Your Mortgage Brief for the Week of March 31st

This week brings us the release of five economic reports that have the potential to move mortgage rates with two of them considered to be highly important to the markets. The week kicks off Monday with none of those reports but we do have a public speaking engagement by Fed Chairman Yellen. She is set to speak at a conference in Chicago at 9:55 AM ET. The topic is not expected to bring any surprises or juicy tidbits about the economy or monetary policy. However, we always have the possibility of something said catching the attention of market participants. I am not concerned about this speech though and feel there is little likelihood of mortgage rates moving to anything that she may say.

The first relevant economic report of the week is actually one of those highly important ones and comes late Tuesday morning when the Institute for Supply Management (ISM) will release their manufacturing index. This index gives us an important measurement of manufacturer sentiment by surveying manufacturing executives. It is the first piece of data that we see each month that covers the preceding month. In other words, it is the freshest economic data each month. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened. This month’s report is expected to show a reading of 54.0, which would be an increase from February’s reading of 53.2. This means that analysts think business sentiment improved from last month’s level. That would be relatively bad news for the bond market and mortgage rates. A noticeable decline would be favorable for rates while an increase would be considered negative.

The ADP Employment report is set for release early Wednesday morning, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs of ADP’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we have seen more reaction than historically to the report recently, we should be watching it. Analysts are expecting it to show that 193,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.

February’s Factory Orders will be released late Wednesday morning. This data is similar to last week’s Durable Goods Orders report, except it includes orders for both durable and non-durable goods, giving us another measurement of manufacturing sector strength. It is considered to be only moderately important to the bond and mortgage markets, so unless it varies greatly from forecasts of a 1.2% increase, I suspect that the data will have a minimal impact on Wednesday’s mortgage rates.

Thursday’s only monthly data is February’s Goods and Services Trade Balance that will give us the size of the U.S. trade deficit, but is not considered to be of high importance to mortgage rates. This report can influence other markets more than bonds and usually has little impact on mortgage rates unless it shows a significant variance from forecasts. Since there is no other data to drive trading Thursday, it is worth watching. It is expected to show a trade deficit of $39.5 billion. Regardless of its results though, I doubt this data will have a noticeable impact on Thursday’s mortgage rates.

The biggest news of the week will come early Friday morning when the Labor Department posts March’s Employment report, revealing the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate slipped from 6.7% to 6.6% and that approximately 205,000 payrolls were added to the economy during the month. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and would likely push mortgage rates lower Friday morning because it would indicate weaker than thought conditions in the employment sector of the economy. However, stronger than expected results would probably fuel a stock rally and bond selling that leads to a sizable increase in mortgage pricing.

Overall, Friday is the biggest day of the week due to the significance of the Employment report but I suspect we will have an active day in mortgage rates Tuesday also. The middle part of the week should be relatively calm, at least compared to Tuesday and Friday’s trading although we should see some positioning by traders as we get closer to Friday. Keep in mind though that we can see the markets change quickly any day, so please proceed cautiously if still floating an interest rate and closing in the near future.

Mortgage News Roundup - What to Do When an Employer Wants to Pull Your Credit Report

Mortgage rates are rising sharply after the Federal Reserve’s March 2014 FOMC meeting.

They described the U.S. economic growth as having “slowed” during the winter months acknowledging inflation rates as less-than-optimal. The Fed also announced the next phase of its QE3 taper, to being in April.

QE3 is a economic stimulus program which aims to suppress U.S. mortgage rates. As the size of QE3 shrinks, mortgage rates are expected to rise. The April taper marks the third round of reductions to the QE3 program.

Subprime mortgages making a comeback

Say it ain’t so, Joe. Borrowers with bad credit were shut out of the mortgage market after the housing bubble burst, but now a handful of small lenders are starting to offer subprime loans again. A bad credit score is considered one less than 640.

This time, the mortgages come at a heavy price. Last time, lenders were handing out subprime loans with low teaser rates and little to no down payments. Now, these small lenders are charging interest rates of as high as 8% to 10% and requiring borrowers to make down payments of as much as 25%-35%.

It could be worthwhile for some people with poor credit who are looking to build it back up and buy a house while they’re still below market price.

What to Do When an Employer Wants to Pull Your Credit Report

It’s been happening for a few years now. Companies want to run a credit report on you to see if you’re responsible enough to work there. Mind you, studies don’t prove any correlation between your credit and how you behave at the office, but that’s an article for a different blog.

So, here’s some things you should know.

1. It’s considered a soft pull, so it won’t affect your credit score.
2. They can’t see your credit score.
3. The reporting bureaus have created a special report for potential employers that doesn’t include account numbers, date of birth, or any references to a spouse if you have one.
4. They need your permission first.

So what can you do?

Well, you should regularly pull your report and look for errors. If you see something that’s incorrect, get it fixed as quickly as possible. You should know what’s on your credit report before your potential employer sees it. If you can’t get it fixed and they want to pull it, be up front that you’re in the process of fixing errors.

If there’s some problems that really are correct, you get a chance to have your side of the story heard beforehand which makes you look more forthright and a better candidate.

Market Commentary for the Week of March 24th

This week brings us the release of six pieces of relevant economic data along with two Treasury auctions that have the potential to affect mortgage rates. The week starts of slow with nothing of importance set for release Monday. It is the only day that doesn’t have something scheduled that is likely to affect mortgage pricing. Most of the reports can influence mortgage rates but none of them are considered extremely important or key data.

The first will come from the New York-based Conference Board late Tuesday morning when they post their Consumer Confidence Index (CCI) for March. This index gives us an indication of consumers’ willingness to spend. Bond traders watch this data closely because consumer spending makes up over two-thirds of our economy. If this report shows that confidence in their own financial situations is falling, it would indicate that consumers are less apt to make a large purchase in the near future. If it reveals that confidence looks to be growing, we may see bond traders sell as economic growth may rise, pushing mortgage rates higher Tuesday morning. It is expected to show little change from February’s 78.1 reading. The lower the reading, the better the news it is for bonds and mortgage rates.

Also late Tuesday morning, the Commerce Department will give us February’s New Home Sales figures. They are expected to announce a decline in sales of newly constructed homes. This report tracks a much smaller percentage of home sales than last week’s Existing Home Sales report covered, so it should have a much weaker influence on the markets and mortgage pricing. A large increase in sales would be negative for the bond market and mortgage pricing because it would point towards economic strength.

Wednesday’s only economic data is February’s Durable Goods Orders at 8:30 AM ET. This Commerce Department report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be volatile from month to month but is still considered to be of fairly high importance to the markets. Analysts are expecting it to show an increase in new orders of approximately 1.0%. A much larger increase would be considered negative for bonds as it would indicate economic strength and could lead to higher mortgage rates Wednesday morning. Since these orders are volatile, it will take a wider variance from forecasts for it to move mortgage rates than other data requires.

The next relevant data is Thursday’s final revision to the 4th Quarter GDP. This is the second and final revision to January’s preliminary reading of the U.S. Gross Domestic Product, or the sum of all goods and services produced in the U.S. The GDP is the benchmark measurement of economic activity. It is expected to show that the economy grew at an annual pace of 2.6% last quarter, up from the previous estimate of 2.4% that was released last month. Analysts are now more concerned with next month’s preliminary reading of the 1st quarter than data from three to six months ago, so I don’t expect this report to affect mortgage rates much.

Friday has the remaining two reports that could affect mortgage rates. The first is February’s Personal Income & Outlays report early Friday morning. This data helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending related information has on the financial markets. If a consumer’s income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.2% increase in income and a 0.3% rise in spending. Smaller than expected increases would be good news for bonds and mortgage shoppers.

The final report of the week comes from the University of Michigan just before 10:00 AM ET Friday. Their revision to their March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers’ willingness to spend. As with Tuesday’s CCI report, rising confidence is considered bad news for the bond market and mortgage pricing. Friday’s report is expected to show little change from the preliminary reading of 79.9. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.

In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.

Overall, I believe Tuesday or Friday will be the most active day for mortgage rates with multiple reports and some of the more important data of the week set for those days. The calmest day will likely be Monday although we still could see some movement in rates. If your lender didn’t improve rates late Friday, you have an improvement of approximately .125 of a discount point waiting as the markets open Monday, assuming that stocks remain fairly calm Monday. Stock strength, particularly on days with no relevant economic data to drive trading, usually pressures bonds and often leads to an increase in mortgage pricing. Falling stocks tend to make bonds more appealing and leads to lower mortgage rates.

Mortgage News Roundup - 5 Features That Can Spike Your Home Insurance Costs

Mortgage News Roundup

Congress is debating whether or not to keep the mortgage interest deduction again as part of a larger talk about revamping the tax code in general. Homeowners in the U.S. last year received a total of roughly $70 billion in federal tax breaks through the deduction.

5 Features That Can Spike Your Home Insurance Costs

When you look for a new home, you can easily get caught up in the kitchen layout (make sure the oven door doesn’t open up into an entry way), or how it will look when you remove the burnt orange carpeting. But it’s also important to keep in your mind what it will cost to insure the house.

Here are the top five common home features that will increase the insurance premium.

1. Swimming pools
2. Trampolines
3. Water view because of flooding
4. A much older home with old plumbing and electrical systems
5. Total square footage of the house and the property

Mortgage Loan Rates Tick Down

The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting a decrease of 1.2% in the group’s seasonally adjusted composite index. That followed a drop of 2.1% for the previous week. Mortgage loan rates fell slightly on all types of loans.

The MBA’s refinance index decreased by 1%, after declining 3% in the previous week. The share for refinances fell for the sixth consecutive week to 56.5% of all applications.

If you’re thinking about refinancing, contact a reputable loan officer. They spend time regularly each week staying on top of regulations and interest rate trends to help you find the best solutions.

3 Things You Should Know About Homeowners Insurance

When it comes to protecting your home, it’s not just about safeguarding against structural damage or theft. Insurance is also about feeling secure in where you live. If disaster strikes, your focus should be on reclaiming your sense of stability rather than worry about money.

• What does your insurance cover exactly. Will it cover your hotel costs if you are displaced? Does it cover theft?
• What doesn’t it cover. Standard policies have exclusions including earth movements (landslides, earthquakes, sinkholes), power failure, war, nuclear hazard, government action, faulty zoning, bad repair or workmanship, defective maintenance and flooding.
• Learn to shop around for better coverage and costs.

For additional reading, you can go to LearnVest for their online Ultimate Homeowner’s Insurance Guide.

Market Commentary for the Week of St. Patty's Day

This week brings us the release of five monthly reports for the bond market to digest in addition to a Fed-filled day in the middle part of the week. Geopolitical events (Ukraine/Russia) may also affect the financial and mortgage markets. The most important reports and Fed events take place the middle days, so we may see the most movement in mortgage rates those days.

The calendar will kick off mid-morning Monday when February’s Industrial Production report is posted at 9:15 AM ET. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.1% increase from January’s level. A decline would be considered favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.

Also worth noting is this weekend’s vote for Crimea to break away from Ukraine and become part of Russia. By theory, the escalation in the crisis should rattle global stock markets and create a flight-to-safety in bonds where investors shift funds away from the stock selling into bonds for safety. That causes bond yields to drop and mortgage rates move lower. However, this vote and its results were pretty much a foregone conclusion so it will be interesting to see exactly what transpires when our markets open Monday morning. We should have more information on this topic and how it is affecting mortgage rates by the time we post our daily report Monday morning. But please keep in mind that most geopolitical flight-to-safety moves usually reverse course fairly quickly. And since mortgage rates tend to spike higher quicker than they move lower, I strongly recommend proceeding cautiously if relying on this crisis to push rates lower.

February’s Consumer Price Index (CPI) will be released at 8:30 AM ET Tuesday, which measures inflationary pressures at the very important consumer level of the economy. Its results are watched closely by bond market traders and analysts because rising inflation makes long-term securities such as mortgage-related bonds less appealing to investors. It is expected to show a 0.2% increase in the overall index and a 0.1% rise in the more important core data that excludes more volatile food and energy prices. If we see weaker than expected readings like we did in last week’s Producer Price Index (PPI), bond prices should rise and mortgage rates will likely fall early Tuesday.

Also early Tuesday morning, February’s Housing Starts data will be released. This report tracks construction starts of new housing. It doesn’t usually cause much movement in mortgage rates and is considered one of the less important reports we see each month. It is expected to show an increase in housing starts, indicating growth in the housing sector. Good news for the bond market and mortgage rates would be a sizable decline in new starts, but unless we see a large variance from forecasts the data likely will not lead to a noticeable move in mortgage pricing.

Wednesday is the day with several Fed events scheduled. They start with the 2:00 PM ET adjournment of the two-day FOMC meeting that began Tuesday. It is widely expected that Fed Chairman Yellen and company will not change key short-term interest rates at this meeting, although market participants will be watching the post-meeting statement closely for changes in verbiage that could indicate a swing in the Fed’s thought process and potential move in the future. They also will be watching for another adjustment to the Fed’s bond buying program or the pace that the Fed is reducing that campaign. Any surprises on these topics could heavily influence the markets and mortgage rates.

The FOMC meeting is ending a little earlier than the traditional 2:15 PM because it is one of the meetings that will be followed by a press conference with Chairman Yellen (her first as Chairman). The meeting will adjourn at 2:00 PM while the press conference will begin at 2:30 PM and will probably lead to afternoon volatility in the markets and mortgage rates Wednesday. The Fed will also update their economic and monetary policy projections when the meeting adjourns at 2:00 PM. Any significant revisions to the Fed’s outlook on unemployment, GDP growth or their timetable for keeping key rates at current levels will also cause volatility in the markets and mortgage rates.

February’s Existing Home Sales will be posted late Thursday morning by the National Association of Realtors. It will give us a measurement of housing sector strength and mortgage credit demand. It is expected to reveal a small decline in home resales, meaning the housing sector was flat last month. Ideally, bond traders would prefer to see a decline in sales, pointing towards a weakening housing sector. Bad news would be a sizable increase in sales, indicating that the housing sector is gaining momentum. That could be troublesome for the bond market and mortgage rates because housing and unemployment the two primary hurdles the economy has to overcome. A soft housing sector makes broader economic growth less likely, so the weaker the level of sales, the better the news it is for mortgage rates.

The Conference Board will post its Leading Economic Indicators (LEI) for February late Thursday morning also. This index attempts to measure economic activity over the next three to six months. It is considered to be moderately important, but likely will not have a significant impact on mortgage rates. Current forecasts are calling for a 0.3% increase, meaning it is predicting that economic activity will likely expand modestly in the coming months. A smaller than forecasted rise, or better yet a decline would be considered good news for the bond market and mortgage rates.

Overall, I am considering Wednesday as the key day of the week with the Fed events scheduled, but Monday could be interesting also due to the Ukraine/Russia conflict. We saw weakness in bonds Friday afternoon, so you have an increase of approximately .250 of a discount point going into Monday’s open if your lender did not revise pricing higher Friday afternoon. The least important day will probably be Friday, however, we could see noticeable movement in rates any day. Accordingly, I am holding the current conservative stance on mortgage rates- at least for the time being.

Mortgage News Roundup - Short Sales and HARP Predictions

Mortgage News Roundup

In today’s blog, we’ll look at short sales, HARP predictions, and new-home building trends.

Why Short Sales Take So Long

There’s nothing short about a short sale. You’re dealing with extra levels of bureaucracy and complexity as you have two lenders. In a short sale, you need the seller’s bank to approve before you can close. Banks require dozens of pages of paperwork to evaluate whether or not to approve a short sale. Since the seller is asking the bank to accept a sale price that’s less than the mortgage amount, the bank needs to verify that a short sale is the right thing to do. The word “short” comes from the fact that the market value is shorter than what is owed.

The bank is highly motivated to wait and see if the situation will get better or if it really makes sense to approve the sale.

The best way to speed it up is to find a reputable real estate agent who has experience and can help move the process through more quickly.

With clock ticking on mortgage relief, homeowners wonder what’s ahead

Five years after the federal government bailed out more than 1 million struggling homeowners, many who got the relief may end up losing their homes after all.

The numbers show that 30% of the homeowners who qualified defaulted on the loan again.

Additionally, with the government not purchasing bonds to keep interest rates low, homeowners are seeing an increase in their monthly payments. In some cases, the payment has been raised by over $1000. Regulators and consumer advocates fear that more homeowners will get behind on their payments again.

The original initiative believed that the jobs market would bounce back faster than it has. Because of these factors, some are wondering if the feds will start buying bonds again to lower interest rates.

After all the increases take effect, the median monthly payment would rise by about $200 a month, according to a recent analysis of Treasury Department data. But many will face steeper increases. In California and Hawaii, which have a high concentration of HAMP modifications, the median increases will be $300 and $356, respectively. In California, payments will jump by as much as $1,724 in some cases.

If you are being impacted by increased rates, talk with a reputable mortgage officer sooner rather than later to find a better alternative. Don’t wait until you’ve gotten behind in payments and damaged your credit score.

New-Home Building Is Shifting to Apartments

The percentage of homes being built as rental apartments is now the highest in forty years. This could cause some interesting problems as the improving jobs market spurs younger Americans to form their own households but tighter lending standards make it more difficult to buy.

The move toward apartment construction reflects the convergence of several trends. Mortgage credit is still tight, and interest rates are increasing. Americans have seen minor wage gains, and others still have high student-debt loads, forcing people to rent instead of buy.

Home builders believe that the Millennial generation will be wanting to move out of their parents home, and into a smaller, more affordable home of their own. Additionally, the Millennial generation prefers smaller dwellings that require less care. They’re more interested in their jobs and travel.

Are you interested in the new rental apartments?

Market Commentary for the Week of March 10th

This week brings us the release of only three relevant economic reports along with two Treasury auctions for the markets to digest. Two of the three reports are considered highly important, so we could see a fair amount of movement in rates again the latter part of the week. There is nothing of relevance to mortgage rates being released or taking place Monday or Tuesday, so all of the week’s events are scheduled over three days.

The first thing on the calendar will come Wednesday afternoon. There are two Treasury auctions this week that could potentially affect mortgage rates. The first is the 10-year Treasury Note auction Wednesday and the 30-year bond sale will be held Thursday. Results of both sales will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates late Wednesday and/or Thursday.

February’s Retail Sales data will come from the Commerce Department early Thursday morning. This data is extremely important to the financial markets because it measures consumer spending strength. Since consumer spending makes up over two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month’s report is expected to show an increase in sales of approximately 0.2%. If it reveals a larger than expected increase, the bond market will likely fall and mortgage rates will move higher as it would indicate a stronger level of economic growth than many had thought. If it reveals a much weaker level of spending, I expect to see bond prices rise and mortgage rates improve Thursday morning.

The Labor Department will post February’s Producer Price Index (PPI) early Friday morning. This important index measures inflationary pressures at the producer level of the economy. There are two portions of the index- the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy (including gasoline) prices. If the index shows a large increase, inflation concerns will rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Friday morning. Current forecasts are calling for a 0.2% increase in the overall reading and a 0.1% increase in the core data.

Also Friday is the University of Michigan’s Index of Consumer Sentiment for March just before 10:00 AM ET. This index gives us a measurement of consumer willingness to spend. If consumers are more confident in their own financial and employment situations, then they are more apt to make large purchases in the near future. This helps fuel consumer spending levels and economic growth. A drop in confidence will probably hurt the stock markets and boost bond prices, leading to lower mortgage rates if the PPI matches forecasts. Bad news for bonds and mortgage rates would be rising confidence. It is expected to show a reading of 82.0, which would be a small increase from February’s final reading 81.6.

Overall, I would label Thursday as the most important day of the week, but Friday is also likely to be active for mortgage rates. Stocks rallied last week, helping to drive bond yields and mortgage rates higher. The yield on the benchmark 10-year Treasury Note closed the week at 2.79%. This is troublesome for mortgage borrowers because rates tend to follow bond yields. This coming week will tell us a lot about which direction bond yields and mortgage pricing will be headed in the near future. It will be interesting to see if it moves closer to 2.95% or back toward 2.70%. I suspect it is going to move higher before moving much lower, so please be careful if still floating an interest rate and closing soon.

Daylight Saving Time - Set Your Clocks Ahead 1 Hour

Daylight Savings Time

It’s happening this Sunday at 2am. We spring forward and set our clocks ahead one hour. Most of us will do that Saturday before we go to bed.

Some of us may not need to do that at all. Computers, phones, and televisions now automatically change time for us.

Those of us old enough to remember, it was fairly time consuming (yes, sorry, pun intended) to go around and find every clock in the house as well as wrist-watches.

And I hear you asking: why do we do this? Does it really provide a benefit or should we go Hawaii and Arizona on the Daylight Savings?

How Did It All Begin?

If we have to “blame” anyone for our sleep deprivation, it would be the Germans back in 1916 in an effort to conserve fuel. Of course, they didn’t change their clocks until May 1st. The plan was not adopted here until the Standard Time Act of March 19, 1918, which established our standard time zones and set summer DST to begin on March 31, 1918. The idea was unpopular even then, and Congress abolished DST after the war, overriding President Woodrow Wilson’s veto.

Daylight Savings became a local option until FDR made it mandatory in 1942. He called it “War Time” rather than Daylight Savings, and it was in effect until 1945.

Local regions went back to choosing whether they wanted to adjust time to save fuel or not until 1962.

By 1962 the transportation industry found the lack of consistency confusing enough to push for federal regulation. The result was the Uniform Time Act of 1966 (P.L. 89-387). Beginning in 1967, the law defined standard time within the established time zones and provided for adjusting time. Clocks would be advanced one hour beginning at 2:00 a.m. on the last Sunday in April and turned back one hour at 2:00 a.m. on the last Sunday in October. States were allowed to exempt themselves from DST as long as the entire state did so.

In 1986 Congress enacted P.L. 99-359, amending the Uniform Time Act by changing the beginning of DST to the first Sunday in April and having the end remain the last Sunday in October.

The Energy Policy Act of 2005, DST was extended in the United States effective March, 2007 when DST would begin on the second Sunday of March and end on the first Sunday of November.

Does It Save Energy

It probably used to but it’s not so true anymore.

DST’s potential to save energy comes primarily from its effects on residential lighting, which only consumes about 3.5% of electricity in the United States and Canada. Delaying the time of sunset and sunrise reduces the use of artificial light in the evening but it increases it in the morning. So there isn’t much savings.

Plus, it doesn’t impact the usage of people working early or late in the office.

How Can I Recover More Easily

We could try to tell you to start changing your habits weeks in advance (like we do with getting school kids back on a regular schedule after Summer), but the truth is, there’s not a lot you can do.

So, the number one thing is to get as good of a night’s sleep as you can Sunday night. Don’t drink alcohol as it will disrupt your sleeping patterns. Exercise lightly when you wake up to help get the blood flowing.

Drink coffee or tea if caffeine’s your thing.

Be extra cautious when driving. There are more accidents in the few weeks after a time change than normal. And we trust you to be a good driver, we just don’t trust everyone else out there.

Look into shifting your hours for a few days, maybe going in earlier and leaving earlier (and then taking a short nap when you get home), or going in a little later while you adjust your internal clock to the new time.

If we had a referendum to change the state to not be on Daylight Savings, would you vote for it? Or do you like having more hours during the summer for exercise or playing outside?

Mortgage News Roundup

The Washington Post reported that if you refinanced your mortgage, you probably don’t want to sell your home. Why? They listed higher interest rates and the 3.8% tax imposed by the Affordable Care Act which will impact any profits from the sale of the house.

We’re not fully convinced because pending home sales in January rose 0.1%. While that may not be a lot, it’s still an increase especially since the number of home sales were down in December.

We’ve also talked a lot about the new regulations and how important it is to talk to a reputable loan officer to understand how the rules affect you. The good news is that in general, these mortgage rules are designed to protect you.

The Philadelphia Inquirer published a nice summary including

“The most significant new rule, perhaps, is meeting the new debt-to-income ratio requirement of 43 percent. Borrowers who cannot will likely face less favorable terms to get a loan,” Koss adds. 

Consider, for example, a prospective buyer who earns $5,000 per month. He cannot have more than $2,150 in monthly debt (including mortgage payment, credit card bill, auto and student loans, etc.) or he won’t qualify for many mortgage loan types. 

“At that point, he would have to apply for an FHA loan at a cost of an extra hundred dollars or more per month,” says Tim Lucas, editor of MyMortgageInsider.com. These recent regulations don’t apply to FHA, VA, USDA and some conventional home loans.  

“The new rules could cost some home buyers serious green in the long run,” Lucas says.

FHA loans will cost more due to higher interest rates.

Even Home Affordable Modification Program (HAMP) loans are going to cost more. HAMP was developed in 2009 to help people who were underwater by reducing the principal or the interest. Modifications under the program remained fixed for only five years. Starting over the next several months, the first borrowers in the program will begin seeing their rates climb by 1% a year to a high of 5.4%.

As a result, some 33,000 borrowers are expected to see their rates increase this year, with payments climbing by an average of almost $200 a month.

However, a Treasury Department spokeswoman notes that the resets don’t actually begin until five years after the modifications become permanent, which, in most cases is five years and three months after they were initially granted. That reduces the number of resets expected this year to about 18,000.

9 Questions to Ask Before Buying Your First Home

And we’ll wrap up with a great article on the important questions you need to ask yourself before buying your first residence. A reputable loan officer will be able to help you understand quite a few of these answers.

1. Why do you want to purchase a home?
2. What can you reasonably afford?
3. Have you factored in all the hidden costs?
4. What kinds of loans do you qualify for?
5. What will your life look like in five years?
6. Are you ready to stay put for the next few years?
7. What kind of neighborhood do you want?
8. Are you working with the right realtor?
9. Is the rest of your financial house in order?

So are you ready?

Market Commentary for the Week of March 3rd

This week has seven relevant reports for the markets to digest with two being considered highly important. The rest of the reports are moderate to fairly important to the markets, meaning they have the potential to affect mortgage rates but usually don’t cause a noticeable change. The most important data comes early and late in the week, but sizable moves in stocks can impact bond trading and mortgage rates any day.

January’s Personal Income and Outlays data will start the week’s activities at 8:30 AM ET Monday morning. This data gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.3% while spending is expected to rise 0.1%. Lower levels of income means consumers have less money to spend. And weaker levels of consumer spending helps limit overall economic growth, making long-term securities such as mortgage-related bonds more attractive to investors. Therefore, the weaker the readings, the better the news it would be for mortgage rates.

The Institute for Supply Management (ISM) will release their manufacturing index for February late Monday morning. This index measures manufacturer sentiment and can have a pretty large impact on the financial and mortgage markets if it varies from forecasts. It is expected to show a small increase from January’s 51.3 to 51.6 this month. This is important because a reading above 50.0 means more surveyed manufacturers felt business improved during the month than those who felt it had worsened, meaning growth is likely in the manufacturing sector. If we see a weaker than expected reading, the bond market could rally. This is especially true if we see a reading below 50.0 that would point towards manufacturing sector contraction. But, a much higher than forecasted reading could lead to major selling in bonds, causing mortgage rates to rise Monday morning. One of the reasons this data is considered so important is the fact that it is usually the first monthly report posted that covers the preceding month. It is traditionally posted the first business day of the month, allowing for a current snapshot of conditions in the manufacturing sector.

This week has a couple of private sector employment-related reports due to be posted. The biggest one comes Wednesday morning from payroll processor ADP who will announce their change in private-sector payrolls processed last month. Since it is not a government agency report, it isn’t considered to be highly important however, as with any employment-related data it does draw some attention. This is especially true for this report because it is posted just a couple days before monthly employment figures are released by the Labor Department. I personally believe it is given more attention than it really deserves, particularly because many use it to predict the monthly government figures but often fail miserably. Still, if it shows a noticeable variance from expectations, it will likely cause movement in the markets and mortgage rates.

The Fed Beige Book is the next report scheduled for release and it will be posted Wednesday afternoon. This report details economic activity throughout the country by Federal Reserve region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading Wednesday. It probably will not cause a major sell off in the stock or bond markets, but it is still worth watching it.

Thursday has two reports scheduled for release, but neither is considered to be highly important. The first is the revised Productivity index for the 4th Quarter of last year. The preliminary reading posted last month showed an increase of 3.2% in worker output. Analysts are expecting to see a downward revision of 0.7% to last month’s initial reading. Employee productivity is watched fairly closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns. However, since this data is quite aged now, it likely will have little impact on Thursday’s mortgage rates unless it shows a significant change.

The second report of the day is January’s Factory Orders at 10:00 AM ET, which will give us a measurement of manufacturing sector strength. This data is similar to last week’s Durable Goods, except this report covers orders for both durable and non-durable goods. Current forecasts are calling for a drop in new orders of approximately 0.5%. A larger than expected drop would be good news for the bond market and could lead to an improvement in mortgage rates since it would point towards economic weakness.

The biggest news of the week comes early Friday morning when one of the single most important monthly reports we see will be posted. The Labor Department will release February’s Employment report at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for no change in the unemployment rate of 6.6% and approximately 155,000 new jobs added to the economy. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the economy’s ability to continue to grow that would have an opposite impact on the markets and mortgage pricing.

January’s Goods and Services Trade Balance report will also be released at 8:30 AM ET Friday morning, but it will likely draw little interest from market participants. It will give us the size of the U.S. trade deficit, which does not directly impact mortgage rates and is the week’s least important piece of news. Current forecasts are calling for a $37.3 billion trade deficit during January, but with it being posted at the same time as the almighty employment report, there is little possibility of this report affecting Friday’s mortgage rates.

Overall, look for a fairly active week in the markets and mortgage rates, especially the early and latter days. Friday is the most important day of the week due to the significance of that day’s data but we could also see a noticeable move in rates Monday. The lightest day will probably be Tuesday unless something unexpected happens. With data or relevant reports being posted four of five days and some of that data considered key, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing soon.