INTEREST RATES FOR AUGUST 7^th, 2009

MBS prices opened about the same as yesterday's close.  Employment data released at 8:30 EST sparked a stock market rally which took investors (and their money) away from fixed income (treasury and MBS) bonds.  Employment numbers showed fewer job losses and beat forecasts.  So, with the jobs picture (less bad) than expected, the DOW is already up 145 points this morning.  That's it for economic data today, but MBS prices may bounce around a little as investors try to decide the best place to put their money.  Mortgages loose today as rates are generally about 0.125 worse in rate than yesterday.  There is a  potential for rates to worsen even further during the day.

It does look like things may be looking up for our economy.  IF the changes to Fed policy during this Obama administration have in fact improved housing starts, housing sales, and (if this trend in) empoyment numbers has seen a reversal, what's next?  Most analysts agree that interest rates on mortgages will increase.  That means ARM indicies will increase, and the Fed may consider increasing the overnight lending rate, which historically triggers immediate increases in prime lending rates among banks.

I have been promoting fixed rate mortgage product as the first choice for the last year.  I am keeping an eye on the 5/1 ARM, and if property values start to increase in Arizona (in all markets) and the spread between ARM rates and fixed rates stays at 1%, I may change my bias to the 5/1 ARM.

August 7th, 2009 Interest Rates at CNN Mortgage

Conforming Conventional 30Yr Fixed  5.625%

Conforming Conventional 15Yr Fixed  5.000%

Conforming Conventional 5/1 IO ARM 4.625%

FHA 30Yr Fixed 5.500%

Jumbo Conventional 5/1 ARM 5.625%

* Above Conventional rate quotes are as of  08/07/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  Fees are $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Jumbo quote assumes a 720 FICO, 75% LTV.  Documentation of income and assets required.  No origination or discount points.

After one year as the director for the Federal Housing Finance Agency,  James Lockhart announced he is stepping down, and plans to return to work in the financial-services industry in New York.   The Federal Housing Finance Agency is the Fannie Mae and Freddie Mac regulator, created during the government's seizure of the two companies.  According to the  Wall Street Journal article, the Obama administration will need to select new director and is expected to make changes to the companies, which it says will be announced February.   

The Obama administration is expected to make changes to the mortgage agencies, Fannie Mae and Freddie Mac , who buy and securitize most of the nation's prime mortgages.  Currently the agencies are holding troubled loans that could be removed and placed into another government backed financial entity.  The government is considering many ways to overhaul the Agencies, and is scheduled to be taken up by the White House's National Economic Council on Thursday.

INTEREST RATES FOR AUGUST 6, 2009

MBS prices were up 7/32 upon opening, Jobless Claims came in lower than expected.  Weakness in the labor market is (less bad) compared to expectations.  The July employment report is out tomorrow which is the big number.  After the news, the yield on the 10Yr Note is up 3.77% and mortgages are slightly worse.

Conforming Conventional 30Yr Fixed 5.500%

Conforming Conventional 15Yr Fixed  4.875%

Conforming Conventional 5/1 IO ARM 4.500%

FHA 30Yr Fixed 5.500%

* Above Conventional rate quotes are as of 8/06/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

Pending Home Sales Up

According to the National Association of Realtors (NAR),  Pending Home Sales  is up for the fifth month in a row.  Pending home sales in June rose in all regions:  up 7.1 percent in the South, 2.9 percent in the West, 0.8 percent in the Midwest and 0.4 percent in the Northeast.  NAR's Pending Home Sales Index (PHSI) is released during the first week of each month.   It is based on signed real estate contracts for existing single-family homes, condos and co-ops , and is a leading indicator of housing activity.

Interest Rates for August 5, 2009

Signs of economic growth were bad for Treasuries and MBS yesterday, and prices worsened.  The worsening MBS price trend continued this morning until the release of the ISM Services index, which renewed investor interest in MBS.  The ISM index is a national survey of purchasing managers' orders, production, employment, inventories, delivery times, prices, export orders, and import orders.   The ISM index is considered an indicator of future economic growth.  The economy is improving; not with a lot of growth in the near term, but the economic slide appears to be over.   Consumers are still struggling,  but the increasing consensus in the markets is that the recession is over.

Jobless claims and unemployment numbers come out Thursday and Friday.   There is some speculation that the unemployment data that is announced on Friday will be weaker than expected and could improve mortgage prices - we will see.

Conforming Conventional 30Yr Fixed 5.500%

Conforming Conventional 15Yr Fixed  4.875%

Conforming Conventional 5/1 IO ARM 4.500%

FHA 30Yr Fixed 5.500%

* Above Conventional rate quotes are as of 8/05/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

Private Mortgage Insurance Reminder:

Mortgage insurance is available for Conventional financing in the (declining market) states of Arizona and California under the following terms:

•·         90% LTV / 90% CLTV

•·         Owner Occupied Primary Residence

•·         720 Minimum FICO score

•·         41% maximum debt-to-income ratio

•·         2-4 months reserves

•·         1 unit SFR or PUD (no condos)

•·         title seasoning requirements apply

 Rate Quotes and underwriting guidelines can be found online.  There are some restrictions and overlays to standard FNMA/FHLMC guidelines.

Genworth

MGIC

UG

Interest Rates for August 4^th, 2009

Yesterday's economic data came in stronger than expected and sparked enthusiasm in the stock market - bad for mortgage prices.  The Dow rose 115 points yesterday. Today's stock market is somewhat flat and bond prices initially opened slightly better that yesterday's close, but retracted quickly.  Pending home Sales came in stronger than expected and MBS prices are a litle worse. 

Conforming Conventional 30Yr Fixed 5.500%

Conforming Conventional 15Yr Fixed  4.875%

Conforming Conventional 5/1 IO ARM 4.500%

FHA 30Yr Fixed 5.500%

* Above Conventional rate quotes are as of 8/04/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

The HOPE NOW ALLIANCEincludes a number of counseling organizations, which consists of all HUD intermediaries that have offices across the United States. The organizations play a key role in the success of HOPE NOW, providing borrowers in-depth debt management, credit counseling and overall foreclosure counseling.  Homeowner resources for at risk of foreclosure.    The Hope Now website Includes an external link to  NO PAWS LEFT BEHIND , a resource for pet owners that may be having difficulty taking care of their pet and need to find shelter for their pets.   

Interest Rates for  August 3^rd, 2009

The Treasury sells bills, notes, and bonds in order to finance their activities.  Treasury and MBS bonds are losing ground this morning against a rally in stocks - Traders are hopeful that this morning's improved earnings are signs of an economic recovery.   Interest rates are worse this morning due to signs of a strengthening economy and large supply of bond debt .   ISM numbers indicates strength in the manufacturing sector and construction spending .   Mortgage rates are a little worse this morning by 0.125 to 0.250 compared to Friday afternoon. 

Conforming Conventional 30Yr Fixed 5.500%

Conforming Conventional 15Yr Fixed  4.875%

Conforming Conventional 5/1 IO ARM 4.500%

FHA 30Yr Fixed 5.500%

* Above Conventional rate quotes are as of 8/03/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

The U.S. Department of Treasury has a program called the Build America Bonds program  which provides funding for state and local governments at lower borrowing costs for community projects projects such as construction of schools and hospitals, development of transportation infrastructure, and water and sewer upgrades.

This program improves the conditions for an economic recovery and address challenges facing state and local governments.  The Build America Bonds program will help states and local governments finance building.  The Build America Bonds program supports the construction of schools, hospitals, roads, and environmental projects, and helping communities build a foundation for a stronger economic future.

Under the program, the Treasury makes a direct payment to the state or local governmental issuer in an amount equal to 35 percent of the interest payment on the bond.  These bonds are designed to appeal to a broader set of investors than traditional tax-exempt bonds.  Potential investors include pension funds that traditionally do not hold tax exempt bonds and foreign investors.  These investors have been important additions to the market for municipal debt.

Early market reception for Build America Bonds has been very positive. Since the program was launched on April 3, 2009:

• There has been $17.4 billion in Build America Bond issuance;
• Build America Bonds constitute  about 16.6 percent of municipal bonds issuances since mid April; and
• A total of 34 states are participating in the program, with a total of 178 separate issues.

Here's an update on the Build America Bonds in use in Arizona to date:

Interest Rates for July 31, 2009

MBS prices are up this morning and will result in improved pricing - about 0.125 better to rate than yesterday. 

Yesterday's 7-yr auction was successful, and MBS prices are seeing interest from fixed income investors as the rally continues.  Gross Domestic Product was released this morning and is contributing to this morning's price improvement.   The Dow is up 50 points. No more economic data will be released today.  Rate movement during the day may be subject to movement in the stock market.

Conforming Conventional 30Yr Fixed  5.375%

Conforming Conventional 15Yr Fixed  4.75%

Conforming Conventional 5/1 IO ARM 4.37%

FHA 30Yr Fixed 5.250%

* Above Conventional rate quotes are as of  7/31/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

In a Washington news release today, HUD announced it's  NEW FHA-MAKING HOME AFFORDABLE LOAN MODIFICATION .  Now loans backed by the Federal Housing Administration (FHA) will be eligible for payment reductions similar to the Obama administration's loan modification program currently in use on Conventional loans serviced by FannieMae and FreddieMac.

This program goes into effect on August 15.  Distressed homeowners who have an FHA loan may be able to refinance to reduce their payments and avoid foreclosure.

The program was launched for Conventional programs in March 2009 and has helped 200,000 borrowers so far.   The FHA program works differently than the conventional program, and allows loan servicers to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. Borrowers will not be charged any interest on that amount.

"We're bringing another important tool to the table to help struggling families who are desperate to keep their homes," Housing and Urban Development Secretary Shaun Donovan said in a statement.

If you have an FHA loan and have experienced a loss of income and are worried about making your mortgage payments, contact your loan servicer in August and ask about this program.  Lenders who participate in the FHA program are being incentivized to do these modifications for eligble borrowers.

Interest Rates at market close 7/30/2009

The Fed is consistent with its purchase of Agency MBS, buying another $20.2 billion in agency MBS over the last week. The Fed is still purchasing about 80% of all MBS.

Conforming Conventional 30Yr Fixed  5.375%

Conforming Conventional 15Yr Fixed  4.750%

Conforming Conventional 5/1 IO ARM 4.375%

FHA 30Yr Fixed 5.375%

* Above Conventional rate quotes are as of  7/30/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

Home sales create jobs.   The construction and sale of homes generate revenues for the home builder, contract labor, and retailers.  After a home is sold, the new homeowner purchases appliances and furniture to make the house a home.

Housing activity impact on the local (and state) economy is substantial, and effects national and global economies as well.   The business of housing has a direct bearing on stocks, bonds, and commodities .  The Mortgage Bankers' Association of America  compiles data on home sales activity.  The MBAA purchase applications index tracks trends for home builder stocks, mortgage lenders, home furnishings companies, and applications for home loans.  This index is a leading indicator for single-family home sales and housing construction.

Interest Rates for 7/29/2009

Poor economic data and decline in the stock market improves MBS prices and interest rates early this morning. New York Fed President William Dudley spoke on the economy this morning.  He sees positive growth for the economy in the second half but the recovery will be slow due to weak income, a reduction in household net worth, and consumers boosting savings.

Conforming Conventional 30Yr Fixed  5.375%

Conforming Conventional 15Yr Fixed  4.750%

Conforming Conventional 5/1 IO ARM 4.375%

FHA 30Yr Fixed 5.375%

* Above Conventional rate quotes are as of  7/29/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

The pressure is on lenders to modify mortgages but lenders are not giving easy handouts. There are varying degrees of distressed borrowers. Modification only makes sense for a lender if the borrower cannot make payments without it, but will be able to keep up with a lower mortgage payment. 

While Washington policy makers are incentivizing lenders to perform mortgage modifications, not every homeowner will receive one. Lenders evaluate the long term potential of repayment on the new loan. Some homeowners will still fall behind on their payments even after receiving the temporary band aid because of income instability and may lose their homes one way or another. A modification that just delays the inevitable is more expensive for the lender.   Some homeowners who (may even currently be delinquent but) can catch up without a modification, have asset reserves, or could lower their lifestyle and sacrifice luxury items will find their lender is less than willing to modify the terms of their mortgage.   

In a blog written by David G. Kittle,  chairman of the Mortgage Bankers Association, "Everybody loses when a home goes to foreclosure. The homeowner loses a home. The bank loses a customer and a significant amount of money by having to take back the home and cover costs of resale, taxes and interest. The community as a whole loses."

We will keep an eye on Washington over the coming months to see how this all plays out.

Interest Rates for Monday, 7/28/2009

Mortgage prices are lower (interest rates rates slightly higher) this morning ahead of this week's large Treasury note auctions, which will take place over this week.

Conforming Conventional 30Yr Fixed  5.500%

Conforming Conventional 15Yr Fixed  4.875%

Conforming Conventional 5/1 IO ARM 4.500%

FHA 30Yr Fixed 5.500%

 * Above Conventional rate quotes are as of  7/28/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

Mortgage prices are lower (interest rates rates slightly higher) this morning ahead of this week's large Treasury note auctions, which will take place over the next three days.

National Home Sales - Numbers are improving.  Credited for drop in inventory are investors buying discounted homes, builder incentives, and first-time homebuyers

• June New Home Sales up 11% (over May)
• 8.8 months of inventory (down)
• 281,000 homes remaining on the MLS

.

Activity on the Hill - Last week the House Financial Services Committee held two hearings on financial services regulatory reform, and the Senate held a hearing on bankruptcy cramdown.

Interest Rates for Monday, 7/27/2009

Conforming Conventional 30Yr Fixed  5.625%

Conforming Conventional 15Yr Fixed  5.000%

Conforming Conventional 5/1 IO ARM 4.625%

FHA 30Yr Fixed 5.500%

* Above Conventional rate quotes are as of  7/27/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.