A “Short Sale” is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.

By way of example, a Short Sale may be appropriate for a Olympia home seller whose mortgage balance is $250,000 but whose home wouldn’t sell for more than $220,000.  Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.

Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan.  Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.

For this reason, Short Sales are sometimes considered “the economical alternative” to default.

The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start.  And sellers should be aware of how a Short Sale on their credit can impact future borrowing.

Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.

In a news-heavy week, mortgage markets improved last week, adding to a 3-week rally.

But, given last week’s data and domestic story lines, it’s surprising that rates actually fell.

1. The Federal Reserve said the economy continues to strengthen
2. Consumer Confidence pushed to a 2-year high
3. 4th Quarter domestic output exceeded Wall Street’s expectations

Usually, events like these draw money away from the bond markets and into the stock markets and Wall Street preps for better corporate earnings. The movement pressures mortgage rates to rise.

Last week, however, different stories trumped the headlines including a report from Standard & Poor’s that said U.K. banks are no longer counted among the world’s most stable.  This research, in particular, triggered a flight-to-quality among investors that pumped the U.S. dollar and sparked new demand for mortgage bonds.

It’s one reason why we ended the week on a rally and it just goes to show how unpredictable mortgage rates can be.

This week figures to be a challenge, too.

First, we start the week with key inflation data.  When inflation runs hot, it’s usually bad for mortgage rates.  Inflation is expected to be tame, however — a point the Fed made several times in its press release last week.  That said, inflation data is closely watched by markets and can make a big impact on rates.

Then, on Wednesday, ADP releases its private sector job report.  The ADP data is a precursor to the government’s own Non-Farm Payrolls report which is due to hit Friday.  ADP is expected to show a net loss of roughly 85,000 jobs.  Depending on where the actual numbers comes in, mortgage rates could wiggle a bit.

If the ADP report shows much fewer than 85,000 jobs lost, expect mortgage rates to rise.  The same is true for Friday’s job report.  A miss on expectations will cause mortgage to ratchet higher.

Since peaking on the last day of December, mortgage rates took a slow, steady descent through January. They’ve have taken back close to two-thirds of December’s overall losses.  This week, rates could fall some more, or they could bounce back up.  The most prudent time to lock would be prior to Tuesday’s closing. 

After that, the respective jobs reports will take over and rates could go either way with force.

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.

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.

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.

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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. 

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.