Welcome to Tax Week. I hope your tax return is safely finished and in. That puts us squarely in the middle of April and only 18 days remain to get a valid contract in place to qualify for the $8,000 or $6,500 credit. Congress did heed the advice of realtors when the tax credit was extended this time, giving two deadlines for contract and closing rather than just one deadline which would cause log jam problems at title companies. If you didn't see the article Tuesday on the expiring tax credit in the Bulletin, Andrew Moore quoted Signet a few times. You can link to it here and if the article doesn't come up, it is reprinted at the bottom of this email.
The big news of the week came from Bernanke comments (referred to as Fedspeak) and basic supply and demand issues with long-term bonds. And it was all good news for the rate-influential Mortgage Backed Securities (MBS) market and residential interest rates. Wednesday had a very significant Treasury auction that went quite well. It surprised a bit and drove the demand for long term bonds up (prices up and interest rate yields down.) so as we sit this morning, the rates for 30-year fixed have improved back to 4.875% for the price of an origination and normal closing costs. Our 30-year amortizing adjustables, fixed for 7 years are at 4.000% for the same price. This is low enough that borrowers with a specific time horizon really need to consider all options before settling in. We are happy to help with the analysis and give people the best available options.
The comments from Bernanke were surprising only in that many in the press had started to believe that we really were in a steep recovery. You and I can feel it and see it and know that we are not there yet at all. Protracted 10% unemployment and closer to 20% real underemployment look to be a fixture for at least 18 months. Mr. Bernanke specific words were: "We are still far from being out of the woods. Many Americans are still grappling with unemployment or foreclosure, or both." Remember that tough economic times hold off interest rate inflation and so bad news like this is keeping interest rates down.
Commercial Loan Program news: We followed up on the legislation in congress and there are at least 4 separate bills that are intended to accomplish the following four objectives before the end of April:
- Extend the fee waiver on SBA 7(a) loans to December 31, 2010. 7(a) loan are used in business purchases and generally have adjustable rate terms.
- Extend the fee waiver on SBA 504 loans also to 12/31. These are 20 year fixed loans for owner occupied property purchases with rates under 6% and loan to value numbers as high as 90%.
- Expand the loan guarantee limits from the current $2 million to $4-5 million
- Expand the availability of 504 loans to include refinances.
The last two expansions are critical for commercial real estate recovery. Current LTVs on refis are generally near 65% and limiting some loans from being renewed. Congress is back from their spring recess today, so we will start to hear a flood of news from Washington again. We'll keep you posted on the progress of these bills. Other news this week will be on inflation (CPI numbers and retail sales numbers release on Wednesday) and Housing Starts on Friday.
Thank you for your support and encouragement. With emphasis on customer-focused analysis and exceptional loan products, Signet Mortgage continues to expand. Let us help you, your friends and clients get the best advice available. These days, more than ever, experience counts! Make it a great week!
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