, focused, thorough, and finish the task completely before moving on to the next task. Knocking out your biggest task of the day first is a key to great success and happiness in life!

Credit Report Tips
Credit cards play a huge role in the calculation of one's credit score. Here are a few tips that you may not know:
• Carrying too many credit cards with balances can hurt a score as it indicates higher risk and over-extension. Action Point: Actively use only a few credit cards.
• The ratio of a credit card's balance to the credit limit is critical and, ideally, all balances would be at 30% of the limit or less. Thus, the higher the credit limit the better, and the lower the balance the better. Action Point: Increase your credit card limits and pay down the balances to 30% or less of the limit.
• Carrying a small balance and paying timely will lead to a higher score than carrying no balance at all, but closing an unused account with a zero balance usually does not increase a score. Action Point: Maintain a small balance on credit cards and never let the payment be more than 30 days late.

Friday, November 6, 2009


Congress has approved an extension today of the home buyers tax credit, sending the bill to the White House for the President's signature.

The House voted 403-12 to pass the bill after the Senate unanimously approved the measure Wednesday night. The legislation continues a home buyers' tax credit and a measure allowing businesses to write off some of their losses incurred over the past two years.

House lawmakers voted to approve the measure more than a month after initially agreeing to a more modest extension of unemployment benefits. The home buyers' tax credit and business-tax measure were added in the Senate.

The bill extends an $8,000 first-time home buyers' tax credit that was set to expire at the end of this month. The credit will apply to all house contracts entered into before April 30, 2010, and closed by June 30. It creates a new $6,500 credit for existing property owners looking to sell their home and buy another during the same period of time. Both credits have income restrictions limiting their availability.

Monday, June 29, 2009

Mortgage Update- Monday, June 29, 2009

Mortgage Rates Drop

With major economic data, a Fed meeting, and large Treasury auctions on the schedule, last week was a busy week for mortgage markets. In the end, it was the Treasury auctions which had the greatest impact on rates. Much of the rise in interest rates we have seen over the last month was due to concern about the enormous supply of debt the government needs to issue to pay for all the stimulus programs. The question has been whether investors would require significantly higher yields to continue purchasing bonds. Strong demand from both domestic and foreign investors at these auctions eased those concerns for now and helped pushed mortgage rates lower last week.

As expected, on Wednesday the Fed made no change to the Fed Funds rate. Although investor expectations varied widely regarding the Fed's statement, the good news is that the statement revealed no significant shifts in policy. In particular, there was no change in the timing or the quantity of future MBS and Treasury purchases. In addition, the statement contained no discussion about exit strategies to eventually unwind Fed stimulus programs. Overall, the Fed simply held the course, and mortgage rates were nearly unchanged after the news.
In the housing sector, May Existing Home Sales rose 2.4%. It was the first time since September 2005 that Existing Home Sales increased for two months in a row. The inventory of unsold homes declined to a 9.6-month supply from a 10.1-month supply in April. A NAR survey revealed that 29% of sales were to first-time home buyers, helped by the $8,000 tax credit, low mortgage rates, and favorable affordability levels.
Federal Tax Credit Growing from $8000 to $15,000?
There has been a lot of talk about the proposed $15,000 federal tax credit but since we have not been able to confirm any details, we decided to call Johnny Isakson's office directly. One of our loan officers called and spoke to one of his aides and was told that the proposal was on hold until it could be attached to another bill as an amendment. The aide said that support was strong from both sides of the aisle and they expected it to pass easily. Hopefully, they'll find another bill to attach it to soon! This may come together in the end but it sure doesn't seem like its going to be anytime soon. In the meantime, the $8000 federal tax credit seems to be working! As we talk with people in the industry, it is clear that purchase business has certainly picked up and much of that is first-time home buyer business.

A Quick Lending Tip for Each Major Type of Loan
Conforming: The minimum down payment in metro-Atlanta area is 10%. If a borrower is putting between 10-20% down, they will need to pay PMI and their debt ratio will be limited to 41%. FHA: The minimum down payment is 3.5% but there is more flexibility with debt ratios as they are often allowed into the mid 40's. VA: The original 100% loan program is again THE best 100% loan program. If your buyer is a veteran and doesn't want to put much money down, VA is the way to go. There is no PMI at all. Instead a 2.15% "VA Funding Fee" is added to the sales price and, thus, financed into the loan. Jumbo: The gap on Jumbo rates has closed to only about 1% more than Conforming resulting in Jumbo programs once again being a viable alternative. But if sales price is in the low $600k's or less, the best way to structure the financing is by maxing out the first at the $417k Conforming limit and then tacking on a 2nd mortgage for the difference. 2nd mortgages are much more difficult to get these days but there are still some out there and available! This technique is called a Jumbo Blend and although there are many hurdles to make it over with this approach, it usually is the best way to go when you compare payments. Rate UpdateIt was a good week for rates:

Looking Ahead This week, the ever important Employment Report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for a loss of about 370K jobs in June. Before the Employment data, the Chicago PMI and ISM National Manufacturing Indexes will come out on Tuesday and Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Wednesday. Consumer Confidence, Construction Spending, and Factory Orders will round out the schedule. Mortgage markets will be closed on Friday ahead of the July 4th holiday.

The information contained herein is believed to be accurate, however no representation or warranties are written or implied. All Rights Reserved.

Monday, June 8, 2009

June 8th, 2009 Update


Investors have been concerned for quite a while about the coming supply of new debt needed to pay for all the government stimulus programs. On top of that, the economic outlook has been improving sooner than expected. The combination of these two potentially inflationary developments pushed mortgage rates higher during the week.

The economic surprise last week came from the Employment report. Although the economy lost -345K jobs in May, it was far fewer than the consensus estimate for a loss of -525K jobs. The Unemployment Rate jumped to 9.4% from 8.9% in April. A surge in people entering the labor force was responsible for the unexpected increase in the Unemployment Rate. The labor market is typically one of the last areas to show improvement during an economic rebound, so signs of a turnaround are particularly significant.

Fed Chief Bernanke supported the notion that the recession would end this year. In testimony before Congress last week, Bernanke stated that he still expects the economy to move higher later this year, although it may take a while for growth to return to average levels. He looked ahead to measures needed once the economic crisis has passed, such as containing the budget deficit and reducing government control of markets. At this point, most investors believe that the Fed is not inclined to expand the mortgage-backed security (MBS) purchase program beyond its current level of $1.25 trillion, unless economic growth falls short of the Fed's outlook.

More evidence that the economy may be rebounding came from last week's housing data. April Pending Home Sales rose for the third consecutive month, increasing 7% from March. Pending Home Sales are a leading indicator, meaning that future New and Existing Home Sales reports may show increases.

Looking Ahead

This week, the most significant economic data will be the Retail Sales report on Thursday. Retail Sales account for about 70% of economic activity. In addition, the Trade Balance and the Fed's Beige Book will be released on Wednesday. Import Prices and Consumer Sentiment will come out on Friday. There will be large Treasury auctions on Tuesday, Wednesday, and Thursday as well.

Have a great week and when you think of financing, please think of Fairfield!

To unsubscribe, please notify me at
r.crozier@fairfieldmortgage.com. The information contained herein is believed to be accurate, however no representation or warranties are written or implied. All Rights Reserved.

Monday, May 4, 2009

May 4th, 2009- Mortgage Update

News From Last Week

It was a busy week last week in financial markets and mortgage rates rose following Wednesday's Fed announcement and ended the week higher for the first time in a few weeks. Demand for the $101 billion in last week's Treasury auctions was average, and foreign investors purchased a healthy 29% to 33% of each auction. The stock market ended the week with little change. Nearly all of the movement in mortgage rates during the week was related to the Fed meeting.

In anticipation of the announcement of favorable new Fed actions, mortgage rates actually moved lower early in the week. Some investors were looking for the Fed to expand its purchases of Treasury securities, which would be positive for mortgage rates. Those investors were disappointed, however, as the Fed announced no new initiatives. The Fed made no change in rates, holding the fed funds rate close to zero. According to the Fed, the economic outlook has "improved modestly" since the March 18 meeting. A lack of new Fed programs and confirmation of improved economic prospects pushed mortgage rates higher.

Overshadowed by the Fed meeting, an important report on first quarter Gross Domestic Product (GDP) presented data which supports the Fed's economic outlook. GDP fell -6.1%, which was significantly weaker than the consensus forecast. However, a breakdown of the GDP report reveals that the weak headline number for the first quarter may not be reflective of the current condition of the economy. GDP fell more than expected mainly due to declines in inventories and business investment. Consumer spending actually far exceeded expectations. If this trend continues, then businesses will have to begin to rebuild depleted inventories, lifting future economic activity.

Looking Ahead

The important Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for a loss of about 620K jobs in April. Before the Employment Data, Pending Home Sales and Construction Spending will come out on Monday. Pending Home Sales is a leading indicator for the housing market. The ISM Services index will be released on Tuesday, while Productivity is scheduled for Thursday. There will be large Treasury auctions on Tuesday, Wednesday, and Thursday. The results of the government's stress tests for 19 large financial institutions will be released on Thursday.
Have a great week and when you think of financing, please think of Fairfield!

Tuesday, March 10, 2009

This Week's News

Last week, concerns about prolonged weakness in the economy caused investors to sell stocks and buy relatively safer investments, including mortgage-backed securities (MBS). This, plus the fact that the Fed purchased more MBS than in any prior week, resulted in mortgage rates falling a little during the week.

For months, leading economists have been predicting that the economy will perform poorly during the first half of this year, and Friday's Employment report was right in line with those forecasts. The economy lost 651K jobs in February, and the December and January figures were revised lower by a total of -161K. The Unemployment Rate jumped to 8.1% from 7.6% in January, which was the highest level since December 1983.

Borrowers interested in refinancing their loans under the Financial Stability Plan received some additional guidance last week. The program is designed to assist homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, who are current on their payments, and where the loan amount is no more than 105% of the value of the home. A website (www.financialstability.gov) provides guidance on how to determine if a particular loan is owned or guaranteed by Fannie or Freddie and whether the borrower may qualify under this program. Additional details of the program are expected over coming months.

Looking Ahead

The Economic Calendar has a light schedule this week. Thursday's Retail Sales report will be the primary economic data. Retail Sales account for about 70% of economic activity. Import Prices, Consumer Sentiment, and the Trade Balance will be released on Friday. Fed Chief Bernanke is scheduled to speak on Tuesday. Treasury auctions and new information on government programs also may have an impact next week.

Have a great week and when you think of financing, please think of Fairfield!

Saturday, January 24, 2009

Market Update

Mortgage Rates Rise Sharply

Although nothing has fundamentally happened over the last week to push mortgage rates higher, rates have indeed soared greatly over the last seven days. But why? I offer you three main reasons:

1. Supply and Demand. With rates falling as low as 4.5%, mortgage lenders have locked in more loans than they can handle over the last month. It is natural to see rates bump up a bit after they have been so low. Don't forget that there are 50% less loan officers out there today than there were two years ago. The mortgage industry is clogged right now and it's going to take a few weeks or longer for things to resume to normal. Higher rates will enable everyone to catch up a bit.

2. Investor Fees. With mortgages paying off more quickly due to the super low rates, investors are not paying as much in the secondary market for these loans. Mortgage lenders are in turn charging a little bit more to offset this loss of income. This has contributed to the recent rise in rates.

3. The Silly Government. Fannie Mae and Freddie Mac, now run by the government, implemented higher fees beginning last week that make it more expensive for many to take out a Conforming loan. These fees will impact those making smaller down payments, those with credit scores under 740, and even those buying condo's. Yes, this is very counterproductive to the aims of the Federal Reserve to lower mortgage interest rates but they are doing it because they feel that this risk based pricing policy will make their Mortgage Backed Securities more valuable on the secondary market. The bottom line is that mortgage rates have pushed up a good .5% over the last week and are now over 5%. I believe the surge is temporary and that we will see rates drop below 5% again in the days / weeks ahead.

Hello to Down Payment Assistance?

Last week, there was a bill introduced in Congress that would reinstate seller-funded downpayment assistance (DPA). With the minimum FHA down payment rising to 3.5% effective Jan 1st, it would be great news to see the 100% option come back again.

Good-Bye to Interest-Only Loans!

Fannie Mae announced this past week that they will no longer purchase "interest-only" loans. About five years ago, interest-only loans came out of the blue and all of a sudden were available on most any program at little or no premium. They were the rage with it seems like every other borrower obtaining this feature. During 2008, the cost of obtaining an interest-only loan jumped to about 1 discount point which more or less eliminated this as a good option. And, now, the feature is being buried with many of the other programs and features that rose to prevalence over the last decade.

News from Last Week

Good news last week with inflation. The December Consumer Price Index (CPI) declined -0.7% from November, mostly due to lower energy prices. The core CPI rate, which excludes food and energy, rose a scant 1.8% from one year ago. The December Producer Price Index (PPI) report contained similar results, and inflation concerns are nonexistent right now. All of the other economic reports showed continued weakness in the economy. It is worth reporting that oil prices fell last week to $35 per barrel, down from $145 in July!

A Great Idea Our own Senator from GA, Johnny Isakson, has just introduced legislation to jump-start housing demand and to boost the economy by expanding the home buyer tax credit passed by Congress last year. The final version of the legislation that was signed into law last year only included a tax credit for first-time home buyers that must be repaid over a 15-year period. The legislation introduced by Isakson today would expand that tax credit to include all purchasers and would eliminate the current requirement that it be repaid. Repayment of the tax credit would only be required if the home is sold within three years. Hopefully, this bill gets passed because it sure seems like it would offer a pretty big incentive for many to buy! Rate Update Mortgage rates are sharply higher this week but still at super low levels not seen since the 1950's!

Have a great week and when you think of financing, please think of Fairfield! To unsubscribe, please notify me at jaw@fairfieldmortgage.com. The information contained herein is believed to be accurate, however no representation or warranties are written or implied. All Rights Reserved.