Happy Friday!  The ships are in, Rose Festival is still going in spite of the rain!  Maybe the clouds will part and we'll get to go outside for a bit this weekend!

Below are commentaries that give some insight into the mtg rates.  Also, information is included below on how our first time buyers might have access to assistance funds. 

As usual, if any questions please contact me.  Thanks!

From "Think Big Work Small"

The first Friday of the month is always a walk on the wild side in terms of positioning for the monthly employment report. Today was no exception; markets had believed non-farm payrolls would increase by 540K (the average consensus yesterday) with most coming from temp census workers but also a sizeable increase in private sector jobs. The BLS reported non-farm jobs increased only 430K with census workers amounting to 411K and private sector jobs up just 41K. Adding to the increasing reality that the employment sector is still not improving,  March revisions took away 22K from what were originally reported. The unemployment rate fell to 9.7% -0.2% and a little better than the 9.8% expected.

We have noted more than a few times lately that the US economy will continue to face high unemployment for much longer than the Wall Street optimists have been thinking. Many of the lost jobs in the past two years are not likely to come back for a very long time as businesses are not as optimistic as those that make their living getting investors to buy. PIMCO's Mohammad El Erian coined the phrase " a new normal" to describe the future of the US economy; meaning that the recovery and the economic future of the US will not rebound to the levels seen in the past 10 to 20 years. In many circles he was roundly criticized as too pessimistic; one thing Wall Street will not swallow easily is any view of a slower economy in the longer term outlook. Today's employment report adds some credence to that "new normal" as a definition that will vary from what we have considered normal prior to the financial crisis two years ago.

The political view will likely tout the decline in the unemployment rate to 9.7% as a positive sign that jobs are being created. What in fact the decline in the unemployment rate implies is that more workers have simply given up looking for a job. When a person is surveyed in the phone survey that is used to establish the unemployment rate is asked if he/she is unemployed and is continuing to actively look for a job that falls in the camp of the unemployed; if however the response is that the person is no longer looking, he/she is not considered as unemployed.

Adding to the selling in stocks this morning and the strong rally in the bond and mortgage markets; after a few days of some relaxing over the EU debt issues, it is back in play. Hungary is now saying it is in trouble with its debt, a new problem and a new country in debt difficulties.  Hungary said it's in a "very grave situation" because a previous government lied about the state of the economy. Sovereign debt problems in Europe are not relaxing, but are worsening. This morning the euro is crashing and the German bund (its 10 yr note) is now at the lowest rate it has ever seen at 2.60% as safety moves are increasing.

500K census workers in the past two months have been hired (411K in May). That is an average of 10K census workers per state---!!

Technically, yesterday both the bellwether 10 yr note and the 4.5 FNMA coupon tested and held their respective 20 day MAs. Today's employment report and the news out of Hungary will increase market volatility; if floating loans we suggest keeping alert to any reversals in today's early rally. The wider trend continues to be bullish for now.  

Should clients Lock???  Advice to consider if closing: 

5-7 days - float but volatility may remain high.  7-15 days - float be remain on alert.  15-30 days - continue to float.  30+ days - float

From Freddie Mac:  Long- and Short-Term Rates Nearly Unchanged From Last Week

 

June 3, 2010
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 4.79 percent for the week ending June 3, 2010, up slightly from last week when it averaged 4.78 percent. Last year at this time, the 30-year FRM averaged 5.29 percent.

The 15-year FRM this week averaged 4.20 percent, down slightly from last week when it averaged 4.21 percent. A year ago at this time, the 15-year FRM averaged 4.79 percent. The 15-year FRM has not been lower since Freddie Mac started tracking the 15-year FRM in August of 1991 and breaks last week's record low.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.94 percent this week, down from last week when it averaged 3.97 percent. A year ago, the 5-year ARM averaged 4.85 percent.

The 1-year Treasury-indexed ARM averaged 3.95 percent this week, unchanged from last week when it averaged 3.95 percent. At this time last year, the 1-year ARM averaged 4.81 percent. The 1-year ARM has not been lower since the week ending May 27, 2004 when it averaged 3.87 percent.

"The economy grew at a slower rate than originally reported in the first three months of the year, according to the Bureau of Economic Analysis, which suggests inflation will remain tame in the near term," said Frank Nothaft, Freddie Mac vice president and chief economist. "As a result, mortgage rates held at historic levels this week. In fact, rates on 15-year fixed-rate mortgages set another record low for the third week in a row.

"There are also signs that credit conditions may be improving. The number of homeowners with private mortgage insurance who became current on their mortgages outnumbered those who defaulted for the third month in a row in April, according to data compiled by the Mortgage Insurance Companies of America."

From Dick Lepre, San Francisco

Friday June 4, 2010 The BLS Employment Situation Report painted a bleak picture.  Payrolls rose by 431,000 but more than 90% of those jobs were temporary census workers.  Private sector jobs growth was 41,000 down from 218,000 in April.  The Unemployment rate fell to 9.7% partly because 322,000 people left the labor force.  This is one month on the path of recovery but a very bleak picture for the jobs market Home Sweet Home Program ABOUT THE PROGRAM The HOME Sweet Home Program for first-time homebuyers operates together with your buyer's lender, who must be a member of the Oregon Bankers Association, to assist them in the purchase of their first home. Through funds received from the NAR Ira Gribin Workforce Housing Grant, your buyer's lender can make available to the borrower a $2,000 grant for their down payment and/or closing costs, along with matching assistance from the borrower's lender or other qualified sources valued at a minimum of $500. The borrowers must meet all the program requirements as outlined in the Home Sweet Home Program procedural guide. More details about the HOME Sweet Home Program is available from the Oregon Association of REALTORS® and the Oregon Bankers Association. Grant availability is subject to program funding. The Oregon Association of REALTORS® and the Oregon Bankers Association are pleased to help your clients purchase their first home!   For First-Time Homebuyers AMOUNT OF ASSISTANCE In addition to the $2,000 grant, your buyer's lender will help your buyer determine the type and amount of additional assistance from other sources that fit their needs and budget. HOMEBUYER EDUCATION Successful completion of an approved homebuyer education course is required to be eligible for assistance through this program. If your buyer has not completed such a program, they can contact their lender or visit www.ohcs.oregon.gov/ OHCSSFF_HomebuyerTraining.shtml to learn about upcoming classes in their area. ELIGIBLE BORROWERS To be eligible for a grant; borrowers must: • Be qualified as a first-time homebuyer • Occupy the property they purchase as their principle residence • Not have household income over 100% of the area median income in the country where they purchase their home. Median income varies by county - the lender can give information on specific limits • Be able to qualify for a standard mortgage loan product • Have no more than $10,000 in liquid assets left after loan closing • Successfully complete an approved homebuyer education course • Be a legal Oregon resident or be pursuing permanent residency ELIGIBLE PROPERTIES Eligible properties include any new or existing single-family residences located in the State of Oregon, including site-built homes, condominiums, townhouses and manufactured homes. Properties must meet quality standards required to qualify for a mortgage loan.