Rate Lock Advisory - Friday Apr. 30th
Friday's bond market has in positive territory after this morning's most important economic data gave us favorable results. The stock markets are also helping to boost bond prices with the Dow down 35 points and the Nasdaq down 15 points. The bond market is currently up 8/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.
The first of this morning's three economic reports was the most important of all of the week's data. The 1st Quarter Gross Domestic Product (GDP) came in at an annual rate of growth of 3.2%. This was slightly below forecasts, meaning the economy grew at slower pace than thought during the first three months of the year. In addition, a key inflation reading within the data was just below forecasts also. These are fairly good results for the bond market and mortgage rates.
The second report was the 1st Quarter Employment Cost Index (ECI) that showed a 0.6% increase in employer costs for wages and benefits. This was just above the 0.5% increase that was expected, so this data can be considered negative for bonds. However, it was not enough of a variance to have much of an impact t on this morning's rates.
The last was the University of Michigan's update to their Index of Consumer Sentiment for April. They announced a reading of 72.2, which exceeded forecasts of 71.0. This indicates that surveyed consumers were more confident about their own financial situations than thought, which is believed to mean they are more apt to make large purchases in the near future. Again, bad news for bonds and mortgage pricing, but the most important data of the day was favorable for bonds and had led to this morning's buying.
I would not be surprised to see further stock losses and bond gains before the day ends. It seems the momentum for bonds remains strong and that stocks could be due for another drop. If this is accurate, we could see funds shifted into bonds and mortgage rates move even lower. Accordingly, I am a little less cautious towards mortgage rates than I was earlier in the week.
Next week brings us the release of several relevant reports, including two important ones Monday morning. Early Monday we will get March's Personal Income and Outlays data that will give us a measurement of consumer ability to spend and current spending habits. Later Monday morning, the Institute for Supply Management (ISM) will post their manufacturing index that tells us manufacturer sentiment about current business conditions. Both can move the bond market enough to affect mortgage rates, so Monday will be a busy day. Look for more details on next week's events in Sunday's weekly preview.
If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Friday, April 30, 2010
Thursday, April 29, 2010
Rate Lock Advisory - Thursday Apr. 29th
Rate Lock Advisory - Thursday Apr. 29th
Thursday's bond market has opened flat despite early stock gains. The stock markets are showing sizable gains with the Dow up 110 points and the Nasdaq up 25 points. The bond market is nearly unchanged form yesterday's close, which means we will likely see a slight increase in this morning's rates due to the volatility late yesterday.
The Labor Department gave us today's only semi-relevant economic data when they posted last week's unemployment figures. They said that 448,000 new claims for unemployment benefits were filed last week. That was close to expectations, so it had practically no impact on this morning's trading or mortgage rates.
Today's 7-year Note auction may impact bond trading and mortgage rates later today. The results of the sale will be posted at 1:00 PM ET, so any reaction will come during afternoon hours. If demand for the notes was strong, we could see bond prices rise and mortgage rates move lower later today. However, a lackluster interest could lead to bond selling and higher mortgage rates.
There are three reports scheduled for release tomorrow morning. The first is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets Friday and therefore the mortgage market also. Analysts are expecting to see an increase in output at an annual rate of 3.3%. A much smaller increase would be good news for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates tomorrow morning.
The second report of the day is the 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.5%.
The last is the University of Michigan's update to their Index of Consumer Sentiment for April. This report gives us an indication of consumer sentiment. I don't expect it to have a significant impact on bonds and mortgage pricing unless it varies greatly from forecasts. Current forecasts are calling for an upward revision to push the index to 71.0. This means that surveyed consumers were more optimistic about their own financial situations than they were earlier this month.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Thursday's bond market has opened flat despite early stock gains. The stock markets are showing sizable gains with the Dow up 110 points and the Nasdaq up 25 points. The bond market is nearly unchanged form yesterday's close, which means we will likely see a slight increase in this morning's rates due to the volatility late yesterday.
The Labor Department gave us today's only semi-relevant economic data when they posted last week's unemployment figures. They said that 448,000 new claims for unemployment benefits were filed last week. That was close to expectations, so it had practically no impact on this morning's trading or mortgage rates.
Today's 7-year Note auction may impact bond trading and mortgage rates later today. The results of the sale will be posted at 1:00 PM ET, so any reaction will come during afternoon hours. If demand for the notes was strong, we could see bond prices rise and mortgage rates move lower later today. However, a lackluster interest could lead to bond selling and higher mortgage rates.
There are three reports scheduled for release tomorrow morning. The first is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets Friday and therefore the mortgage market also. Analysts are expecting to see an increase in output at an annual rate of 3.3%. A much smaller increase would be good news for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates tomorrow morning.
The second report of the day is the 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.5%.
The last is the University of Michigan's update to their Index of Consumer Sentiment for April. This report gives us an indication of consumer sentiment. I don't expect it to have a significant impact on bonds and mortgage pricing unless it varies greatly from forecasts. Current forecasts are calling for an upward revision to push the index to 71.0. This means that surveyed consumers were more optimistic about their own financial situations than they were earlier this month.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
When You Think You Have Run Short On Space In Your Home
A 24-Room Apartment in 344 Square Feet
Hong Kong architect Gary Chang, has managed to turn his tiny apartment into a mansion of sorts, comprising more than 20 rooms. The innovation he says could improve the lives of low income people around the world. Courtesy of Reuters.
Hong Kong architect Gary Chang, has managed to turn his tiny apartment into a mansion of sorts, comprising more than 20 rooms. The innovation he says could improve the lives of low income people around the world. Courtesy of Reuters.
“lock at the price highs, float at the price lows”
Mortgage rates greatly benefited from headline news yesterday. Around mid-morning we learned that Standard and Poor's had cut Greece's government debt rating all the way down to junk. That is as low as ratings go! Stocks, which have rallied for eight consecutive weeks, sold off sharply on the news. This was a positive for mortgage rates because stock selling led to a "flight to safety" rally in the bond market which pushed benchmark Treasury yields lower and mortgage-backed security prices higher. Gains in the secondary market were large enough to allow lenders to reprice mortgage rate sheets for the better.
(see discription of "flight to safety" in post below)
Early this morning the Mortgage Bankers Association released the Weekly Mortgage Applications Survey. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole.
Today’s release indicated purchase demand continues to trend higher as the homebuyer tax credit gets closer to its April 30th expiration. Purchase applications increased +7.4% from last week while refinance applications fell 8.8%. It appears that most prospective home owners are looking to finance their home using FHA insured loan programs. AQ discusses a trend toward borrowers putting down less money and its relation to the housing recovery.
If you are hoping to take advantage of the up to $8000 tax credit for first time home buyers or the up to $6500 for repeat buyers, you better hurry. To qualify, you must be under contract by April 30 and your loan must close by June 30. It appears that there is no chance of this government stimulus to be extended
Reports from fellow mortgage professionals indicate the par 30 year conventional mortgage rate is holding in the 4.875% to 5.125% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirements.
(see discription of "flight to safety" in post below)
Early this morning the Mortgage Bankers Association released the Weekly Mortgage Applications Survey. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole.
Today’s release indicated purchase demand continues to trend higher as the homebuyer tax credit gets closer to its April 30th expiration. Purchase applications increased +7.4% from last week while refinance applications fell 8.8%. It appears that most prospective home owners are looking to finance their home using FHA insured loan programs. AQ discusses a trend toward borrowers putting down less money and its relation to the housing recovery.
If you are hoping to take advantage of the up to $8000 tax credit for first time home buyers or the up to $6500 for repeat buyers, you better hurry. To qualify, you must be under contract by April 30 and your loan must close by June 30. It appears that there is no chance of this government stimulus to be extended
Reports from fellow mortgage professionals indicate the par 30 year conventional mortgage rate is holding in the 4.875% to 5.125% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirements.
In accordance with the “lock at the price highs, float at the price lows” motto....I favor locking all loans closing within the next 30 days.
How Does The Fed Come Up With Mortgage Rates
Mortgage rates are controlled by the action of rising and falling stocks & bonds. When stocks rise, investors take a "flight to safety."
A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.
I hope this helped everyone (esspecially those seeking a mortgage loan in the near future) understand how the Fed generates mortgage loan rates. This was just a cursory glance, if you have more questions feel free to leave me a comment here or e-mail me with your request.
MortgageSmith101@yahoo.com
A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.
I hope this helped everyone (esspecially those seeking a mortgage loan in the near future) understand how the Fed generates mortgage loan rates. This was just a cursory glance, if you have more questions feel free to leave me a comment here or e-mail me with your request.
MortgageSmith101@yahoo.com
Wednesday, April 28, 2010
Figuring Out the Fed With Fred Mishkin (Video - MND)
I found this video this morning on one of my more frequented websites I visit every morning. I thought it it explained the Federal Reserve Bank tactics and their influence on mortgage rates, inflation and debt-control in the simplist way imaginable.
Tuesday, April 27, 2010
Mortgage Rates On The Fence In The Days To Come
Mortgage rates bounced back and forth in a relatively tight range before going out at their highest levels of the week last Friday. Although prices of mortgage-backed securities managed to rally of their lows of the day, most lenders did not reprice for the better.
The only economic data we got today was the First Quarter Residential Vacancies and Homeownership Report. While vacancy rates are appearing to moderate, home ownership in the U.S. has declined to a level last seen at the beginning of the decade. The greatest decrease is among the youngest homeowners
Reports from fellow mortgage professionals indicate lender rate sheets to be improved from Friday. The par 30 year conventional rate mortgage does remain in the 4.875% to 5.125% range for well qualified consumers though. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. You may elect to pay less in closing costs but you will have to accept a higher interest rate.
When evaluating the risk/reward of floating, you have very little to gain by floating and a lot to risk. We have several high impacting events taking place this week which could pressure mortgage rates higher very quickly. With that in mind, if you need to decide on locking or floating in the next week or are within 15 days of closing, I would lock today. If you have a longer decision making timeline, I am floating on a day to day basis.
The only economic data we got today was the First Quarter Residential Vacancies and Homeownership Report. While vacancy rates are appearing to moderate, home ownership in the U.S. has declined to a level last seen at the beginning of the decade. The greatest decrease is among the youngest homeowners
Reports from fellow mortgage professionals indicate lender rate sheets to be improved from Friday. The par 30 year conventional rate mortgage does remain in the 4.875% to 5.125% range for well qualified consumers though. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. You may elect to pay less in closing costs but you will have to accept a higher interest rate.
When evaluating the risk/reward of floating, you have very little to gain by floating and a lot to risk. We have several high impacting events taking place this week which could pressure mortgage rates higher very quickly. With that in mind, if you need to decide on locking or floating in the next week or are within 15 days of closing, I would lock today. If you have a longer decision making timeline, I am floating on a day to day basis.
Monday, April 26, 2010
Is a FHA Loan Right For You?
After posting excerpts from a letter from a member of the FHA (Fair Housing Administration), I received quite a few e-mails asking questions about what exactly is a FHA loan. So, here are a couple of links that will help you understand if an FHA loan is right for you.
(info provided is for the state of California residents)
Here's some links to some of the FHA insured mortgage programs:
Section 203b Insured Mortgage
Section 203h Insured Mortgage for Disaster Victims
Section 255 Home Equity Conversion Mortgage (HECM)
Section 203k Rehabilitation Mortgage
Energy-Efficient Mortgage Program (EEM)
Adjustable rate mortgages
Section 248 Indian Reservations and Other Restricted Lands
Title I Home Improvements
One of the more common FHA Loans
203(b) Mortgage Insurance
What is the purpose of this program?
To provide mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.
What are the eligibility requirements?
For More Information
Contact FHA approved lenders in your area.
(info provided is for the state of California residents)
Here's some links to some of the FHA insured mortgage programs:
Section 203b Insured Mortgage
Section 203h Insured Mortgage for Disaster Victims
Section 255 Home Equity Conversion Mortgage (HECM)
Section 203k Rehabilitation Mortgage
Energy-Efficient Mortgage Program (EEM)
Adjustable rate mortgages
Section 248 Indian Reservations and Other Restricted Lands
Title I Home Improvements
One of the more common FHA Loans
203(b) Mortgage Insurance
What is the purpose of this program?
To provide mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.
What are the eligibility requirements?
• The borrower must meet standard FHA credit qualifications.
• The borrower is eligible for approximately 96.5% financing. The borrower is able to finance the upfront mortgage insurance premium into the mortgage. The borrower will also be responsible for paying an annual premium.
• Eligible properties are one-to-four unit structures.
For More Information
Contact FHA approved lenders in your area.
$10,000 Tax Credit for New Home Buyers in California
Governor Arnold Schwarzenegger today returned to the La Ventana Homes project in Fresno where he kicked off his campaign to extend and expand the hugely successful homebuyer tax credit to sign legislation that will do just that. AB 183, authored by Assembly member Anna Caballero (D-Salinas) and Senator Roy Ashburn (R-Bakersfield), will provide a tax credit of up to $10,000 to Californians who are buying their first home or purchasing a brand new home. This legislation, part of the Governor’s larger California Jobs Initiative, will play a key role in getting our economy moving again by encouraging home ownership and stimulating job creation.
“I have been up and down the state pushing this important housing bill that will get people off the fence and into homes while creating jobs and stimulating our economy – and today I am proud to take action and put it into law,” said Governor Schwarzenegger. “Creating jobs is my number one priority and I am glad that I have been able to sign two job-creating bills in two days. I applaud the legislature for their great work and encourage them to keep it up and pass the remaining job-creating elements of my California Jobs Initiative.”
AB 183 was passed by the legislature on March 22 and gives the Franchise Tax Board authority to extend a total of $200 million in tax credits to California homebuyers; $100 million for buyers of new, unoccupied homes and another $100 million for first-time buyers of existing homes. The credit will be extended from May 1, 2010 to December 31, 2010. The tax credit will be available to buyers on a first-come, first-served basis and is applied in equal amounts over a period of three taxable years. To qualify, the buyer must not be a dependant and must purchase a home that does not belong to a relative.
Governor Schwarzenegger fought hard to extend and expand the homebuyer tax credit after its successful run in 2009. That $100 million tax credit, which was approved in February 2009, ran out after just four months with 10,659 Californians claiming the credit – increasing home purchases, jumpstarting building projects and boosting local economies. In fact, La Ventana Homes saw a 300 percent increase in sales when the tax credit went into effect.
FHA to the Rescue!!!
from a letter written to the Mortgage News Daily by Brian Montgomery Oct., 2009
There has never been a point in our nation’s history that better illustrates exactly why FHA and Ginnie Mae exist. During these uncertain economic times, their counter-cyclical role of ensuring adequate mortgage activity and liquidity has been necessary and vital.
FHA has saved close to one million sub-prime/Alt-A borrowers from possible financial ruin by allowing them to refinance into a safe and secure 30-year fixed rate mortgage. Another 2 million qualified borrowers (80% of them first-time homebuyers) have taken advantage of the declining house prices and historically low interest rates to purchase a home using FHA. FHA’s role has grown substantially from three percent of lending activity by dollar volume in 2006 to nearly 25 percent of all mortgages originated today. That massive uptick in volume occurred almost overnight beginning in spring 2008.
Through it all…. FHA has helped pump more than $400 billion of mortgage activity and liquidity into the market since 2008, while still managing to deliver a higher credit quality borrower whose average FICO score is 700.
One can only imagine how much worse our economy would be right now without the FHA. However, the growth of FHA in the past 18 months has understandably attracted a lot of attention. While the FHA did not take part in the housing boom, it is feeling its effects.
Reminder: FHA collects premiums from borrowers (revenue) and also pays out claims to lenders when loans go into default and foreclosure (outlays).
The FHA has undeniably tightened guidelines in an effort to help ensure a higher loan quality. Prospective borrowers must verify income and job history as part of a rigorous underwriting process.
As a reminder, I offer the following insight about the strategies the FHA is considering to ensure the market remains confident in the FHA’s risk management models:
* Tighten underwriting criteria
* Increase premiums
* Raise the down payment requirements above 3.5%
* Overlay a credit score cut-off
Looking forward it’s important for all of us to continue advocating for reforms that better ensure a vibrant, transparent, and sound mortgage marketplace. Current market conditions highlight the critical role of the private and public sectors in keeping mortgage credit flowing.
Rate Lock Advisory - Monday April 26th
I am predicting a decrease in rates this week to the same levels we saw them last Wednesday. If (or should I say when) they fall, I would suggest being in a position to lock in your loan.DATE: Monday, April 26, 2010
TIME: 8:00 am PST
CHANGE (from last Monday): Improvement
*** The Fed News last week immediately dropped rates on Wednesday afternoon, however pricing worsened Thursday and Friday- still below last Monday’s update. Get in position to lock pending more market movement…
Rate Lock Advisory - Monday April 26th
Monday's bond market has opened fairly flat despite an early stock rally. The stock markets are reacting favorably to the release of details of the Fed's plan for relieving banks of their bad holdings in mortgage related securities. The bond market is nearly unchanged from Friday's close, which will likely keep this morning's mortgage rates close to Friday's levels.
The National Association of Realtors announced late Friday morning that home sales rose this month, greatly exceeding analysts' forecasts. This report was expected to show a small incline in sales, meaning that the housing market was much more active than many had thought.
I would like to say that this may be a relatively calm week for mortgage rates, but as we have seen recently, a lack of important releases does not mean we will not see volatility in the markets and rates. Therefore, I recommend not letting our guard down, particularly if still floating an interest rate.
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