The March Jobs Report is in - a whopping 80,000 jobs were lost in March making it the worst report in 5 years. The unemployment rate ticked up from 4.8 to 5.1% and projections were at 5.0%. Because of this negative news, bonds are currently up +44 basis points. The rate for a No Money Down, 30-year fixed Loan Amounts over $170k is 5.75%.
Have you ever been involved in a bidding war on Ebay and you're getting down to the last minute of bidding........you have the best bid.....and just when you're about to win the product.......you accidentally kick your plug and your computer shuts off. "NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!!!!" is what your kids hear as you're screaming your head off. You frantically sign back on the computer and that pain-in-the-rear that you were at war with won the product....by bidding a penny over your last bid!
I Welcome You to the Mortgage Interest Rate world.
I received an email from one of my past customers saying, "Santos, I heard mortgage rates went down to 5.25% and are going lower." Seeing as my best rate for the past couple of days has been 5.75% with no points, I just had to chuckle.
There used to be day when a rate sheet was good for a whole day and sometimes two or three days. Those days seem like only a dream. There are days when bonds start off in a good mood and rates decrease on the first rate sheet. Then positive stock market news is released and bonds take a dive. Then the stock market loses steam and close out on a negative note. That's when things get really crazy when trying to quote an interest rate to a customer.
My point - make sure your Loan Officer has the technology to be up to date on mortgage rates. A 1/4 percent higher rate could be the difference between a loan approval and loan denial.
.....believe it or not, it's NOT Michigan. I keep telling my agents, "as bad as it seems here, there's always something worse out there!" So hang in there folks....it WILL get better!
Below is the link from a 60 MINUTES story on the Foreclosure Capital of the U.S!
(Cut and paste this link into your browser if you can't click on it)
I have been in the mortgage business for 9.5 years now and I feel like a brand new Loan Officer.
In the state of Michigan, Fannie Mae has ruled that MOST of our state is considered an area of "declining markets." They say MOST of the state of Michigan is but I haven't ran across a zip code that ISN'T. So the days of No Money Down programs in Michigan in the Conventional Loan world is gone. Yes, the lenders offer them but Fannie Mae is saying that if a home is in an area of declining markets, the customer MUST put 5% down. So in Michigan, the only way you're going to purchase a home with No Money Down is with an FHA loan with Down Payment Assistance (FHA does not have the 'declining markets' issue).
So sharpen your FHA pencils, Michigan agents....because that's going to be the trend. Keep in mind that we still have to pay attention to the FHA Maximum Loan Limits per county. To check the maximum Loan Limits, follow this link: https://entp.hud.gov/idapp/html/hicost1.cfm
Because there are A LOT of deals that are coming in on Foreclosure Homes, be VERY careful of any safety issues that might come up in the appraisal and talk about them to your potential buyer. What we are finding is that the foreclosing bank will NOT pay for any necessary repairs so it becomes the responsibility of the buyer to fix any issues. I had a deal where the previous owner took all or most of the light fixtures and the wiring was exposed. The lender was requiring that the hazard was remedied BEFORE the closing and that threw everyone for a loop. But save yourself from any potential headaches....take a little more time in the beginning and it'll save you a lot of headache in the end.
In today's market, the appraisal will make or break a deal regardless if you have a buyer with 700 credit scores. So again....what we used to know.....throw that out the window.
I was talking to a friend of mine that loves going to the casino about the market and I could only give the following analogy in order to explain how the lenders are reacting:
You take the last $500 you own to a casino. The first $1 you put in and lose, you really aren't worried yet. $20 is lost and you're still not worried. When you have lost $450 of the $500 and you haven't won anything yet, you start to get worried and really start considering other options. When you get down to your last $10, you really want to KNOW that one of those last dollars is going to perform before you put it in the machine. Well, we have seen many lenders have gone under because they spent their last $10. The ones that are still out there are on their last $10 so they want to KNOW that their loans will perform.
In other news, bonds are having a favorable day after losing -144 basis points over the past few days. So time and time again, news of the Fed's Fed Funds/Discount Rate does not really translate into lower mortgage interest rates. As of today, we could offer a 30-year fixed at 5.50% for purchase transactions over 170k with credit scores over 680.
No lack of volatility in the market today! Mortgage bonds opened up relatively flat at -3 basis points and over the last few minutes, they have dropped down to -16 so we may see a little bit of a rate increase. As of this morning's rate sheets, we could've squeezeda 30-year fixed in at 5.50% for purchase transactions over $170k with 5% down. With what's happening as of now, we might see them trickle back up to 5.625%.
In other news:
This morning's CPI (Consumer Price Index) numbers came in better than expected at 2.4% so this looks like it's contributing to the dent in mortgage bonds. At 2:00 today, the Fed's Beige book (report of the country's economic conditions) will be reported.....so this could be a bond market mover as well.
100% Financing - As you know, it's getting harder and harder to get these loans - not only because of credit score requirements, but now because Fannie Mae has declared most of Michigan an area of declining markets. When we run a loan through Automated Underwriting, whether it be through Fannie Mae or Freddie Mac's system, we get an approval or a decline. If the loan is approved, it gives us a report of the information that we need to submit in order to turn it into a final approval (a pay stub, W2, etc). Before in the collateral section, it was just indicate that we need an appraisal with outdoor and indoor photos. Now, Fannie Mae is putting a blurb that resembles "this address appears to be in an area of declining values." If that is the case, the borrower will HAVE to put 5% down. Again, it's not anything to do with the borrower's qualifications - it's the home itself and how Fannie Mae is categorizing it. For a very brief window, we were running loans through Freddie Mac's AUS because they weren't putting that blurb on their approval letters. Starting today, some lenders are no longer accepting the Freddie Mac approvals. So again...this market is ever-so-changing! If this completely goes away, you will have to start sharpening your FHA with Down Payment Assistance programs pencils in order to do a No Money Down program. I would be happy to walk you through the process - it is actually very easy.
THE ELASTIC WAISTLINE PANTS ARE READY FOR TOMORROW!!!
Volatility continues in the Bond Market. Currently, bonds are up a whopping +38 basis points so we're enjoying this news. As of today, we are offering 30-year fixed at 6.375% with NO points and we will advise to "float" your interest rate to see if further gains come our way.
Yesterday, Mortgage Bonds opened lower, hovered on an support floor of support throughout the day before dropping sharply right before the market close. Unfortunately, we heard of some lenders re-pricing early in the day, which is unusual in advance of the release of the Fed Meeting Minutes without a significant move in the market. Thankfully we have had a great ride on the Up Escalator, which provided significant gains. But, we apologize if your lender had re-priced prior to the alert. We always strive to be ahead of lender moves and assure you that we will continue to do our best.
Yesterday, it was also interesting to see the divergence between Mortgage Bonds and the Ten-Year Note. At one point in the day, the Ten-year Note was trading 12bp HIGHER and Mortgage Bonds were 22bp LOWER.
Also yesterday, the Fed Minutes and Forecasts were released. There were no surprises, but the Fed did forecast lower inflation ahead, which is good news for Bonds in the longer term. Additionally, there was some talk that indicated some Fed members feel the Fed should not cut rates at the Dec 11th Meeting. However, the forecasts for lower inflation, slower economic growth and slower job growth all suggest that there may indeed be another rate cut in December.
Stocks are getting hammered lower and from a technical standpoint are looking pretty bad. Each of the three major stock indices, the Dow, NASDAQ and S&P 500, are trading beneath their 200-day Moving Average. As long as Stocks continue to struggle, Bonds may be the beneficiary as money flows out of Stocks and into Bonds.
Technically, Mortgage Bonds remain on the Up Escalator and this morning's rebound higher has popped prices back above yesterday's floor of support. With prices still enjoying the nice uptrend we will continue to float longer-term transactions, but be mindful of the extreme volatility and itchy trigger fingers some lenders are showing.This means that if you have transactions closing in the next couple of weeks, you need to pay closer attention to the quick daily changes in pricing. However, with transactions closing 30 days out or more, it is wise to watch the long-term uptrend in price we are seeing. In either case, should prices step off the Up Escalator as we have seen in the past, we will quickly change to a locking stance across the board.
On behalf of John Adams Mortgage and myself, Have A Very Safe and Happy Thanksgiving Day!
Welcome to our roller coaster ride! Yesterday's update ended with a "floating" stance because bonds closed out the day at +25 points....so, of course, we thought rates would get better. Right out the gate this morning, bonds opened up at roughly -22 basis points so they woke up on the wrong side of the bed. Throughout the day, they deteriorated even more and closed out the day at -34. Although none of our lenders issued a rate increase, we do expect the increase to hit tomorrow. So if you have overnight protection..........lock 'em if you got 'em!
Why all the commotion? The Fed 'hinted' in their meeting minutes that they would cut rates again and, as history has proven, mortgage bonds react negatively. So monies pulled out of bonds and filtered into stocks. So we'll see what tomorrow brings.
As of the close the day, we are offering 30-year fixed mortgages at 6.50%.
On a warmer note.......can you smell the turkey already?!?!?/ :)
2 MORE FULL DAYS BEFORE THE BIG 'STUFF YOURSELF TILL YOU CAN'T STUFF NO MORE' DAY!
I, for one, will be hitting the gym extra hard this week in anticipation of Thursday's feast! Is it bad when you're working out and you're thinking of what you're going to eat later on that day? hahahah :)
OK...now to business.....
The big news was from this morning - Goldman Sachs downgraded Citigroup to a "Sell" from a "Hold", saying that Citi could have to write off an additional $4 Billion due to sub-prime mortgage related losses. This announcement has applied pressure on Stocks, which in turn has boosted the Bond Market slightly higher.
Tomorrow at 2pm ET, the new and improved, "more transparent" Fed is slated to release the first of its new economic forecasts as well as the Minutes from its October Meeting. The new quarterly forecasts from the Fed will include their projections on Overall and Core Personal Consumption Expenditure, Real Gross Domestic Product and the Unemployment Rate. The Minutes and forecasts could have an impact on the market tomorrow, especially as Traders look to handicap the December 11th Fed meeting for direction on whether the Fed will cut or not.
Mortgage interest rates are still at 6.375% for a 30-year fixed with no points and the bond market looksl like it will close on a positive note.....so today's stance is a "floating" stance. If anything changes, I will let you know.
In observance of the Thanksgiving Holiday, the Bond market is scheduled to close early this Wednesday and Friday at 2:00pm ET with a full-day close on Thursday.
Well, it's the Friday before the Thanksgiving holiday so I think I can officially turn my holiday lights on outside :) Oh you just KNOW I had them up last weekend! I just thought it was a little early for me to turn them on.....but now....I'm good! :)
Closing out the work week.....
On the economic front, Industrial Production and Capacity Utilization, which measure the change in industrial output, were reported close to expectations and remain a bit below levels consistent with inflationary pressure.
Mortgage Bonds have been experiencing a little bit of an upward trend and we have been giving a "floating" stance. However, closing out the day, mortgage bonds have dipped down to -21 basis points. As a reminder, when they drop below -16, we usually see an intraday rate increase. I saw the stock market bounced back a little bit today so it's taking a toll on bonds. I am ultra conservative and definitely not a gambler so I have suggested that my pipeline lock today - better safe than sorry!
As of 4:40 pm today we are offering a 30-year fixed at 6.375 with NO points.
ONE MORE WEEK TILL THANKSGIVING?!?!?!?!?? How this year is flying by!
I hope everyone is having a FANTASTIC day. Yesterday's temperature was a beautiful 55'ish...and today is a cold, rainy, snowy mix at 30 degrees. WELCOME TO MICHIGAN!
Mortgage Bonds are trading higher, currently at +19 basis points, after this morning's inflation report. The Consumer Price Index (CPI) reported that inflation is inline with expectations. However the Core CPI, which strips out food and energy, was reported at 2.2%--up from 2.1%.
Typically, higher inflation is a negative for Bonds. But in this case, Mortgage Bonds improved because Traders viewed the higher Core CPI as a potential reason for the Fed to hold off on another rate cut. This initially led to Stock sales with the proceeds moving into Bonds--which has helped Bond prices move higher.
For now, I will continue to float as bonds enjoy the improved pricing. Seeing as bond prices have increased higher than the "rule of thumb" +16 basis points, we may see rates go down. As of today, we are still offering a 30-year fixed at 6.50% with NO points.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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