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  1. Mortgage Rates: More Jobs = Higher Mortgage Pricing

    By on February 3, 2012

    A blowout Non-Farm Payrolls (NFP) report this morning has mortgage rates heading higher.  After a week filled with data that was roughly in-line with expectations the NFP report blew away forecasts.  The expectations were for 150,000 new jobs to be created in January, yet when the counting was done 243,000 new jobs were documented.  This is certainly confirmation that the US economy has strengthened dramatically, yet the naysayers have already begun to spin why the jobs uptick may be limited.

    Two additional economic reports have the potential to accelerate the upward move in mortgage pricing today or to moderate it.  At 10 AM the ISM Services Index and Factory Orders report will be released.  The ISM Services Index is forecasted to increase from last month, which seems like a good bet given the number of service-sector jobs that were created according to the NFP report.  The Factory Orders report is forecasted to drop slightly which also seems likely given the weakness in the ISM Manufacturing Index earlier in the week.  If these reports come in as expected, I suspect that it will cause further losses in MBS and more upward momentum for mortgage pricing.

    On Monday Euro-Zone financial ministers are meeting and there is hope that approval of the second round of bailout funding will be approved at that time.  However, there is much still to be agreed to.  After reaching a deal with private creditors to cut their payouts from existing Greek debt by 70%, the burden is now on the Greek government to come up with additional savings from labor market and other reforms that will drop the country’s debt/GDP ratio to 120%.  This is a tall task as Greek politicians who must approve these reforms don’t want to be associated with these very unpopular reforms.  I would not be surprised to see Monday come and go with no deal and no bailout funds for Greece.

    After a week in which the attention was primarily on the state of the US economy, next week will see a return to the Euro-centric focus that has been so pervasive for over a year.

    Have a great weekend!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  2. Mortgage Rates: Change in Trend “Or Not”

    By on February 2, 2012

    As I discussed at the outset of this week, it was destined to be a very important week for mortgage rates.  With more data of significance announced this week as compared to almost any other week during the year, we could see a major change in the mortgage trend.  What has been a very favorable, downward trend for mortgage rates could continue with weak economic news. Or strong economic news could cause a reversal in the trend and send mortgage rates higher.  We could have seen this type of movement…or not.  What I did not count on, based on my experience with economic forecasts, was for the data this week to come in almost exactly as forecasted.

    Thus the result so far this week has been virtually no change in mortgage pricing at all since last Friday.  However—it’s only Thursday and the biggest economic report of all is still to come tomorrow.  The Non-Farm Payrolls Report still has the power to establish a trend for mortgage rates for the foreseeable future.  This time though, I will include the possibility that a result, “in-line with expectations”, could reinforce the current level of mortgage pricing.

    Today’s economic data that is moving mortgage pricing nowhere was Productivity and Weekly Jobless Claims.  Productivity was forecasted to increase by .8%–the actual result was an increase of .7%.  Weekly Jobless Claims were forecasted at 370,000—the actual result was 367,000.  Despite these reports offering no positive or negative surprise, I do see signs of improvement.  The drop in productivity signals that businesses are getting less from efficiency or technology changes and will soon need to increase labor in order to boost production.  Also, the slow drop in jobless claims signals a slow (painfully slow) improvement in the labor market.  These measures are connected and the drop in the first should lead to an accelerating drop in the second.

    Related to the European debt crisis, the biggest news of the day is a meeting between German Chancellor Angela Merkel and China’s Premier Wen Jiabao.  The Chinese leader did provide some positive news as he stated that China may “get more involved” with efforts to resolve the crisis.  With almost $4 trillion in reserves, China certainly has the ability to help.  This should provide another calming bit of news for world markets today.

    Today mortgage rates are likely to stay very close to current levels.  Tomorrow the Non-Farm Payrolls report could lead to a change in the mortgage rate trend…or not!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  3. Mortgage Rates: Obama to “Friend” Millions?

    By on February 1, 2012

    Today is the day that Facebook will file its initial public offering.  There are also rumors that today is the day that President Obama will announce his plan to enable millions of homeowners to refinance at current historically low interest rates.  In some ways, it’s as if he is sending a huge “friend request” to American homeowners.  Is this good economic policy or simply politics as usual and what effect will it have on mortgage rates?

    It appears from early trading in mortgage-backed securities (MBS) today that the markets are focused on the Facebook IPO and stocks are set to rise.  This will put pressure on MBS pricing today and could keep rates from falling any further.  Unless the stock market surges more than appears likely, mortgage rates will likely remain close to current levels throughout the day.

    Several economic reports are also in the mix today.  The ADP Employment Change report came in about at the point of expectations though newly created jobs were down significantly from December.  Analysts were encouraged however by the surge in new service sector jobs, explaining that a broad-based improvement in employment across all sectors is necessary for sustainable economic growth.

    At 10 AM both the Construction Spending report and the ISM Manufacturing Index will be released.  The ISM Index is a gauge of manufacturing industry activity and is a very important report.  If this report is at or above expected levels, mortgage pricing may feel more upward pressure.  If, however, we see a surprise to the downside, then mortgage pricing may improve.

    Let’s get back to the President’s refinance plan.  According to reports the plan will call for a tax on large banks to pay for the cost of allowing homeowners to refinance into Federal Housing Administration loans.  Having failed to get the conservator of the other two government-sponsored housing agencies to go along with a similar plan, the president has turned to the one agency he has direct control over.  That being said, the plan has virtually no chance to pass Congress as it has failed to even be acted on twice before.

    As to its public policy and economic implications my belief is that it is poor policy to allow refinancing into government (taxpayer) backed mortgages by homeowners that would not otherwise qualify for the loans.  Economically, it would provide substantial stimulus initially but it might also have the unintended consequence of causing mortgage rates to rise.  Banks unable to handle the onslaught of borrowers, and fearing repurchase risks from loans that go bad, may raise their interest rates to discourage borrowers.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  4. Mortgage Rates: Record Lows Daily?

    By on January 30, 2012

    Mortgage rates look to fall even lower today as a busy week for economic data gets underway.  On-going drama in Greece combine with the busy economic calendar to make this a crucial week for establishing the rate trend for 2012. So far, anyway, it looks like a positive trend for rates.

    The first big report of the week, the Personal Consumption and Expenditures report indicated that consumers pulled back on spending in December despite an increase in their income.  Most analysts are interpreting this as a sign of a slow-down ahead for early 2012. Once again I would urge caution in this interpretation.

    Annual consumer spending rose for 2011 by 4.7%, the largest margin in four years. A dip of .1% in the December expenditures portion of the PCE report, while breaking the string of three consecutive positive months, does not signal a trend reversal all by itself.  Particularly when you remember that the PCE report is adjusted for inflation.  According to the PCE’s own inflation component, prices increased by 2.0% rather than the 1.0% forecasted.  This largely accounts for the so-called “drop” in consumer spending.

    The never-ending Greek drama continues to play out.  Last week it was negotiations with private bond holders that dominated the scene.  After reaching an agreement with private bond holders to cut their payouts by 70% the attention now turns to how the remaining budget shortfall will be made up.  Will Greece be forced to cut spending further or will additional loans come from European nations and the ECB?

    Over the weekend the idea of installing a Eurozone budget overseer who would have the power to veto budget measures from Greece.  As you might imagine, that idea did not go over very well in Greece.  One official stated that such a measure would force Greece to choose between “financial assistance” and “national dignity”.

    The rest of the week will provide a great deal of additional economic data on the strength or lack thereof in the US economy. Chicago PMI (a gauge of manufacturing in the Chicago region) and consumer confidence reports will be released on Tuesday.  Wednesday provides the ADP Employment Change report along with construction spending and the ISM index (manufacturing).  Thursday’s key reports include the weekly jobless claims report and productivity report.  Finally, on Friday we will see the Non-Farm Payrolls report , Factory Orders and ISM Services.

    Current low mortgage rates are not justified by the economic data available to date.  Perhaps this week’s data will show developing weakness in the US economy and support the recent moves downward. Nevertheless, for the time-being consumers needing a mortgage for a refinance or purchase transaction can be comforted in knowing that rates have never been lower.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  5. Canadians: Possible Saviors For Distressed Housing Markets

    By on March 31, 2011

    canadian real estate investors, canadian home buyers

    Distressed housing markets can try looking north for help. With home prices low in the American Sun Belt and the Canadian dollar strong, Canadians might be doing more than sunbathing during spring vacations stateside.

    One in five Canadians would now consider purchasing real estate in the United States, reveals a survey from BMO Bank of Montreal. Lower prices for American homes and a strong Canadian dollar are boosting their interest in U.S. properties.

    Housing prices in the U.S. overall have dropped 30 percent from their peak four years ago, but prices where Canadian snowbirds traditionally visit have dropped even more. For instance, prices have dropped 44 percent in Tampa, Fla., 54 percent in Phoenix, 57 percent in Las Vegas, and 49 percent in Miami.

    “Now, with the American economy and employment gaining strength, home sales should pick up and put a floor under soft prices,” says Sal Guatieri, a senior economist at BMO Bank of Montreal. “We expect prices to rise over time as the overhang of unsold homes eases.” Continue Reading…

    Category: Housing Market

  6. In A Reversal, More Homeowners Pay Credit Cards And Miss Mortgage Payments

    By on March 31, 2011

    pay mortgage or credit card?In a departure from traditional behavior, more homeowners continue to pay their credit card bills while falling behind on mortgage payments.

    Consumers typically paid their mortgages and missed credit card bills during financial troubles, but that pattern revered in the recent recession.
    Experts thought payment behaviors would return to normal when the recession ended. Instead, the trend became even more widespread, finds a study by TransUnion, a company providing credit and information services.

    “The latest data from our study show that the new payment hierarchy has persisted for longer than many industry experts initially believed, and provides evidence that consumers continue to adjust their payment behavior in response to their economic and personal financial environment,” said Sean Reardon, author of the study released yesterday.

    The percentage of consumers current on their credit card payments and delinquent on their mortgages first surpassed the percentage of those current on their mortgages and delinquent on credit cards in the first quarter of 2008. Continue Reading…

    Category: Housing Market

  7. Covered Bonds – A Mortgage Tool For A Housing Market Recovery?

    By on March 17, 2011

    covered bonds, mortgage loans, housing market recoveryCould covered bonds create a new mortgage financing system and help the housing markets recover? Some people believe they can.

    When banks issue covered bonds, they keep the mortgages on their balances sheets, unlike home loans in current mortgage securities. Banks have the power to change the mortgage terms and can borrow against the value the mortgages to make new loans and must replace bad loans.

    In typical mortgage-backed bonds, investors own the mortgage securities. Banks do not back their home loans and are constrained from changing mortgage terms. Covered bonds are used in Europe, but are untested in this country.

    Covered bond supporters say they could offer an alternative to Fannie Mae and Freddie Mac, the government-held mortgage giants that now own or guarantee most mortgages. The Obama administration has put forth alternatives for reforming and down scaling Fannie Mae and Freddie Mac. Many Republicans want to see them shut down altogether.

    Rep. Scott Garrett, a New Jersey Republican, has introduced a bill in the House that would create regulations allowing covered bonds. Senator Charles Schumer (D-NY) said he might introduce similar bill in the Senate. Continue Reading…

    Category: Housing Market, Mortgage Regulations

  8. Home Builders Are Cautiously Optimistic About Spring Home Buying

    By on March 16, 2011

    Home builders are cautiously hopeful home buying, home construction, mortgage lending guidelinesthat an improving economy will boost construction and home buying this spring.

    Builder confidence in the newly built, single-family home market improved by just one point in March, rising to 17 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). That’s the best the index has been since May 2010 just before the federal home-buyer tax credit program expired.

    “Builders are cautiously looking forward to the spring home buying season in hopes that improving economic conditions will help bring more buyers to the table,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.

    The bad news that that home buyers still face the same problems as before: competition from short sales and foreclosures, difficulties selling existing homes, appraisals that are below construction cost due to the inappropriate use of distressed properties as comps, and restrictive mortgage lending conditions for both buyers and builders.

    Housing starts in February were down 20.8 percent from January and 20.8 percent from February 2010, the U.S. Census Bureau and Department of Housing and Urban Development announced today. Housing completions were down 13.9 percent from January and 13 percent from February 2010

    Continue Reading…

    Category: Housing Market

  9. Banks Consider Wide-Ranging Settlement On Foreclosures And Loan Modifications

    By on March 8, 2011

    Major banks are considering how to respond to demands from state and federal officials to revamp their foreclosure and mortgage serbank foreclosures, mortgage loan modificationsvicing practices.

    The 27-page plan from state attorneys general and federal regulators covers the details of how the largest banks, including Bank of America, Wells Fargo and Citigroup, should handle loan modifications and foreclosures.

    Under the code of conduct, banks would have to follow strict time lines for considering loan modifications, provide a single point of contact for borrowers seeking help, and write-down mortgage principal balances in some circumstances. The proposal would also forbid banks from starting foreclosure proceedings while considering a mortgage loan modifications. The proposal would also encourage banks to complete more loan modifications through the federal government’s Home Affordable Modification Program.

    The idea is to have one settlement between all the states, federal regulators and major banks rather than a plethora of agreements that would create confusion. Iowa Attorney General Tom Miller told reporters at a press conference yesterday that a settlement could be reached in a couple months. The states and federal agencies are also considering penalties against the banks for shoddy foreclosure practices that emerged in the robo-signing scandal last year.

    In the proposal, regulators get into the details of mortgage servicing. The New York Times noted that the attorneys general and the new federal Consumer Financial Protection Bureau would have to review training documents and videos for mortgage servicing employees.  An article in The Wall Street Journal said bank executives and attorneys complained that the government is trying to mico-manage industry practices.

    Banks could argue that the attorneys general and federal agencies have no right to set down standards without new legislation or regulations. They could protest that it is unfair to set new rules for them and not all banks and servicers, although the top five banks service 80 percent of home loans. Yet protesting could be difficult when goodwill to banks is zero and they’re being blamed for everything but bad weather.

    Actions against banks could prolong economic doldrums, driving down their stock values and postponing a housing market recovery. If history is a guide, providing more loan modifications will usually only postpone foreclosures.

    Yet many will probably argue that the settlement does not go far enough.

    Category: foreclosures

  10. Oil Prices and Mideast Turmoil May Impact Mortgage Rates

    By on March 2, 2011

    mortgage rates and oil prices, interest ratesTurmoil in Libya and Middle East countries may send oil prices up and affect mortgage rates.

    If investors fear that rising oil prices will derail an emerging recovery, they will remove their money from stocks and put it into safer bonds, especially government Treasuries. That will help lower mortgage rates. More bond purchases will push bond prices up and their yields, or their interest rates paid to bond owners, down. Mortgage rates would also decline, since they cannot be lower than government bond rates.

    That’s exactly what’s been happening this week. Oil prices went over $100 a barrel, its highest price since September 2008.  Mortgage rates have declined for three consecutive weeks, with the average rate for the 30-year fixed-rate mortgage declining from 5 percent to 4.84 percent last week.

    Continue Reading…

    Category: Mortgage Interest Rates

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