Mortgage Market Snapshot – Friday June 1, 2012: The May employment data has been a huge shock to the markets and... bit.ly/Le8n1ZLatest Update ----1 day ago
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Monday’s bond market has opened in negative as Friday’s selling extends into this morning’s trading. The stock markets are not helping as they are posting sizable gains. The Dow is currently up 88 points while the Nasdaq has gained 25 points. The bond market is currently down 8/32, which will likely push this morning’s mortgage pricing higher by approximately .250 – .375 of a discount point from Friday’s morning levels.
There are only two pieces of monthly economic data scheduled for release this week and neither comes today. Nothing of relevance is scheduled for today or tomorrow, so look for the stock markets to be the biggest influence on bond trading and mortgage rates until we get to Wednesday afternoon.
Wednesday doesn’t have any economic news scheduled, but does have a speaking event for Fed Chairman Bernanke and the first of this week’s two relevant Treasury auctions. But these will be the first important events of the week that could affect the bond market and mortgage rates. Mr. Bernanke’s congressional testimony before the House Budget Committee will be late morning, while the results of the 10-year Note auction will be posted early afternoon.
Overall, despite being an extremely light week in terms of economic releases and relate events, it is still relatively crucial for the mortgage market. We saw the yield on the benchmark 10-year Treasury Note break above 3.50% and close at 3.65% last week. This should be of concern for mortgage shoppers as the 10-year was trading in a well-defined range until late last week. Since mortgage rates follow yields, we need to see some stabilization very soon or yields (and rates) may be moving higher. I suspect it will be tough to fall below 3.5% unless we get some unexpected major news or a significant stock sell-off. Therefore, please be careful if still floating an interest rate this week as I believe we are set for a noticeable move in the very near future. However, the question is if it will be rates moving higher or lower from current levels.
If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my 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.
Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower’s gross monthly income that goes toward paying off all debts. The maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines in the very near future.
The agency is also taking a harder look at payment histories on revolving debt. In the past, if an item on a borrower’s credit report was missing a monthly payment, Fannie Mae may have ignored it, or required that lenders add a few percentage points to the total balance when calculating the debt-to-income ratios. Now, buyers who have items on their credit report without a payment will have 5 percent of the total balance added to their debt ratios. In some case they may also look at old debt that is unpaid and factor that into the debt ratio if the borrower has failed to make a payment on the debt and it is found to still be a valid debt.
Buyers who had bought big-ticket items through financing with delayed payments ( one year same as cash ) will also be affected, 5% of the balance will be used as the payment in calculation debt ratios.
In addition, Fannie Mae is scrutinizing people who are at the end of their mortgages, with 10 or fewer payments left. It will now count those remaining balances in the debt-to-income ratios — another departure. Mortgage experts say that older buyers near the end of their loans may now have a tougher time securing a loan for a second home.
But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from four. That change was announced separately from the gift and debt rules, but will also take effect in Fannie Mae’s automated underwriting systems next month.
Fannie Mae buys or guarantees around $3.2 trillion in residential loans, about 28 percent of the entire residential mortgage market in the United States. Lenders typically issue loans based on the agency’s guidelines.
Buyers who do not meet the new Fannie Mae requirements may have to consider a loan from the Federal Housing Administration or FHA Loan. These loans, which do not follow Fannie Mae underwriting guidelines, require FHA mortgage insurance premiums and, for those with lower credit scores, higher debt ratios and smaller down payments may be the only alternative in some areas of the country. All loans are however subject to underwriting approval and as each month goes by guidelines seem to get tougher everywhere. Your best bet is to obtain a mortgage loan pre-approval from your mortgage lender to see which program you qualify for.
For a mortgage loan pre-approval in Thurston County Washington call William Tuning at CU Mortgage Division at (360) 539-4687 or visit www.williamatuning.com .
For information related to first mortgage loans in Washington State call William Tuning at CU Mortgage Division at (360) 539-4687 or visit www.williamatuning.com . Free Mortgage Pre-Approvals Available.
Provides a free comprehensive look at how current home loan rates and points are set throughout each trading day including the most recent one. Also offers a look at why you need to subscribe to guard against the potential for another round of higher rates on home loans including home financing, home refinance and home purchase as well as other residential real estate refinancing of all fixed rate mortgages from future economic releases and other influences today or tomorrow.
What’s Going On With Mortgage Rates?After reaching the lowest levels in decades, mortgage rates have shot higher over the past two weeks. There is not a simple explanation for why this happened, but looking at the many factors which are influencing mortgage rates right now will help to understand what’s going on. In short, when investors look ahead, they see few reasons for mortgage rates to move lower and many possible causes for them to move higher. The major negatives for mortgage rates include stronger than expected economic growth, domestic and foreign opposition to quantitative easing, and concerns about lower foreign demand for US securities.Beginning in late August, the Fed hinted that they would initiate a new stimulus program to purchase Treasury securities, which is known as quantitative easing. In the short-term, Treasury buying by the Fed increases demand for bonds, including mortgage-backed securities (MBS). In anticipation of this added demand, investors purchased MBS, which pushed mortgage rates lower.
After the Fed’s official announcement on November 3, mortgage rates began to move higher for a variety of reasons. Stronger than expected economic data caused investors to raise their outlook for economic growth, which generally leads to higher inflation. In addition, there was substantial opposition to the quantitative easing program from other countries and from many US politicians and economists, meaning that the Fed will face strong resistance to an expansion of the program. Investors had viewed the $600 billion initial level as a first step which would likely be increased in the future. Stronger economic growth and opposition to quantitative easing has reduced the likelihood that the program will be increased.
The recent news has not been uniformly negative for mortgage rates. Current inflation levels remain extremely low. In fact, the Consumer Price Index data released this week showed that annual core inflation dropped to a record low in October. Bottom line, though, when mortgage rates reached such extremely low levels, it left them in a position to reverse direction very quickly.
Call CU Mortgage Division in Lacey, Washington at (360) 539-4687 for a free mortgage loan pre-approval or visit www.williamatuning.com .
Also Notable:
The Jobless Claims four-week average declined to the lowest level since Sept. 2008
Bernanke testified that the $600B quantitative easing could create 700K jobs over two years
The Treasury will auction $99 billion in 2-yr, 5-yr, and 7-yr securities next week
Oil prices dropped 6% from the high for the year reached last week
Average 30 yr fixed rate:
Last week:
+0.15%
This week:
+0.10%
Stocks (weekly):
Dow:
11,150
-50
NASDAQ:
2,500
-25
Week AheadDue to the Thanksgiving holiday, all of next week’s economic reports will come out before Thursday. Revisions to third quarter GDP and Existing Home Sales will be released on Tuesday. Durable Orders, New Home Sales, Personal Income, Consumer Sentiment, and the Fed Minutes from the November 3 meeting will come out on Wednesday. There will be Treasury auctions on Monday, Tuesday, and Wednesday. Mortgage markets will be closed on Thursday and will close early on Friday.
Mortgage lenders including Wells Fargo & Co. and Bank of America Corp., the two largest, have raised the minimum credit score on FHA-insured loans that they will buy to 640 from 620. About 6.3 million people fall within that range, according to FICO, which created the formula for the ratings.
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which found that the 30-year fixed-rate mortgage rate rose slightly for the first time in five weeks. The 15-year fixed-rate mortgage rate also rose slightly while the 5-year ARM and 1-year ARM fell.
News Facts
30-year fixed-rate mortgage (FRM) averaged 4.21 percent with an average 0.8 point for the week ending October 21, 2010, up from last week when it averaged 4.19 percent. Last year at this time, the 30-year FRM averaged 5.00 percent.
15-year FRM this week averaged 3.64 percent with an average 0.7 point, up from last week when it averaged 3.62 percent.A year ago at this time, the 15-year FRM averaged 4.43 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.45 percent this week, with an average 0.6 point, down from last week when it averaged 3.47 percent. A year ago, the 5-year ARM averaged 4.40 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in January 2005.
1-year Treasury-indexed ARM averaged 3.30 percent this week with an average 0.7 point, downfrom last week when it averaged 3.43 percent. At this time last year, the 1-year ARM averaged 4.54 percent. The 1-year ARM has not been lower since Freddie Mac started tracking it in January 1984.
For More Information Visit Freddie Mac’s article by clicking here.
Wednesday’s bond market has opened fairly flat with stocks showing little movement and the day’s only economic data failed to reveal a significant surprise. The stock markets are showing minor gains with the Dow up 14 points and the Nasdaq up a single point. The bond market is currently up only 2/32, but we will likely see a slight improvement in this morning’s mortgage rates due to strength late yesterday.
Today’s only relevant data was August’s Industrial Production. It showed a 0.2% increase in output at U.S. factories, mines and utilities. This was slightly below the 0.3% that was expected, indicating manufacturing activity was weaker than thought. However, since this data is considered to be of only moderate importance to the markets, its impact on trading and mortgage rates has been minimal. It usually takes a wide variance from forecasts for this report to have a noticeable influence on rates.
Tomorrow morning brings us the release of an important inflation reading that is likely to affect the markets and mortgage pricing. The Labor Department will give us August’s Producer Price Index (PPI) early tomorrow morning. It measures inflationary pressures at the producer level of the economy. The overall reading is expected to show a 0.3% increase, while the more important core data reading is expected to rise only 0.1%. The core data is the more important of the two since it excludes more volatile food and energy prices, giving us a more stable snapshot of inflation at the producer level. Larger than expected readings would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market. It erodes the value of a bond’s future fixed interest payments, causing bonds to be sold at a discount to offset that loss. As bond prices fall, their yields move higher and mortgage rates follow bond yield trends.
Also tomorrow will be weekly unemployment figures from the La bor Department. They are expected to say that 460,000 new claims for unemployment benefits were filed last week. This would be an increase from the previous week and considered favorable news for bonds. The higher the number of claims, the better the news for the bond market and mortgage rates because it indicates that the employment sector is weakening. A broader economic recovery is not likely while the labor market remains weak.
If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my 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.
There are four relevant reports scheduled for release this week that are likely to affect mortgage pricing. The first important release is the Institute for Supply Management’s (ISM) manufacturing index for July late tomorrow morning. This index measures manufacturer sentiment by surveying trade executives about business conditions during the month and is considered to be of fairly high importance to the markets. A reading above 50.0 means that more surveyed executives felt that business improved last month than those who said it had worsened. Tomorrow’s release is expected to show a reading of 54.2, down from last month’s 56.2, indicating manufacturer sentiment slipped in July. A smaller than expected reading would be good news for the bond market and would likely improve mortgage rates tomorrow. However, a stronger than expected reading could lead to higher mortgage rates.
June’s Personal Income and Outlays data will be posted early Tuesday morning. This rep ort helps us measure consumer ability to spend and current spending habits. If it shows sizable increases, bond selling could lead to higher mortgage rates. Current forecasts are calling for a increase of 0.1% in income and no change in spending. A larger than expected increase in income means consumers have more funds to spend, which is not favorable to bonds because consumer spending makes up two-thirds of the U.S. economy. Ideally, we would like to see declines in spending and income.
Also Tuesday morning will be the release of June’s Factory Orders data. This report helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to last week’s Durable Goods Orders report that tracks orders for big-ticket items only. Since a significant portion of the data was released last week, this report likely will not have as big of an impact on the markets as last week’s did. Analysts are e xpecting to see a decline in new orders of approximately 0.5%. A larger than expected drop would be considered good news for bonds and mortgage pricing.
There is no relevant monthly or quarterly economic news scheduled for release Wednesday or Thursday, but Friday is a different story. The most important piece of data this week and arguably each month is the monthly Employment report. This report gives us the U.S. unemployment rate, number of jobs added or lost during the month and the average hourly earnings reading for July. The ideal situation for the bond market is rising unemployment, a sizable loss of jobs and little change in earnings.
While the GDP is arguably the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Friday’s report is expected to show that the unemployment rate rose to 9.6% last month while approximately 85,000 jobs were lost. The unemployment rate probably will not be much of a factor unless it moved much more than the 0.1% that is expected. However, due to the importance of these readings, we will most likely see quite a bit of volatility in the markets and mortgage pricing Friday morning if they vary from forecasts.
Overall, I am expecting to see another fairly active week for mortgage rates. The most important day is Friday due to the data being released, but tomorrow is also a very important day with the ISM index scheduled for release. The rest of the week is likely to be a little calmer than Monday and Friday. We may see some pressure in bonds mid to late week ahead of Friday’s employment numbers, but we also need to watch the stock markets for significant moves that can influence bond trading. Accordingly, this is a good week to maintain contact with your mortgage professional.
If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my clos ing 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.
As you consider selling your home, you might be thinking… “Why do I need a Realtor, what value does a Listing Agent bring to the table?” There are five main areas where a licensed Realtor can help you in your home’s sale -
SETTING THE PRICE
Pricing your home is a careful balance. Set the price too low and you leave money on the table. Set the price too high and your home will be on the market a long time, which just compounds the problem as it raises questions about it’s sale-ability.
As a Realtor, it is their job to know what properties like yours have sold for recently, and can utilize the detailed history of area sales to tell whether your home – with it’s unique features, location and condition – will bring more, or less, than similar listings. And they always have the pulse of the local and regional Real Estate market, so they know whether the market is heating up or cooling down, and can stay ahead of the trend, pricing your home to get you the highest possible price in the least amount of time.
BEING OBJECTIVE
Selling a home can be an emotional experience. After all, it’s been a part of your life, perhaps the center of your life, for years. As a third party, a Realtor can keep you focused and provide independent feedback on things you should do, or changes and repairs that should be made, to help the home sell. They will also act as a buffer during negotiations. As a licensed Realtor, they adhere to a strict code of ethics, and they work to represent your best interests.
PROVIDE MARKETING MUSCLE
Attracting interested people to view and buy your home does not happen automatically. They will market your home to the widest audience of potential buyers through a well-coordinated multimedia campaign. Of course, They will use Signs, Newspaper Ads, Internet and open houses, but you’ll also be placed in the Multiple Listing Service where local agents can bring it to the attention of their buyers, and then to Realtor.com and Yahoo Classifieds Real Estate where it can be viewed by anyone in the world that is relocating to this area.
PRE-QUALIFY BUYERS
Your Realtor can help separate the serious buyers from the “lookie-loos” and thus save you a lot of time and frustration. They will determine if buyers are serious by getting answers to questions about their motivations and purchasing power and by ensuring that they have been pre-approved for a mortgage loan by a reputable lender in the amount needed to buy your home. When they bring you an offer on your home, you can be sure that the buyers’ finances are sound and the deal is ready to be done.
FOLLOW THROUGH and CLOSE THE DEAL
Selling your house is complicated and there is a mountain of paperwork. First there are offers and counter-offers. Then come the inspection reports, disclosure forms, deeds, mortgage documents. They keep track of it all and see to every detail. Their value is in avoiding delays and mistakes, and coordinating the timing of the sale of this house with the purchase of another, so that you make a smooth transition to your new home.
SUMMARY
The value that a licensed Realtor brings to someone selling a house is, in the end, peace of mind. The marketing, the details, the paperwork, the coordination. They do it every day, and they enjoy the process. So relax and leave the details to a licensed professional. You’ll find that having a knowledgeable Realtor beside you throughout the sale of your home is priceless.
