Mortgage Market Weekly – Update Feb 2, 2015

In This Issue

Last Week in Review: GDP and Durable Goods Orders disappointed, home price gains have returned to more normal levels, and the labor sector still shows signs of improvement.Forecast for the Week: The week is busy from start to finish, with key news on inflation, manufacturing and jobs.

View: Do you know what words you should avoid using on LinkedIn?

Last Week in Review 

[Read more…]

Mortgage Market Weekly – Update Jan 5, 2015

In This Issue…

Last Week in Review: The U.S. economy had a strong third quarter, while recent housing reports show signs of slowing in that sector.

Forecast for the Week: On Friday, the Jobs Report for December could be a market mover.

View: If you received new electronics over the holidays, see the tips below for selling, recycling or donating your old gadgets.

Last Week in Review 

“It’s a new dawn, it’s a new day…and I’m feeling good.” Nina Simone. The new year is here, and with home loan rates still near historic lows, 2015 rang in with plenty for consumers to feel good about. Here are some other highlights from the end of 2014.

existing-home-sales-2015-01-05 The final reading for Gross Domestic Product (GDP) for the third quarter of 2014 came in at a blistering 5.0 percent, the fastest pace of economic growth since the third quarter of 2003. The big gains were led by a surge in both consumer and business spending. GDP is considered the broadest measure of economic activity, so this is a strong sign for our economy heading into the new year.

In housing news, the October S&P/Case-Shiller Home Price Index came in at an annual rate of 4.5 percent, down from the 4.8 percent recorded in September. The October reading was the eleventh straight month of decelerating price gains. It was also the smallest annual gain since October 2012, as price gains return to more normal levels. Also of note, sales of new and existing homes fell in November as well. The housing market continues to remain in a somewhat choppy trend, despite an improving economy and job market.

As we look ahead into 2015, the uncertainty in Europe will continue to rear its head over time. The European Union (EU) is fighting deflation, recessionary pressures, a Greece exit from the EU, and limited political capital required for the necessary fixes. This could lead to safe haven trading in our bond market, helping Mortgage Bonds and home loan rates (which are tied to Mortgage Bonds) in the process.

The bottom line is that home loan rates remain near historic lows, and now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

[Read more…]

Government Shutdown and Lending

Before my comments, this is what you may see for a while in the news:

obamayikes

It appears that loan applications will continue on, rates will still be locked, appraisals ordered and loans underwritten.  However, that “4506 transcript” from the IRS will still be required by all lenders I have researched at this point, but instead of at the origin of underwriting, will be required as a funding condition, at least by lenders who are putting their customers first.

I requested several years ago that my personal staff and underwriter NEVER hold up a file over a 4506 transcript. Either the file is a viable file or not at origination and holding it up for a transcript is an insult to your clients, both borrowers and Realtors. So, the only question mark here is how long it will be before that part of the government is operational so loans can actually close. Well, there is one other question….or two, or three…..if we as a people become more and more dependent on the government, e.g. turning over more and more of our independence…..Health Care, retirement, housing, to name only a few, how does this not teach us a lesson about worse things to come?  Does it not make sense to furlough all politicians for about 9 months out of the year, so they only have 3 months a year to wreak havoc on the American public?  Notwithstanding the few who are really looking out for us and our kids and grandkids future, the rest of the lot should get real jobs, paying taxes, and living under everything they have handed down for decades. NO exemptions or special health care or special retirement packages.  Statesmen are what we need, God fearing not ballot box fearing!

Here are a few additional remarks I have pulled from Rob Chrisman’s Leadership Report.

“…..the IRS staff is also staying in bed today, and lenders are telling staff that it is doubtful that Tax Transcripts can be obtained and therefore they can process and underwrite loans without the Tax Transcripts but will not be able to close or fund until the Tax Transcripts have been obtained.”

stress350“Does anyone know whether FNMA is offering relief on validation of tax returns since the IRS is not validating returns during the shutdown?” Fannie just issued a new selling guide announcement. It provides details on a number of underwriting considerations for lenders with regard to the shutdown. It is posted on www.fanniemae.com. The mortgage market, including Fannie Mae and Freddie Mac, should not be affected by the government shutdown, SIFMA Managing Director Chris Killian said. “Fannie and Freddie should be unaffected by the government shutdown (Freddie Mac went so far as to issue a client update stating this), Ginnie Mae informs us that their [mortgage-backed securities] and Multiclass Securities Programs and operations continue uninterrupted, and [the Federal Housing Administration] appears to be able to endorse loans,” Killian said. “However, SIFMA urges Congress to come to a resolution as soon as possible.”

More to come…

HELOCS (Home Equity Line of Credit) Will Pose a New Threat

warning-sign200When it is reported that the Feds did not raise rates or they did raise rates, THIS IS NOT referring to LONG TERM MORTGAGE RATES. This is the Federal funds rate. When you take the Federal Funds rate of .250 plus the current 3% spread, you get the going prime rate of 3.250. This is the index that most credit cards and Helocs are tied to for adjustments. The Feds have not changed this rate since Dec. 16, 2008 and may not change it again for another year or two, let’s hope…..for those with Helocs.

Remember that the Feds raise the Fed rate or lower the Fed rate when they think the economy needs slowing down or stimulated. When they take the “first” step of tightening or loosening, approximately every 6 weeks, it is non-stop for 12-18 months at increments of .250 to .500 usually. So this is how much your rate and payments will go up, in most cases immediately, not at the end of the month, non-stop until they decide enough tightening is sufficient.

If you are at your 10 year point, unfortunately your loan could also begin a final recast or final amortization. If your loan is 50,000 or less your loan could amortize over 15 years. If your current balance is greater than 50,000 you may have an option for a 30 year amortization. Most rates right NOW at the recast rate are usually between 7-8.5%. Some banks may offer a Heloc modification or refinance but I would not count on this.

One of the most onerous rules to date is that if you pay off a Heloc or 2nd trust deed by combining it with your 1st trust deed, which in most cases is the wisest thing you could do, you are penalized by calling it a “cash out event” with higher fees, which lead to a higher interest rate. If you have 20% equity or more you are fine, and at 40% equity, there is no “hit or fee”. (These apply via Fannie/Freddie as LLPA’s-Loan Level Price Adjustments, not lender overlays) And this is usually on 417,000 or lower loans, not high balance loans where you often have to have 25% equity. The only exception is if the 2nd lien was part of your original purchase transaction, which is not very common. One other exception is a portfolio loan which allows this to be treated correctly, as a rate and term refinance, NOT a cash out event, but the product selection at this time is a venue of 1,3,5,7 & 10 year fixed ARM loans only, not 30 year fixed. Lastly, as we begin to see some rule changes solving similar problems in other areas, we would hope to see this grievous issue addressed with a rule change… just not holding my breath….

So, if you have a Heloc and we have not talked in the last several months, it may be time to review your situation again, especially with the latest appreciation of homes.

Mortgage Insurance Cancellation – What You Need to Know

mortgage-ins-250Effective July 29, 1999, the Homeowners Protection Act (HPA or Act) requires that private mortgage insurance be cancelled when a loan reaches certain, specified thresholds. The Act’s MI cancellation policy applies to privately insured first mortgages:

  • on single-family, primary residences, AND
  • closed on or after July 29, 1999, AND
  • for the purpose of financing the acquisition, initial construction or refinancing of the dwelling.

Following the HPA’s lead, Fannie Mae and Freddie Mac have  updated their own MI cancellation policies, in accordance with the Act, for privately insured first mortgages.

For more information, please check out the informative free downloads here:

 

Mortgage Market Weekly Update – Jun 21, 2013

In This Issue

Last Week in Review: The Fed met and the volatility continued. Find out how home loan rates were impacted.

Forecast for the Week: The last week of June will be busy, with news on housing, inflation, consumer confidence and more.

View: Been wondering what those #Hashtags are really about, and if they really do make a difference? Learn more below.

Last Week in Review

“I’m free…free fallin’.” Tom Petty. Mortgage Bonds continued to fall last week as the Fed met and more volatility followed. Read on to learn what happened.

existing-home-sales-may2012-2013After last week’s meeting of the Federal Open Market Committee (FOMC), the Fed released its Policy Statement, noting that the downside risks to the outlook for the economy and labor market have diminished. Especially important: There was no mention of tapering their Bond Purchase program known as Quantitative Easing.

However, in the press conference that followed, Fed Chairman Ben Bernanke said, “Assuming the economy and labor conditions evolve as the Committee expects, the Fed anticipated it would begin tapering later this year and to finish by mid-2014.” This mixed message caused a sell-off in both Stocks and Bonds, adding to the volatility the markets have seen of late.

In economic reports of note, there was more good news in the housing sector as Existing Home Sales rose by 5.18 million units annualized in May. This is an increase of 12.9 percent from May 2012 and the highest rate since 5.44 million units were sold in November 2009. Housing Starts also rose by 7 percent in May, and though they came in lower than expected, they are actually up a whopping 28 percent since May 2012. [Read more…]

Mortgage Market Weekly Update – Jun 10, 2013

In This Issue

Last Week in Review: The Jobs Report for May was released, plus more good news in the housing sector.

Forecast for the Week: Look for Retail Sales, Consumer Sentiment and inflation data at the end of the week.

View: Be smart about using your smart phone with the important tips below.

Last Week in Review

“You ain’t a beauty, but hey you’re alright.” Those lyrics from the Bruce Springsteen song Thunder Road are a good description for the May Jobs Report. Read on to learn why.

may-job-creations_2013-06-07On Friday, the Labor Department reported that 175,000 new jobs were created in May, above the 159,000 expected, while the unemployment rate rose to 7.6 percent from 7.5 percent. The increase in the unemployment rate was due to more job seekers entering the labor force.

The Jobs Report also showed that the Labor Force Participation Rate (LFPR) ticked up to 63.4 percent from the thirty-five year low of 63.3 percent. The LFPR calculation is quite simple. If you are 16 years old and not in the military, then you either have a job or you don’t. The ratio of people “participating” or working is then compared to the total population. [Read more…]

Mortgage Market Weekly Update – April 29, 2013

In This Issue

Last Week in Review: Weak economic news continues here at home and abroad, but is that good or bad news for home loan rates?

Forecast for the Week: Look for important reports on inflation, housing, manufacturing, and the labor market.

View: Want to know the key to being remarkable? Be sure to read the tips below.

Last Week in Review

You’re riding high in April and shot down in May.” The lyrics from the old Sinatra tune “That’s Life” haven’t applied to the economy this year, as it has limped along in April. Read on for the latest news, and how home loan rates were impacted.

apr29-existing-home-salesIn housing news, New Home Sales for March met expectations, coming in at 417,000. However, Existing Home Sales were down 0.6 percent and below expectations and February’s numbers were revised lower to 4.95 million units from 4.98 million units. There has not been much of an improvement in the Existing Home Sales numbers of late, but on the bright side they are higher than the 4.48 million mark from March 2012.

Gross Domestic Product (the broadest measure of economic activity in the U.S.) rose by 2.5 percent in the first quarter of 2013. However, this number was below the 2.8 percent to 3.2 percent that was expected. While the report showed that consumer spending rose at its fastest pace in two years and that businesses ramped up their inventories, overall this is not a great number. However, it is just the first of three readings and revisions will most likely be forthcoming. Also of note, March orders for Durable Goods (which are products that last for an extended period of time) also came in below expectations.

What does this mean for home loan rates? Bonds have benefited from the string of weak economic reports here at home, as investors typically move their money into safer investments like Bonds during weak economic times. This includes, Mortgage Bonds, to which home loan rates are tied. Bonds and home loan rates have also benefited from weak economic news overseas, as investors there continue to see our Bonds as a safe haven for their money. In addition, if inflation remains in check and economic data remains weak, this gives the Fed cover to continue its Bond purchase program known as Quantitative Easing–which should also benefit Bonds and home loan rates as a result.

The bottom line is that now is a great time to consider a home purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

The economic calendar will be busy all week. Plus the Fed meets.

  • The week begins on Monday with Personal Consumption and Expenditures, the Fed’s favorite measure of inflation, as well as Personal Income and Personal Spending.
  • In housing news, Pending Home Sales will also be released Monday, followed by Tuesday’s Case-Shiller Home Price Index.
  • We’ll get a sense of how the consumer is feeling with Tuesday’s Consumer Confidence reading for April.
    Several key manufacturing reports will be released, beginning on Tuesday with the Chicago PMI followed by Wednesday’s ISM Index.
  • Weekly Initial Jobless Claims will be reported on Thursday. Last week, jobless claims fell to 339,000 after averaging 362,000 in the previous four weeks.
  • On Friday, we end the week with the often market-moving Jobs Report for April, which includes Non-Farm Payrolls and the Unemployment Rate. ISM Services Index will also be reported.

In addition, the Fed’s regularly scheduled two-day meeting of the Federal Open Market Committee begins on Tuesday, with their Policy Statement scheduled for 2:15 p.m. ET on Wednesday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving – and when they are moving lower, home loan rates are getting worse.

To go one step further – a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Bonds and home loan rates continue to remain near historic best levels. I’ll be watching their movement closely.

apr29-bonds-chart

The Mortgage Market Guide View…

6 Keys to Being Remarkable

“The key to success in any field is, to a large extent, a matter of practicing a specific task for a total of around 10,000 hours.”
Malcolm Gladwell, Outliers, 2011

“Strenuous individual application is the price paid for distinction; excellence of any sort is placed beyond the reach of indolence.”
Samuel Smiles, Self-Help, 1859

“We are what we repeatedly do. Excellence, then, is not an act, but a habit.”
Aristotle, 345 BC

The myth that people are born talented is rapidly dispelling. The scientific community is at last catching up with what even Aristotle knew; the difference between success and non-success, outstanding skill and mediocrity, is a matter of dedication and time rather than innate ability. But can the way you practice make a difference? Yes, says Tony Schwartz, author of The Way We’re Working Isn’t Working, who offers six principles for becoming really good at anything:

  1. Pursue your passion. Passion will keep you motivated better than anything. If you can’t be passionate, find something else or you may burn out.
  2. Hard work first. Most experts–and experts who study experts–say that practicing first thing in the morning when you have the most energy is best.
  3. Practice intensely, but not too long. Working without interruption for short periods of no longer than 90 minutes with short breaks–and not longer than 4.5 hours each day–seems to be the norm for top performers.
  4. Get feedback in small doses. Too much advice too frequently can impede learning and make you gun shy.
  5. Refresh regularly. All work and no play… stinks. And it won’t help you in the long run. Plus, if it’s breakthroughs you want, rest is the best thing for activating your creative, right-hemisphere.
  6. Ritualize practice. Time-blocking your practice ensures you don’t have to expend any energy thinking about when you’ll work.

Please feel free to pass these tips along to any clients and colleagues who may benefit!

economic-carlendar-apr29

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In the unlikely event that you no longer wish to receive these valuable market updates, please email me at don @ donparsons.com.

If you prefer to send your removal request by mail the address is:

Don Parsons
20250 Acacia Street, Suite 120
Newport Beach, CA 92660

Federal Housing Finance Agency Extends HARP to 2015

The Federal Housing Finance Agency (FHFA) today directed Fannie Mae and Freddie Mac to extend the Home Affordable Refinance Program (HARP) by two years to December 31, 2015. The program was set to expire on December 31, 2013.

To be eligible for a HARP refinance, homeowners must meet the following criteria:

  • The loan must be owned or guaranteed by Fannie Mae or Freddie Mac
  • The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009
  • The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March – May 2009
  • The current loan-to-value (LTV) ratio must be greater than 80%
  • The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months

HARP HIGHLIGHTS
Unlimited Loan To Value

No OVERLAYS or program restrictions – Unlimited LTV/CLTV

  • FHFA-HARP-extension-prNo Minimum Credit Score – Determined by AUS
  • Primary, 2nd Homes and Non-Owner Allowed
  • Single Family, 1-4 unit properties, condos, PUDS & manufactured homes
  • Expanded Approval Levels I, II and III allowed (Refi Plus)
  • No limit on the number of properties financed
  • CMG picks up the cost of the appraisal waivers (do not disclose on GFE)
  • Fast Turnaround times – Close within 30 days!

Click here to download copy of the FHFA HARP Extension Press Release (PDF)

Mortgage Market Weekly Update – April 8, 2013

In  This Issue

  • Last Week in Review: Important jobs data for March was released. How did home loan rates respond?
  • Forecast for the Week: Several key reports will be released during the second half of the week. Plus on Wednesday, look for the minutes from the Federal Open Market Committee meeting in March.
  • View: “KISS” complexity in your business goodbye with these great tips.

Last Week in Review

march-job-creation_2013-04-08“Don’t believe the hype.” Unfortunately, the lyrics from Public Enemy’s hit song came true last week when the official Jobs Report for March was released. Read on for details, and what they mean for home loan rates.On Friday, the Labor Department reported that 88,000 jobs were created in March–less than half the 192,000 expected. This was the lowest monthly job creations number since June 2012, and could be the beginning of a slowdown in the labor market this spring. There was one small positive note, however, as the number of job creations for January and February were revised higher by 61,000.

The Unemployment Rate fell to 7.6 percent, which is the lowest level since December 2008. While this sounds like good news, the decrease can be partly attributed to the fact that 500,000 people left the workforce. As a result, the Labor Force Participation Rate (LFPR) fell to 63.3 percent: its lowest level since 1979. Remember: the LFPR calculation is quite simple. If you are 16 years old and not in the military, then you either have a job or you don’t. The ratio of people “participating” or working is then compared to the total population.

The Jobs Report wasn’t the only poor economic report released last week. The ISM Manufacturing Index was below expectations, ADP private jobs data was less than expected, planned job cuts were up 30 percent from last year, and the employment component within the ISM Services Index fell.

What does this mean for home loan rates? Remember that weak economic news often causes investors to move their money out of Stocks and into safer investments like Bonds. This includes Mortgage Bonds, to which home loan rates are tied. And last week’s string of poor economic reports, coupled with the tensions in North Korea and the debt woes in Europe, helped Bonds and home loan rates reach some of their best levels this year.

The bottom line is that home loan rates remain near historic lows, making now a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

The second half of the week heats up with several important reports.

  • Weekly Initial Jobless Claims will be released on Thursday. Last week’s report showed that initial claims surged by 28,000 to 385,000, the highest number since November and well above expectations.
  • On Friday, we’ll get a sense of consumer spending with the Retail Sales Report for March and a sense of how consumers are feeling with the Consumer Sentiment Index.
  • Also on Friday, the Producer Price Index will show us March’s inflation reading at the wholesale level.

In addition, the minutes from the March meeting of the Federal Open Market Committee will be released on Wednesday. Traders will be looking at this closely, especially regarding any mention of the Fed’s Bond purchase program known as Quantitative Easing.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving –and when they are moving lower, home loan rates are getting worse.

To go one step further –a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Bonds and home loan rates improved last week after weak economic data was released and tensions increased with North Korea. I’ll continue to monitor their movement closely.

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Apr 05, 2013)

mortgage-bond-surge_2013-04-08

The Mortgage Market Guide View…

KISS the Chef
How Doing Too Much Can Kill Your Business

Kitchen Nightmares, featuring Scottish chef Gordon Ramsay, was a long running hit show in Britain well before FOX brought it to Americans in 2007. The show presents a critical lesson for business owners and professionals everywhere: don’t let things get too complicated.From the elaborate menus to strange customer service habits, the “broken” restaurants featured on the show persist, day after day, to slowly choke out the ability to do what they are supposed to–fulfill the need of customers efficiently and consistently. It’s a lesson well worth listening to, especially from Gordon Ramsay. He is recipient of 15 Michelin Stars and no stranger to success, but he’s also admitted losing a few of his own restaurants to mismanagement and over-extension.

Kitchen Nightmares makes the viewer keenly feel the validity of the “KISS principle”. KISS is an acronym for “Keep it simple stupid” and it was coined by U.S. Navy engineers in 1960 to stress the importance of building aircraft that could be repaired on the battlefield by a regular mechanic using only basic tools. Essentially, the KISS principle states that most systems work better when they are simple rather than complex.

Here are a few ideas on how to keep things simple in your business:

Identify the need you fulfill. Whether you sell homes or financial services you are fulfilling a need for your clients that has nothing to do with real estate or stocks and bonds–try to think of the psychological need you fulfill.

Build your plan to serve that need. You may have the ability to offer other services that don’t serve the core need of your market, but avoid the temptation to use them if possible. The likelihood of confusing your prospects and customers is too high to justify the value you think you’re creating.

Don’t get too elaborate with systems. Especially the ones that impact customer service. While every business should have processes for everything, the more common sense they are the better. If yours are intuitive and easy to perform for both staff and clients, they are going to be win-win.

Stay focused. If you’re in business to sell houses or do financial planning, don’t extend your brand to include staging or insurance–or anything else you can think of that might dilute your ability to perform the core need.

Feel free to pass this along to clients and colleagues who might benefit from these tips!

econ-calendar-4-8-2013

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In the unlikely event that you no longer wish to receive these valuable market updates,
please USE THIS LINK or email: don@donparsons.com

If you prefer to send your removal request by mail the address is:

Don Parsons
20250 Acacia Street, Suite 120
Newport Beach, CA 92660