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.