Hey there - let's agree that today is our Lucky Day - and not fall victim to old superstitions! Below are some great resources to help you get organized so that if disastor strikes you won't be in a lurch! The economic commentaries point to some interesting trends in the housing market and the impact our low rates are having. The last bit of info pertains to FHA and the lack of reserves that this agency is faced with.
As always please call me when I can be of assistance to your clients, friends & associates.
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Take Stock of Your Stuff...While You Can
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| Mortgage Interest Rates for Fixed Rate Mortgages* | |||||||||||||||||||||||||||||||||||||||||||||||||
| Rates as of Friday, November 13, 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||
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| *Rates are subject to change due to market fluctuations and borrower's eligibility. | |||||||||||||||||||||||||||||||||||||||||||||||||
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Imagine the nightmare of having your home damaged or destroyed. Then, to make matters worse, imagine trying to recreate and remember all of the contents of your home for insurance and replacement purposes. Many thousands of Americans find themselves in that situation every year. If it happens to you, will you be prepared? 
From "Think Big, Work Small"
Mortgage markets continue to improve early this morning, the 10 yr note however was unchanged through 9:00. The stock indexes traded better early pointing to a better open. Guess why; the dollar is weaker today. Yesterday the dollar had some strength, the DJIA declined and crude oil prices fell over $2.00.
At 8:30 the Sept trade balance came with a deficit of $36.47B, about $5B more than expected and the worst monthly deficit in 10 years. Imports of autos and higher oil prices contributed to the increase. The jump in the trade deficit will cause a downward revision to Q3 GDP growth when the preliminary GDP hits on the 24th; originally reported at +3.5% in the advance report. Import prices for Oct were +0.7%, export prices +0.3%; imports increased 5.8% while exports were +2.9%. Nothing in these reports was a surprise; we still import more than we export and that won't change. Even with the dollar falling almost daily our exports will not match imports as the US cannot produce goods at costs cheaper than we can import them.
The world is in a currency war; America is letting the dollar crumble and it isn't only natural market forces. It is a unannounced, unwritten plan to let the dollar fall in an attempt to make US exports more competitive and fuel the carry trade by enticing investors with stronger currencies to use that strength to buy America on the cheap. Not necessarily a mistake if we view it in the present context, but in the long run a weak currency, especially the US dollar will undermine the value as the world's reserve currency thus lessening the clout in trade the US has always had. The cheap dollar is the prime support for the US stock and bond market and consequently mortgage rates. Both equities and bonds are essentially dollar trades.
Meanwhile, many of the developing countries are trying to no avail to prop up the dollar against their currencies to better compete globally. Russia, Brazil, South Korea and many more buying dollars to stem the tide. Can't do it however, the foreign exchange market is by far bigger than any central bank or combinations of central banks to control. The only way the dollar will strengthen is when US interest rates begin to increase, but the Fed and the Obama administration are in no mood to do that with our economic mess. Higher US rates will send the US recovery back a few steps and further harm the fragile mortgage and housing markets. Much of the greenback's decline stems from investors borrowing funds in the U.S., where the target benchmark interest rate is between zero and 0.25%. They then invest the proceeds in countries with higher rates and faster growing economies.
The last of the data this week, the mid-month U. of Michigan consumer sentiment index; expected to have improved to 71.8 frm 70.6 at the end of Oct, it dropped substantially to 67.0; the one year out expectations fell to 67.0 frm 81.0 at the end of Oct. The declines in the survey are one on hand concerning, but the declines were so intense markets are not taking it too seriously. Sometimes when data is way off expectations markets toss it out or do not take it at face value; so far that appears to be the case given the minor reactions in both stocks and rate markets.
Mortgages are holding today so far, as is the 10 yr note. It is the coiling spring scenario; once the tight range is breached it will set a big move in the direction of the breakout. Tight ranges usually imply the market is in balance between bearish and bullish outlooks, the longer the balance is maintained the possibility of a huge move in the direction of the break increases. The likelihood is a break to higher interest rates based on present concerns on inflation as the dollar falls and the recovery improves.
From Freddie Mac: Long-Term Rates Fall to Lowest Level in Five Weeks
30-Year FRM Below 5 Percent for Five of the Last Seven Weeks
McLean, VA - Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.91 percent for the week ending November 12, 2009, down from last week when it averaged 4.98 percent. Last year at this time, the 30-year FRM averaged 6.14 percent.
The 15-year FRM this week averaged 4.36 percent down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 5.81 percent.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.29 percent this week, down from last week when it averaged 4.35 percent. A year ago, the 5-year ARM averaged 5.98 percent.
"Mortgage rates eased further over the week, helping to promote an affordable home-purchase market and stimulate refinance," said Frank Nothaft, Freddie Mac vice president and chief economist. "This comes at a time when house price declines are moderating and consumer demand for prime mortgages at commercial banks has picked up.
"The National Association of Realtors® reported that national median sales price of existing homes fell 11.2 percent in the third quarter relative to the same period last year. Moreover, almost 20 percent of the top metropolitan areas experienced positive annual growth, compared to only about 12 percent in the first quarter of this year."
From Wall Street Journal: Housing Agency Reserves Fall Far Below Minimum
The Federal Housing Administration's capital reserves have fallen to razor-thin levels, increasing the likelihood the agency will eventually require a taxpayer bailout, and adding fuel to the debate about how much support the U.S. should provide to the mortgage market.
The FHA has said for months that its reserves for unexpected loan losses would fall short of the required 2% level by this fall. But an audit of the FHA released Thursday showed that reserves have been depleted much faster than the agency and analysts had expected. The FHA's capital-reserve fund fell to $3.6 billion as of Sept. 30, down 72% from a year earlier, leaving reserves at just 0.53% of the $685 billion in total loans insured by the FHA.
A sign promotes the government's tax credit for first-time home buyers outside a house for sale in Aurora, Colo., in October.
Administration officials said the losses, while large, come as the FHA is helping to heal the housing market. "That reserve account is playing exactly the role that Congress intended it to," said Shaun Donovan, secretary of Housing and Urban Development.
Mr. Donovan, whose agency oversees the FHA, also played down the idea that the FHA would need a federal subsidy, except under the most severe economic scenarios. That is because the FHA still has around $30 billion in capital to pay for losses.
But the projected capital losses in 2009 were worse than the most pessimistic assumptions from last year's review, and some housing analysts and economists say it is increasingly likely the agency will need to ask Congress for money in the years ahead.
"If it were private, it would need a substantial capital infusion now, period," said Thomas Lawler, an independent housing economist. "They're a monoline mortgage insurance company that has just gone through the worst housing environment since the Great Depression. How can anyone argue that they wouldn't need more capital now?"
The FHA doesn't make loans but insures lenders against defaults on mortgages that meet standards set by the agency. The volume of loans insured by the agency jumped 75% in the 2009 fiscal year, which ended Sept. 30, as lenders shied away from risk and as policy makers used the agency to help jump-start the ailing housing market.
The FHA's rising losses reveal one of the hidden costs of the U.S. government's extraordinary efforts to rescue the housing market, raising questions about how much more support the U.S. should give to the mortgage market. A sharp pullback by the FHA could undo recent stabilization in the housing market, but the agency's outsize role in the mortgage market could make it harder to attract private lenders back to the market.
"The longer you have government-subsidized mortgage insurance, or government-subsidized mortgages, or a first-time home-buyer tax credit, the harder it is to scale back," said Mr. Lawler.
Even if the FHA doesn't ask Congress for money, the agency probably will need to raise the insurance premiums it collects from borrowers. Officials said a final decision on premiums hadn't been made.
The FHA largely avoided the subprime bust by requiring minimum down payments and documentation of incomes when many lenders didn't. But the New Deal-era agency has seen its market share swell, to around one-quarter of the mortgage market today, up from 2% in 2006, according to Inside Mortgage Finance.
The U.S. Federal Housing Administration's cash reserves drops well below the congressionally mandated level. The News Hub discusses whether we should expect another housing bailout.
During the second quarter, the FHA backed nearly half of all mortgages made to first-time home buyers, and today it accounts for around half of all new home loans in some of the nation's hardest-hit housing markets.
"The role the FHA is playing in the market right now is helping to...prevent a much worse, more toxic economic decline," said Sarah Rosen Wartell, an executive vice president at the Center for American Progress, a liberal think tank.
The FHA has been particularly exposed to the economic downturn, because it allows borrowers to finance purchases with down payments as low as 3.5%. In a declining housing market, that means borrowers could soon end up owing more than their homes are worth, and raises the risk of default when borrowers face job loss or other hardships. More than half of all FHA-insured loans outstanding had an initial loan-to-value of 95% or more.
Rep. Scott Garrett (R., N.J.) introduced a bill last month that would raise minimum down payments to 5%, something that the agency opposes. "Others are beginning to see that this could be the next major bailout," he said.
David Stevens, the commissioner of the FHA, warned on Thursday that the "biggest mistake" that the agency could make would be to "overcorrect."
Write to Nick Timiraos at nick.timiraos@wsj.com
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