Monthly Archives: January 2010

Home Values Rose In November 2009 By Another 0.7 Percent

January 29, 2010
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Home Price Index April 2007 to November 2009

Reporting on a two-month lag, the government said home values rose 0.7 percent in November. 

National home prices are at their highest point since February 2009.

But before we look too much into the FHFA’s Home Price Index, it’s important that we’re cognizant of its shortcomings; the most important of which is its lack of real-time reporting.

According to the National Association of Realtors™, 80% of purchases close within 60 days. As a result, because of its two-month delay, the Home Price Index report actually trails today’s market data by an entire sales cycle.

This is one reason why home values appear to be rising even while new data shows that both Existing Home Sales and New Home Sales fell flat last month.  The home valuation report is using data from November; the sales reports are using data from December.

The Home Price Index is a trailing indicator and next month, as the Spring Market gets underway, the government will be reporting data from the holidays.

The same is true for the Case-Shiller Index. It, too, operates on a 2-month lag.

All of that said, however, long-term trends do matter in housing and the Home Price Index has shown consistent improvement over the last 10 months.  In many markets, home sales are up, home supplies are down, and values have increased.  This trend should continue into the early part of 2010, at least.

If you’re wondering whether now is a good time to buy a home in Olympia , consider low prices, cheap mortgages and an available tax credit as three good incentives.  By May, none of them will likely be available.

Mortgage Interest Update – The Day After the Feds Meet -01/28/10

January 28, 2010
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Thursday’s bond market has opened in negative territory as yesterday’s afternoon weakness continues into this morning’s trading. The stock markets are showing noticeable losses with the Dow down 74 points and the Nasdaq down 26 points. The bond market is currently down 5/32, which with yesterday’s late losses will likely push this morning’s mortgage rates approximately .375 – .500 of a discount point higher than yesterday’s morning rates. Just how much of that increase will be seen this morning depends on whether or not your lender revised higher yesterday afternoon.

December’s Durable Goods Orders was posted this morning, giving us an indication of manufacturing sector strength. It revealed a 0.3% increase in new orders for big-ticket products, which fell well short of analysts’ forecasts of a 2.0% increase. However, if more volatile transportation related orders are excluded, such as orders for new aircraft, we saw a larger than expected increase of 0.9 %. Therefore, this report basically gives us mixed results, but should be considered slightly negative for bonds and mortgage rates.

In a bit of positive news, the Labor Department reported that 470,000 new claims for unemployment benefits were filed last week. This was a decline from the previous week, but was much higher than the 450,000 that were expected. This is good news for bonds but its impact on trading and mortgage pricing is minimal because it is not considered to be very important news due to its single-week tracking.

There are three relevant reports scheduled for release tomorrow morning. The first is arguably the single most important report that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early tomorrow. This data is so important because it is considered to be the best measurement of economic growth. The GDP itself is the total sum of all goods and services produced in the United States. Its’ results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter’s activity, each released approximately one month apart. The first, which usually carries the most volatility, is expected to be an increase of 4.6%. A noticeably weaker reading would be great news for the bond market, questioning the pace of the economic recovery. That would likely fuel stock selling and a rally in bonds that would push mortgage rates lower tomorrow morning.

The 4th Quarter Employment Cost Index (ECI) is also scheduled for release early tomorrow morning. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. Current forecasts are showing an increase of 0.4%. A lower than expected reading would be favorable to bonds and mortgage rates, but the GDP reading will be the biggest influence on trading and rates tomorrow.

The last report of the week is the revised reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer confidence, which is thought to indicate consumer willingness to spend. I don’t see this data having much of an impact on the markets or mortgage rates due to the importance of the employment index and GDP figures. It is expected to show a slight upward revision from the previous estimate of 72.8.

A Simple Explanation Of The Federal Reserve Statement (January 27, 2010 Edition)

January 27, 2010
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Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to strengthen”, that the jobs markets is getting better, and that financial markets are supportive of growth.

There was no mention of the housing market’s strength.  The last 3 statements from the Fed included that specific verbiage.

It’s the fifth straight statement in which the Fed spoke about the economy with optimism.  This should signal to markets that 2008-2009 recession is over and that economic growth is returning to U.S. economy.

The economy isn’t without threats, however, and the Fed identified several in its press release, including:

  1. Credit remains tight for consumers
  2. Businesses are reluctant to hire new workers
  3. Housing wealth is down

The message’s overall tone, however, remained positive and inflation appears is still within tolerance.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to wind down its $1.25 trillion commitment to the mortgage market by March 31, 2010.  This is noteworthy because Fed insiders estimate that the bond-buying program suppressed mortgage rates by 1 percent through 2009.

Mortgage market reaction to the Fed press release is, in general, negative. Mortgage rates in Lacey are rising this afternoon.

The FOMC’s next scheduled meeting is March 16, 2010.

A Rate-Locking Strategy Ahead Of The Fed’s Meeting Today

January 27, 2010
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Fed Funds Rate (Jan 2007 - Jan 2010)The Federal Open Market Committee ends a scheduled, 2-day meeting today in Washington. It’s the first of 8 scheduled meetings for the policy-setting group in 2010.

The group adjourns at 2:15 PM ET.

As is customary, upon adjournment, the Fed will issue a press release to the markets recapping its views of the country’s current economic condition, and the outlook for the near-term future.

The post-meeting statements from the Fed are brief but comprehensive. And Wall Street eats them up.  Every word, sentence and phrase is carefully disected in the hope of gaining an investment edge over other active traders.

It’s for this reason that mortgage rates tend to be jittery on days the FOMC adjourns. Wall Street is frantically rebalancing its bets.

Today should be no different.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history.  However, it’s what the Fed says Wednesday that will matter more than what it does.

After the Fed’s last meeting in December, it made several observations:

  1. The jobs market is getting “less worse”
  2. The housing sector is making improvements
  3. Financial markets are stabilizing further

The economy is gradually improving, the Fed told us, but there are still risks to the economy ahead.  Furthermore, inflation remains in check.

As compared to December’s press release, today’s FOMC statement will be closely watched. If the Fed changes its verbiage in any way that alludes to strong growth and/or inflation in 2010, expect mortgage rates in Tumwater to rise as Wall Street moves its money from bonds to stocks.

Conversely, reference to slower growth in 2010 should lead rates lower.

We can’t know what the Fed will say so if you’re floating a mortgage rate right now or wondering whether the time is right to lock, the safe approach would be to lock prior to 2:15 PM ET Wednesday. After that, what happens to rates is anyone’s guess.

Call CU Mortgage Division at (360) 539-4687 to discuss your rate lock options or visit www.cumortgagedivision.com .

Existing Home Sales Plummet In December, But It Was Expected

January 26, 2010
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Just one month after from blowing away Wall Street, December’s Existing Home Sales hit the skids, shedding nearly 17 percent and falling to a 4-month low.

Don’t be alarmed, though. The plunge was expected. And not just because Pending Home Sales cratered last month.

When November’s Existing Home Sales surged, it was clear to observers that an expiring $8,000 federal tax credit was the catalyst. At the time, the tax program was slated to expire November 30 and the looming deadline pushed a lot of would-be buyers in Tumwater from a December time frame into November.

The expiration date has a cannibalizing effect on December’s sales figures. It was only later that Congress extended the tax credit to June 30, 2010.

So, with home sales plunging in December, it’s no surprise that home supplies rose for the first time in 9 months.  Home Supply is calculating by dividing the number of homes for sale by the current sales pace.

The national housing supply now rests at 7.2 months.

Despite December’s Existing Home Sales report appearing shaky, it’s actually terrific new for home buyers in neighborhoods like Pierce County.

See, for the past few months, as housing has been improving, sellers nationwide have been bombarded by messages of “hot markets” and rising home prices by the media.  Psychologically, a seller is more likely to hold firm on price if he believes the housing market is improving and now December’s data is deflating that argument.

This is why we say there’s always two sides to a housing story — the buyers’ side and the sellers’ side. And, usually, what’s good for one party is bad for the other. It’s what we’re seeing now.

Because of soft data like December’s Existing Home Sales, buyers may retake some negotiation leverage that’s been lost since Spring 2009, helping to improve home affordability and, perhaps, spur more sales.

Daily Rate Lock Recommendation – 01/26/2010 12:25:00 PM EST

January 26, 2010
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Tuesday’s bond market has opened in positive territory despite stronger than expected results form this morning’s important economic news and stock market gains. The major stock indexes have rebounded from early opening losses to move into positive ground. The Dow is currently up 58 points while the Nasdaq has gained 10 points. The bond market is currently up 4/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point.

The Conference Board released their Consumer Confidence Index (CCI) for January late this morning. They reported a reading of 55.9 that exceeded forecasts by over two points. This can be considered negative news for bonds because it indicates that consumers may be more willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. But fortunately mortgage shoppers, the data seems to have had little influence on this morning’s bond trading and mortgage pricing.

December’s New Home Sales report will be posted late tomorrow morning. It is expected to show an increase in sales of newly constructed homes, but is not important enough to heavily influence mortgage pricing.

Also tomorrow is the 5-year Note auction. Results of the sale will be posted at 1:00 PM ET. This sale doesn’t directly impact mortgage rates, but it will gives us a measurement of investor interest in U.S. securities. If the demand for the sale was strong, the broader bond market will likely react positively, making an improvement to mortgage rates possible. However, a poor demand could lead to bond selling and higher mortgage rates tomorrow afternoon.

Today begins the 2-day FOMC meeting that will adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to short-term interest rates, but as is often the case, traders will be looking for any indication of the Fed’s next m ove and when they may make it. I believe that there is little chance of indicating a possible rate hike in the near future, so I don’t believe that this meeting will have the influence they usually do.

It appears that tomorrow afternoon will be more active than tomorrow morning for the bond market and mortgage rates. The morning data is not very important since it covers only approximately 15% of all homes sold in the U.S. The 5-year Treasury Note auction is not the most important of the sales that we track. But it does carry the potential to influence the bond market enough to impact mortgage pricing. And that takes us to the FOMC results that can cause more movement in the markets than both of the other events combined. So, I would not be surprised to see the most movement in mortgage rates to come during afternoon hours.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if m y closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

©Mortgage Commentary 2010

CU Mortgage Division a Branch of Network Funding LP (NMLS: 2297)

January 23, 2010
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We know that each of our customers has specific needs so we strive to meet those specific needs with quality service and individual attention. We pride ourselves in giving you the mortgage information, loan options and convenient assistance you’re looking for. It is our goal to give you the same level of customer service you have come to enjoy from your favorite local credit union.

At CU Mortgage Division, our priority is to ensure that every detail of your loan process is managed in a timely and ethical manner. As a branch of Network Funding LP (NMLS 2297) they fund all of our mortgage loans making us a Direct Mortgage Lender. This gives us the power to provide the lending options that are most appropriate for our customers and in-house as well as timely underwriting decisions. We have the resources to fulfill all your home financing needs and the flexibility to meet the demands of an ever-changing market.

What makes CU Mortgage Division different from everyone else? Well for one thing we are in total control of the loan process from start to finish; this means fast turn times, timely loan approvals and most closings in less than two weeks. We offer lender fees from $300 to $700 less than our competitors. And unlike big banks who offer mortgages as a small part of their business plan, mortgage lending is our only business-period.

Consider the gigantic mega bank for a moment. Your loan may be shipped far away to a processing center in another state where the final decision will be made by a total stranger.

For you this means red tape and precious time. A mega bank’s lack of personal service means you will not benefit from comparing your individual needs with the wide selection of products and competitive rates that are available throughout the marketplace.

As we said, we’re different. We have teamed up with Network Funding LP & O Bee Credit Union to offer you the finest mortgage products available. CU Mortgage Division was started with a mission to originate, underwrite and close quality mortgage loans. By offering local service and professionalism that is second to none our company has closed millions of dollars in mortgages for your neighbors and many members of O Bee Credit Union.

We are a full-service direct mortgage lender, serving the needs of home buyers throughout the Pacific Northwest. Our approach to lending is very much localized with our office being staffed by local people who know and understand the local market, and are committed to providing their neighbors with competitive rates and concerned, professional, personalized service.

At CU Mortgage Division we care about the communities we serve and we share many advantages. One is a solid reputation for integrity, which we have earned by honoring our commitments with our many satisfied customers and O Bee Credit Union members. Another is an understanding that we are not in the banking business – we are in the people business. We never forget that our customers make our success possible – and our customers are people. At our office, inside of O Bee Credit Union, you’ll find that understanding expressed in a friendly smile, a genuine welcome, and a commitment to finding a mortgage solution that works for you. We take the time to get to know you, to understand your wants and needs and then work quickly to find the ideal mortgage loan for your individual situation.

You can apply Online 24 hours a day. If you prefer you can also apply by appointment at our office or apply by calling (360) 539-4687. At CU Mortgage Division you’ll find a dedicated mortgage professional who will seek the best mortgage for you. This is what you have come to expect at your favorite credit union. And it’s what you will receive from a mortgage lender who has an office in your neighborhood, too.

__________________________________________________________________________

CU Mortgage Division is a Branch of Network Funding – A Direct Mortgage Lender Serving Washington State.
Consumer Loan License Number 520-CL-26248-42529 (NMLS: 65808)
Network Funding LP – NMLS 2297

Copyright © 2010-  CU Mortgage Division a Branch of Network Funding L.P. 

Mortgage Market News for the week ending January 22, 2010

January 22, 2010
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Mortgage Rates Improve, Stocks FallWhile the economic data released this week had little impact, mortgage rates were heavily influenced by two big stories. One was an announcement that China will take steps to slow its economic growth and the other was President Obama’s proposed new restrictions on the activities of financial institutions. Both measures are expected to lead to slower economic growth in the US, which hurt the stock market but helped fixed income markets. As a result, mortgage rates ended a little lower.

During the week, China released a report showing that its Gross Domestic Product (GDP) grew at an 8.7% pace in 2009. Rapid growth generally leads to higher inflation. In an effort to slow its economy and prevent inflation, China announced that it is going to curb bank lending. China currently has the third largest economy and is responsible for a significant percentage of global economic growth, so the effects of a slowdown in China will be felt around the world. In the US, President Obama proposed to limit the size and activities of large banks to reduce the risks to the financial system as a whole. If passed by Congress, this too would lead to slower growth for many large US financial services firms. The potential for slower economic growth and the resulting reduction in inflationary pressures was favorable for mortgage rates.

To build capital and reduce risk, the FHA announced that it will raise insurance rates and tighten credit score requirements. The major changes include increasing upfront premiums from 1.75% to 2.25%, reducing the maximum seller contribution from 6% to 3%, and increasing the level of FICO scores from 500 to 580 below which a down payment of 10% is required. At this point, the expected timing of the upfront premium increase will be in the spring, and the other changes will take place over the summer.

 

 
 Also Notable:

  • December Core PPI inflation increased just 0.9% from one year ago
  • The Senate is expected to vote on Bernanke’s reappointment next week
  • The Treasury will auction $118 billion in 2-yr, 5-yr, and 7-yr securities next week
  • The Fed purchased $12 billion in agency MBS during the week ending 1/20
     
 

 

 
Average 30 yr fixed rate:
Last week: -0.10%  
This week: -0.05%  
Stocks (weekly):
Dow: 10,400 -200
NASDAQ: 2,250 -50

 

   Week AheadThe biggest story next week will be Wednesday’s Fed meeting. No change in rates is expected, but any surprises in the Fed statement could move markets. The Economic Calendar will also be packed next week. Existing Home Sales will come out on Monday, and New Home Sales will be released on Wednesday. Durable Orders, an important indicator of economic growth, will be released on Thursday. Fourth quarter Gross Domestic Product (GDP), the broadest measure of economic activity, will come out on Friday, along with the Chicago PMI manufacturing index. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Spring 2010 FHA Guidelines Make Borrowing Tougher And More Expensive

January 21, 2010
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New FHA guidelinesSecuring an FHA mortgage in Washington State is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

  1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
  2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
  3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in Olympia should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.

If nothing else, you’ll save some money at closing. Call CU Mortgage Division at (360) 539-4687 for more information or visit or website at www.cumortgagedivision.com .

There's 100 Days Left To Claim The Homebuyer Tax Credit

January 20, 2010
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100 days remain for the Home Buyer Tax Credit ExpirationNovember 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There’s 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Lacey to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, “move-up” buyers were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit.  If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit’s basic eligibility requirements remain the same:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which they’re a majority owner
  • You can’t acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

First, the subject property’s sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don’t forget that the program is a true tax credit — not a deduction.  This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

There’s just 100 days to go. Call William Tuning at CU Mortgage Division at (360) 539-4687 to obtain your Mortgage Loan Pre-Approval and then your Realtor before you miss out on the Homebuyer’s Tax Credit.