Honoring The Golden Rule
Mortgage & Industry News
REAL ESTATE
In a 22% increase over the prior year’s activity, mortgage bankers funded $233 billion in Federal Housing Administration (FHA)-insured loans last year. By law FHA is required to maintain a 2% Mutual Mortgage Insurance (MMI) reserve. Due to the quantity of defaulted FHA mortgages over the last decade, the reserves fell to -1.44%. Therefore, FHA has announced some changes for the program designed to rebuild the MMI. Most notably, this year will produce yet another increase in their annual mortgage insurance premiums.
The new MIP Begins April 1, 2013
FHA-backed mortgages will be subject to an MIP increase of 10 basis points annually, or 0.10% points. The increase applies to all loan terms, including 15-year fixed-rate FHA loans.
Loans with terms of 15 years or less, and balances greater than $625,500 will have an increase of 10 basis points annually, or 0.10 percentage points. Loans with terms of between fifteen and 30 years and balances greater than $625,000 will be adjusted higher by 5 basis points annually, or 0.05 percentage points, to a the maximum 1.55% annual MIP rate as allowed by law.
The new FHA MIP Cancelation Policy Begins June 3, 2013
The Federal Housing Administration is reversing its policy allowing FHA-backed homeowners to cancel mortgage insurance premiums once the outstanding principal balance of an FHA loan reaches 78% of the original balance. FHA will not allow the removal of MIP throughout the life of a loan if the initial loan balance was greater than than 90% of its appraised value. This is true for purchases and refinances. For loans with loan-to-values starting at 90 percent or less, mortgage insurance premiums must be paid for 11 years.
The good news is the FHA now and in the future will continue to be a great program for many borrowers. If you or someone you know may be interested in purchasing a property with an FHA loan please get them in touch with me right away so we can help get them into their new home today or discuss how these changes may affect them in the future. If you are an agent or borrower with listings/offers and expect the escrow period to flow into April, please give me a call so we can discuss how the changes may affect the loan qualification.
MARKET
U.S. stocks recoiled from their recent gains on concern over weakness in the European markets, political corruption in Spain and criminal derivatives activity in Italy. Additionally, the U.S. factory orders report for December fell short of the anticipated increase at a disappointing 1.8% increase. Last week, the first estimate of fourth quarter Gross Domestic Product reports came out and was one of the lowest since the recession at 3.3% growth.
Spanish Prime Minister Mariano Rajoy is under scrutiny over allegations of cash payments to he and other leaders of his party. Although he agreed to disclose tax returns and financial asset information, the markets in Spain slumped.
Additionally, Italy realized a 2.4% decline in their markets in the midst of a criminal investigation into derivatives trading by banks.
Asian markets were predominately higher after this weekend’s economic showed continued expansion in China services sector and non-manufacturing purchasing.
RATES
There are three reports scheduled for this week that may impact mortgage rates. None of this week’s reports are considered to be particularly impactful so we may see the stock market be of primary influence in the market. This morning’s stock sell-off activity is good for today’s mortgage pricing.1. December's Factory Orders data, today - Measuring manufacturing sector strength via data regarding new orders for durable and non-durable goods, it was expected to show 2.4% increase in new orders, indicating manufacturing sector strength. Today’s results fell short of forecast with a 1.8% increase, which was good news for the bond markets this morning.
2. Employee Productivity and Costs for 4th quarter 2012, Thursday – Forecasts call for a 1.2% decline in worker productivity. Higher than expected results would be good because it means the economy can expand with little threat of inflation. Lower than expected results may incite inflation concerns and would be negative for the bond markets.
3. December's Goods and Services Trade Balance, Friday – Measuring the U.S. trade deficit, this report influences the value of the U.S. dollar compared to other currencies A $45.4 billion trade deficit is expected.
I am a loan officer with San Diego Funding and I work around the schedule of my clients including evening and weekends. If you or anyone you know has financing needs or questions, please give me a call. It would be my pleasure!
Deja Correia
Senior Loan Officer
San Diego Funding
Office: 619.260.1660 ext. 228
Cell: 619.251.1432
Fax: 619.574.0966
deja@correiateam.com
2468 Historic Decatur Road Suite 160 San Diego, CA 92106
NMLS: 413050 CA DRE: 01904562
Happy Monday! December 17, 2012
“Living at risk is jumping off the cliff and building your wings on the way down." -Ray Bradbury
REAL ESTATE
According to a recent report by DataQuick, November housing pricing results showed an increase of 13.7 percent over last year which proves to be the best results in the last seven years and highest peak since July 2008.
The recent decline in inventory and an increase in demand for higher priced homes can be attributed to improving home prices. While much of the mortgage and real estate communities are focused on rates and when we may see an increase, it cannot be argued that affordability is a big driver in the home buying decision. With an inventory half of last year’s and the influx of multiple offer bidding, price remains a key component of the home buying process and may be easier to predict than mortgage rates. Especially true if investor activity and all cash offers (the latter representing 33 percent of home sales this last November) continue to dominate the market.
If you know someone who is considering a home purchase in the future, now is the time to speak with a mortgage and real estate professional. There may not be a better time to determine what you can afford than today.
MARKET
Just two weeks before tax increases and government spending cuts take effect, known as the Fiscal Cliff, there appears to be signs of progress in Washington’s budget talks fueling today’s stock activity.
Following House Speaker John Boehner’s offer to increase tax rates on high-income Americans, offering $1 trillion in higher tax revenue over the next 10 years and an increase from 35% to 39.6% in the top tax rate for those making over $1 Million per year, the markets moved even higher after word that Boehner met with President Obama again today.
Unless a deal is struck by January 1st, tax cuts ratified a decade ago for all Americans will expire and a massive amount of government programs will be cut; a dangerous double-punch which analysts predict is likely to result in a recession.
RATES
The stock markets are responding positively to this weekend’s Fiscal Cliff negotiation progress, the DJIA ended over 100 points up, and pushed the bond market and mortgage rates lower today.There will be seven economic reports scheduled and two Treasury auctions being released this week which may influence mortgage rates. Most of the reports are coming in the latter part of the week so the beginning of this week will be largely driven by stock activity and continuing Fiscal Cliff discussions.
1. 5-year Treasury Note auction, tomorrow – While not as influential as Wednesday’s auction, if Tuesday’s auction shows stronger than expected demand bond prices may rise Tuesday and Wednesday afternoon and rates may improve. If demand is lower, rates may increase.
2. 7-year Notes Wednesday – The more important of the two auctions this week, watch for mortgage activity in the afternoon trading hours.
3. November's Housing Starts, Wednesday 8:30 AM ET – The week’s least influential data, this report is expected to result in a decline of new home construction starts. An increase would show housing recovery which may be negative news for bonds and mortgage pricing.
4. The final revision to the 3rd Quarter Gross Domestic Product (GDP), Thursday – Last month this report revealed an annual economic expansion of 2.7% and this month’s report is expected to indicated stability in that rate. Higher results may negatively impact mortgage rates.
5. Existing Home Sales figures for November, Thursday – The National Association of Realtors posts this report quantifying housing sector strength and mortgage credit demand. An increase in sales and upswing in housing sector growth is expected.
6. November’s Leading Economic Indicators (LEI) from the conference board, Thursday – Used to identify expected economic activity for the following three to six months, this report is expected to reflect a small decline of economic growth over the next several months. If results are much greater than the anticipated 0.2% decrease, we may see mortgage rates increase on Thursday.
7. November's Personal Income and Outlays, Friday 8:30 AM ET – Measuring two-thirds of the economy, the ability and habits of consumer spending, this report may be the most influential of the week. A 0.3% increase in income and in spending is expected but softer than expected results may improve bond and mortgage pricing Friday morning.
8. November's Durable Goods Orders, Friday – Measuring manufacturing sector strength through the reporting of orders for big-ticket items “products expected to last at least three years.” A 0.2% rise in new orders is expected. A report known to be volatile, a large increase in orders may lead to higher rates on Friday.
9. University of Michigan’s Revised Index of Consumer Sentiment for December – A downward revision of 74.5 in consumer confidence is expected. A higher than expected reading indicates consumers may be more willing to make large purchases in the near future which would be negative news for the bond market and mortgage pricing.
Watch for Thursday and Friday to be the most active days in this week’s mortgage market unless we see some headlines from stock and Fiscal Cliff negotiation activity in the meantime.
I am a loan officer with San Diego Funding and I work around the schedule of my clients including evening and weekends. If you or anyone you know has financing needs or questions, please give me a call. It would be my pleasure!
Deja Correia
Senior Loan Officer
San Diego Funding
Office: 619.260.1660 ext. 228
Cell: 619.251.1432
Fax: 619.574.0966
deja@correiateam.com
2468 Historic Decatur Road Suite 160 San Diego, CA 92106
NMLS: 413050 CA DRE: 01904562
Where are today's rates from Lani Furrows:
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From our local Mortgage Banker, Deja Correia at San Diego Funding
September 24, 2012
June 5, 2012
Bank of America
Short Sale Agent Update
Based on the Department of Justice settlement, effective June 1, Bank
of America is extending additional support to homeowners in agreeing to
enhanced 2nd lien deficiency waiver guidelines.
Once you have determined if your homeowner may qualify for this waiver,
contact your short sale specialist for establishing the amount to request for
the 2nd lien.
Basic qualifications:
Short sales initiated on or after June 1, 2012
The 2nd lien must be attached to a 1st lien mortgage owned by Bank of America.
Important Reminders:
Agents should use Equator messaging as the primary way to communicate
with their short sale specialist.
November 23, 2011
Market Update from Dr. Lawrence Yun, Chief Economist for the National Association of Realtors
Strange Days
By Lawrence Yun, NAR Chief Economist
These are strange times we live in. The economy has officially and statistically been out of recession for two years. Still, consumer confidence (as measured by The Conference Board) is at or near its lowest point ever. Consumer inflation – as reported by the Bureau of Labor Statistics – has reached four percent – the highest inflation rate in years. Yet the 10-year government borrowing rate is barely over two percent; that means that a creditor is in essence getting two percent more money next year to buy products that are four percent more expensive.
Then there’s the bank and lending environment. Most of the qualified households with the highest credit scores are paying higher mortgage interest rates than most other borrowers (because of higher interest rates on jumbo mortgages). Perhaps most puzzling of all is this. The U.S. banking system has been healing nicely since its near-death experience in late 2008, and banks have seen their profits soaring to record heights in 2010 and will likely see profits just as high in 2011.Yet bank stock prices are in the tank and banks’ abundant cash reserves and profits have not translated into more lending. It is doubly puzzling and frustrating for the real estate industry since mortgages originations since 2009 have been performing outstandingly with exceptionally low default rates. Those elevated default rates that the media love to report are not recent loans but simply the “legacy” toxic mortgages that were originated during the housing bubble years that are still moving through the pipeline.
One rationale for constrained lending that some of the banks invoke is lawsuit threats from robo-signing scandals. Another reason why they claim to need to hold on to their extra cash is the regulatory uncertainty from the Dodd-Frank legislation and how that will all play out (compliance costs money). But the extra cash holding could also be due to nice steady income stream that flows when there is a lack of competition in the marketplace. We’ve seen significant consolidation in the banking industry in the past few years. Economic textbooks say fewer firms mean easier tacit collusion to raise fees and interest rates for consumers.
Let’s not, however, put all of this on the shoulders of the banks. Policymakers are also at fault for letting the conforming loan limit slide downward. That has forced more consumers to take out jumbo mortgages – especially in certain high cost markets -- which do not carry government backing from FHA, Fannie Mae, or Freddie Mac. As of this writing (early November), the average 30-year jumbo mortgage rate was near five percent. Compare that to the conforming mortgage loan rate of near four percent. On a $500,000 mortgage, the difference in those mortgage rates results in a significantly different monthly mortgage payment (principal and interest only) which could be $250 per month. In other words, people with highest credit scores – those who have demonstrated the highest ability of financial responsibility – are being forced to fork over extra money to the banks that are already flushed with cash. That is an absolute pity. Reinstating the loan limits to where they were so fewer people would have to take out jumbo mortgages should be an easy one for policymakers to support – particularly close to an election year. Apparently convoluted thinkers in Washington disagree.
Despite these strange days in which we find ourselves, let’s not overlook some good developments. Several housing market indicators have shown stabilizing – although not yet definitive recovery – signs. Here’s one that garnered little press. The U.S. homeownership rate rose a notch in the third quarter of 2011 – 66.1 percent of U.S. households owned their own home. That is an increase – albeit small – from the 66.0 percent homeownership rate in the prior quarter. The ownership rate matches the level back in 1998. Back then, there was no mention of a housing bubble or about unsustainability in the media or in the academic literature.
It’s quite possible that the current homeownership rate of 66.1 percent may indeed be the right stabilizing level for the country. Remember – that still represents two thirds of American households. If the homeownership rate stabilizes at the current 66 percent or so level then the natural increases in population (three million a year) and households (about 1.1 million a year in normal times) in the U.S. will bring about 700,000 additional potential homeowners each year. That presents home sales and business opportunities for REALTORS®, not just from these entrants into the housing marketplace, but also from those resulting from a “turnover rate” among the existing 75 million home-owning families. That turnover rate had been exceptionally low in recent years due to the weak economy and from the many underwater homeowners who could not move without a short-sale approval from the banks.
Other housing data in recent months have also pointed to stabilization. Despite the ever present discussion and consumer perception of when home values will stop dropping, the Case-Shiller price index has actually been rising for five consecutive months. Furthermore, Case-Shiller’s low point was set in 2009, two years ago. Since then there have been only low single-digit increases and decreases. In essence that says that home values have stabilized.
Home sales have also shown stabilizing patterns. Home sales rose five percent in 2009 nationally, then retreated five percent in 2010. Sales are expected to be roughly the same this year as in 2010. So again, it is only of some small single-digit percentage movements and nothing of cataclysmic changes. Housing starts have also been at 500,000 to 600,000 annualized pace for the past three straight years.
But perception is reality – in both “normal” as well as strange times. Many consumers have been pounded with messages from the media about the continuing sharp falls in home values, home sales, and housing starts. That is not a confidence builder for consumers or for the broader economy. Strange times, indeed. Looking at the real numbers – and what’s behind them – shows us that things may actually be better than we think.
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