Jeff's Blog

New RESPA Law Redefines a Loan

Connecticut Home Mortgage — Wed, 16 Dec 2009 17:28:17 -0600

The new RESPA law, which is effective January 1, 2010, has altered the list of items which constitue a loan application. If a mortgage originator gathers information from a client if he/she has all of the following information, a good faith estimate must be issued to the client within three days whether or not a full loan application is taken. It must be delivered to all applicants by mail or email (only if the client has given permission). The six necessary items are as follows:

Borrower's name

Borrower's income

Borrower's social security number

A requested loan amount

An estimate of the value of a property (used to determine loan to value)

A property address

December 16th Mortgage Market Wrap-up

Connecticut Home Mortgage — Wed, 16 Dec 2009 17:19:06 -0600

Mortgage backed securities (MBS) closed up 6 basis points today closing at 100.91 still in a gap between resistance offered by the 50 day moving average at 101.37 and above the 100 and 200 day moving averages. MBS bonds opened on the up side early in the day. When the FED announced that it would hold its rate at the current low level, for some reason, bonds turned negative but returned to positive levels near the close.

Dreading New Federal Good Faith Rules

Connecticut Home Mortgage — Tue, 15 Dec 2009 17:27:31 -0600

More complicated Federal regulations having to do with the Good Faith Estimate and the HUD1 closing document will arrive the first of the year. The onorous new regulations will require that a new Good Faith Estimate be issued within three days of every application and again any time a change is made to the mortgage conditions. Sections of the Good Faith will allow no tolerance for change from the initial iteration until the final one. Any variance greater than what was originally listed will have to be paid for by the originating organization. Wait until you see what a nightmare this will be. More on this later.

December 15th Mortgage Market Wrap-up

Connecticut Home Mortgage — Tue, 15 Dec 2009 17:21:48 -0600

Mortgage backed securities (MBS) closed down 25 basis points (bps) at 100.84 just barely above support at the 100 and 200 day moving averages and below resistance offered by the 50 day moving average at 101.39. The Producer Price Index released today showed a much higher level of inflation tha expected. The index was up 1.8% a full point higher than the anticipated .8%. As inflation is the arch enemy of interest rates, bonds were down 47 bps at one point before easing in to the close.

Fed Likely to Keep Its Rates Low for Now

Connecticut Home Mortgage — Mon, 14 Dec 2009 17:02:53 -0600

The Fed has its monthly meeting Tuesday and Wednesday. Since most markets experience light trading at this time of year, there is little likelihood of the Fed annoucing anything earth shaking. When trading is light, markets are prone to accencuated swings in reaction to news because the smaller population requires fewer players to sell or buy to move the market. It would be surprising to see the Fed take any action to alter its accommodative policy before its meeting in February.

December 14th Mortgage Market Wrap-up

Connecticut Home Mortgage — Mon, 14 Dec 2009 16:55:06 -0600

Mortgage backed securities (MBS) closed down 12 basis points (bps) today at 101.09 below resistance offered by the 50 day moving average and above double support of the 100 and 200 day moving averages. It was a relatively calm day for both stocks and commodities. As a result, MBS bonds drifted only slightly lower. Gold and oil futures were nearly flat and the Dow closed up a mere 29 points closing at 10,601.

Help Your Mortgage Broker Keep His Source of Income

Connecticut Home Mortgage — Fri, 11 Dec 2009 17:24:21 -0600

Currently mortgage brokers are compensated by commissions paid by banks called yield spread premiums. The government is considering eliminating this form of compensation. Brokers are required to disclose these premiums on the Good Faith Estimate. Banks pay similar premiums to their originators. Not only has the government not targeted the premiums banks pay but they do not require the amount paid to be disclosed anywhere. Please help your mortgage broker by writing to your Congressman and Senators to halt consideration of this policy which is potentially a death sentence for mortgage brokers.

December 11th Mortgage Market Wrap-up

Connecticut Home Mortgage — Fri, 11 Dec 2009 17:16:11 -0600

Mortgage backed securities (MBS) closed down 9 basis points at 101.22 below resistance offered by the 50 day moving average at 101.41 and above support at the 100 day moving average at 100.80. Consumer sentiment and retail sales reports both came in better than expected. Remember that good economic news is normally bad for bonds. MBS bonds were down for the week overall mostly becasue of less than desirable Treasury auctions.

A Trust May Help Keep Your Wishes Intact

Connecticut Home Mortgage — Thu, 10 Dec 2009 17:11:06 -0600

Did you know that 62% of marriages in this country end up in divorce? What would happen if you had just inherited money from the death of a relative and then got divorced. Would you be able to keep your inheritance. Probably not. In most states half of that new found wealth would go to your spouse. Your childen could be protected from this fate is you left money to them in a trust. The trust could set forth conditions under which they could have access to the money such as establishing an a minimum age. Always consult with an estate attorney or tax planner to be sure your hard earned money is allocated as you intend.

Deceember 10th Mortgage Market Wrap-up

Connecticut Home Mortgage — Thu, 10 Dec 2009 16:45:17 -0600

Mortgage backed securities (MBS) closed down 25 basis points today at 101.56 just above support provided by the 50 day moving average @ 101.42 and just below resistancee of the 25 day moving average at 101.77. MBS bonds were held down by rising stock prices and by two consecutive Treasury acutions which did not go as well as hoped. The Dow closed the day up $68.

Additional Principal Payments Have Dramatic Effect on Interest and Term

Connecticut Home Mortgage — Wed, 09 Dec 2009 16:22:31 -0600

There are many banks that offer a program, at a small cost, allowing borrowers to pay an extra thirteenth payment each year. The extra payment has the effect of reducing the term of your loan by more than 2 1/2 years and saves a great deal of interest the longer you keep the loan. The additional payment is comprised of principal and interest with mostly interest and little principal in the early portion of the loan. If you have discipline you would do much better to pay one twelth of the extra payment as additional principal each month. This practice has a much more dramatic effect on the total interest you will pay and shortens the term by nearly three more years. The final benefit is that there is no charge to use this powerful tool.

December 9th Mortgage Market Wrap-up

Connecticut Home Mortgage — Wed, 09 Dec 2009 16:12:01 -0600

Mortgage backed securities (MBS) closed down 16 basis points (bps) today at 101.88 just above support at the 25 day moving average and below resistance at 102.06. The results of today's Treasury auction were less than satisfactory. This caused MBS bonds to dip down during the middle of the day but traders minimized the impact as the trading session came to a close. Of note in other markets today was crude oil which closed under $71. for the first time in two months.

Why a Credit Report?

Connecticut Home Mortgage — Tue, 08 Dec 2009 16:28:15 -0600

Why do banks require credit reports and what do they use them for one might wonder. The partyline is to predict the chance of a borrower being 90 days late on a loan within the next two years. Each of three bureaus has a different scoring models. In fact, each of the bureaus has several models and they differ widely. It is possible to have a borrower qualify with one model at Equifax and fail to qualify with another. The higher the score the lower the chance of default.

December 8th Mortgage Market Wrap-up

Connecticut Home Mortgage — Tue, 08 Dec 2009 16:20:31 -0600

Mortgage backed securities (MBS) closed up 22 basis points (bps) today at 102.03 just below resistance at 102.06 and above all moving averages. MBS bonds were still riding on the coattails of Bernanke's positive comments yesterday. They were up as high as 53 basis points early in the day. When the Treasury auction results came in, however, even though they were fairly strong, the weight of the increasing debt took a little joy out the morning's euphoria.

Reverse Mortgage Can Provide Peace of Mind

Connecticut Home Mortgage — Mon, 07 Dec 2009 17:17:33 -0600

Reverse mortgages are responsible for allowing elderly homeowners to remain in their homes, pay their taxes and keep food on their tables. The relatively new financial products can provide financial security in three ways. Funds can be distributed in a lump sum which can be used as an investment vehicle from which to generate income. They can be used like a line of credit or as a scheduled monthly advance. The loans require no monthly payments and are not paid off until the house is sold. Contrary to rumors, they do not compromise ownership of the property.

December 7th Mortgage Market Wrap-up

Connecticut Home Mortgage — Mon, 07 Dec 2009 17:11:23 -0600

Mortgage backed securties closed up 28 basis points today at 101.81 having bounced off support at the 50 day moving average and jumped above the 25 day moving average. Principally, Bernanke's comments asserting that rates and inflation will remain low for the foreseeable future quelled the fears of bond traders. The results of the treasury auctions will likely guide the tenor of trading for the rest of the week as there will be little economic news forthcoming.

Low Jobs Number Sends Gold Reeling

Connecticut Home Mortgage — Fri, 04 Dec 2009 16:27:09 -0600

A surprisingly low number of job losses reported today set all the markets moving. As usual, good economic news, or should I say economic news that was better than previous worse economic news, is good for stocks and bad for bonds. Today's news was also good for the dollar. In fact perceptions of an improving U.S. economy sent many of the world's currencies reeling. A strong dollar affects commodities as they are traded in dollars. The result stopped gold's mercurial rise and caused a 4.8% selloff. We can not let our euphoria exceed reality, however. The dollar is still down more that 6% for the year.

December 4th Mortgage Market Wrap-up

Connecticut Home Mortgage — Fri, 04 Dec 2009 16:18:37 -0600

Mortgage backed securities (MBS) closed down 28 basis points (bps) today at 101.53 just below resistance of the 25 day moving average and above support offered by the 50 day moving average at 101.35. Today was the first day in weeks that MBS bonds have failed to close above all the moving averages. Today's close was 110 basis points below the close of November 30th which was the high for the year. Since each 50 bps represents .125%, that means interest rates have gone up more than .25% in just four days.

Impending Legislaton Could Force Potential Buyers out of the Market

Connecticut Home Mortgage — Thu, 03 Dec 2009 16:26:07 -0600

Congress is looking at the possibillty of severely limiting mortgage brokers and their livelihood. Lawmakers are considering legislation that would impose severe penalties on brokers for violations of a new "duty of care" standard to borrowers. Further they are mulling over a plan to limit yield spread premiums know as ysp. YSP is a payment like a commission which a bank pays a broker for bringing in business. Without YSP brokers would have to be compensated directly by borrowers which would increase closing costs. We look forward with interest to see how this works out. If the ysp is eliminated borrowers with little funds available could be prevented from being able to afford to buy.

December 3rd Mortgage Market Wrap-up

Connecticut Home Mortgage — Thu, 03 Dec 2009 16:16:10 -0600

Mortgage backed securities (MBS) closed down 25 basis points (bps) at 101.81 above support represeneted by the 25 day moving average at 101.61. A better than expected report on initial job claims combined with worries about the massive supply of treasury offerings pushed MBS bonds downward for the third consecutive day. Technical factors indicate that rates may be on the rise.

Should You Apply for an FHA Loan Soon?

Connecticut Home Mortgage — Wed, 02 Dec 2009 16:45:44 -0600

Changes may be brewing at the Federal Housing Administration (FHA). The FHA is required to have capital reserves of 2% of the loans it insures in what is called a capital reserve fund. As of November they had only .53% in reserve. Short of a bailout, there are a couple ways of boosting the funds in that account. Both would cost the consumer frustration. They could increase the cost of the insurance premiums they charge on each loan and/or increase the amount of the minimum down payment requirement. Buyers may now put down as little as 3.5% on an FHA loan. If you have clients thinking FHA loan, now may be the time to buy.

December 2nd Mortgage Market Wrap-up

Connecticut Home Mortgage — Wed, 02 Dec 2009 16:29:17 -0600

Mortgage backed securities (MBS) closed down 12 basis points (bps) at 102.06 right on a support level. The next support level is a full 50 bps below at 101.56. Remember that each 50 bps move represents a .125% change in the interest rate for a conforming 30 year fixed loan. The move is attributed to the combination of an overbought market and more Fed members mumbling about inflation. With tomorrow's Treasury auction announcement there could be more downward pressure on bonds.

Can Bernanke Control Inflation?

Connecticut Home Mortgage — Tue, 01 Dec 2009 16:43:21 -0600

One of FEd Chairman Bernanke's key tasks is to manage inflation. Currently he is keeping interest rates down with his commitment to buy an additional $212. billion worth of mortgage backed securities between now and the end of March. Thusfar that has kept interest rates low and has stimulated the housing market. When that program ends however, he will be treading in dangerous waters. A number of key conditions currently existing, among them the huge deficit, the massive spending for two wars and impending tax increases, are all historically contributors to inflation. Buckle your seat belts and watch how well he can manuever through the obstacles ahead.

December 1st Mortgage Market Wrap-up

Connecticut Home Mortgage — Tue, 01 Dec 2009 16:30:57 -0600

Mortgage backed securities (MBS) were down 44 basis points (bps) today closing at 102.19 below resistance at 102.41. A Fed speaker was heard talking about the dreaded "i" word today, inflation. This combined with easing of concerns about the Dubai debt crisis caused stocks to rally as the dollar, no longer perceived as a safe haven, ran for cover and oil prices soared.

This Week's Economic Reports

Connecticut Home Mortgage — Mon, 30 Nov 2009 16:46:14 -0600

This week will be packed full of economic reports. Today was the aforementioned Chicago Purchasing Managers Index which is a high impact report. Other high impact reports this week are tomorrow's ISM Index which reflects the non-manufacturing sector and Wednesday's ADP National Employment Report which is frequently inaccurate but is still considered a harginer of jobs figures to come. The week winds up with four high impact reports on Friday. Among them are Hourly Earnings, Non-farm Payrolls, the Unemployment Rate and the Average Work Week.