My Thoughts for the Week of May 21, 2012

Posted on May 21, 2012 by Administrator

Another fairly calm week ahead of us domestically, which means once again most attention will be on Europe. The EU Summit starts Wednesday, whether or not Greece exits the EU will be a topic of discussion. Concern over Greece has erased $4 Trillion from global stock markets so far this month and driven the move to safe US Treasury Bills, which has pushed the 10 yr treasury (and Mortgage Backed Securities) to historic lows.

Domestically, speculation has risen that the Fed may have to either extend its current stimulus “Operation Twist” or possibly introduce a third round of QE to prevent another dip in our economic recovery, or possibly even a second recession, after reports have been showing a slowing pace in job recovery. This is promising news to investors as it gives confidence that the Fed is standing by and prepared to act to re-boost the economy if needed. It is also creating confidence that rates are likely to stay low for some time, tho maybe not quite at current record lows. At this point it would take some extreme actions to move rates any lower.

MBS Rate Tracker Snapshot for this week:

 

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Friday May 18, Market Update

Posted on May 18, 2012 by Administrator

Some minor credit/rebate declines today in the mortgage markets, but the outlook remains positive for lower rates. The 10 yr and mortgages have made a huge run over the week or so, a slight pullback is not unusual. At 9:30 the stock market (DJIA) opened +45 but by 10:00 the key indexes were having trouble holding gains. 1.70% on the 10 yr note is a technical resistance level that held the rally last Sept; this time though we expect the 10 will move below 1.70% with the potential of 1.50%, especially if traders believe the Fed will launch anther QE. Given the decline in economic outlooks around the world the Fed is more likely to ease again to continue pushing rates lower and with the intent that investors will be forced into the stock market and business will increase spending; at least that is what many believe.

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My Thoughts for the Week of May 14, 2012

Posted on May 14, 2012 by Administrator

Interest rates could continue lower this week on increasing fears Europe is facing defaults from Greece and increasing likelihood Greece will depart from the EU, which could set up a domino effect with Ireland, Portugal, and Spain. Problems in Europe will continue to dominate our bond markets as global investors keep flocking towards US Treasury bonds as the only safe investment right now. This week domestically, everyone will be looking at the minutes released from the April 25th FOMC meeting, looking for hints of a possible third round of QE and overall opinion of how our economy is doing.

After spending the entire last week below 1.90% the 10 yr T Note has dropped to 1.78% this morning. Amazing. This is another indicator that rates may continue to improve. I will be keeping an eye on the 10 yr, not really sure what it will test next as it has never traded this low for this long.

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My Thoughts for the Week of May 7, 2012

Posted on May 8, 2012 by Administrator

There isn’t much in the way of key economic reports this week and rates are starting off pretty close to where they started last week, but with a slightly better credit. Last week had a number of influential reports but none were able to cause surprise. Friday’s less than stellar April unemployment report helped push the 10 yr note below 1.9%, a strong resistance point, for the first time in several months. Don’t be fooled by the drop in unemployment from 8.2 to 8.1%. It was more of a result of less people able to renew their UE benefits and revisions to Feb and March data than what happened in April, where job growth actually stalled. The 10 yr has never traded below the 1.9% barrier for more than three days. I’ll be watching this technical resistance closely. If it can manage to stay below this mark we could be in for a new round of even lower rates. Most likely it will continue to flirt with this technical barrier and could even come back higher, as indicators point to treasury’s as overbought. What this means, 10 yr lower – rates lower; 10 yr higher – rates higher.

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Debt Relief Act of 2007 set too expire soon!

Posted on April 30, 2012 by Administrator

The tax debt relief act of 2007, where the IRS forgives you of any 1099′s that result from short sale, loan mod, or foreclosure, is set to expire at the end of this year. This sounds like a long time from now but any of the processes mentioned above can take several months to complete. The debt relief act could get an extension, but there are no guarantees. Time to act is now.

What this means:

If you have had a foreclosure or short sale, the lender is required to send a 1099 to the IRS for the amount of debt that was forgiven. The IRS can then tax you at your current tax rate for that amount of money as if it was income. The Debt Relief Act of 2007 says that the IRS will forgive borrowers for being on the hook for this money. This is set to expire December 31, 2012. This means if you have a foreclosure/short sale and the bank forgives $100,000 of unpaid debt, you would have to pay the IRS as if this was taxable income. This could be as much as $37,000 depending on your tax bracket!

This is something to keep in mind if you are on the fence with proceeding with a short sale or going into foreclosure. Chances are the Act will get an extension. I mean seriously, who has ten’s of thousands of dollars to give to the IRS who is going through a foreclosure? Talk about getting kicked while you’re down! But you never know, with all the deficit mess and budget problems in Congress, they could let it slip away…

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Weekly Market Update for April 16, 2012

Posted on April 17, 2012 by Administrator

Mortgage pricing continues to improve as more doubts about the economy surface, and don’t forget about Europe with Spain struggling to issue new debt now. Investors have continued their move into US Treasury bonds which has pushed yields down which leads to better mortgage rates. Pricing, the credit you get for a specific interest rate, is really good right now and I don’t really see it getting much better. There is a much greater chance of rates going back up a little so my advice is take the gains now.

My pipeline is filling up with purchase transactions and fewer refinances. This is pretty consistent with what is going on out there, more buyers are entering the market. My advice is don’t get caught up in a bidding war, there will be plenty of properties out there as more foreclosures hit the market every month. We still have a HUGE supply of foreclosures to go thru before we get out of this mess.

Tip: notice how the interest rates don’t change much, but the credit/fee associated with a specific rate changes frequently? As more investors throughout the world decide to purchase Mortgage Backed Securities, the demand for this debt increases which causes the credit to the borrower to improve. This is called “better pricing” and gives the borrower a bigger credit back which can be used to either buy the rate lower or put towards closing costs. If investors decide to go elsewhere, like the stock market, demand goes down and the credit for the same rate gets smaller. What I do is try to help you time your rate lock by studying the markets to maximize the credit you get back towards closing costs.

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Weekly Market Update for April 2, 2012

Posted on April 2, 2012 by Administrator

My Thoughts for the Week of April 2, 2012:  This week’s headliner will be the February employment data on Friday. Luckily the stock markets will be closed and bond markets will be closing early in observance of Good Friday. Good thing as I’ve been losing sleep over the crazy volatility spurred by the monthly employment data offerings lately. In my opinion of Behavioral Economics, markets do better with a day or two to digest unexpected data, should we get another shocker. Estimates are for the unemployment rate to remain unchanged at 8.3%.

Rates are a little better starting this week than last. Some of the shock from the FOMC’s positive economic statements a few weeks ago has worn off, and Bernanke helped by stating last week that the economy is still on shakey grounds. Right now, any pessimistic views/comments from the Fed are welcomed and will help keep investors in risk free bonds and mortgage rates low. I know, and you know, the economy is improving and that’s all that really matters, let the Fed say whatever they want if it helps keep rates low.

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FHA about to tighten guidelines regarding credit collections

Posted on March 27, 2012 by Administrator

Beginning April 1st, home buyers with ongoing credit disputes over $1,000 will no longer be approved for a mortgage backed by the Federal Housing Administration. Buyers with collection accounts will either have to pay the debt off or enter into a documented payment plan.

Buyers will also have to show that three payments have been made toward the debt. The payment will be factored into the buyer’s debt-to-income ratio, which could lower the amount that can be borrowed.

While this is not expected to reduce the amount of fha loan applications, it is expected to slow down the process of new buyers applying for loans while they try to resolve or pay off their disputed credit lines.

Before the new rule, an underwriter could determine whether the collection accounts would impact the approval of a mortgage. The new rule comes as belt-tightening for the federal agency, since it had no earlier requirement that disputed credit accounts be paid off.

Since the housing market tanked and banks tightened lending standards, more buyers have sought government-backed loans because they only require a down payment of 3.5 percent. Conventional loans generally require slightly higher down payments.

Credit accounts more than 2 years old or those related to identity theft will not be factored into the new rule. The lender, however, must document the fraudulent charge with a police report. If the outstanding balance of all collection accounts is less than $1,000, borrowers are not required to pay off the debts to get mortgage approval, the FHA says.

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All signs are pointing to increased housing demand

Posted on March 22, 2012 by Administrator

What do you get when you mix an improving economic outlook for the US economy, a healthy supply of housing inventory at record affordability, record low fixed interest rates, immediate passive income opportunities for investment properties, and situations in most areas where owning is cheaper than renting? A PARLAY OF OPPORTUNITIES WE’VE NEVER SEEN BEFORE…

Sounds like a no-brainer right? Well the market in general is yet to act on this opportunity because of the looming bottom everyone is waiting for. But the smart ones are buying. Two thirds of the purchases right now are by investors. First time buyers need to step up to the plate and get in while the getting is good. Time to start taking advantage of this amazing opportunity people! Think it will stay like this for very long, not likely!

 

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Here’s why the 10 yr note (and mortgage rates) shot up over the last two days

Posted on March 14, 2012 by Administrator

Interest rates are hitting a four month high this morning, breaking many technical support levels. The 10 yr and MBSs were hit hard yesterday and so far this morning another spike in rates. For four months the 10 yr traded quietly in essentially a 15 basis point yield range with a few forays out of the range that lasted just a day or so. We noted for weeks that although the range was holding the momentum oscillators were weakening; the relative strength index was slightly negative since the first of February. Nothing was changing however; the situation in Europe with Greece’s debt kept a bid in US treasuries, the Fed’s constant comments that the US economy wasn’t on solid footing, and that the Fed would keep the FF rate at zero to +0.25% thru 2014 kept long rates in check. Much of the rationale for low rates is still there but has lessened. Putting it in perspective, as we have constantly commented, interest rates are at 50 yr lows and were unlikely to decline much regardless of the momentary circumstances.

Yesterday the dam broke, traders have been nervous about being long bonds but held on until the 10 blew through its first key support at 2.05%, the level that had previously stopped selling. Yesterday the trigger that started the run was two-fold; Feb retail sales were stronger than thought then in the afternoon the FOC policy statement was the preverbal straw. There was a growing thought that the Fed would launch another easing move to increase buying of treasuries and MBSs; the FOMC said no, not yet. The economic outlook according to the Fed had improved somewhat from the previous FOMC meeting. The stock market has continued to increase taking another support from the bond market. Meanwhile in Europe there are still huge debt issues but at the same time (at least at the moment) that its economy while in recession may not be as serious as markets had believed.

While the increase in rates in the past 24 hours has been swift, we continue to believe rates will not increase too much. How high is questionable but I don’t see them higher than 2.25% (10yr) on the 10 yr note on this move. Will rates fall back to under 2.00% on the 10 yr? Not likely as long as Europe doesn’t completely implode, and that isn’t expected. The Fed is committed to keeping rates low; it’s the definition that is in question. The bond market is capitulating, the exodus has been rapid however once positions are re-balanced the bond and mortgage markets will begin another trading range but at higher levels.

 

Commentary provided by David Shirmeyer

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