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If you're like most soon-to-be new homeowners waiting for your house to close, you keep thinking of projects you can do and things you need to buy to make your home just right.
It could be the carpeting that doesn't match your furniture, or maybe you don't want your old refrigerator in your new home. You're probably considering hitting the big-box stores so you can get your hands on all the new state-of-the-art gadgets and appliances to your new home.
You're also probably tempted to just pull out your credit card and charge the purchase, or maybe you're lured by a "12-months-with-no-interest" offer. You could have the installers on their way as soon as you have the keys!
As is often the case, what we want isn't what's best for us. Fannie Mae's new rules go into effect June 1 that require lenders to pay more attention to changes in your credit report from the day you applied until the day you close.
Lenders must refresh your report to see if your credit balances have changed or if you have acquired a new debt. They must even check out credit inquiries to see if you are obligated to pay back any 'new' loans. Lenders also have access to new fraud detection tools that can determine if you are trying to work around the system or if you have undisclosed debt.
Note that lenders can put these new rules into effect at any time prior to June 1, and for most borrowers, new debt could delay closing, or the bank could even decide against approving the loan altogether.
If you are buying a home, pay cash for all the new things you want, or wait until you can really afford the new purchases. Don't even let stores run your credit to see if you qualify. Plan a little slack in your moving schedule so you can have new carpets, appliances, etc. installed before you have to move from your old home.
Market Color: How many times is it appropriate to say "What?" before you just nod and smile because you didn't hear or understand a word the individual said? How many times can you point to the same excuse or reason for what is going on in the market before you repeat yourself. Same song again today with the issue in Greece with the Euro still falling against the dollar, labor department reported jobless claims at 444,000 as analysts want it lower than 400,000 to signal some form of job growth. Unemployment number to be released tomorrow and that is expected to remain the same or maybe a tick lower. Right now, the futures market is pricing in a 76% chance that the Fed keeps rates at .25% through September 21st, 2010. Currently, the Ten Year yield is at 3.56% (3.55% yesterday). 30 year fixed rates looks like it will hold a .125% improvement in price from the market open.
Market News: The tug of war continues about who is going to have the responsibility to regulate independent mortgage bankers. Senate Republicans are pushing for a division of consumer protection within the FDIC to oversee nonbank mortgage firms and write consumer regulations. The proposal also would continue the practice of having federal laws override state laws. Meanwhile, a Democratic plan backed by the White House would place an independent bureau within the Federal Reserve to police customer financial service transactions. It would allow states to write and enforce tougher laws -- language opposed by the financial industry.
Meanwhile we see the first suggestions being advanced on what to do with Fan and Fred. Sens. Richard Shelby, R-Ala., John McCain, R-Ariz., and Judd Gregg, R-N.H., have introduced an amendment to the Democrats' financial reform bill requiring "conservatorship" of Fannie Mae and Freddie Mac to end within two years. Once the firms are no longer under federal control, they would be stripped of their mandate to promote affordable housing; and the government's role in mortgage finance would be sharply scaled back.
Amendments after amendments are being introduced to the Financial Reform Act. Now we have a Senator that is suggesting that a "Self Employed Home Loan" be developed for the loan market. Senate leaders late Tuesday cleared the way for Sen. Olympia Snowe, R-Maine, to offer an amendment allowing mortgage bankers to originate residential loans to small business owners with flexible payment schedules that reflect seasonal changes in cash flows. The Snowe language would amend the Consumer Financial Protection Agency section of the financial services regulatory reform bill, putting such mortgages in a category where they will not be considered abusive by the new agency. "The bill does not take into account that many entrepreneurs use home mortgage loans with customized payment terms," Sen. Snowe said. (Until the credit crisis, some self employed workers used payment option ARMs, or "NINA" loans to obtain housing credit but those loans have since fallen out of favor and are now viewed warily by consumer groups and many elected officials as well as regulators.) Once Senate leaders reach an agreement to start the voting process, the Snowe amendment is expected to be adopted.
And finally in our news section today, we have another Senator that is working to establish minimum underwriting standards for all residential lenders and attach it to the Financial Services Regulatory Reform bill. An early draft of Bob Corker's R- of Tennessee, amendment would prohibit warehouse lenders and wholesalers from funding mortgages that do not meet the minimum standards. Sen. Corker has complained that the current bill before the Senate does not prevent the underwriting of bad loans. His amendment directs the federal banking regulators to establish minimum standards with specific requirements for a downpayment. It is understood that the senator wants a minimum 5% downpayment requirement. It seems that any new products or underwriting limitations are now going to be decided in Congress not the marketplace.
Market News: Financial reform moved closer to a bill as the Senate cleared a hurdle on May 6, when Democrats blocked a GOP attempt to dilute the size and scope of a consumer regulator designed to safeguard borrowers from lender abuses. They did so by garnering the support of two key Republican lawmakers -- Sens. Charles Grassley of Iowa and Olympia Snowe of Maine -- who Democrats are counting on for support of their broader reform bill.
First we had to worry about our mortgage rates going up due to the FED not buying Mortgaged backed securities which thankfully has not been realized as other bidders have taken their place. Now we have to worry about the FED selling their large position of securities they hold. The Federal Reserve is debating how soon and how aggressively to sell some of its $1.1 trillion of mortgage-backed securities, a move that could lower MBS prices and boost mortgage borrowing costs. Translation, increase mortgage rates. Most Fed officials do not want to hold onto the MBS because that would lead some observers to believe the central bank would allow inflation to take hold in the future; they also are concerned that observers would view sales as a sign that the Fed wants to tighten credit.
While the tax credit has expired for the bulk of the people on April 30th, members of the U.S. military, foreign service and intelligence communities have another year to purchase a home and claim the home buyer tax credit. Any service member who is or has been on extended duty for 90 days or more between Jan. 1, 2009 to April 30, 2010, has until April 30, 2011, to sign a sales contract and until June 30, 2011, to close on the property. Both the $8,000 first-time and the $6,500 repeat home buyer tax credits are included in the extension. The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they receive government orders to move.
The effect of the Tax Credit for housing was measured by First American on future home prices. That report if helpful to your realtor referral sources is attached. Another report and illustrations discuss the impact on home prices and the dreaded shadow inventory in the other attachment.
Given the turmoil and unrest, thoughts of ones own mortality can creep in. It seems A man dies and goes to hell. There he finds that there is a different hell for each country. He goes to the German hell and asks, "What do they do here?" He is told, "First they put you in an electric chair for an hour. Then they lay you on a bed of nails for another hour. Then the German devil comes in and whips you for the rest of the day."The man does not like the sound of that at all, so he moves on.
He checks out the American hell, as well as the Russian hell and many more. He discovers that they are all more or less the same as the German hell.
Then he comes to the Greek hell and finds that there is a long line of people from all nationalities waiting to get in. Amazed, he asks, "What do they do here?"
He is told, "First they put you in an electric chair for an hour. Then they lay you on a bed of nails for another hour. Then the Greek devil comes in and whips you for the rest of the day." But that is exactly the same as all the other hells. Why are there so many people waiting to get in?" He is told, "Because the maintenance crew is always on strike, there is no electricity so the electric chair doesn't work; Albanians have stolen all the nails from the bed; and the Greek devil is a former Greek government employee, so he comes in, signs the register, and then goes to have his kafethaki (coffee) and eat kourabiethes (cookies) all day."
Remember your mother this weekend and all the times she told you to take your nap when you were little. I totally take back all those times I didn't want to take my nap when I was younger. Sorry mom
Market Color: Can civil unrest in one part of the globe lower mortgage rates? Apparently so and oversized fingers on a stock market trade for some lucky trader who will have some explaining to do that sold 38 billion shares of Proctor and Gamble instead of 38 million shares can contribute as well. At one time the bond market was improved by almost 1.0% yesterday. Things remain a little unsettled today as investor worries and jitters continue. Our bond market started out negative and now has swung to the positive. Market psychology is ever so fickle. Nonfarm payrolls printed much higher than expectations, +290K vs. +190K consensus; the unemployment rate jumped up .2% to 9.9%; U6 is up to 17.1%. The SEC will conduct an investigation as to what happened yesterday with a supposed mis-entered trade and the subsequent almost 1,000 point DOW sell-off and immediate 650 point rally from the low. Right now, the futures market is pricing in a 67% chance that the Fed keeps rates at .25% through September 21st, 2010. Currently, the Ten Year yield is at 3.46% (3.56% yesterday). And your 30 year fixed rate mortgages are up .25% but rate sheets have not come in from investors to reflect it as of yet.
As we watch the financial reform bill inch forward, which will have a sweeping impact on our business, beside lobbyists, others are concerned about the direction of the bill. Since Freddie and Fannie are not a part of the bill and the government sector is over 95% of loans being made today, concerns mount about what the liquidity will be in the capital markets for the mortgage market. Article in New York Times explores the issues attached.
http://dealbook.blogs.nytimes.com/2010/05/03/senate-financial-bill-misguided-some-academics-say/?src=busln
Market News: The Rural Housing Service has enough remaining loan commitment authority to continue guaranteeing single-family loans through May 6, according to the Department of Agriculture. "We anticipate funding likely will be exhausted by May 7," the agency said. It was understood RHS would run out of loan authority on April 30 and the House quickly passed a bill (H.R. 5017) last Tuesday to extend the program through Sept. 30. Sen. Michael Bennett, D-Colo., has introduced a similar bill, but the Senate adjourned on Friday without passing it. The Senate resumes legislative activities on Monday. "Depending upon Congressional activity with the proposed legislation, it is possible that the agency may consider issuing conditional commitments," RHS said. The House-passed bill makes the RHS single-family program self-funding by raising the 2% upfront guarantee fee to 4%. RHS is expected to set the fee at 3.44%. The increase means Congress will not need to approve additional funding to keep the RHS guarantee program running. We still await the Senate for action.
Market News: The Rural Housing Service has enough remaining loan commitment authority to continue guaranteeing single-family loans through May 6, according to the Department of Agriculture. "We anticipate funding likely will be exhausted by May 7," the agency said. It was understood RHS would run out of loan authority on April 30 and the House quickly passed a bill (H.R. 5017) last Tuesday to extend the program through Sept. 30. Sen. Michael Bennett, D-Colo., has introduced a similar bill, but the Senate adjourned on Friday without passing it. The Senate resumes legislative activities on Monday. "Depending upon Congressional activity with the proposed legislation, it is possible that the agency may consider issuing conditional commitments," RHS said. The House-passed bill makes the RHS single-family program self-funding by raising the 2% upfront guarantee fee to 4%. RHS is expected to set the fee at 3.44%. The increase means Congress will not need to approve additional funding to keep the RHS guarantee program running. We still await the Senate for action.
Market News: Since the FED has backed out the MBS market and the expectations that rates would go up as much as 1/2 of 1% thankfully did not materialize, will we see the same with our purchase market now that the tax credits are expired. The National Association of Realtors expects activity to decline following expiration of the home buyer tax credit. Resales are projected to rise 4.3 percent, compared to NAR's forecast in April for a 6.5 percent increase for the year; but the group now anticipates a jump of 6.9 percent in sales of new single-family homes, compared to an earlier call for a 0.6 percent gain. NAR also expects resale home prices to rise 2.5 percent this year, down from the previous prediction of a 2.7 percent increase, and prices for new homes to rise 3.3 percent, better than the previous forecast of a 2.7 percent increase. We will know before the month is out for sure.
Market Color: Most people don't know that in 1912, Hellmann's mayonnaise was manufactured in England. In fact, the Titanic was carrying 12,000 jars of the condiment scheduled for delivery in Vera Cruz, Mexico, which was to have been the next port of call for the great ship after its stop in New York. This would have been the largest single shipment of mayonnaise ever delivered to Mexico. But as we know, the great ship did not make it to New York. The ship hit an iceberg and sank, and the cargo was lost forever. The people of Mexico, who were crazy about mayonnaise, and were eagerly awaiting its delivery, were disconsolate at the loss. Their anguish was so great that they declared a National Day of Mourning, which they still observe to this day. The National Day of Mourning occurs each year on May 5th and is known, of course, as Sinko de Mayo. This of course is not to be confused with Cinco de Mayo celebration when the Mexican Army overcame the insurmountable odds of defeating the French Army at the battle of Puebla on May 5, 1862. Many avocados, limes and Corona Extras will meet their demise in addition to mayonnaise.
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