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If The Fed Lowers The Fed Funds Rate We Should See Long Term Rates Increase The End Of The Month

Tue, 07 Oct 2008 17:54:47 -0400

Lock You Home Loan Rate Today If You Are Closing This Month

After a trading day that saw the largest point swing in market history, Stocks are now trying to stabilize. Yesterday, the Dow closed down 370 points on the day, but that was almost 500 points better than the worst levels of the day. As global credit markets continue to improperly function, both Stocks and Bonds are not a place for the faint of heart.The Fed and Treasury Department just announced they are developing a plan to purchase short-term commercial paper that many companies rely on to finance their day-to-day operations. This plan would make the Fed a credit source for commercial banks, investment firms and non-financial businesses as well. Stocks like the news as this plan will help many businesses with their short-term credit and funding needs - thus helping lift some uncertainty and restoring confidence.

Australia lowered its benchmark rate by 1 full point this morning, and rumors are now swirling that the Fed may make an emergency 50bp rate cut to the Fed Funds Rate, prior to their scheduled meeting on October 29th. Iceland is seeking an emergency bailout from Russia and the Russians unveiled an aid package for their own banks - this is truly a global credit crunch and a coordinated effort of central banks may be needed, in order to restore liquidity and confidence.At 1:15pm ET, Fed Chairman Bernanke will speak about the economy and this could be a market mover. The "Minutes" from the September 16th Fed meeting will be released at 2:00PM ET. Normally, this could have an impact on the market, but with changes occuring so rapidly - comments from September 16th meeting are like ancient history.

For now, we can Float carefully, but prices are already all over the map. This morning, the Bond dipped down to test support at the 25-day Moving Average, and then bounced dramatically higher. But should prices reverse and close below support at the 25-day MA, a Locking bias may be prudent, as the next clear floor of support lies at the 200-day Moving Average, currently about 100bp beneath present levels.

Mortage Rates Lower Today

Mon, 06 Oct 2008 21:09:26 -0400

The bond and stock market were all over the board today. Lock in the morning.

We're finally getting the move higher we had been expecting in bond prices. Mortgage Bonds are trading higher this morning, fueled by sinking Stock prices around the world forcing money over into Bonds. Global Stock markets plunged overnight as the $700 Billion rescue plan passed by the House and Senate last week is not being perceived by global investors as a "cure-all" for world economies and credit issues that are truly now a world-wide problem. But governments around the globe are scrambling to ease concerns and guarantee bank deposits, in an effort to avoid a global loss of confidence and run on the banks. Overnight, Germany, Ireland and Greece pledged to back their retail bank deposits.

The Fed is pumping more liquidity into the system this morning, by announcing a doubling of its Term Auction Facility from $450 Billion to $900 Billion, and will also begin paying interest on the required reserves of the banks as was allowed by the bailout bill. The announcement however, contained no hint of a potential rate cut in the near future - which was perceived as a negative by Stocks.

Typically, and contrary to the media and general public's understanding, Fed Rate cuts have an adverse effect on mortgage rates. However, with the world-wide financial crisis, it would be nice to see a coordinated effort by our Fed, the Bank of England, and the European Central Bank to simultaneously cut rates. This would help the currency markets remain stable. In the past, when our Fed has cut rates alone, our Dollar weakens, which is inflationary, and that is a big factor in the negative movement for Mortgage Bonds. But a coordinated effort would keep the Dollar, which has already made a major comeback against the Euro, near unchanged levels. This means that Bonds just might like a Fed cut, if it's done in tandem with other world central banks. By the way - Stocks would likely move much higher following a move like this. We are just speculating on this, but given the global financial situation, the stage is now set for a possible coordinated action. Currently, there is an 84% chance that the Fed Funds Rate will be lowered by 50bp at the upcoming October 29th Fed meeting.

There are no economic reports scheduled today, but good old Dallas Fed President Richard "Loose Lips" Fisher and Chicago Fed President Charles "Big Boy" Evans both are due to speak on the US economy, which could have some impact on the Bond markets depending on their commentary.

If you have a Countrywide mortage that has recasted or the interest rate and payment have reset call them for options.

Mon, 06 Oct 2008 21:03:39 -0400

Bank of America and a several states reached an $8.4 billion accord

Bank of America and a number of U.S. states reached an $8.4 billion agreement under which the banking giant will modify troubled mortgages and enable nearly 400,000 Countrywide Financial Corp. clients to keep their homes. Bank of America acquired Countrywide on July 1. The agreement resolves claims that several state attorneys general had filed based upon Countrywide loan programs.

The new program's goal, Bank of America said in a statement, is to enable borrowers who financed their homes with subprime loans or pay-option adjustable-rate mortgages to hang on to those homes. For B of A, "the cost of restructuring these loans is within the range of losses we estimated when we acquired Countrywide," Bank of America Chief Financial Officer Joe Price said in a statement. The plan will reduce interest and principal on the mortgages by $8.4 billion.

The program applies to mortgages serviced by Countrywide and originated before Dec. 31, 2007. The target borrowers are those who occupy their homes as their principal residences and "who are seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts," Bank of America said. Option ARM mortgages enabled borrowers to pay only minimal amounts at the start of the loans. But those initial payments often didn't cover even the interest that was due, and the loan balances then ballooned.

By Dec. 1, Countrywide staff will begin contacting eligible customers. B of A said it would not begin or advance a foreclosure sale for a borrower who is likely to qualify for the program until Countrywide decides whether the borrower is indeed eligible.

How will Bank of America ensure that the mortgage workouts will keep people in their homes? One method, the bank said, is to ensure that first-year payments of principal, interest, taxes and insurance will equal 34% of the borrower's income. The modified loans' interest rates will adjust with "minimal risk of payment shock and redefault," Bank of America said.

The bank said it would modify the loans via a number of methods, including:

Refinancing through the Federal Housing Administration's Hope for Homeowners program;
Automatically reducing interest rates
Reducing the principal on pay-option adjustable-rate mortgages so as to restore equity that the borrowers have lost.

B of A said Countrywide wouldn't charge the borrowers any fees to modify the loans, and it will waive prepayment penalties for subprime and pay-option ARM loans. The bank also will lay out $150 million to help Countrywide customers who are already in foreclosure or are at serious risk of foreclosure. And it will pay as much as $70 million to help Countrywide customers who've lost their homes to make the transition to other living arrangements.

States that are likely to sign the agreement include Arizona, California, Connecticut, Florida, Iowa, Illinois, Michigan, North Carolina, Texas and Washington, a Bank of America spokesman told The Wall Street Journal. States that haven't joined the program will have the opportunity to do so, Bank of America said.

Bond Market Looks Better Today

Wed, 01 Oct 2008 13:43:00 -0400

Call For Advice Tomorrow On When To Lock Your Home MortgageUncertainty continues to hover over the markets as everyone awaits for the Senate to vote tonight on a revised rescue plan. There are apparently some changes to the plan which includes some tax breaks and an increase in the amount of FDIC protection from $100,000 to $250,000. Everyone on Capitol Hill understands the sense of urgency to get a plan signed and in motion, so we expect to see the plan pass this evening. Failure to approve something this evening would likely have a damaging effect to the stock markets tomorrow.

The ADP payroll report showed 8,000 jobs lost when estimates called for a drop of 53,000. When you factor in the 20,000 or so government jobs added each month, this month's ADP suggests Friday's official Jobs Report will come in somewhere near 12,000 jobs gained...this is a far cry from the 105,000 job loss economists are expecting. Tomorrow, we will lay out our Jobs report strategy, but we do feel Friday's Jobs report will not be very good.

The Institute for Supply Management for September will be reported shortly. Unless this report really misses expectations, we don't expect much of a reaction.

Yesterday's Bond selloff was stopped dead by support at the 200-day Moving Average. Prices are now bouncing a bit higher off this strong floor of support. We will continue to float as long as prices remain above the 200-day Moving Average.

Evening Update: Bill passes Senate by wide margin. On to the House.

Today Is Wait and See What Will Happen With Credit Market

Tue, 30 Sep 2008 16:42:23 -0400

The Bond Market Took A Big Hit Today So We Will Have To Wait To Lock Home Loans

US Stock markets plunged yesterday after the House and Senate voted down the proposed $700 Billion rescue plan that called for taking illiquid assets off of financial firms balance sheets. The Dow Jones Industrial Average had its single worst loss in its 112 year history as the carnage was broad and hit every sector of the equity markets. In response, investors fled to the Bond market, but with most of the money being directed to the safe haven of the Treasuries and NOT Mortgage Bonds. You could see this clearly on the Bond page yesterday as the 10-year Note traded significantly higher while Mortgage Bonds traded just 28bp higher and well off the best levels of the day.

Congress will be off the next day or so celebrating Rosh Hashanah - but they will likely be back to the drawing board on Thursday. Something has to get passed soon in order to help the beleaguered financial sector. As we've said before, let's hope political posturing doesn't stand in the way of quickly restoring confidence around the globe.

The uncertainty in the financial markets has pressured the overnight LIBOR a staggering 430 basis points higher to 6.87%, the highest in 7 1/2 years, but also the highest spread above the Fed Funds rate in history. And yesterday's news caused the Fed Fund Futures to jump higher, as they now are pricing a 72% chance of a 50bp cut to the Fed Funds Rate in October - this from a 0% chance just a short while ago.

Consumer Confidence was reported at 59.8, better than the 55.0 expected, and that is surprisingly good. Chicago PMI was 56.7, better than the 54.0 expected. These good reports gave Stocks a little boost higher, at the expense of Bonds. But stocks already had a positive bias this morning, as cooler heads saw an opportunity after the market decline looked overdone, especially seeing how stocks dropped like crazy in the last few minutes of trading yesterday.

Resistance and Support are highlighted on the Bond Page to help us understand where prices can go before being halted (resistance) and where selling may stop (support). Amazingly, yesterday Mortgage Bonds had traded all the way up to touch the Resistance 2 level we identified at $101.31 and eventually settled back down below the closest ceiling at Resistance 1 at $100.50. The market remains volatile as prices are more than 100bp off yesterday's intra-day high. The Bond remains in a range between the aforementioned resistance and support at the 25-day MA at $101.09.

Let's float carefully and see if prices can build on the bounce higher off support at the 25-day Moving-Average, which it has been riding of late.

FHA Refinance Programs Comparison

Mon, 29 Sep 2008 19:47:05 -0400

What are the options available to Refinance Out of an ARM?

Today many people are looking to refinance Adjustable Rate Mortgages that they used to purchase their home. In many cases the ARM loan that they purchased with is adjusting every 6 months and some every year. The current rate may look good today but the unknown is what will interest rates rise to in the next year? Since we are at traditionally low rates now may be a time to refinance. FHA has many options for borrowers that are delinquent on their current ARM, the appraised value is lower than what you owe on your first and second mortgage or you would like to look at refinance options for either taking cash out or just to set your interest rate for the next 30 years.

The first program is FHA Secure:

If your current mortgage is a conventional fixed-rate or ARM loan you may use this program.

If you are delinquent on an ARM loan: and that the delinquency was caused by rate reset or extenuating circumstace but does not affect borrower's overall capacity to repay the FHA loan.

Your current loan may include interest only, payment option and negative amortization.

However this program does not include delinquent FHA loans.

With this program you will have different mortgage insurance requirements depending upon your current situation.

FHA 95% Cash-out Refinance:

This program is for an FHA or conventional loan that you have had for at least 12 months and all payments were made on time.

With this program we can refinance you up to 95% of the appraised value of your home.

If you owe more than that amount we can work with your current mortgage holder to negotiate options.

FHA to FHA Refiance:

For this option you need to have currently an FHA mortgage current and have an acceptable mortgage payment history. This options is very low cost and is a great benefit to current FHA mortgage holders looking for a lower interest rate.

Please give me a call today if you are interested in more information or refinancing using an FHA loan.

Liz Fontanini

Certified Mortgage Planning Specialist

928-556-0600 office

928-600-9360 cell

liz.fontanini@wvmb.com

Current Mortage Rates Are Higher Than Early Last Week

Mon, 22 Sep 2008 13:05:30 -0400

Look For Lower Rates To Apppear Again - Working With A Certified Mortage Planner Is Advised.

This is a confusing time for making mortgage decisions. Working with a Certified Mortage Planning Specialist is more important today because we watch the market and belong to services that help to decipher the market so we can advise you on when to lock and when to wait.

Just days after rumors that Morgan Stanley might be another Wall Street casualty, Japan's Mitsubishi Financial Bank announced it will purchase 10% to 20% of the company. This indicates that the government's plan to stabilize the financial sector appears to have done its job initially.

One thing to keep in mind, however, is that the recent actions by the Fed could be viewed as inflationary. This may be why we are seeing commodity prices soaring this morning, while the US Dollar is under selling pressure.

Currently, Mortgage Bonds are trading near an important level of support. Overall, the recent moves by the government could lead to lower rates within the next few months. But, in the short-term, the market will be volatile. For today, Bonds appear to be moving lower; therefore, I recommend locking. I will keep you posted of any changes.

Mortgage Rates Will Rise As The Stock Market Stabilizes

Fri, 19 Sep 2008 16:35:56 -0400

Fed Moves Are Good For Everyone Long Term

An historic week was capped off with an incredible Friday of government announcements.

There are three huge announcements that are changing the financial markets around the world. First, we have been talking about the fear over the safety of savings for many Americans. Banks are on the brink of collapse, bonds are losing some or all of their value, and stocks are dropping at an alarming rate, all causing tremendous fear and anxiety for investors. This fear caused a flight to quality of such magnitude that the return on Treasuries was actually negative. People are actually willing to pay money in order not to lose money...forgetting all about any type of return for their investment.

Yesterday this panic lead to a modern day "run on the bank". There was $180 billion taken out of money market funds due to a lack of confidence. This resulted in a "breaking of the buck", which means that the Net Asset Value or NAV of some money market funds dropped below $1. Virtually all investors consider money market funds very safe and do not expect any change in the principal value, so a $1 invested will always result in a $1 balance plus any interest. But once the $1 valuation was broken investors panicked and the flood gates opened. This caused the Treasury to step in. This morning, Treasury Secretary Paulson announced that the US government will guarantee money market funds. It should be noted that this does not include high yield, enhanced type, or riskier money market funds. This action is helping settle the markets and as a result stocks around the world are marching higher.

The second big announcement is helping to calm global markets and regain confidence. The Federal Reserve will create a market for illiquid mortgage debt. The big problem is that there are no buyers for this debt in the current marketplace. So the Fed is stepping in to create a entity to make these purchases of mortgage debt and provide a liquid marketplace. This move has been very well received and should do a lot of long term good to help the housing and lending environment. Stocks around the world have responded very favorably to this.

The final announcement is that the SEC has placed a ban on short selling in 799 financially-related stocks. This ban will last through October 2nd and can be extended if needed in 30 day increments. Some other countries around the globe are also instituting similar bans. There are already some lawsuits challenging the legality of this ban, but it may help the financial stocks in the immediate future and allow the government to impose more regulation of short-selling.

As the stock market stabilizes, home loan rates will rise again.

BANKS ARE NERVOUS- ARM's Will Increase This Week.

Wed, 17 Sep 2008 17:05:15 -0400

If You Have An Adjustable Rate Home Loan, It Is Time To Refinance Into A Fixed Loan

Mortgage Bonds sure have been fluctuating in wild fashion so far the this week and this morning was no exception. In the first hour of trading, Mortgage Bonds had already traded in a 44 basis points.

Last night, the Fed threw insurance giant, AIG, an $85 Billion lifeline to keep it from falling into bankruptcy. The company received a 2-year $85 Billion loan from the Federal Reserve in return for a 79.9% stake in the company's stock. The loan has to be paid back in 24 months, which may give AIG time to sell assets to cover the bill. This was a deal that the Fed believed had to come together as an AIG bankruptcy would have had enormous, far-reaching negative effects in the global economy. The saving of AIG has done little to help the overall stock market, which has been trading sharply lower today.

Housing Starts for August were 895,000, below estimates of 950,000. This is a 17-year low. Building Permits were also below expectations. This wasn't a good number, but the market was already expecting something on the weak side. There is a lot of existing inventory to clear out before the numbers on this front will improve.

What is going on with LIBOR, you may be asking? LIBOR as well as the actual Fed Fund Rate, are rates that banks charge each other. And while the Fed has set the Fed Funds target rate at 2%, banks are jacking this up closer to 6%. The same is happening to LIBOR. The reason is due to a lack of confidence that banks will make good on funds borrowed from each other. The AIG scare, IndyMac Bank, Lehman, and others have spooked banks into thinking that they may not be paid back. And a low 2% rate is just not enough to justify the risks of lending in today's environment.

This means that those with ARMs tied to LIBOR that are adjusting soon should immediately contact a mortgage advisor to determine if a refinance to lower fixed rates makes sense.

Home Mortage Interest Rates Increased Mid-Morning Tuesday

Tue, 16 Sep 2008 14:55:09 -0400

Our Alert To Lock Monday Was Very True!

If you're in the process of buying a Flagstaff home, and you saw this blog yesterday and followed the advice to lock your loan, you're a winner. Rates went up Tuesday morning as the stock market made a recovery from Monday's plunge. Here's Tuesday's mortgage market news, compliments of Liz:

Fed Keeps Rate at 2%, Rebuffing Call for Cut to Soothe Markets

Sept. 16 (Bloomberg) -- The Federal Reserve left its main interest rate at 2 percent, rebuffing calls by some investors for a cut after Lehman Brothers Holdings Inc.'s bankruptcy shook markets worldwide. Still the Fed has been pumping funds into the money supply.

Downside risks to growth and the upside risk to inflation are both of significant concern, the Federal Open Market Committee said in a statement in Washington. The committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending and aim monetary policy at a longer-term economic forecast that may still show the economy skirting a recession. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters, the statement said. Over time, the substantial easing of monetary policy combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

The Fed Open Market Committee's decision was unanimous, the first such agreement in a year. The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain. New York Fed President Timothy Geithner didn't come to Washington today for the meeting, staying in New York, where talks continue at his Fed regional bank on the crisis at American International Group Inc.

Futures Bets

Futures traders had put an 80-percent chance on at least a quarter-point rate cut. Three months ago, they saw a 100 percent chance of an increase.

The Fed held rates steady even after the Standard & Poor's 500 Index dropped 4.7 percent yesterday to the lowest level since October 2005. Rate cuts totaling 3.25 percentage points in the past year and emergency Fed loan programs have failed to revive lending among banks. We have a very concentrated problem in housing that's not really a rate problem, and we've got a financial crisis that's really not a rate problem, former Dallas Fed President Robert McTeer said in an interview with Bloomberg Radio before the decision. I don't think we have a generally weak economy that needs lower rates.

Wall Street Upheaval

Bernanke and Treasury Secretary Henry Paulson refused to offer federal aid to Lehman after its stock plunged last week, pushing the 158-year-old company into bankruptcy early yesterday. Merrill Lynch & Co. became engulfed by the turmoil, agreeing to a quick merger with Bank of America Corp. this week, while insurer AIG struggled to stave off collapse after its credit ratings were cut.

The rout sparked by the collapse of the U.S. subprime mortgage market has cost financial institutions worldwide $515 billion in writedowns and losses since the start of 2007. Firms have raised $362 billion of capital in response.

The New York Fed injected $70 billion of temporary reserves into the banking system today and $70 billion yesterday, the most since the September 2001 terrorist attacks. The central bank has also provided billions of dollars through direct loans of cash and Treasuries, and widened on Sept. 14 widened the collateral accepted for loans to securities firms to include equities.

Credit-Market Seizure

Still, banks are driving up short-term lending rates on concern AIG will follow Lehman into bankruptcy and leave financial institutions with losses on $441 billion of credit derivatives issued by the biggest U.S. insurer. Central banks around the world pumped more than $210 billion into the financial system as they sought to alleviate the credit-market seizure. [Evening update: We're not going there. The U.S. government is lending $85 billion to AIG at over 11% interest rate.]

The cost of borrowing in dollars overnight more than doubled to the highest since 2001. The overnight dollar rate soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The rate was as low as 2.07 percent in June.

Tumbling commodity prices, including a 38 percent decline in crude oil from a July 11 peak, ease pressure on the Fed to fight against inflation. The consumer price index fell 0.1 percent in August, the Labor Department said today. So-called core prices, which exclude food and energy, rose 0.2 percent after a 0.3 percent gain in July.

Impeding Growth

Lehman's bankruptcy filing came amid signs that losses at financial institutions are impeding U.S. economic growth.

The economy will slow to a 1.2 percent annual growth rate, or less than half the prior quarter's pace, as consumer spending, the biggest part of the economy, stalls this quarter, according to a Bloomberg survey from Sept. 2 to Sept. 9.

The decline in consumer spending prompted automakers last month to reduce car output by 12 percent, or the most in a decade, Fed figures showed yesterday. Industrial production in the U.S. fell by 1.1 percent, or the most in almost three years.

Unemployment rose to a five-year high of 6.1 percent in August and foreclosure filings rose to a record as falling home prices frustrated homeowners' efforts to sell or refinance their homes, RealtyTrac Inc. said.

Downside risks to growth have risen significantly,'' Robert DiClemente, chief U.S. economist for Citigroup Global Markets said yesterday in a note to clients in which he predicted, incorrectly, a half-point Fed rate cut. Conditions remain hostile to a sustained restoration of economic growth.

Lehman Fallout

Still, Fed officials may prefer to wait a little longer to see how the Lehman fallout affects the broader economy. Former Fed Governor Lyle Gramley compared Fed policy with its approach during the start of the credit crisis in August 2007, when the Fed waited a month to lower the federal funds rate.

Policy makers have tried to make a clear demarcation between setting the funds rate and providing liquidity ever since the beginning of the financial crisis, said Gramley, now senior economic adviser at Stanford Group Co. in Washington. He correctly predicted the central bank wouldn't change the benchmark rate.

A rate cut would have indicated that Fed officials believe the turmoil is likely to continue and there may be much deeper repercussions, former St. Louis Fed President William Poole said yesterday in an interview with Bloomberg Television. The right position is, the market is taking care of this, as painful as that is. It seems to me the risks are declining now as the weaker players are eliminated, Poole said.

The question is, how many "weaker players" are out there?

Bond Market Continues To Rally Up 52 points

Mon, 15 Sep 2008 13:19:46 -0400

Lock Now - Remember It Is Impossible To Predict The Bottom - Rates Are At A Historical Low

"Its just another manic Monday"...The Bangles. If you thought last Monday was wild on the news from Fannie and Freddie, the headlines that lead us into this week are even crazier. First, Mortgage Bonds are up sharply, which should lead to much better home loan rates and the great refinance opportunities that we have been expecting.

Let's begin with more fallout in the financial sector. Lehman Brothers is done after 158 years, thanks to their exposure to sub-prime mortgages. And another casualty, that was narrowly avoided was Merrill Lynch, which is being acquired by Bank of America, again this is all due to their greed and exposure in the risky mortgage business. Also on the ropes is insurance giant, AIG, as they try to raise cash quickly to stay afloat.

So what do all these headlines mean to us in the mortgage business? It's a time to look for opportunities. Pricing will be at its best level in some time, homes are at much more attractive prices, terms to purchase are far more favorable than they have been and the forecast could get even better. Prices should improve nicely today as money flows out of Stocks - but there is another story on the Bond side. We know that Treasury Bonds offer the lowest yield with the lowest risk. Then Mortgage Bonds offer a higher yield and for an even greater yield, there are Corporate Bonds. But they do carry higher risk. With all the turmoil in the financial sector, the risk on Corporate Bonds has increased significantly. While this will translate to higher yields being offered, the risk on Corporate Bonds may be greater than the appetite or tolerance of investors. In fact, many funds will preclude investments in riskier Bonds.

As fund managers and investors seek alternatives they will notice that Mortgage Bonds offer a much higher yield than Treasuries with the same guarantee. This should help Mortgage Bond pricing down the road...especially, with some potential good news on inflation. The Dollar has made significant gains against other major currencies, which should help import prices. The Job market is weak and that should keep wage based inflation in check. The move in Oil lower has been dramatic. A $52 drop in two months puts Oil at $95...likely on its way to $85. All these positive inflationary factors spells good news for mortgage rates.

But this time it will not be as easy, as credit and appraised values will represent more of a challenge. That said, there are a lot of deals to be had. Brush up on how to improve credit scores and do as much research as possible on valuations for potential refi clients ahead of time.

My advisors say: "Remind your clients that these drops in rates don't last forever and should be taken advantage of if they make sense. Greed kills." Here's the reminder.

Home Mortgage Interest Rates Remain Strong, But Qualifying Is Tougher

Mon, 15 Sep 2008 12:14:02 -0400

Early report on today's mortgage market in the Lehman/Merrill Lynch fallout

The government's move helps to stabilize the shaky mortgage market and take out some of the unknowns, removing some of the fears of mortgage investors, said Bob Moulton, president of Manhasset, N.Y.-based Americana Mortgage Group. Without worries about Fannie and Freddie, more people were willing to invest in mortgage bonds, creating downward pressure on mortgage rates.

The lower rates could hold for a while, some mortgage professionals said, a welcome respite compared with the mid-6% range the 30-year hit at various times this year.

Another area where the government bailout could help homeowners: So-called conforming jumbo mortgages could become more obtainable and affordable, said Gibran Nicholas, CEO of the CMPS Institute, a training, certification and membership program for those who provide mortgage and real estate equity advice. These are mortgages at the top of the conforming limit, as high as $729,000 in high-cost areas including California.

Recent legislation created this new breed of mortgage when conforming loan limits -- the top mortgage amounts Fannie and Freddie were allowed to finance -- were raised in an effort to make bigger loans more affordable. But the mortgages still remained harder to get and more expensive than loans that met the previous $417,000 limit, Nicholas said.

"Buyers in the bond market have been reluctant to invest in new types of mortgage bonds -- such as those backed by as-yet-untested conforming jumbo loans," he said in an email. But now, the government could buy bonds backed by conforming jumbo loans and become the "catalyst" to jump start demand for them in the bond market, Nicholas said.

A break on conforming mortgage rates could, in turn, help bring some stability to the housing market if buyers decide to take advantage of them, said Lawrence Yun, chief economist of the National Association of Realtors. "There is generally one quarter lag time between when rates fall and when home sales pick up," he said, adding that an improvement in home sales might come in the fourth quarter.

Coupled with lower home prices and a temporary $7,500 tax credit for first-time home buyers, there could also be more activity from those who don't currently own a home, said Jim Sahnger, a mortgage planner with Palm Beach Financial Network.

But for others, it is going to take more time before they're comfortable making a home purchase. Some worry that prices will continue to drop, while others fear they'll lose their jobs or are just trying to keep up with high fuel costs and other household expenses, Cutaia said.

"As soon as there's certainty -- a general feeling among the populace that this is the bottom and it's not getting worse -- people will come outside and buy houses," Cutaia said.

Refinancing "boomlet"

The rate drop could also spur somewhat of a "refi boomlet," in the next several months, Cutaia said.

Some of the people seeking a refinance are those with adjustable-rate loans that have already or will soon reset to higher rates, said Greg Willis, president of retail lending for Ace Mortgage Funding in Indianapolis, Ind.

Still, people who are underwater on their loans -- owing more on their homes than they're currently worth -- probably aren't going to get any additional relief due to this recent Fannie and Freddie development, said Jared Bernstein, senior economist at the Economic Policy Institute, a nonprofit group that examines economic issues with a focus on the interests of low- and middle-income workers.

"There are significant numbers of people out there who still have homes worth less than their mortgages and it doesn't change that game," Bernstein said.

Amy Hoak is a MarketWatch reporter based in Chicago.

THIS IS HUGE - THE LOWEST HOME MORTGAGE INTEREST RATES OF THE YEAR THIS WEEK!

Mon, 08 Sep 2008 13:37:39 -0400

IT IS THE TIME TO BUY OR REFINANCE!

It's Refi-season - read on! Mortgage Bonds are soaring higher on yesterday's announcement that Fannie Mae and Freddie Mac will come under control of the government. This announcement came as the government felt both these institutions will no longer be able to meet their mission statement which is to provide liquidity, stability and affordability in the housing markets.

Fannie Mae and Freddie Mac both have issued many Bonds which over time mature, and Fannie and Freddie need to pay back the principal on the maturing Bonds. The way they raise capital to pay these maturing Bonds is to issue new Bonds. This happens every month. And as long as Fannie and Freddie can sell new Bonds this system works well. But the problems in the mortgage industry have reduced investor appetite to purchase these Bonds...and that's where the trouble begins. Without the ability to sell new Bonds, Fannie and Freddie are less able to meet the capital requirements to pay off the maturing Bonds. And that's the big fear. If Fannie and Freddie were to default and become insolvent, it would throw the beleaguered mortgage and housing markets even deeper into the abyss.

Additionally, the recent lack of appetite for Fannie Mae and Freddie Mac Bonds caused the two mortgage giants to have to do something to make their Bonds more attractive...so they offered their Bonds at higher yields to gain more investor interest. However, since they couldn't go back and raise rates on loans that had already been closed, it sucked even more profits out of Fannie and Freddie, reducing capital even further, and exacerbating the problem.

That's why the Treasury has stepped in and said that they will back the payments on these Bonds. This action has given investors a lot of confidence to step in and now buy Mortgage Bonds. Think about it. For a higher rate of return, investors can now buy Mortgage Bonds with the same guarantee as lower yielding Treasury Bonds. This is causing a nice rally in pricing this morning - which combined with the break above the 200-day Moving Average - leads to attractive rates and what could be the aforementioned refinance season ahead.

Home Mortgage Rates Improved This Week.

Fri, 05 Sep 2008 16:14:08 -0400

Be Sure To Work With A Mortgage Planning Specialist That Keeps You Informed.

Market Comment

Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading in the financial markets remained extremely volatile with wide swings in stock and oil prices. Oil prices fell sharply at the beginning of the week pushing stocks higher and pressuring rates. Stock prices fell sharply Wednesday and Thursday helping rates recover and move lower.

For the week, interest rates on government and conventional loans fell by about 5/8’s of a discount point.

The producer price index data Friday will be the most important event this week. There isn’t much data until the latter portion of the week so oil prices, US dollar strength, and stocks will likely be the focus in the beginning.

Looking Ahead

Economic

Indicator

Release

Date and Time

Consensus

Estimate

Analysis

Consumer Credit

Monday, Sept. 8,

3:00 pm, et

Up $8.5 billion

Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.

Trade Data

Thursday, Sept. 11,

8:30 am, et

$58 billion deficit

Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.

Producer Price Index

Friday, Sept 12,

8:30 am, et

Down 0.3%,

Core up 0.2%

Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.

Retail Sales

Friday, Sept 12,

8:30 am, et

Up 0.1%

Important. A measure of consumer demand. Large decrease may lead to lower mortgage rates.

Business Inventories

Friday, Sept 12,

10:00 am, et

Up 0.5%

Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates.

U of Michigan Consumer Sentiment

Friday, Sept 12,

10:00 am, et

None

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Professionals

Obtaining a mortgage is often a confusing task that can also lead to frustration. The reason for the confusion is due to the fact that mortgage financing is complex. The good news is that this complexity provides consumers with options and choices best suited to fit their needs.

Everyone’s financial position is unique. Some people have large cash reserves that can be used for down payments while others want to get into a home with little money down. Credit ratings vary from person to person. In addition, future plans vary. Some people plan on staying in their home for the rest of their lives while others only plan on staying for a few years.

These facts alone make comparing your mortgage to your neighbor’s based on rate alone a flawed endeavor, yet many people attempt to do so. Admittedly, everyone wants a good deal. Keep in mind that comparing rates is just one component of the entire mortgage. Other variables include the term, down payment requirements, income qualifications, credit ratings, reserve requirements, current debt, prepaid points, and many more.

A mortgage professional is able to take all of these variables that are unique to each individual and help a person obtain the mortgage loan that works best for their situation. The service they provide is time consuming and complex. However, the rewards of dealing with a professional carry forward throughout a borrower’s life. Making wise financial decisions today helps to pave the way for a safe and secure future.

Great Home Loans Rates Ahead

Thu, 04 Sep 2008 15:42:25 -0400

The Bond Market Keeps Improving

Mortgage Bonds are trading slightly higher and have made a break above the important ceiling of resistance at the 200-day Moving Average. A convincing break above this important barrier would signal a major trend shift towards lower rates. It is highly probable that the results of tomorrow's Jobs Report will be the deciding factor whether Mortgage Bonds can make the break above the 200-day MA or if they will be pushed back towards worse pricing. The Jobs report strategy below lays out our thoughts.

Some good news on Productivity is helping Bond prices this morning, as productivity for the second quarter was revised higher to 4.3% from a previous reading of 2.2% and well above expectations of 3.5%. Higher productivity is good news for the economy and inflation as it shows employers are able to squeeze more output from hours being worked. And if employers can produce more goods from their existing workforce, without a need to hire or increase pay, it keeps wage-based inflation down. Within the Productivity Report, Unit labor costs -- a key inflation gauge - fell 0.5%, revised down from a gain of 1.3%, representing the biggest decrease since the third quarter of 2007. Lower Unit Labor Costs means less of a threat for wage-based inflation and this is good news for Bonds.

Initial Jobless Claims came in at 444,000, significantly higher than expectations of 420,000. And the ADP Report showed a loss of 33,000 private sector jobs, pretty much in line with expectations. After factoring in the usual 20,000 new government jobs added to the economy, the ADP Report suggests tomorrow's official Jobs Report will come in somewhere near -13,000. Expectations for tomorrow's Non-farm payrolls is -75,000.

Jobs Report Strategy

We feel tomorrow's Jobs Report will be soft, but muddied. The headline number may come in better than the loss of 75,000 jobs that is expected, but other factors may turn the report into a bullish one for Bonds. We are looking at the Jobs number to come in around a 40k loss...that would normally be bad for bonds, as it is better than expectations. And as we have discussed often, the system for reporting includes a lot of estimates and averaging.

The "Birth / Death Ratio", which estimates the number of business created and dissolved, primarily uses averages to determined the net for changes in the number businesses operating. It then figures how many new jobs that would create. While this is a guess at best system, the averaging factor really can skew the numbers. The economy is in a sharp downtrend, so previous averages will surely overstate the number of new jobs in the current environment. We have seen this in both directions in the past. And as the inevitable revisions occur, they wind up being yesterday's news, especially since much of the revisions happen years later. That said, the negative revisions we expect for the past two months should balance the scales in market sentiment tomorrow, as they will likely offset the better than expected headline. But we feel that the rate of unemployment, currently at 5.7%, may swell higher and strike fear into the minds of stock traders. This should help bonds and may be enough to put pricing convincingly above the 200-day MA. Let's hope this happens, as it would start the flow of refinances. So we suggest a floating position.