Final Market Commentary for 2013

This holiday-shortened week has only two monthly economic reports scheduled for release that are relevant to mortgage rates. One of those two is considered to be highly important to the bond and mortgage markets. There is nothing of importance Monday, but every other day does have at least one event scheduled that could have an impact on the financial markets and mortgage rates.

The Conference Board will post their Consumer Confidence Index (CCI) for December late Tuesday morning. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make large purchases. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a large increase in confidence from November’s reading of 70.4. Analysts are expecting Tuesday’s release to show a reading of 77.1, meaning consumers felt much better about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.

The bond market will close at 2:00 PM ET Tuesday ahead of the New Year’s Day holiday, but the stock markets are scheduled to be open for a full day of trading. All banks and major U.S. financial markets will be closed Wednesday for the holiday and will reopen Thursday morning for regular hours. As a result of the holiday schedule, we should see lighter than normal trading a couple days. However, I don’t believe it will be as thin as we saw last week. That should help prevent larger moves in bonds on days with little or no news to justify the move like we saw last week.

After the holiday, the Institute for Supply Management (ISM) will post their manufacturing index for December late Thursday morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. That indicates manufacturing sector strength rather than contraction. Analysts are currently expecting to see a 56.9 reading in this month’s release, meaning that sentiment softened from November’s 57.3. A smaller reading will be good news for the bond market and mortgage shoppers, while a higher than expected reading could lead to higher mortgage rates Thursday morning as it would point towards stronger economic growth.

Also worth noting are a handful of Fed member speaking engagements all scheduled for Friday afternoon, including one by Chairman Bernanke. None of them are considered to be highly important or likely to be market-moving, but whenever they speak publicly, particularly the Fed Chairman, their words have the potential to influence the markets. There are five set for Friday with the first scheduled for 12:45 PM ET and the last at 5:00 PM ET. Chairman Bernanke is expected to speak in Philadelphia at 2:30 PM ET. This means any reaction to their speeches will come during afternoon trading.

Overall, I am expecting to see Thursday be the most active day for mortgage rates, although Tuesday morning could also be fairly busy as the year comes to an end. It is difficult to label any day as the calmest because even Monday that doesn’t have anything scheduled to be posted, could also be relatively busy following last week’s light holiday trading. The benchmark 10-year Treasury Note yield closed the week at 3.00% Friday, which is above the previous key level of 2.95%. Due to last week’s extremely light trading volume, I am not too concerned about it closing at that level. However, I am looking for it to move back below nearly immediately or we could be in for a sizable upward move in mortgage rates very soon. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Market Commentary for the Week of Christmas

This week brings us the release of four pieces of monthly economic data that are considered relevant to mortgage rates. It is a holiday-shortened week with the financial markets closing early Tuesday and remaining closed Wednesday in observance of Christmas. None of the week’s data is considered key, but some of it does carry enough importance to affect mortgage pricing. All of the important reports come the first part of the week, so we should see the most movement before the holiday.

The first report of the week is November’s Personal Income and Outlays data at 8:30 AM ET Monday. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up over two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.5% increase in income and a 0.5% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Monday morning. We already have an improvement of approximately .125 – .250 of a discount point waiting if your lender did not revise lower Friday afternoon. So even a miss in this data likely will not be enough for rates to come in higher than Friday’s morning pricing.

Monday also has the revised University of Michigan Index of Consumer Sentiment for December just before 10:00 AM ET. Current forecasts are calling for an upward revision from the preliminary reading of 82.5. This is a fairly important index because rising consumer confidence indicates that consumers feel better about their own financial and employment situations, meaning they be more apt to make large purchases in the near future. A reading above the 83.3 that is forecast would be negative for bonds and mortgage rates while a large decline would be favorable.

The remaining two monthly reports are set for release Tuesday morning. November’s Durable Goods Orders is the first at 8:30 AM ET. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years such as appliances, airplanes and electronics. Analysts are expecting the report to show a 2.2% rise in new orders. A decline in new orders would indicate that the manufacturing sector was weaker than many had thought. This would be good news for the bond market and should drive mortgage rates lower. However, a much larger jump in orders could lead to mortgage rates moving higher early Tuesday morning. This data is known to be quite volatile from month-to-month though, so it is not unusual to see large headline numbers on this report.

November’s New Home Sales data is the second report of the day and the final monthly report we need to watch this week. It will give us a measurement of housing sector strength and mortgage credit demand. It is the sister report of last week’s Existing Home Sales report, but covers a much smaller portion of the housing market than that one did. A weakening housing sector is considered good news for the bond market and mortgage rates because broader economic growth is less likely in the immediate future. Since bonds tend to thrive in weaker economic conditions, a large decline would be considered favorable for bond prices and mortgage rates. Current forecasts are calling for a decline in sales of newly constructed homes. Ideally, we would like to see a large drop in sales.

Overall, I believe we saw an important move in bonds Friday morning that could be a good sign for mortgage shoppers. As predicted, the 10-year Treasury Note yield finally hit 2.95% Friday before moving away and closing at 2.89%. It appeared that the 2.90 – 2.95% levels were important in predicting mortgage rate direction and needed to be hit before we could expect a noticeable downward move in yields and rates. With the next two weeks including trading holidays, we cannot necessarily rely on movement some of those days to be an accurate reflection of longer-term trends. However, we will be watching trading closely for any sign of concern that would alter that prediction. Stay tuned for further updates on rate direction.

Mortgage News Roundup - Will New Rules Make It Harder to Get a Mortgage?

 

This week’s FOMC meeting has adjourned with no changes to key short-term interest rates, as expected. However, it did bring an announcement of the first reduction in the Fed’s current bond buying program. They announced that the current pace of $85 billion in monthly purchases of government and mortgage debt would be reduced by $10 billion starting next month. This move wasn’t exactly expected at this meeting, but didn’t surprise some traders and market analysts. It was bound to come sooner or later and it turns out sooner was today.

U.S. Mortgage Applications Volume Falls 5.5% in Last Week

The average number of mortgage applications fell 5.5% on a seasonally adjusted basis as interest rates generally increased compared to the previous week, the Mortgage Bankers Association said Wednesday.

“Both purchase and refinance applications fell as interest rates increased going into today’s Federal Open Market Committee meeting,” said Mike Fratantoni, MBA’s vice president of research and economics.

How to Negotiate Repairs After a Home Inspection

Most people believe the real estate “deal” is negotiated and completed at the signing of the contract. By that point, the counteroffers have been made and the back and forth has happened, so it’s easy to assume that the deal will go on auto-pilot until closing.

The reality, though, is that in many cases, the deal-making and negotiations only start at the contract signing. Even in more competitive real estate markets, negotiations still happen once in escrow.
Zillow’s blog has these areas for you to consider when ti comes to negotiation:

• Ask for a credit for the work to be done: Think long term. If you’re going to remodel a bathroom anyway, or if you know someone who can do the repair, ask for a credit and do the work yourself
• Keep your cards close to your chest: Whatever you say in front of the seller’s real estate agent will get back to the seller.

A word of caution: You should never complete the original contract assuming that you can negotiate more as a result of the property inspections

Will new rules make it harder to get a mortgage?

We’ve mentioned before how important it is to talk to a reputable loan officer before the end of the year because obtaining a mortgage may be harder to get, at least in the early months of 2014.

“You’ve heard all the stories about how difficult it is to get a mortgage and all the documentation required — there’s going to be a lot more of the same,” said Ron Haynie, senior vice president of the Independent and Community Bankers Association.

A lot of new mortgage regulations will take effect between Jan. 10 and Jan. 20, 2014. The most noteworthy of these for borrowers is the ability-to-repay rule and the qualified mortgage (QM) rule, which together establish new standards and practices for mortgages that lenders must follow.

Bob Davis, vice president of the American Bankers Association, estimates that 20% of people who could obtain a mortgage in 2013 will not be able to get one in 2014.

The QM Rule prohibit a number of mortgages that were generally bad for consumers, including “balloon,” interest-only and negatively amortizing loans. The new rule also limits the “points” to 3.
So call a reputable loan officer if you’re thinking about getting a new loan or refinancing. Talk with them about your situation and your goals. They are dedicated to following the markets and all of the loans being offered.

Market Commentary for the Week of December 16th

This week has nine monthly or quarterly economic reports scheduled for release in addition to some key Fed events and a couple of Treasury auctions that could potentially affect mortgage rates. There is data set for release every day of the week, but the more important events will take or be posted the middle days. Still, with the majority of the days having multiple reports or events scheduled, there is a good chance of seeing plenty of movement in mortgage pricing this week.

The week opens with revised 3rd Quarter Productivity numbers at 8:30 AM ET Monday. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn’t necessarily bad for the bond market. It’s the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 2.8%, up from the previous estimate of 1.9%. The higher the reading, the better the news it is for the bond market.

Next up is November’s Industrial Production report mid-morning Monday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.4% increase in output, indicating modest manufacturing growth. A smaller than expected rise would be good news for bonds, while a stronger reading may result in slightly higher mortgage pricing.

November’s Consumer Price Index (CPI) will be released at 8:30 AM ET Tuesday. It is similar to last Friday’s Producer Price Index, except it tracks inflationary pressures at the more important consumer level of the economy. Current forecasts call for an increase of 0.1% in both the overall and core data readings. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. That translates into falling bond prices and rising mortgage rates. Therefore, weak readings would be favorable for the bond market and mortgage shoppers.

Wednesday’s only economic report is Housing Starts, but we will get three months worth of it. Due to the government shutdown in October and problems collecting data last month, we will see results for September, October and November at 8:30 AM ET Wednesday. This data isn’t known to be highly influential on bonds or mortgage pricing. It does give us an indication of housing sector strength by tracking new home groundbreakings, so it is worth watching. All three months are expected to show increases, indicating strength in the new home portion of the housing sector. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates.

Wednesday also has some significant FOMC events that can be highly influential on the financial and mortgage markets. The two-day FOMC meeting that began Tuesday will adjourn at 2:00 PM ET Wednesday. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting, but traders and analysts are anxious to get the Fed’s current economic forecasts and any word of a potential reduction in the Fed’s current bond buying program. Also worth noting is that the meeting is ending earlier than the traditional 2:15 PM because it is one of the meetings that will be followed by a press conference hosted by Fed Chairman Bernanke. The meeting will adjourn at 2:00 PM, forecasts will be posted at 2:00 PM and the press conference will begin at 2:30 PM. It is fairly safe to assume that all of that will lead to afternoon volatility in the markets and mortgage rates Wednesday.

Thursday has two monthly reports scheduled for 10:00 AM ET that we will be watching. The first is November’s Existing Home Sales figures from the National Association of Realtors, giving us a measurement of housing sector strength and mortgage credit demand. It is expected to show a decline in sales, indicating a slowing housing sector. A sizable decline in sales would be considered positive for bonds and mortgage rates because a softening housing market makes broader economic growth more difficult. But unless the actual readings vary greatly from forecasts, the results will probably have little or no impact on mortgage rates.

The Conference Board will also release their Leading Economic Indicators (LEI) for the month of November late Thursday morning. This release attempts to measure or predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning that it predicts economic growth over the next several months. This probably will not have much influence on bond prices or affect mortgage rates unless it shows a much stronger reading than the 0.6% rise that is forecasted. The weaker the reading, the better the news it is for bonds and mortgage pricing.

Friday has the remaining report with the final revision to the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. I don’t think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month’s first revision showed that the economy expanded at a 3.6% annual pace during the quarter and this month’s final revision is expected to show no change from that level. A revision higher than the 3.6% rate that is expected would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month, I don’t think it will have much of an impact on Friday’s mortgage rates.

In addition to this week’s economic data and Fed events, we also have Treasury auctions scheduled the first three days. The two that are most likely to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand, particularly Thursday’s auction, bond prices may rise enough to lead to improvements in mortgage rates shortly after the results are posted. They will be announced at 11:30 am Wednesday and 1:00 PM Thursday. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates Wednesday and/or Thursday.

Overall, Wednesday is the key day of the week due to the afternoon Fed schedule. Tuesday’s data is also key to the bond market, but I think we will see the most volatility in the markets and mortgage rates Wednesday. Despite the GDP reading, I believe Friday is the best candidate for calmest day. Generally speaking, this is probably going to be a pretty active week for the bond and mortgage markets. It is likely that I will remain very cautious towards rates until the benchmark 10-year Treasury Note yield breaks above 2.90% (currently at 2.87%) for more than a few minutes to see if that truly is a strong resistance level or if it will continue to rise past. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future as we are getting very close to that threshold.

Mortgage News Roundup - Estate Tax in 2014

 

Some interest rates are going up, others are holding steady and a few more are going down. It’s quite the volatile week.Today we’ll look at four things you need to know in 2014 for estate tax planning,

 

Estate Tax in 2014: 4 Things You Need to Know

The Motley Fool is reporting that no matter how much you earn or are worth, you should look into planning your estate carefully. In 2014, there will be four main things you should be aware of with estate taxes:

1. Higher exclusions will apply to the estate tax in 2014. Congress agreed to set the level at which estate taxes kick in at $5.25 million, avoiding expiring provisions that would have sent the exclusion down to just over $1 million. And one of the biggest improvements in the estate-tax laws is that the exclusion amount was set to adjust with inflation.
2. What’s included can surprise you. The biggest surprise for many people is that life insurance proceeds are often included in taxable estates even if the benefits go directly to beneficiaries rather than passing through the estate’s probate proceedings. So talk with a professional.
3. It’s easier for married couples to preserve their full estate tax benefits.Another good thing to come out of the recent legislation is that couples no longer have to worry about losing part of their joint exclusion amount in the event of their untimely death.
4. State limits for estate tax in 2014 can differ markedly from federal limits. Many states also charge estate taxes, and some of them have much lower limits at which their taxes apply.

End of mortgage-fix break could mean big tax bills

CNN ran a story about how a tax break for people struggling with mortgage payments ends on January 1, 2014.

If a mortgage holder was able to get some of the debt forgiven by having some principle forgiven, they weren’t taxed on it thanks to when Congress passed the Mortgage Foreclosure Debt Forgiveness Act in 2007. Unfortunately, that law is set to expire at year’s end, and the forgiven debt will now be taxed as income.

Consumer advocates consider the tax unfair: “The money being taxed was ‘phantom income’ that existed only on paper,” said Elyse Cherry, CEO of Boston Community Capital, a non-profit, neighborhood stabilization group.

It will also damage foreclosure-prevention efforts, said Cherry. Many at-risk homeowners could not participate in programs if a big tax bill accompanies the fix.

If you’re thinking of making updates to your mortgage, or getting a new one, now is the time to talk to your mortgage loan officer and see what you can lock down before December 31 when a lot more changes will happen.

Nine Tips for New Homeowners

 

You’ve closed escrow and have the keys to your first home. Your starter home or your dream home. It’s yours. But if you’ve never owned a home before, there may be some gaps in your knowledge.

So today we’re going to review ten tips for things you new homeowners should know.

Go Meet Your Neighbors

Sure, in the olden days, as soon as you put up your curtains, neighbors would bring over cookies. Unfortunately, everyone’s really busy these days and may intend to stop by, but don’t always make the time. So don’t be afraid to go over and introduce yourself. You could write a letter with your contact information and an open invitation to get together to say hello.

Your neighbors are vital for understanding known problems and safety issues in the neighborhood. Plus, it’s good to build that friendship so you can look out for one another.

Save for unexpected problems

A new water heater could cost $5000. Plumbing repairs could be $1000. And even if you have warranties, generally you have to pay out of pocket and get reimbursed. So it always pays to have a special account for unexpected problems that pop up along the way.

Form an inspection habit

We remind you regularly what maintenance you should do on your home in Spring and Fall. It’s important to follow through. Look into creating a spreadsheet of tasks and noting the last time you did it.

Buy a bunch of furnace filters and replace them regularly. If you bought a new house, chances are you don’t need to replace them right away. But if you bought a used home, who knows when the last time was that they were replaced.

Review your appliances and figure out how many more years you can get out of them. Then monitor them occasionally to see how well they’re still working.

Take advantage of tax credits

Get in touch with a good tax accountant to better understand how you can write off your points and mortgage interest.

Start keeping records

Keep records of when you purchased appliances, how long their warranties are, if you get free maintenance and when you need to phone to get the service. Keep records of repair work. Keep your contracts for services. You never know when it will come in handy.

Review your insurance

You may need to increase your auto insurance, or obtain life insurance because of your new asset.

Install programmable thermostats

Save money right off the bat by keeping the HVAC turned off when no one is home.

Mark any cracks in the foundation with dated masking tape

Don’t forget to use permanent ink on the tape. You could also mark the area with masking tape and put a date on it and a number, and then keep a spreadsheet with the number, date and approximate size of the crack.

Plant shade trees near your house

They will grow and provide much needed shade during the hot months. Plus, it gives you a sense of settling into your own home.

And even if you’re not a homeowner, you can start using any of these tips today.

What’s your favorite tip for a new homeowner?

Market Commentary for the Week of December 9th

 

This week has only two pieces of monthly economic data scheduled for release in addition to a couple of Treasury auctions that have the potential to influence mortgage rates. Both of the economic releases are considered highly important though and the Treasury auctions are the more important set of auctions we regularly deal with, so despite the lack of a busy calendar we still should see noticeable movement in rates this week.

Monday has no relevant economic data scheduled, but does have several afternoon speaking engagements by Federal Reserve members. The topics of a couple of the speeches are related to the economy, so analysts and traders will be watching them for any surprises or tidbits that could alter forecasts of what future moves the Fed may make and when they will be made. Often these appearances are non-factors because they are related to banking rules or other boring topics. Since some of Monday’s look to be directly related to current and future economic conditions, we could see one or more of them affect afternoon trading and mortgage pricing.

There are Treasury auctions scheduled for several days this week, but the two we need to watch are the 10-year Note sale Wednesday and the 30-year Bond sale Thursday. Wednesday’s auction is the more important one and will likely have a bigger influence on mortgage rates. Results of the sales will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, particularly international buyers, we should see strength in the broader bond market and improvements to mortgage pricing during afternoon hours those days. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates.

November’s Retail Sales report is scheduled for release Thursday at 8:30 AM ET. This report will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher Thursday. Current forecasts are calling for an increase of 0.6% in November’s sales.

The second and final relevant report of the week will be November’s Producer Price Index (PPI) early Friday morning. It measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices, giving a more stable reading for analysts to consider. If Friday’s release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should respond well and mortgage rates could fall. Current forecasts are showing a 0.1% decline in the overall index and a 0.1% rise in the core data.

Overall, I suspect Thursday will be the most active day of the week with the consumer spending data and 30-year Bond auction, but Friday’s data can also cause movement in rates. The calmest day will likely be Tuesday. It will probably be a calmer week than last week in terms of mortgage rate movement although we still should see rate changes multiple days. The benchmark 10-year Treasury yield closed the week at 2.88% after touching 2.92% immediately after November’s stronger than forecasted Employment report was posted. I believe this week will help determine if that yield will break above 2.90% again or retreat towards 2.62%. Since mortgage rates tend to follow bond yields, the latter would be preferred by mortgage shoppers. Because the 2.92% on Friday was momentarily, I am hesitant to rely on it as a basis in switching to Float recommendations. Therefore, I am maintaining the conservative stance towards locking or floating an interest rate for the time being.

Mortgage News Roundup - Qualified Mortgage Update

 

Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, sank 12.8 percent in the week ended November 29, even with adjustments for the Thanksgiving holiday weekend.

That is the fifth straight week applications have dropped.

In today’s post, we’ll look at the idea of refinancing without changing the remaining time left on the loan, and how mortgage offerings may start to change in 2014.

Mortgage Refinancing Without Resetting the Clock

Have you wanted to refinance but you’ve already paid a number of years down and don’t really want to have a 30 year mortgage again? Some mortgage lenders are now offering refinancing options that lower the interest rate while keeping the remainder of the term intact.

From AOL’s Real Estate Blog:

The original loan amount taken out in January 2009 is for $300,000 on a 30-year fixed-rate mortgage, with a 5.5 percent current balance of $282,000 and a mortgage payment of $1,703.37. The new loan on a 30-year mortgage at 4.375 percent on same principal balance of $282,000 means a new mortgage payment of $1,407.98. That’s a savings potential of $296 per month on a new 30-year mortgage. 

A prudent consumer will stand to benefit by taking out the new 30-year mortgage over one full percentage point lower in interest in exchange for the savings just shy of $300 per month. By making the $1,703 monthly payment, rather than the payment of $1,407.98 that would actually be due each month, the loan would be paid off in 21.3 years instead of the current 26 years remaining with the higher interest rate. Moreover, this homeowner could always revert back to the lower monthly payment in case of financial hardship. As long as the same payment that was being made on the previous loan is made on the new loan that contains a lower monthly payment, the loan can be paid off much sooner.

Talk with your loan officer to understand the interest rates so you can compare apples to apples.

AOL listed some helpful tips for your refinance. Here are three of them:

• Verify that the total new loan amount is lower than your original balance (unless you’re cashing out or increasing the amount of the loan)
• The interest rate should be the same or lower than the rate on the loan currently being paid off.
• If pmi exists on the loan being paid off and the new loan contains a higher interest rate, the removal of the mortgage insurance greatly offsets even a slightly higher interest rate on the new refinance.

New mortgage rules may mean less choice

Beginning Jan. 10, banks have to ensure that monthly mortgage payments are affordable defined by the Dodd Frank law passed in 2010. The failure to do so carries strict penalties. Many small lenders may drop out of the business of providing mortgages due to the increased regulation and the overhead it carries.

Lenders will need to carefully determine that borrowers have the ability to repay their loans. Banks can no longer lend to anyone whose total debt payments would exceed 43% of their income. Lenders must carefully check pay statements, bank records, tax returns and other documents provided by the borrower.

Banks will need to:

1. Update their their underwriting policies and procedures
2. Change their technology
3. Retrain staff

Some analysts feel that small banks are overstating the problem and shouldn’t have any difficulties staying competitive even with the new regulations.

Contact a reputable loan officer before 2014 to understand what you may be eligible for and how the changes may impact you if you choose to wait. The loan officers are diligent in staying on top of regulations and market offerings to help you get the best options for your situation.

Market Commentary for the Week of December 2nd

 

This week is packed with economic data with 10 pieces set for release, including two that are considered to be highly important to the markets and mortgage rates. November’s manufacturing index from the Institute for Supply Management (ISM) reports were released. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. The ISM report came in higher than expectations at 57.3, higher than the expected 55.5, triggering a sell-off in the bond market.

There is nothing of importance scheduled for Today, but tomorrow has three reports starting with October’s Goods and Services Trade Balance at 8:30 AM ET. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is actually the week’s least important monthly report. It is expected to show a $40.5 billion trade deficit, which would be a decline from September. Unless it varies greatly from forecasts, I don’t expect this data to affect mortgage pricing tomorrow.

Next on tap is two months’ worth of new home sales data from the Commerce Department. At 10:00 AM ET Wednesday we will get September’s and October’s New Home Sales reports that will give us an indication of housing sector strength. September’s data was delayed during the government shutdown, so we will get both reports this week. This data is not considered to be highly important because new home sales make up only a small portion of all home sold in the U.S. Analysts are expecting to see an increase in September’s sales but a decline in October’s sales. Ideally, bond traders prefer to see declining sales as it would point towards weakness in the housing sector. However, unless there is a significant surprise in the results, the data will probably have only a modest impact on Wednesday’s mortgage rates.

Also tomorrow, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report, which is named simply after the color of its cover, details economic conditions by Fed region. That information is relied upon heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any noticeable changes from the last update. More times than not though, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.

The first of two revisions to the 3rd Quarter Gross Domestic Product (GDP) will be posted early Thursday morning. It is expected to show an upward revision from last month’s preliminary reading of a 2.8% annual rate of growth. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. Current forecasts call for a 3.0% rate of growth, meaning that there was a little more economic activity during the third quarter than previously thought. This would be bad news for mortgage rates because solid economic growth makes long-term securities such as mortgage-related bonds less appealing to investors. A modest increase shouldn’t be too detrimental to rates since it is expected. On the other hand, a sizable revision upward or downward could significantly influence the financial and mortgage markets.

October’s Factory Orders will be posted late Thursday morning. This report is similar to the Durable Goods Orders report that was released last week, except this one includes manufacturing orders for both durable and non-durable goods. This data usually isn’t a major influence on bond trading, but it does carry enough importance to impact mortgage rates if it shows a sizable variance from forecasts. Analysts are expecting to see a 1.0% decline in new orders. The larger decline, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness. If we do see a much larger drop in new orders, the bond market could thrive, improving mortgage rates Thursday morning.

The biggest news of the week comes Friday morning when the Labor Department posts November’s Employment figures. This is arguably the most important monthly report we see, so its impact on the markets and mortgage rates is often significant. It is comprised of many statistics and readings, but the most watched ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for a 0.1% decline in the unemployment rate to 7.2% while 185,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate than October’s 7.3%, a smaller increase in payrolls (or a decline) and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see the stock markets fall, bond prices rise and mortgage rates move much lower Friday. However, stronger than expected readings would likely fuel a stock rally and bond sell-off that would lead to higher mortgage rates.

October’s Personal Income and Outlays data is scheduled for early Friday morning also. This data measures consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up over two-thirds of the U.S. economy. It is expected to show that income rose 0.3% and that spending increased 0.3%. Weaker than expected readings would mean consumers had less money to spend and were spending less than thought. That would be theoretically favorable news for bonds and mortgage pricing, although the Employment data will be the focus of Friday’s morning trading.

The final report of the week is the release of December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly if it shows a sizable miss from forecasts. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the economy, any related data is watched closely. Friday’s release is expected to show a reading of 75.4, which would be a small rise from last month’s final reading of 75.1. A large decline in confidence would be considered good news for the bond market and mortgage rates.

Overall, look for Friday to be the most active day of the week but we should see noticeable movement in rates Monday also. And in between those days there is plenty of data being posted that may move mortgage rates. The best candidate for calmest day is Tuesday with nothing in terms of relevant economic data set for release. With so much on tap this week, there is plenty of opportunity to see large swings in the major market indexes and mortgage rates. Accordingly, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Mortgage News Roundup

 

It’s been an interesting week with interest rates slowly creeping up, refinancing numbers continuing down, and JP Morgan settling with the Department of Justice.

Mortgage Applications in U.S. Retreated for Third Straight Week

Has refinancing bottomed out? Bloomberg is reporting that mortgage applications have decreased to a two month low.

The Mortgage Bankers Association’s index fell 2.3 percent in the period ending Nov. 15 after a 1.8 percent loss compared to the week prior. The group’s purchases measure increased 5.8% to the highest since September. However, the refinancing gauge dropped 6.5% to the lowest since mid-September.

Reuters is reporting that the Fed has announced it would begin to slow its policy of buying $85 billion per month in Treasuries and mortgage-backed securities when economic growth meets its targets. Strong data recently has reinforced concerns that the tapering could come soon. Previously, it was expected that those accommodating monetary policies would last into 2014.

JP Morgan Settles With Government

The JP Morgan mortgage settlement was announced this week with a whopping $13 billion made up of $7 billion in civil securities settlements, $2 billion for “a civil penalty to settle the Justice Department claims under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA),” and $4 billion is “in the form of relief to aid consumers harmed by the unlawful conduct of JPMorgan, Bear Stearns and Washington Mutual.”

This is the largest settlement in U.S. history. JP Morgan, the nation’s largest bank, admitted to knowingly peddling the toxic securities that helped lead to the housing bubble and the worst financial meltdown since the Great Depression.

It was unclear yet how the $4-billion relief program would be apportioned to struggling homeowners, but that it would distributed over the next four years. Government officials said California would receive a large share as the state was hit hard by 1 million foreclosures.

Half of the program is intended to go toward writing down the balance of mortgages and waiving certain payments on home loans. Most of that would be achieved through outright forgiveness of first-mortgage debt.

The remaining $2 billion is to be allocated for various other uses, including aid to help low-income people buy homes, reduction of the interest rate on mortgages and efforts to reduce blight in neighborhoods most affected by foreclosures.

California’s public pension plans will also get some cash. The California Public Employees’ Retirement System will receive $221.6 million, while the California State Teachers’ Retirement System will receive $19.5 million. Smaller state-run pension plans will receive lesser amounts.
Yahoo! Finance posted a blog pondering if the punishment was a good idea or if it would make the economy worse:

Specifically, Whalen says the combination of the Fed’s ultra-low interest rates and a much more stringent regulatory environment are going to have a “chilling effect on credit creation.” (While the Fed’s zero-interest rate policy was initially good for banks, it is hurting all ‘savers,’ including banks, who are being forced to sit on higher levels of capital, he notes. “The cheap funding actually enhanced net interest margin, but the point where the ‘net’ benefit for banks went negative has long since passed.”)
That, in turn, will hurt economic growth and limit job creation, he says, creating a cruel circle of irony.

If you have any questions on mortgage interest rates, applications or refinancing, please contact a reputable loan officer who diligently studies the market trends to find the best answers for you and your situation.

Market Commentary for the Week of November 18th

This week has five economic reports scheduled for release that are relevant to mortgage rates in addition to the minutes from last month’s FOMC meeting. A couple of the reports are considered highly important to the markets, meaning we could see noticeable movement in rates more than one day. There is nothing scheduled to be posted Monday or Friday, so the middle part of the week will likely be the most active.

The 3rd Quarter Employment Cost Index (ECI) will be released at 8:30 AM ET Tuesday. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.5%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week. Therefore, it will likely take a large variance from forecasts for this report of have a noticeable influence on mortgage pricing.

Wednesday has four events scheduled that we need to watch, including two of the week’s more important economic reports. The Commerce Department will give us October’s Retail Sales figures early Wednesday morning. This data measures consumer level or retail spending. It is considered extremely important to the markets because it makes up over two-thirds of the U.S. economy. It is expected to show a 0.1% increase in retail-level spending, meaning consumers spent just a bit more last month than they did in September. A larger increase in spending would be considered negative news for bonds because rising spending fuels economic growth and raises inflation concerns in the bond market. If Wednesday’s report reveals a decline in spending that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower. If it shows an unexpected increase, mortgage rates will likely move higher.

The second report of the morning will be the release of October’s Consumer Price Index (CPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The CPI measures inflationary pressures at the consumer level of the economy and is one of the most important reports the bond market sees each month. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the consumer level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see no change in the overall reading and a 0.2% increase in the core data.

October’s Existing Home Sales data will be posted by the National Association of Realtors late Wednesday morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking home resales in the U.S. This report is expected to show a small decline in sales, meaning the housing sector weakened slightly last month. That would be good news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact on mortgage rates.

Also worth noting is the release of the minutes from the last FOMC meeting Wednesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy or potential tapering of their current bond purchases. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising, we may see some movement in rates Wednesday afternoon, but it is more likely there will be little reaction.

Thursday’s only monthly report is October’s Producer Price Index (PPI) at 8:30 AM ET. This index is similar to Wednesday’s CPI, except it measures inflationary pressures at the manufacturing level of the economy. The overall reading is expected to show a 0.2% decline from September’s level while the core data is expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates Thursday morning.

Overall, I am expecting Wednesday to be the most active day for mortgage rates with three economic reports and the FOMC minutes set for release, but Thursday could be a little volatile also. The calmest day will probably be Monday while Friday should be a close second unless something unexpected transpires. The yield on the benchmark 10-year Treasury note closed last week just above 2.70%, which appears to be somewhat of a support level for the market. That means there is more of a possibility of it moving higher than breaking below and since mortgage rates tend to follow bond yields we could see higher mortgage rates before getting much of an improvement. Therefore, I strongly recommend proceeding cautiously if still floating an interest rate and closing in the near future.

Market Commentary for the Week of November 4th

 

This week has seven economic reports scheduled for release that may have an impact on mortgage rates. The most important data is scheduled later in the week, but there is data or speeches from Fed members set for every day making it likely that we will see an active week for mortgage rates with a good possibility of intra-day revisions multiple days.

Monday kicks off the week’s schedule with the release of two months of Factory Orders data. We will get results for August and September instead of the traditional single month due to delays caused by the government shutdown. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 0.3% rise in August and a 1.8% increase in new orders in September. I don’t believe that August’s data will have much of an impact on Monday’s mortgage rates. This report is normally considered to be only moderately important and August data is a couple months old now. Basically, smaller than forecasted increases would be good news for the bond market and mortgage rates while bigger increases would be bad news and could contribute to higher mortgage pricing since it would indicate economic strength.

There is nothing of relevance scheduled for release Tuesday and Wednesday’s sole report is not considered to be highly important. Wednesday’s data will come from the Conference Board, who will post their Leading Economic Indicators (LEI) for September at 10:00 AM ET. This report attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% rise, indicating that the overall economy is likely to grow in the immediate future. Good news for the bond and mortgage markets will be a much smaller increase than forecasts. However, this data is not known to be highly influential on rates, so it will likely take a large variance from forecasts for it to affect Wednesday’s mortgage pricing.

Thursday starts the big news for the week. The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released at 8:30 AM ET Thursday morning. The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Thursday’s release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 1.9% in the GDP, which would mean that the economy grew at a noticeably slower pace than the 2nd quarter’s 2.5% rate. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Thursday morning.

The first of Friday’s three reports is another key release with the Labor Department posting October’s Employment data. It is arguably the single most important monthly report since it is comprised of many statistics and readings, including the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for the unemployment rate to move higher by 0.1% to 7.3%, an increase in payrolls of approximately 100,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news. On the other hand, if the report indicates employment sector strength, especially after the government shutdown, we could see mortgage rates spike noticeably higher Friday morning.

September’s Personal Income and Outlays report will also be posted early Friday morning. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see a 0.2% increase in income and a 0.2% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing, but the Employment report will take center stage Friday morning.

The week’s economic calendar closes late Friday morning when November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment is posted. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 75.3, up from October’s final reading of 73.2. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely. The lower the reading, the better the news it is for mortgage shoppers.

There are also quite a few speaking engagements by Fed members this week that are worth watching, including Chairman Bernanke. The topics of some of these speeches, which are scheduled each day this week, appear to be directly related to the economy and monetary policy. This means that their words will be watched closely by market participants and can be highly influential on the financial and mortgage markets.

Overall, I believe the most important days of the week for mortgage rates are Thursday and Friday. This is when we will likely see the most movement in rates due to the importance of the data those days. Tuesday appears to be the best candidate for lightest day with nothing scheduled, but we should be alert each day for unexpected news or swings in trading that could cause mortgage rates to jump. The benchmark 10-year Treasury Note yield closed at 2.62% Friday, which could mean there is more room for it to rise before coming down if it does not fall below 2.60% right away. Therefore, please proceed cautiously if still floating an interest rate and closing in the next month or so.

Mortgage News Roundup

 

In today’s mortgage news roundup, we look at another bank that had to settle lawsuits, the idea of test-driving a home before you buy, and more reasons to buy or refinance before 2014 hits.

Ally settles U.S. regulators’ mortgage securities claims

Residential Capital LLC, the former mortgage unit of Ally Bank, has agreed to settle lawsuits by two U.S. regulators over alleged misstatements about its residential mortgage-backed securities.

Residential Capital is under Chapter 11 Bankruptcy protection right now, and will have their bankruptcy exit plan reviewed in a hearing on November 19th.

Alfred Pollard, general counsel for FHFA, said in a statement that details will be released after the end of the current fiscal quarter, as both sides continue to hash out final terms. Ally was one of 18 financial institutions sued by the FHFA in 2011. FHFA targeted companies that they felt made false or misleading statements relating to some $200 billion in residential mortgage-backed securities bought by Fannie Mae or Freddie Mac. FHFA is the conservator organization for Fannie Mae and Freddie Mac.

David Barr, a spokesman for the FDIC, said that agency’s settlement was worth $55.3 million, and resolves four lawsuits against Ally related to mortgage-backed securities.

Quirky Trend Could Save You From Buying The Wrong House.

Try before you buy works well with automobiles, but what about houses?

There is a new trend that allows serious potential home buyers to spend some time alone in the property without the pressure of anyone else. It allows the buyer to pretend that they are living there. You suddenly see things that you might not have just doing a walk through. You could pretend to cook and discover that you don’t like the way the oven door opens into the doorway.

Or that you thought you’d enjoy living next to a park, but weren’t expecting the crush of cars with people who exercise at 5:30am or 6:30pm.

Mortgage refinancing projected to plunge in 2014 as rates rise

Is this the end of bargain mortgage rates?

Home lending will fall by a third next year as interest rates rise, a mortgage industry group says in a new forecast.

The Mortgage Bankers Assn. said Tuesday that it expects to see $1.19 trillion in new mortgages written during 2014, down 32% from $1.75 trillion this year.

Jay Brinkmann, the group’s chief economist, said all-cash home purchases by bargain-hunting investors – a huge driver of home sales the past few years – are expected to taper off next year.

He also expects mortgage rates to rise above 5% in 2014 and to increase further to 5.3% by the end of 2015.

As we’ve reported in prior posts, now is the time to get a mortgage…new or refinance. Contact your local mortgage broker and discuss your goals and current situation to find the best solution for you.

Market Commentary for the Week of October 28th

 

This week brings us the release of six economic reports and two relevant Treasury auctions for the bond market to digest in addition to another FOMC meeting. Most of the data is set for the first half of the week, so we could see plenty of movement in rates the first couple days. The data scheduled this week ranges from moderately to extremely important, so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they can be heavily influential on bond market direction and mortgage rates.

The week kicks off Monday with the release of a moderately important manufacturing report. September’s Industrial Production report will be posted at 9:15 AM ET Monday, giving us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase in production output, indicating minor growth in the sector. Good news for the bond market and mortgage rates would be a decline in this data.

There are three reports scheduled for release Tuesday, two of which are very important to the financial and mortgage markets. The first is September’s Retail Sales report at 8:30 AM ET that measures consumer spending. This data is very important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Therefore, any related data is watched closely. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop Tuesday morning. However, stronger than expected sales would fuel optimism about the economy and would likely lead to a stock rally that hurts bonds prices and pushes mortgage rates higher. Current forecasts are calling for a 0.1% decline in retail-level sales, meaning consumers spent a little less last month than they did in August. Good news for the bond market and mortgage pricing would be a larger decline in sales.

September’s Producer Price Index (PPI) is the second key report of the day, also at 8:30 AM ET. This is one of the two very important inflation readings we get each month. The index measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could raise concerns in the bond market about future inflation, leading to higher mortgage rates Tuesday. However, weaker than expected readings should result in bond market strength and lower mortgage pricing.

October’s Consumer Confidence Index (CCI) is Tuesday’s last report. This Conference Board index will be released at 10:00 AM ET and gives us a measurement of consumer willingness to spend. It is expected to show a drop in confidence from last month’s 79.7 reading. That would mean that consumers felt a worse about their own financial and employment situations than last month, indicating they are less likely to make large purchases in the near future. That would be good news for the bond market because consumer spending makes up a significant part of our economy. As long as the reading doesn’t exceed the forecasted 74.1, we will likely see the bond market react favorably to this report.

Wednesday’s only economic data is also very important to the bond market. September’s Consumer Price Index (CPI) will be released at 8:30 AM ET Wednesday. It measures inflationary pressures at the very important consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.1% in the overall index and an increase of 0.1% in the core data reading. A larger than expected increase in the core reading could raise inflation concerns, pushing bond prices lower and mortgage rates higher. Inflation is the number one nemesis of the bond market because it erodes the value of a bond’s future fixed interest payments, so when inflation is a threat, even down the road, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers.

This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There really is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of a change in Fed sentiment or possibly further development on tapering of their current bond buying program. Possible effects the government shutdown had on the economy will also be of interest to the markets. The meeting will adjourn at 2:00 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours.

There is no major economic news set for release Thursday, but there is a highly influential report scheduled for late Friday morning. That will come from the Institute for Supply Management (ISM), who will post their manufacturing index for October at 10:00 AM ET. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength or weakness. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Friday’s release is expected to show a reading of 55.0, indicating that manufacturer sentiment slipped from September’s level of 56.2. This means fewer surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector weakness. A smaller than expected reading would be good news for bonds and mortgage rates, especially if it drops below the benchmark 50.0.

This week also has Treasury auctions scheduled the first three days. The only two that have the potential to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand from investors, particularly Wednesday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to upward revisions to mortgage rates.

Overall, it appears Tuesday or Wednesday could be the most active day for mortgage rates and Thursday will probably be the lightest. The importance of Friday’s sole report makes it likely to be an active day also, although I suspect the most movement will take place the middle days. With data or other events relevant to mortgage rates scheduled four of the five days, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Mortgage News Roundup

 

The big news this week are the lawsuits against BofA and J.P. Morgan Chase. We’ll also look at 5 things you’re doing that are hurting you financially. Home prices are on the rise again, and we’ll talk about how Blackstone Funding group managed to create the largest single-family rental business in the U.S.

Jury: BofA liable for Countrywide mortgage fraud

The big news across all the financial media is that BofA committed fraud when they sold sub-prime mortgages to Fannie Mae and Freddie Mac in a program they called The Hustle. The mortgages were originally acquired from when BofA purchased and merged with Countrywide.

The jury also found that Rebecca Mairone, a former Countrywide Financial Corp. executive, was liable for fraud for her role in leading the Hustle loan-processing program.

The trial lasted approximately one month. Investors are also currently suing J.P. Morgan for $5.75 billion.

5 Things You’re Doing That Could Make Your Life Hell

Credit.com posted a useful list on Yahoo Finance of 5 things you’re doing that could be negatively affecting your credit score.

1. Oversharing on Social Networking Sites – those quizzes could be a way for the bad guys to get your personal information like mother’s maiden name, your first school, your first pet’s name, etc. Also you should be careful of sharing information like your birthday and when you’re gone on vacation.
2. Joining Accounts With ‘The One’ – when you combine your accounts with someone else, you’re dinged equally for late or missing payments.
3. Focusing on Credit Only When You Need to Use it - you need to build, nurture, manage and protect your credit portfolio regularly & not pull it off every few years.
4. Clicking on a Link in an Email From the IRS – Usually, it’s a phish (a false email used to get you to provide personal information). The IRS communicates through good old fashioned snail mail.
5. Spilling the Beans Over the Phone – just because someone calls and says they’re from your credit card company doesn’t mean they really are. These scammers ask for your credit card number…and since they called, shouldn’t they be telling you what it is? For your safety, tell them you’ll call them back, and then use the 1-800 number of the back of your credit card to verify.

Home Prices Rise for 19th Straight Month; Pace Decelerating

Home prices posted a 19^th consecutive monthly gain in August the Federal Housing Finance Agency (FHFA) said on Wednesday. FHFA’s purchase only Home Price Index (HPI) rose 0.3 percent on a seasonally adjusted basis from July but the 1.0 percent increase previously reported for July was revised down to 0.8 percent.

The FHFA index is calculated using home sales price information from mortgages sold to or guaranteed by the government sponsored enterprises Fannie Mae and Freddie May.

Blackstone Funding Largest U.S. Single-Family Rentals

Blackstone Group LP spent $7.5 billion acquiring 40,000 houses over the last two years creating the largest single-family rental business in the U.S. The private-equity firm is now planning to sell bonds backed by lease payments.

Blackstone Group created their Invitation Homes division in April 2012 to buy and renovate properties to lease, is double the size of American Homes 4 Rent which is the next in line.

The properties are located in states such as California, Arizona, Florida and Nevada where the number of foreclosures was quite high.

Market Commentary for the Week of October 21st

 

This week brings us the release of five economic reports that may influence mortgage rates, one of which is arguably the single most important monthly report for the markets. There is data set for release four of the five days, so we can expect to see movement in rates multiple days this week. We are also into corporate earnings season, which can heavily influence stock trading and indirectly bond trading. If earnings reports start to indicate a general consensus of weaker earnings than analysts were expecting, stocks should go into selling mode and bonds could benefit as investors seek the safety of government and mortgage bonds.

The National Association of Realtors will start the week’s activities with the release September’s Existing Home Sales data late tomorrow morning. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales. I don’t see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts’ forecasts could lead to a slight change in mortgage pricing. It is expected to show a decline in sales from August to September, meaning the housing sector softened. That would be favorable news for the bond market since a weakening housing sector makes a broader economic recovery less likely and allows bonds to remain appealing to investors.

The Labor Department will post September’s Employment report early Tuesday morning, rescheduled from earlier this month due to the government shutdown. This extremely important report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be key readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.

If this report gives us weaker than expected readings, bond prices should move higher and we should see lower mortgage rates Tuesday. Although, it is worth noting that the accuracy of the data is likely to be questioned as a result of the shutdown. However, stronger than forecasted readings would be bad news for the bond market and mortgage rates. Analysts are expecting to see the unemployment rate remain at 7.3%, an increase of 183,000 new jobs from August’s level and a 0.2% increase in earnings.

There is nothing of importance set for release Wednesday and Thursday has only a minor housing report scheduled. That would be September’s New Home Sales at 10:00 AM ET. This data covers the small percentage of home sales that Monday’s Existing Home Sales report didn’t include. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Thursday.

Friday has two pieces of economic data that could affect mortgage rates. The Commerce Department will post Durable Goods Orders for September at 8:30 AM ET. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for an increase in new orders of approximately 3.5%. If we see a much larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on Friday’s bond trading or mortgage pricing.

The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. If consumers are more confident in their own financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watch closely. Current forecasts show this index falling from the preliminary reading of 75.2 to 74.5, meaning confidence was not as strong this month as previously thought. That would be good news for mortgage rates.

Overall, Tuesday is the most important day of the week with the almighty Employment report now scheduled. None of the other data set for release is considered key or market-moving, but most of the reports can still affect mortgage rates if they show a noticeable variance from forecasts. Wednesday should be the calmest day unless something unexpected happens. However, stock movement can drive bond trading and impact mortgage rates any day, so please proceed cautiously if still floating an interest rate. Maintaining contact with your mortgage professional would be prudent this week.

Mortgage News Roundup

 

We hope you’re having a great week and that you have plans to go visit a pumpkin patch this weekend.

This week, we’ll look at what your homeowner’s insurance doesn’t cover with trick-or-treaters, look into why mortgage application rates are flat, and suspect that will change because mortgage lenders are easing up the credit score standards.

Flat Mortgage Applications

Reuter’s is reporting that US mortgage applications are near flat as demand decreases. When you dig into the article, their experts state that refinancing is up, but because it’s only 0.3% for the week ending October 11 and that’s down from the 1.3% from the week ending October 4th.

The refinancing index gained 3.3 percent after recently hitting the lowest level since June 2009. In contrast, the gauge of loan requests for home purchases, a leading indicator of home sales, fell 4.8 percent.

Their analysts blamed the instability of the government shutdown for the reason.

Mortgage lenders ease credit score standards

Mortgage Watch, a Wall Street Journal based website, announced that home buyers no longer need perfect credit to obtain a loan. After the housing bubble burst, mortgage lenders increased the requirements for obtaining home loans.

The average credit score among borrowers who received a mortgage in September was 732, down from a peak of 750 a year prior, according to new data released today by Ellie Mae, which provides mortgage lenders with loan origination systems. That’s also the lowest average credit score since the company started tracking this data in August 2011.
To be sure, the bar to getting a mortgage remains high. Applicants who were denied a mortgage in September had an average FICO score of 696, according to Ellie Mae—a score that’s relatively stellar by most counts. FICO scores range from 300 to 850. Before the recession it was common for borrowers with credit scores in the 600 range and below to get mortgages.
Ellie Mae’s data comes from lenders that input mortgage applicants’ information in its software, which processes applications. The data represents 20% to 30% of all mortgage applications in the country.

So if you don’t have perfect credit and are looking at buying a home, find a reputable mortgage broker and review your situation. If you have a home loan and don’t have perfect credit, it will be easier to refinance. Talk to a mortgage broker to find the best plan for your situation.

What Is Your Risk At Halloween?

Fox Business ran an article on what risks are involved on Halloween and what could or might not be covered by your homeowner’s insurance policy.
The risks are:

• Passing Out Candy – Unfortunately, sometimes people slip and fall or somehow get injured on your property. And you are responsible for that. The good news is that your insurance should cover any slips, trips or falls that take place outside your home. Your insurance should also cover your defense if it went to trial.
• Hosting a Haunted House – Any injuries would be covered if it’s free. If you charge to go in, you would be considered running a business and your insurance would not cover it.
• Vandalism and Stolen Objects – While you could file a claim, you would have to decide if it’s really worth it to pursue an insurance claim for stolen decorations, as it may hurt you in the end if a larger issue occurs down the road. If you have a history of a lot of little claims, it may raise your rates or leave you open to being dropped.

As with all things, please talk to your insurance agent specifically about your situation and concerning your own policy.

So, have you started decorating for Halloween yet?

Market Commentary for the Week of October 14th

 

This week had a handful of economic reports for us to follow that are relevant to mortgage rates, but it will be more of the same as the past two weeks with no resolution yet in Washington. There were five monthly reports scheduled this week that we normally would need to be concerned with. However, due to the shutdown we are likely to only get two of them.

The bond market will be closed Monday in observance of the Columbus Day holiday as will most banks, so there will not be an update to this report Monday. The stock markets will be open for trading though. This means that the lenders that are open for business will likely not be issuing new rates Monday, opting to use Friday’s pricing or not accepting new rate locks. The bond market will reopen for regular trading Tuesday morning. It is worth noting though that due to weakness in bonds late Friday, we can expect to see an increase of approximately .250 of a discount point when new rates are posted unless your lender revised pricing higher already Friday afternoon.

What we will see this week in terms of monthly economic news, assuming that nothing changes in Washington, is the Federal Reserve’s Beige Book report Wednesday afternoon and September’s Leading Economic Indicators (LEI) Friday morning. The Federal Reserve is self-funded and therefore not affected by the government shutdown and the LEI comes from a non-governmental business research group that is based in New York.

The Beige Book will be posted at 2:00 PM ET Wednesday, which is named simply after the color of its cover. This report details economic conditions throughout the U.S. by Fed region and is relied upon heavily by the Federal Reserve when determining monetary policy at their FOMC meetings. If it reveals stronger or noticeably weaker signs of economic growth from the last release, we could see bond prices move and mortgage rates revise Wednesday afternoon. Signs of stronger growth would be negative for rates while much weaker conditions than the previous release would be favorable for the bond market and mortgage shoppers.

September’s LEI will be released by the Conference Board at 10:00 AM ET Friday morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.6% from August’s reading. This would indicate that economic activity is likely to increase over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline.

The reports that are delayed are September’s Consumer Price Index (CPI), Housing Starts and Industrial Production. The CPI measures inflation at the consumer level of the economy, so it is considered very important to the bond market and will be missed. The other two releases are generally considered to be moderately important to the bond and mortgage markets but still can affect mortgage rates if they show significant surprises.

Overall, this holiday-shortened week will still likely bring multiple days of noticeable movement in rates. Besides the minimal economic data to drive trading, we can also expect any rumors or progress regarding the shutdown or upcoming debt ceiling deadline to also influence the financial markets and mortgage rates. I currently believe there is much more risk by floating an interest rate than potential reward if closing in the near future. Therefore, please proceed cautiously if still floating a rate and maintain contact with your mortgage professional.

Market Commentary for the Week of October 7th

 

This week has four pieces of economic data scheduled that was expected to influence mortgage rates in addition to a couple Treasury auctions and the minutes from the most recent FOMC meeting. However, with a resolution to the stalemate in Washington nowhere in sight yet, we likely won’t see most of the week’s economic data. That will leave bond traders to rely on other factors for bond direction and mortgage rate movement.

The relevant economic reports that are scheduled for release but are unlikely to be posted are August’s Goods and Services Trade Balance on Tuesday and Friday’s release of September’s Retails Sales report and Producer Price Index (PPI). Tuesday’s report is not considered to be of high importance to the markets, so it won’t be missed. However, Friday’s data is considered to be key readings of consumer spending and producer level inflation that could have been market-movers.

What we will see this week are the minutes from the most recent FOMC meeting, which was the one that the Fed opted to delay the much-anticipated tapering of their bond purchases. We also will get last week’s unemployment numbers Thursday morning and the University of Michigan’s Index of Consumer Sentiment late Friday morning. The results of these will be magnified because the government shutdown has significantly limited the release of the economic data that was scheduled since the first of the month.

The last FOMC meeting minutes will be posted Wednesday afternoon. These may be a major mover of the markets or could be a non-factor, depending on what they say. However, with little else being posted this week they will likely be more influential than usual. The keys will be concerns over the economy, inflation and the Fed’s next monetary policy move. If Fed members were concerned about the economy continuing to grow, we may see the bond market move higher and mortgage rates lower Wednesday afternoon. It will be interesting to see how much debate and disagreement amongst members took place during the meeting, particularly about tapering QE3. They will be posted at 2:00 PM ET, so any reaction will come during afternoon trading.

Also Wednesday is the first of two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as the auctions are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

The last event of the week is October’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. Rising confidence indicates consumers feel better about their own financial and employment situations, meaning they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related date is watched closely. Good news for the bond market would be a sizable decline in consumer confidence. It is expected to show a reading of 74.5, down from September’s final reading of 77.5.

Overall, I see Wednesday as the key day of the week, although the most movement in the markets and mortgage pricing will probably take place during afternoon hours. We should see more movement in rates Thursday and Friday also even though the reports of those days usually don’t draw high levels of attention. It is the inability to get the key data that is raising the stature of those reports. This could change if something unexpected happens, such as a compromise in Washington D.C. Since that does not appear to be likely in the immediate future, we are left with the reduced activity calendar this week. Still, we can see a fairly significant move in rates if it appears progress is being made in Congress, so please proceed cautiously if still floating an interest rate and closing in the near future.