Wednesday, March 25, 2009
The economic downturn has more Americans shifting to smaller homes. For example, Bernie Madoff just traded a 3,500 square foot penthouse for a 9 x 10 windowless studio in lower Manhattan.
Are mortgage rates heading any lower?
I truly wish that I had a crystal ball to consult. My prediction is that conforming has most likely bottomed out for the time being, aside from the occasional market rally, and that jumbo is going to come down soon. As it stands, borrowers can pay a point or two and tie up a 4.5% 30-yr mortgage on a conforming program. This is because the US government continues to buy conforming paper. When other investors express an interest in owning mortgages, jumbo or conforming, we should see mortgage rates drop across the board. Keep in mind however that this may take some time as companies are continuing to grapple with staffing, processing, and funding issues. In the meantime, they will continue to keep their margins high and make as much money as they can. Consider this, commercial and retail banks are looking at overnight Fed Funds near 0%, but conforming mortgage rates are closer to 4.5 - 5%. The average spread between fixed mortgage rates and the 10-year T-note is 2.3%, the highest it has been in over 20 years. And rates still have not moved…
Does anyone know when the $729,250 loan limit will be rolled out? (Why didn’t they just make it 730K???) I guess I may be out of the loop on this one, as I have heard rumors that the big banks are already advertising the new limit. Since this information came from my “cousin’s friend’s uncle’s dog’s best friend’s owner”, (I have seen nothing tangible) I remain skeptic that anyone has access to the funds. FHA has already been raised, but not conventional financing. I guess we will just have to wait and see.
In other news…
We have witnessed firsthand the problems with residential loans – is commercial paper next? Banks are reporting increased loan delinquencies from owners of office buildings, casinos, and shopping malls. The country’s 10 biggest banks have $327.6 billion in commercial mortgages, and Wells Fargo and Bank of America account for about half of commercial mortgages owned by these 10. According to a study from research firm Reis Inc., commercial property prices are down almost 20% in the past year. Bank of Hawaii Corp., City National Corp., Comerica Inc. and Sovereign Bancorp Inc. were among the companies put on Moody’s list of lenders with a “negative outlook” last week, partly because of their “risk concentrations” in the commercial market.
Ryan Ogata
Senior Mortgage Consultant
Are mortgage rates heading any lower?
I truly wish that I had a crystal ball to consult. My prediction is that conforming has most likely bottomed out for the time being, aside from the occasional market rally, and that jumbo is going to come down soon. As it stands, borrowers can pay a point or two and tie up a 4.5% 30-yr mortgage on a conforming program. This is because the US government continues to buy conforming paper. When other investors express an interest in owning mortgages, jumbo or conforming, we should see mortgage rates drop across the board. Keep in mind however that this may take some time as companies are continuing to grapple with staffing, processing, and funding issues. In the meantime, they will continue to keep their margins high and make as much money as they can. Consider this, commercial and retail banks are looking at overnight Fed Funds near 0%, but conforming mortgage rates are closer to 4.5 - 5%. The average spread between fixed mortgage rates and the 10-year T-note is 2.3%, the highest it has been in over 20 years. And rates still have not moved…
Does anyone know when the $729,250 loan limit will be rolled out? (Why didn’t they just make it 730K???) I guess I may be out of the loop on this one, as I have heard rumors that the big banks are already advertising the new limit. Since this information came from my “cousin’s friend’s uncle’s dog’s best friend’s owner”, (I have seen nothing tangible) I remain skeptic that anyone has access to the funds. FHA has already been raised, but not conventional financing. I guess we will just have to wait and see.
In other news…
We have witnessed firsthand the problems with residential loans – is commercial paper next? Banks are reporting increased loan delinquencies from owners of office buildings, casinos, and shopping malls. The country’s 10 biggest banks have $327.6 billion in commercial mortgages, and Wells Fargo and Bank of America account for about half of commercial mortgages owned by these 10. According to a study from research firm Reis Inc., commercial property prices are down almost 20% in the past year. Bank of Hawaii Corp., City National Corp., Comerica Inc. and Sovereign Bancorp Inc. were among the companies put on Moody’s list of lenders with a “negative outlook” last week, partly because of their “risk concentrations” in the commercial market.
Ryan Ogata
Senior Mortgage Consultant
Thursday, March 19, 2009
Big news hit the wires yesterday afternoon, as the Fed made a blockbuster announcement that sent Mortgage Bonds into rally mode. The Federal Reserve announced that over the course of 2009, they will purchase an additional $750B of Mortgage Backed Securities in an effort to help the housing market and keep rates low. On the announcement, Mortgage Bonds exploded higher, yielding prices at the best levels that we have seen in some time.
Great news right? Not exactly…
Fed purchases may keep a lid on rates, but not necessarily push them dramatically lower. HUH?
Remember that lenders are still not working at max capacity and like all things American, are very likely not going to pass all the gains through to the rate sheets delivered to the consumer (More Profit). The good news is that perhaps this will help lenders feel a bit more comfortable staffing up HR a bit as this massive buying will likely keep rates from moving significantly higher. (Faster turn times)
Bottom line - although the media is already spinning it differently (10% truth, 90% hype), this is NOT a time for clients to stay on the fence, hoping and waiting for lower rates. Home loan rates remain within inches of all-time historic lows, and may not necessarily move significantly lower.
Now...something else worth paying attention to.
Since yesterday's Fed Meeting, the US Dollar has been hit hard, as the aggressive Fed moves appear quite INFLATIONARY (not good for rates). In turn, this has pushed Oil up to $51 per barrel, nearly $5 higher since yesterday afternoon. Gold, which is purchased as a hedge against inflation, is up near $950 an ounce - moving up $60 on the day! While we know there is no inflation at the present time, the potential for future inflation could have a negative effect on Mortgage Bond prices ahead, or at least stifle their move towards lower rates - yet another reason to get your clients lined up to take advantage of present historically low rates.
Ryan Ogata
Senior Mortgage Consultant
Great news right? Not exactly…
Fed purchases may keep a lid on rates, but not necessarily push them dramatically lower. HUH?
Remember that lenders are still not working at max capacity and like all things American, are very likely not going to pass all the gains through to the rate sheets delivered to the consumer (More Profit). The good news is that perhaps this will help lenders feel a bit more comfortable staffing up HR a bit as this massive buying will likely keep rates from moving significantly higher. (Faster turn times)
Bottom line - although the media is already spinning it differently (10% truth, 90% hype), this is NOT a time for clients to stay on the fence, hoping and waiting for lower rates. Home loan rates remain within inches of all-time historic lows, and may not necessarily move significantly lower.
Now...something else worth paying attention to.
Since yesterday's Fed Meeting, the US Dollar has been hit hard, as the aggressive Fed moves appear quite INFLATIONARY (not good for rates). In turn, this has pushed Oil up to $51 per barrel, nearly $5 higher since yesterday afternoon. Gold, which is purchased as a hedge against inflation, is up near $950 an ounce - moving up $60 on the day! While we know there is no inflation at the present time, the potential for future inflation could have a negative effect on Mortgage Bond prices ahead, or at least stifle their move towards lower rates - yet another reason to get your clients lined up to take advantage of present historically low rates.
Ryan Ogata
Senior Mortgage Consultant
Friday, March 13, 2009
Bernie Madoff and his wife are saying they have $69 million that is theirs and is not part of the money he swindled. They say it's money he saved by switching to GEICO. HA!
In all seriousness, I apologize for not getting these daily updates out this week. As you can imagine, we have been pretty busy here at RPM mortgage. Lock desks everywhere have seen a welcomed pickup with application volume up 11%. (+13% for the REFIS and +7.1% for the PURCHASES).
I have several clients calling about the stimulus package and how it may apply to them. Seems like everyone wants a ride on the Obama bailout express. The most common question is “How do I know if my mortgage is owned by Fannie Mae of Freddie Mac?” Since these institutions function primarily as a secondary market, your mortgage statements could be coming from Bank of America, Chase, Countrywide, Wamu, or any other of a hundred different mortgage “servicing” companies. So how can you find out?
Simple:
http://www.fanniemae.com/homepath/homeaffordable.jhtml
https://ww3.freddiemac.com/corporate/
Other cool links…
Here’s everything that you wanted to know about TALF but was afraid to ask: http://www.newyorkfed.org/markets/talf_faq.html
And here’s everything you wanted to know about how the stimulus activity impacts your state: http://www.stimuluswatch.org/project/by_state
And lastly, Countrywide (“Countryfine”) gets a little publicity in the Simpson’s. http://www.hulu.com/watch/61224/the-simpsons-no-loan-again-naturally
In other news…
Several American banks, including Goldman Sachs and Wells Fargo, are “mulling” the return of bailout funds they received because of the growing number of strings the federal government is attaching to the money. And it is already happening: the Signature Bank of New York informed the Treasury Department the bank will give back $120 million it received from the government, due to executive pay caps. Bailout funds include caveats about executive compensation, the postponement of evictions, modification of mortgages for troubled home loan borrowers, reduction of dividends, cancellation of employee training and morale-building events, and the withdrawal of job offers to foreign workers.
RealtyTrac, who tracks foreclosures and hasn’t seemed to put forth good news for a few years, released its report for February. Default notices, auction sale notices and bank repossessions went above 290,000, an increase of 6% from the previous month and an increase of nearly 30% from February 2008. The top states were Nevada (1 in 70 in foreclosure), Arizona (1 in 147), and California (1 out of 165). Rounding out RealtyTrac’s Top 10 were Florida, Idaho, Michigan, Illinois, Georgia, Oregon and Ohio, but on average 1 in every 440 U.S. housing units received a foreclosure filing in February. In spite of many investors putting foreclosures on a temporary halt, according to their spokesman there were some exceptions. For example, a 45-day voluntary moratorium in Florida expired at the end of January, and foreclosure activity there was up 14% from the previous month. In New York foreclosure proceedings delayed by a new law for an extra 90 days appear to have hit the system in February, when the state’s foreclosure activity increased 23% from the previous month.
Come next Monday, Radian will have a different set of guidelines that apply to all markets as Radian is retiring their Declining Markets policy. (For Radian, markets will no longer be classified as stable or declining.) The changes include a Maximum LTV - 90%, Maximum Loan amount - $417,000, Minimum Fico Score – 720, Maximum DTI- 41% (Regardless of AUS decision), and Occupancy- Primary Residence, 1 Unit Only. Ineligible Property types include Attached Condo’s, Attached PUD’s, Construction- to-perm, Interest Only, and Cooperatives or Manufactured housing. And speaking of MI companies, the credit-ratings agency Fitch Ratings placed mortgage insurer MGIC Investment Corp. and its operating subsidiaries on a “negative watch”. A downgrade to junk status could further hinder the insurer's ability to generate new business, and the downgrade occurred after MGIC said it said it would defer interest payments on $390 million in junior subordinated debt. The deferral is further indication of the increasing financial pressure on the company and the entire MI industry. For “good news”, Fitch noted that MGIC has enough liquidity to meet immediate financing needs. (If it is any consolation, Fitch also downgraded Berkshire Hathaway Inc.'s AAA issuer default rating and senior unsecured debt ratings by one notch, saying “a top rating isn't appropriate for financial-oriented holding companies in the current volatile market”.)
Have a great weekend!
Ryan Ogata
Senior Mortgage Consultant
In all seriousness, I apologize for not getting these daily updates out this week. As you can imagine, we have been pretty busy here at RPM mortgage. Lock desks everywhere have seen a welcomed pickup with application volume up 11%. (+13% for the REFIS and +7.1% for the PURCHASES).
I have several clients calling about the stimulus package and how it may apply to them. Seems like everyone wants a ride on the Obama bailout express. The most common question is “How do I know if my mortgage is owned by Fannie Mae of Freddie Mac?” Since these institutions function primarily as a secondary market, your mortgage statements could be coming from Bank of America, Chase, Countrywide, Wamu, or any other of a hundred different mortgage “servicing” companies. So how can you find out?
Simple:
http://www.fanniemae.com/homepath/homeaffordable.jhtml
https://ww3.freddiemac.com/corporate/
Other cool links…
Here’s everything that you wanted to know about TALF but was afraid to ask: http://www.newyorkfed.org/markets/talf_faq.html
And here’s everything you wanted to know about how the stimulus activity impacts your state: http://www.stimuluswatch.org/project/by_state
And lastly, Countrywide (“Countryfine”) gets a little publicity in the Simpson’s. http://www.hulu.com/watch/61224/the-simpsons-no-loan-again-naturally
In other news…
Several American banks, including Goldman Sachs and Wells Fargo, are “mulling” the return of bailout funds they received because of the growing number of strings the federal government is attaching to the money. And it is already happening: the Signature Bank of New York informed the Treasury Department the bank will give back $120 million it received from the government, due to executive pay caps. Bailout funds include caveats about executive compensation, the postponement of evictions, modification of mortgages for troubled home loan borrowers, reduction of dividends, cancellation of employee training and morale-building events, and the withdrawal of job offers to foreign workers.
RealtyTrac, who tracks foreclosures and hasn’t seemed to put forth good news for a few years, released its report for February. Default notices, auction sale notices and bank repossessions went above 290,000, an increase of 6% from the previous month and an increase of nearly 30% from February 2008. The top states were Nevada (1 in 70 in foreclosure), Arizona (1 in 147), and California (1 out of 165). Rounding out RealtyTrac’s Top 10 were Florida, Idaho, Michigan, Illinois, Georgia, Oregon and Ohio, but on average 1 in every 440 U.S. housing units received a foreclosure filing in February. In spite of many investors putting foreclosures on a temporary halt, according to their spokesman there were some exceptions. For example, a 45-day voluntary moratorium in Florida expired at the end of January, and foreclosure activity there was up 14% from the previous month. In New York foreclosure proceedings delayed by a new law for an extra 90 days appear to have hit the system in February, when the state’s foreclosure activity increased 23% from the previous month.
Come next Monday, Radian will have a different set of guidelines that apply to all markets as Radian is retiring their Declining Markets policy. (For Radian, markets will no longer be classified as stable or declining.) The changes include a Maximum LTV - 90%, Maximum Loan amount - $417,000, Minimum Fico Score – 720, Maximum DTI- 41% (Regardless of AUS decision), and Occupancy- Primary Residence, 1 Unit Only. Ineligible Property types include Attached Condo’s, Attached PUD’s, Construction- to-perm, Interest Only, and Cooperatives or Manufactured housing. And speaking of MI companies, the credit-ratings agency Fitch Ratings placed mortgage insurer MGIC Investment Corp. and its operating subsidiaries on a “negative watch”. A downgrade to junk status could further hinder the insurer's ability to generate new business, and the downgrade occurred after MGIC said it said it would defer interest payments on $390 million in junior subordinated debt. The deferral is further indication of the increasing financial pressure on the company and the entire MI industry. For “good news”, Fitch noted that MGIC has enough liquidity to meet immediate financing needs. (If it is any consolation, Fitch also downgraded Berkshire Hathaway Inc.'s AAA issuer default rating and senior unsecured debt ratings by one notch, saying “a top rating isn't appropriate for financial-oriented holding companies in the current volatile market”.)
Have a great weekend!
Ryan Ogata
Senior Mortgage Consultant
Thursday, March 5, 2009
Many mortgage professionals have been anxious to take advantage of today's historically low rates. I personally have encountered tremendous frustration stemming from lower home values combined with much tighter underwriting guidelines. This tough mix has restricted refinancing to those who, unfortunately, probably need it the least.
Those anxiously awaiting some aid from Washington will be happy to find that the refinancing element of the Recovery Initiative allows for rate and term refinances to 105% loan to value. In order to qualify, loans must be currently guaranteed by Fannie Mae or Freddie Mac, be in good credit standing, and meet present "qualifying guidelines".
Like all new things however, there are still a few unknowns in the mix. For example, it remains unclear how second mortgages will play into the picture. In order for these refinances to go through under this plan, holders of second mortgages in many cases may have to agree to subordinate. Since the LTV limit of 105% on the new first mortgage does not account for amounts owed on second mortgages, holders of second mortgages may get nervous in situations where the combined LTV of both mortgages is say, 125% of the value.
More to come...
Those anxiously awaiting some aid from Washington will be happy to find that the refinancing element of the Recovery Initiative allows for rate and term refinances to 105% loan to value. In order to qualify, loans must be currently guaranteed by Fannie Mae or Freddie Mac, be in good credit standing, and meet present "qualifying guidelines".
Like all new things however, there are still a few unknowns in the mix. For example, it remains unclear how second mortgages will play into the picture. In order for these refinances to go through under this plan, holders of second mortgages in many cases may have to agree to subordinate. Since the LTV limit of 105% on the new first mortgage does not account for amounts owed on second mortgages, holders of second mortgages may get nervous in situations where the combined LTV of both mortgages is say, 125% of the value.
More to come...
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