Weekly thoughts:
The FHA said last week they will not request funds from the Federal Government if their reserves fall below 2% (the minimum required) they are currently at 3%. In 2007 they were 6.4%. The scary aspect is the currently 7.8% of all FHA loans are late by 90 days on their mortgage payments. That is a very high delinquency rate when reserves are running low. The worry here is we may see tighter underwriting or increasing the cost of mortgage insurance on FHA loans to try and bolster reserves..
Last week the $12 billion 30-year bond auction on Thursday was very well received by investors. The appetite for our bonds is still very high. This is good news for mortgage backed securities (MBS) as well. Bonds with 30 year maturity parallel mortgages due to their long term nature. With the demand for the 30-year bond strong that gave an overall good feeling in the mortgage backed security market that the demand is still there. This auction boosted the MBS market and helped interest rates improve last week.
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