[Mortgage and Real Estate Video News] - Realty Check Update

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Realty Check Update

Posted to: Mortgage and Real Estate Video News
Thursday, February 25, 2010 2:51 PM

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CNBC's Diana Olick has an update on the real estate market.

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More from MND:

• MND NewsWire: Bernanke Says Status of GSEs in "No-Man's Land". Discussing Reform, Reorganization, Reassurance
• The Garrett Watts Report: The Risk/Return Spectrum: Investing in a Mortgage Bank
• Mortgage Rate Watch: Mortgage Rates Touch 2010 Lows
• MND NewsWire: MBA Proposes Forbearance for Unemployed Borrowers
• Pipeline Press: Stories from the Street; Loan Apps Continue to Slow; Commercial Default Rates; Freddie's Results, Updates from Wells and US Bank

 

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Posted via email from Daryl Hadd

Untitled

Interpreting Housing
Economic Indicators

Analysts, policy makers and investors closely follow economic indicators that track the condition of the housing market. Here’s some background information on these important indicators.

Housing Starts
Housing starts is considered the most important report on the housing sector due to its large ripple effect in the economy when buyers purchase appliances and household furnishings. Construction of single-family homes accounts for about 85% of the industry. Work on multi-family units makes up the rest of the market and is considered highly volatile.

Home Sales
New homes sales account for less than 10% of the market. They are tabulated when the contract is signed. This is different from the way that existing home sales are tallied. They’re counted when the transaction closes and thus reflect contracts signed a month or two earlier. Existing home sales account for more than 80% of the market.

Another important home sales figure is the pending home sales index. This is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. Because it usually takes four to six weeks to close a contracted sale, it’s considered a leading indicator.

Housing Price Indices
There are two housing price indices: the S&P/Case-Shiller home-price index and the Federal Housing Finance Agency (FHFA) index. The FHFA index is a national measure that tracks houses bought with mortgages purchased by Fannie Mae or Freddie Mac and excludes many of the foreclosure sales and properties bought with non-conventional mortgages. Homes with these loans did not experience the sharp rise and subsequent decline in prices throughout the last decade and represent a more stable pricing index.

In contrast, the S&P/Case-Shiller report is focused on large metropolitan areas and includes distressed properties and those bought with non-conventional loans such as jumbo mortgages. These home prices tend to be much more volatile.

Daryl Hadd Sr. Loan Officer Cell 602-361-4110  E-Fax 877-298-2203 Apply Online @ www.DarylHadd.com    FOLLOW ME ON FACEBOOK/TWITTER/ LINKEDIN

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Posted via email from Daryl Hadd

[MND NewsWire] - MBA Delinquency Survey Shows Signs of Stabilization. Progress Depends on Labor Market

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MBA Delinquency Survey Shows Signs of Stabilization. Progress Depends on Labor Market

Posted to: MND NewsWire
Friday, February 19, 2010 12:50 PM

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The Mortgage Bankers Association released the National Delinquency Survey for Q4 2009 today. Total mortgage delinquency rates, seasonally adjusted, were down 17 basis points during the fourth quarter, but up year-over-year by 159 basis points.

9.47 percent of all mortgages on one- to four-family homes are now in some state of delinquency.

 

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While that was the headline on the press release accompanying the results of the Mortgage Bankers Association's National Delinquency Survey, the real news was the 16 basis point drop in new delinquencies recorded during the 4th quarter.   

In a telephone press conference accompanying release of the survey this morning, Jay Brinkmann, MBA's chief economist said that delinquencies in the 30 day plus "bucket" traditionally represent the largest category of troubled loans as many people have short term problems, quickly recover and bring their loans current. 

In the present scenario, that is not the case. The number of loans 90+ days in arrears is now the largest category of delinquency and growing, the MBA believes the drop in new delinquencies may be a sign "we are beginning to work our way out of the problem." 

The timing of this drop, Brinkman pointed out, is especially significant as the fourth quarter usually sees an increase in the 30+ bucket because of seasonal factors such as the holiday season and the arrival of the first heating bills.  Only a few times since MBA has been keeping records has there been a 3rd to 4th quarter decline "and never as large as this one." The 4th quarter number follows a 22 point decline in the 3rd quarter. This was also a drop of 22 basis points from 4th quarter 2008 figures.

Loans in the 60+ day bucket were down 4 basis points, the second consecutive quarter that category had shrunk.  

Long term delinquencies were 71 basis points higher than in the 3rd quarter and 209 basis points higher than the year before and now represent 30 percent of all loans.

The drop in the 30 day bucket was consistent across all loans as was the growth in longer term arrearages.  The latter, Brinkmann said, is paired with a drop in foreclosure starts as many loans in the 90+ bucket are in some type of modification program such as HAMP.  Concrete figures are not available, he said, but it is clear that borrowers are staying in that bucket longer than has historically happened. Not only are loans not moving as quickly into foreclosure status because of these programs, but some people are probably also working their way out of delinquency but haven't quite gotten current.

He pointed to a nearly identical parallel between new and continued delinquencies and employment figures.  Persons who have been out of work for more than 6 months represent 41 percent of all unemployed while new unemployment claims have been steadily dropping - they are now down about a third since their peak in March 2009.  Long term and short term mortgage delinquencies have exactly mirrored this pattern.

“The pattern of mortgage delinquencies now very much follows the pattern of unemployment.  Just as short-term delinquencies have fallen during the latter part of 2009, first-time claims for unemployment insurance have declined by about a third since their peak in March 2009.  Just as long-term delinquencies now dominate total mortgage delinquencies, long-term unemployment now dominates the total unemployment number.  People who have been unemployed for six months or more now constitute over 40 percent of the total unemployed, the highest share in the history of the unemployment survey.  In addition, over the last several months we have seen a large number of people simply drop out of the work force, many who are discouraged about being able to find work.  Until the issue of this large segment of long-term unemployed is resolved, many of the longer-term mortgage delinquencies will remain a problem with a strong likelihood of turning into foreclosures,” Brinkmann said.

Only a few states are really driving delinquency and foreclosure statistics. Nevada continues to have the highest overall delinquency rates at 14.92 percent followed by Mississippi (14.69 percent) and Georgia (13.53 percent).  Leading in foreclosure inventory are Florida (13.44 percent), Nevada (9.76) percent, and Arizona (6.07 Percent.)  The highest rates of foreclosure starts are found in Nevada (3.04 percent), Florida (2.41 percent) and Arizona (2.18 percent.)

Brinkmann was asked to comment on the possible effect of President Obama's newly announced program to pump $1.5 billion into housing agencies in five states, California, Arizona, Nevada, Florida, and Michigan to fund programs for people who are unemployed or underwater with their mortgages. He said he had not had a chance to study the program but that the current problems are not structural mortgage problems, they are employment related.  READ MORE

Subprime adjustable rate mortgages had a 90+ day delinquency rate compared to 16.10 in the third quarter and 11.60 percent one year earlier. Subprime fixed rate mortgages increased from 11.30 percent in the third quarter to 13.04 percent.  One year earlier that 90 day rate was 7.43 percent.  Prime ARM mortgages had a delinquency rate of 7.84 percent compared to 6.63 percent the previous quarter and 4.74 one year earlier and prime 2.91 percent of prime FRMs were over 90 days delinquent compared to 2.34 percent in the third quarter and 1.20 percent in the 4th quarter of 2008.  Delinquent FHA loans increased 50 basis points to 5.85 percent in the fourth quarter.  The rate was 4.55 percent one year earlier.

Brinkmann said he did not expect that problems resulting from option mortgage resets were going to be "the tidal wave that was expected".  Many of the people who had those mortgages are thought to have refinanced already and some people defaulted before their loans reset.  A lot of option loans have already reset so those people may be included in present foreclosure statistics or they may be paying their loans. 

The Federal Reserve's rate increase announced yesterday was generally anticipated by the financial community, he said, and he did not expect it would have any immediate effect on mortgage rates.  The termination of the Federal Reserve's bond purchase program will have a bigger impact and he expects that mortgage rates will begin to rise gradually in April. READ MORE

 

 

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More from MND:

• Mortgage Rate Watch: Mortgage Rates End Week on Three Day Skid. Fed Rate Hike Not to Blame
• Mortgage and Real Estate Video News: Donovan Expects Additional Foreclosure-Prevention Aid: Video
• MBS Commentary: MBS CLOSE: Respectable Improvement Late In The Day
• The Garrett Watts Report: Mortgage Operation Financial Statements: The Roadmap to Profitability
• Pipeline Press: GFE Horror Stories Still Abundant; Lack of HUD Leniency; Loan Mods Made to Out of Work Homeowners; More FHA Tips

 

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Posted via email from Daryl Hadd

[MND NewsWire] - S&P: Shadow Inventory Still a Concern. Reason to Extend Fed's MBS Program?

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S&P: Shadow Inventory Still a Concern. Reason to Extend Fed's MBS Program?

Posted to: MND NewsWire
Tuesday, February 16, 2010 3:58 PM

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Standard & Poors today released "The Shadow Inventory Of Troubled Mortgages Could Undo U.S. Housing Price Gains".

Noting that the Case Shiller/S&P Home Price Index had risen 3 percent since hitting its low in May of last year, today's report speculated that the increase may have been the result of the temporary reduction in foreclosures. However, it says that many servicers have nearly run out of plausible candidates for loan modifications and will find that many loans cannot be salvaged.

What S&P calls a "shadow inventory" may take as much as 33 months to clear at the current sales rate.  This is a conservative estimate according to S&P as it includes only those loans that are currently delinquent and does not take into account current and performing loans that may get into trouble in the months ahead.  This increased inventory indicates that home prices may fall again.  An S&P spokesperson said that loan servicers are increasingly looking to short sales as a solution.

The Wall Street Journal reported today that current loan modification efforts may be more of a delaying action than a panacea for the epidemic of foreclosures that has swept the nation.

The Journal said that two studies, one conducted for John Burns Real Estate Consulting, Inc. and the second by Standard & Poors Financial Services, LLC, anticipate that a large percentage of currently delinquent mortgages will eventually be foreclosed, painting a picture of continued excess inventory and a renewed downward pressure on housing prices.

The Burns study estimates that, of the estimated 7.7 million home loans that are currently delinquent, about 5 million will eventually be foreclosed or otherwise forced onto the market over the next few years.  These homes would add to the already large inventory of homes listed for sale, especially in four states that have been especially foreclosure-plagued.  The report names five cities in the Nevada, Arizona, California, and Florida where, if Burns estimates are correct, there could be backlogs of homes that would take 15 to 27 months to absorb. The increased national inventory would require 10 months to sell.  At the end of December FHA put the current national inventory at an eight months supply and falling.  

At the end of December servicers participating in the Treasury Department's Making Home Ownership Affordable (HAMP) program reported that about 3.4 million residential loans in their portfolios were 60 days or more delinquent.  About 900,000 of those are enrolled in trial modification programs, but as we have reported a number of times, the few permanent modifications arising from these trials - about 66,000 by the end of December - are a cause of serious concern. 

Another FHA report issued in January showed that the rescission rate on Fannie Mae and Freddie Mac's loan modification efforts was around 60 percent.  While there had been some marginal improvements in the rate of re-defaults among more recent modifications, taken together the two reports give some credence to the two reports.   

MND's Adam Quinones comments...

If anyone is searching for a glimmer of hope that the Fed's MBS program is extended...the above issue is one of your best chances. Remember what the Fed keeps telling us: 

"The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets."

While we remain skeptical that "shadow inventory" will actually be dumped on the market all at once by banks, we must remain respectful of the effects that unsuccessful loan modifications could have on the housing market. A spike in housing supply, for any reason, would be damaging to the marginal stabilization and progress made in housing over the summer months of 2009. But again, we are still somewhat optimistic that a home supply "spike" will not occur as a result of increased foreclosure activity. READ MORE

If you happen to be one of those folks who believes the Fed's MBS Program should be extended...I ask you this question: Are you cutting off your nose just to spite your face?

If the Fed was forced to extend the MBS purchase program, wouldn't it imply some key element of the housing market equation was too weak to be removed from life support?

Unless you believe that mortgage rates are going to skyrocket after the Fed exits the TBA MBS market, it seems like we face bigger problems. I know low mortgage rates were the biggest reason for business in 2009, but that won't be the case in 2010. Those borrowers, the ones who qualify, already took advantage of low rates. Originators will need a new source of business in 2010. Purchases are the immediate loan type that comes to mind. (redundent at this point)

If the purchase market fails, it wont be the fault of high mortgage rates. It will be the result of a lack of credit worthy borrowers. 

Consumer demand side support will be crucial if housing is to extend any progress that has been made in the last 6 months and unfortunately, there are several factors moderating growth in consumer demand.

Damaged consumer credit profiles need time for repair. This means a stable job will be required to ensure consistent payments are made and credit is properly mended. After that, total debt service payment can't be over 45% of total income. Jobs needed.

The job issue hits home extra hard in housing. Not only do consumers need jobs to qualify for a new mortgage, they need jobs to stay up to date on current mortgage obligations. All appers to be dependent upon EMPLOYMENT! Shadow inventory, consumer demand, and home prices.

Instead of spending money on the extension of the Fed's MBS purchases (in an already SLOW market), maybe the housing industry should be hoping for structural stimulus at the heart of the problem: job creation and credit repair. Low rates only go so far, we need credit profile healthy consumers!

READ HOW THIS AFFECTS MBS MARKET SUPPLY AND DEMAND TECHNICALS

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More from MND:

• MBS Commentary: MBS CLOSE: Rally All Day, But Nothing Decided Ahead Of Fed
• Mortgage Rate Watch: Mortgage Rates See Small Decline Ahead of Busy Day of Data
• Mortgage and Real Estate Video News: More Real Estate Deals Ahead?
• The Garrett Watts Report: Out of Business Mortgage Insurers; Hedging with TBA MBS; Ideas to Help Create Job Growth; Reasons to Buy a Bank
• Pipeline Press: Mortgage Broker Population Dwindling; Loan Buybacks Create Opportunity; FDIC Rebuttal to OneWest Video; GSE Overlays

 

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Posted via email from Daryl Hadd

[MBS Commentary] - MBS WEEKLY: Don't Expect to See 2009 Rates in 2010

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MBS WEEKLY: Don't Expect to See 2009 Rates in 2010

Posted to: MBS Commentary
Friday, February 12, 2010 4:33 PM

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 A long weekend lies ahead in which much may...or... may not occur. Seems like a good time for an "official announcement" from abroad doesn't it? 

The majority of markets are out of office...

We are closed on Monday for President's Day. Mainland China is out from Monday to Friday for Lunar New Year while Hong Kong is detached until Wednesday. Korea = no markets on Monday. Japan is open but Brazil gets a pass for three days of CARNIVAL. Canada has Family Day. They're closed Monday. India is out for Mahashivratri today. The CAC is open in Paris and so is the DAX in Frankfurt. The French only get three days off...all year!

Guess who else is closed: GREECE! for Ash Monday.

Such an "official announcement" from abroad will be viewed as friendly by stock traders. With that in mind, perhaps officials will save any releases for a time when equity bulls were in attendance to push the BID button. This raises a speculative eyebrow for a rates trader...

The stock lever, although detached at times, has generally been a decent guidance giver for rates lately.  If a concrete rescue plan is offered by EU officials over the weekend or on Monday, when the majority of the marketplace's attention is engaged elsewhere....it would help soften the blow of an equity recovery rally induced  bear steepener in the bond market (higher "rate sheet influential" benchmark yields).

If "official" good news is fed to the press when the US market and others are intently watching their screens on Tuesday...the knee jerk could be violent. "FLIGHT TO SAFETY" funds, currently allocated in risk averse TSY bills and notes, would be sold in size.  This would push yields across the curve out of recent ranges...MBS prices would plummet and rebate would be reduced. (Should I put flattener back on?).  This is the expected initial reaction at least

This of course assumes "ITS A TRADER'S WORLD" is still in effect. (It is)

Since we are still not willing to concede that stocks are done rallying, you should know that we are operating under the assumption that the most recent equity down cycle trade is a hiccup in a broader, LONG term recovery process.

Hiccups are to be expected though.  We will experience periods of volatile data, we will witness nervous reactions to unexpected headline events.  Because investor confidence is still shaky, panic will be allowed to spread quickly. In these times "SELL NOW ASK LATER"  will be the preferred trading tactic. But in the BIG PICTURE, while recovery progress may be slow, the worst will still have been avoided. Life will go on. 

Dont get me wrong here....we dont think stocks are a runaway freight train, we just dont expect a massive retracement. This partially explains why our general outlook for benchmark rates is....generally bearish.

That doesn't mean all hell is about to break lose on the yield curve though. Just as we rely upon the "WORST CASE SCENARIO WAS AVOIDED" perception to be an explanation for optimistic equity behavior, we lean on it as supportive backing for an extension of the RATES RANGE TRADE.

The idea of "the worst case scenario was avoided"  is being broadcast loudly through the cautious actions of the Federal Reserve. Their defensive posture forces us to consistently reconsider our perceptions of economic reality...something especially painful for members of the housing industry. But this reminds us that we're just barely progressing off of an historic contraction in economic activity.  It puts the marketplace on the defensive at all times and helps maintain stable demand for risk averse fixed income assets...a key to the mortgage rates equation.

Plain and Simple:  Because the overall economic environment is cloudy and the Federal Reserve is still quite cautious, investors will remain defensive, which will prevent benchmark Treasury yields from moving significantly higher.  On the flip side, equity bulls will rely on "THE WORST CASE SCENARIO WAS AVOIDED" perception as a reason to speculate that long term "buy low, sell high" investment strategies will be profitable. This will help stocks maintain positive progress instead of retracing back to "worst case scenario" lows. This risk taking attitude combined with a slowly recovering economy (anything but drastically worse) will prevent benchmark 10s from revisting the days of old when 10s held between 3.27 and  3.51%.  The rates of 2009 look to be a thing of the past.

This is the first part of the mortgage rates equation. READ ABOUT THE REST OF THE EQUATION

And now, MG will take it away with the pictures for my thousand or so words...

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Thanks AQ... I have a few words myself, but not too many...  Basically, the following charts will alternate between MBS and Treasuries and should combine to support the notion that rates in 2010 will not be the rates 2009, and despite operating with the 10yr tsy in the 3.50's last week, we certainly have not seen any evidence to suggest this is a better than random probability for the future.  In fact, it's probably worse....

 Starting simply enough, the following two charts will give a view of this week in MBS and tsys.  Prices are generally lower and yields are higher. Note the 101-00 inflection level on the FN 4.5.

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 With these two hourly charts, things get quite a bit more intense and suggestive.  First MBS...

There, again, is a readily visible inflection point just over 101-00.  We can actually see this holding off the selling in Nov and Dec as support, and proving to be tough resistance in late January.  In this zoomed out view, we can clearly see the breakout of early February failed (at least for now...)

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This is even worse... 

In the TSY chart below, there are two big negatives for the rate outlook. The red circles show a clear bounce on support around 3.69, but after moving much higher this week, that same trendline now holds as RESISTANCE.  Beyond that, 3.60 looks like a nearly impossible level to meaningfully break so far this year...  If we can break it, something will have to change.

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 Now zooming out even more, the FN 4.5 chart below  validates the significance of the high 100-20's price levels as inflection points.  By far, prices bounce more there, either for better or worse, than anywhere else.

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 As far as the daily tsy chart, AQ said something like we're still very much range-bound?  Well...  Here's your range...at least the mid term range.  To be fair we'd need to take that all the way up to 3.85%

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 Just a bonus chart to show relative movement between MBS and tsy's.  We inverted the tsy yields so they would move in the same direction as PRICE for better comparison.

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 Finally, the big Nasty: 10yr Treasury Futures Contracts... 

 From top to bottom and knowing that the teal is the price itself, we'll break down the techs

1. red line is 200 day Moving average
2. Orange is the 14 day.  Notice that every time prices have held above the 14 day MA for  more than a few days, that when they've fallen below, prices moved lower in subsequent days.
3. MACD forest.  Can't get too far into detail in this space, but suffice it to say, the fact that there was "one big upside down mountain" followed just now by "one big upside up mountain" suggests at least some size of upside down mountain in our immediate future.  That = bearish for rates
4. RSI.  Just threw this in for those who like it.  Suggestion: closer to overbought than oversold
5. Bottom Section is Volume

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Everyone have a great long weekend...

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More from MND:

• Mortgage Rate Watch: Mortgage Rates End Week Slightly Higher
• The Garrett Watts Report: Outlooks for the Future of Mortgage Lending
• Mortgage and Real Estate Video News: Checking American Consumer
• Pipeline Press: Home Builders Preparing for Spring Buying Season?; Hope for Mortgage Brokers; Continued GSE Discussion
• MND NewsWire: The Day Ahead: Stocks Weaker Before Retail Sales and Consumer Sentiment

 

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[MND NewsWire] - Freddie Mac to Purchase $71 Billion in Seriously Delinquent Loans

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Freddie Mac to Purchase $71 Billion in Seriously Delinquent Loans

Posted to: MND NewsWire
Wednesday, February 10, 2010 2:43 PM

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Freddie Mac today announced it would purchase "substantially all" of the seriously delinquent loans (+120 days) from their fixed-rate and adjustable-rate mortgage Participation Certificate (PC) securities.(These are the main MBS securities at Freddie Mac).

The company made the announcement Wednesday, saying that the decision to purchase the loans was a cost saving move based on criteria established in December 2007. 

At that time Freddie Mac said that it would, in the future, purchase loans that were 120 days or more delinquent at such time it was determined that the cost of guaranteeing payments to the holders of the securities, including advances of interest at the security coupon rate, exceeded the cost of holding the nonperforming loans in the company's mortgage related investment portfolio. 

Freddie Mac said that the delinquent loan purchases will help it preserve capital and reduce the amount of any additional draws from the U.S. Department of the Treasury. The purchases would not affect Freddie Mac's activities under the Making Home Affordable Program.

On January 1, Freddie Mac adopted new accounting standards for transfers of financial assets and the consolidation of variable interest entities, FAS 166 and FAS 167. These changes triggered the rules put into effect in 2007. READ MORE. As a result, the cost of purchasing most delinquent loans from PCs and holding them in portfolio will be less than the cost of continued guarantee payments to security holders.

The purchase will be effective after the close of business on March 4.  Holders of the fixed-rate PCs will receive principal payments on March 15 and ARM PC holders will be paid on April 15.

As of December 31, Freddie Mac had:

• 258,500 loans in it fixed-rate PC pools that were 120+ days delinquent. Unpaid principal totaled $49.8 billion
  
•  72,894 in its adjustable-rate pools that were 120+ days  delinquent.  Unpaid principal totaled $19.1 billion
  

If Freddie Mac were to purchase "significantly all" of these, they would own $71.2 billion 120+ day in loans (including fixed rate 20s,40s, Balloons, and 4.0 coupons). This confirms fears that MBS investors should be expecting an increase in involuntary buyout related prepayment speeds.

Final purchasing decisions will be based on borrower activity through January 31 on applicable loans.

Starting in April, the company will disclose in its Monthly Volume Summary the number of loans in the PC pools that are 90 or more days delinquent in order to provide PC holders with additional information.

Freddie Mac will continue to review the economics of purchasing loans 120 days or more delinquent in the future and may reevaluate its delinquent loans purchase practices and alter them if circumstances warrant.

HERE are Freddie Mac PC Delinquency Rates

HERE is more technical perspective regarding the effect on prepayment speeds.

(View More)

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More from MND:

• MBS Commentary: MBS MORNING: Bonds Weaker Ahead of Auction Release
• Pipeline Press: How Buyouts Affect Loan Originators; FTC & Loan Modification Companies Set to Battle; Fed Chairman Shares Plan
• Mortgage and Real Estate Video News: Realty Check: Foreclosure Filings Slip
• Voice of Housing: GSE's Decision to Purchase Delinquent Loans Forces The Question: Who Will Investors Believe Now?
• Mortgage Rate Watch: Refinance Demand Still Slow. Mortgage Rates Move Higher Again
• The Garrett Watts Report: Mandatory vs. Best Effort Loan Commitments. Servicing Values Affect Pricing

 

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Market Update

Market Update

The bond market is down this morning, but is still near Friday’s seven week high for treasury yields.  The bond market experienced a “flight to quality” last week, as investors worried about oversea credit markets and scared off of equities by disappointing employment numbers loaded up on the safer bond market.  This week the economic data is a little sparser, today has no new reports and there is not data of much significance until Thursday’s Initial Jobless Claims and Retails Sales reports.  Wednesday Fed Chief Bernanke will speak before the House Financial Services at 10:00 am EST.  Also there are three auctions this week; the government will sell a total of $81 billion in 3-year, 10-year and 30-year Treasury securities starting tomorrow. 

Daryl Hadd Sr. Loan Officer Cell 602-361-4110  E-Fax 877-298-2203 Apply Online @ www.DarylHadd.com    FOLLOW ME ON FACEBOOK/TWITTER/ LINKEDIN

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Posted via email from Daryl Hadd

Untitled

Market Update

Unemployment rate comes in this morning at 9.7%, the lowest point since August of last year.  However with the good news, comes some negative news:  Nonfarm Payrolls fell 20,000 while the market was expecting a 15,000 gain and December’s payrolls number was revised from 85,000 jobs lost to 150,000.  This has led to choppy trading in both the bond and equity markets as investors digest those mixed numbers. 

Daryl Hadd Sr. Loan Officer Cell 602-361-4110  E-Fax 877-298-2203 Apply Online @ www.DarylHadd.com    FOLLOW ME ON FACEBOOK/TWITTER/ LINKEDIN

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Confidentiality Statement: This email may contain attorney-client privileged or confidential information. It is for the sole use of the intended recipient(s). If you have received this transmission in error, immediately notify us by telephone at 818-981-0606 and return the original message to us at Prospect Mortgage, 15301 Ventura Blvd.,Suite D300,Sherman Oaks, CA 91403 via the United States Postal Service.

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Posted via email from Daryl Hadd

[Mortgage Rate Watch] - Mortgage Demand Picks Up Ahead of Expected Rise in Rates

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Mortgage Demand Picks Up Ahead of Expected Rise in Rates

Posted to: Mortgage Rate Watch
Wednesday, February 03, 2010 10:10 AM

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Mortgage rates held steady yesterday near what might turn out to be the most aggressive levels of 2010. Mortgage backed securities prices did not move too high or too low without quickly correcting, not much progress was made in any direction yesterday or for the last few weeks for that matter .

Early this morning, the Mortgage Bankers Association released their weekly Mortgage Applications Index.  The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts.  The data gives economists a look into consumer demand for mortgage loans.  A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole.  More home purchases can lead to more construction jobs and increased purchases of items to build a home.  Furthermore, in a low mortgage rate environment, an increasing trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.

In last week's release, which reported on the week ending January 22, total mortgage applications decreased 10.9%. The Refinance Index fell 15.1% while the Purchase Applications Index moved 3.3%  lower.

This morning the MBA told us that mortgage applications rebounded in the most recent week.

Total loan apps were up 21.0%....

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Purchases applications were 10.3% higher...

[Image or graph removed from email. View full article with images]

Refinance demand increased 26.3%....

[Image or graph removed from email. View full article with images]

The average 30 year fixed conventional mortgage rate, including 1.04 origination points, fell from 5.02% to 5.01%.

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In the release, Michael Fratantoni, MBA's VP of Research and Economics, warned to expect rising mortgage rates over the next few months as the Fed exits the MBS buying program.

"Mortgage application volume rebounded last week, returning the purchase and refinance indexes to levels from mid-December," said Michael Fratantoni, MBA's Vice President of Research and Economics.  "Rates continue to hover around 5 percent, quite low by historical standards, but are well above the record lows seen in 2009, and hence are not generating substantial refi volume.  We expect that rates will rise over the next few months as the Federal Reserve winds down its MBS purchase program, and this will likely lead to a decline in refinance volume."

This is line with recent guidance issued on Mortgage News Daily. Don’t wait for mortgage rates to decline! I stand by my statement that 4.75% could very well be the lowest mortgage rates offered in 2010...unless there is a fundamental shift in economic outlook.  If you have been waiting to refinance or to buy, get out there and start the process before you miss the boat of sub 5% rates. 

Later in the morning we got a sneak peek into the health of the labor market with the release of the ADP Employment report.   This data is an unofficial preview of Friday’s Non-Farm Payrolls, it is always released on the Wednesday prior to the government’s official Employment Situation Report.   Historically, the ADP report has varied greatly from the official report but its accuracy has been improving lately.  The biggest difference between the two jobs reports is the ADP numbers do not take into account government hiring, only the private sector.

The report indicated that U.S. companies cut 22,000 jobs last month, barely beating economists estimates for a loss of 30,000. This was the lowest number of job losses in two years, according to ADP.    Last month’s report was revised better from an initial loss of 84,000 to a loss of 61,000 jobs.   With the preview over,  the interest rate market spotlight is on the Employment Situation, due out on Friday morning.  Economists are expecting 5,000 jobs were created in January and a 10.1% unemployment rate. READ MORE ON THE NFP FORECAST

Our final economic report to hit news wires this morning was a read on the strength of the non-manufacturing sector of our economy: the ISM Non-Manufacturing Index. The Institute for Supply Management(ISM) surveys 400 firms including mining, construction, retail, etc.. on the strength of business conditions.  Readings above 50 indicate improving conditions while readings below 50 indicate contraction.  Last month’s report edged higher to 50.1 from the prior month’s 48.7 reading.  Economists surveyed expected this month’s survey to continue to show improving conditions with a  reading of 51.0. Earlier this week we got the ISM Manufacturing Index which came in much better than expected, indicating the manufacturing sector of our economy continues to improve.  This supports theories that the economy is improving, which will pressure mortgage rates higher.

The report indicated the non manufacturing sector of our economy is improving, but at a slower rate than expected.  The survey registered a 50.5 reading.   There was no reaction from the markets following the release.

Lastly, this morning the Department of Treasury announced the supply of next week’s auction.   They will offer $40billion 3 year notes next Tuesday, $25billion 10 year notes next Wednesday,  and $16billion 30 year bonds on Thursday.  As always, more supply of debt in the marketplace requires an offsetting increase in demand. If demand does not match supply, interest rates will rise to draw in demand. This increases the chance of mortgage rates rising.

Reports from fellow mortgage professionals indicate lender rate sheets to be slightly worse than yesterday’s.  The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers.  To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  You may elect to pay less in closing costs but you will  have to accept a higher interest rate.  If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar costs.

As stated earlier, my lock bias is still in place.   I do not see much room for rates to move lower than the current levels.  If Friday’s Employment Situation report is better than expected or even as forecast, rates could move higher very quickly.   If the report on Friday is worse than expected, we do not expect to see significant improvements in mortgage rates, not far from current levels at least. There is much more room to rise than to fall.

(View More)

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More from MND:

• MBS Commentary: MBS AFTERNOON: Expecting Huge Revisions to Previous Jobs Data
• MND NewsWire: Fed MBS Program Update: 94% of Funding Used
• Mortgage and Real Estate Video News: Raising the Debt Limit
• The Garrett Watts Report: If You Can't Measure Performance, You Can't Manage Performance
• Pipeline Press: GMAC Cuts Ditech; Top GFE Mistakes; ASF Non-Agency Loan Product Outlook; Biggest Commercial Loan Servicers

 

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Posted via email from Daryl Hadd