Hey there - crazy week behind us - cloudy weekend ahead of us - might be a good time to get caught up on paperwork if we don't feel like going outside.  While doing so check out your mortgage as it might be worth consideration to refinance.  You might want to advise your clients to do the same.  There are some really great rates available. 

For Immediate Release

June 17, 2010
Contact: corprel@freddiemac.com
or (703) 903-3933

Slowing of New Construction Seen as Homebuyer Tax Credit Expires

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 4.75 percent for the week ending June 17, 2010, up from last week when it averaged 4.72 percent. Last year at this time, the 30-year FRM averaged 5.38 percent.

The 15-year FRM this week averaged 4.20 percent, up from last week when it averaged 4.17 percent. A year ago at this time, the 15-year FRM averaged 4.89 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.89 percent this week, down from last week when it averaged 3.92 percent. A year ago, the 5-year ARM averaged 4.97 percent. This is the lowest the 5-year ARM has been since Freddie Mac started tracking it in January of 2005.

The 1-year Treasury-indexed ARM averaged 3.82 percent this week, down from last week when it averaged 3.91 percent. At this time last year, the 1-year ARM averaged 4.95 percent. This is the lowest the 1-year ARM has been since the week ending May 6, 2004 when it averaged 3.76 percent.

 "Mortgage rates were little changed this week amid preliminary signs that the expiration of the homebuyer tax credit in April may have led to a slowdown in new construction," said Frank Nothaft, Freddie Mac vice president and chief economist. "Starts on single-family homes fell 17 percent to an annualized pace of 468,000 units in May from April's 20-month high. In addition, permits on one-unit homes fell to the slowest pace since May 2009. Finally, builders became more pessimistic in their near-term outlook in June, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

"Nonetheless, household balance sheets have been improving over the past four quarters. In aggregate, households gained $6.3 trillion in net worth in the first quarter from a year ago, according to the Federal Reserve. In addition, homeowners have regained $1.1 trillion in home equity over the same time period."

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From Think Big, Work Small

Treasuries and mortgage opened fractionally soft this morning with the stock indexes also slightly lower at 9:00 am. There are no economic releases today; today is quadruple witching day, expirations of options and futures contracts that can cause increased volatility. Generally the volatility occurs after the open and at the end of the day as traders work the markets.

At 9:30 the DJIA opened +5, 10 yr note -3/32 at 3.20% +1 BP and mortgage prices +1/32 (.03 bp) frm yesterday's closes. By 10:00 the indexes were down a little.

Europe is still on the front page; the EU will perform stress tests on the regions large banks in an effort to ease concerns that have increased over the strength of the financial system as debt default concerns in Greece and a few other countries. A positive step, but as is the case since the global economic decline investors are already questioning how the tests will be conducted. The EU still hasn't disclosed details of its tests, including whether they include a sovereign debt restructuring, raising concern among money managers they may not be stringent enough.  Large banks in Europe are voicing opposition to the publishing of the tests when completed, worrying that the tests may weaken some banks. The same thing occurred here when stress tests were done on our large banks, our government capitulated and refused to reveal the results other than in generalities, refusing to release the results on individual banks.

Alan Greenspan is out commenting that US debt increases may lead to a huge spike in interest rates. No doubt, but when is the question. He didn't even attempt to provide a time frame, but warned what every bond investor already knows; that with Treasury borrowing $180B a month from 2 yr notes to 30 yr bonds will eventually force US interest rates higher. Not to worry now though; with no inflation and safety moves into treasuries we don't expect a big increase in rates through the rest of the year. The US economy is still a question; depressed housing sector, high unemployment and now with yesterday's manufacturing data weakening the outlook for interest rates remains good.

For the last month the 10 yr Treasury note has traded 95% of the time within an 18 basis point range, from 3.32% to 3.16%. Yesterday the note closed at 3.19%, this morning so far buying has waned with the equity market a little stronger early today. Quadruple witching today may move markets but not based on fundamentals but on expirations of options and futures contracts. Looking at the mortgage market charts, mortgages have been unable to break through near term resistance levels, however still holding their 20 day averages. The momentum oscillators are in neutral areas for the immediate term. Still bullish but edgy.

Look for choppy markets through the day; the same trade however, if the stock market rallies the bond and mortgage markets will be under pressure. With no fresh data today or Monday and next week's Treasury borrowing ($108B) the rate markets do have a little headwind. The mortgage markets are finding a little support these days as an adjunct to treasuries with yields high and mortgage volume declining. That said, mortgages are not likely to deviate from the direction in treasuries regardless of what some in the business are saying. 

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Time to Refinance

 

by TaxMama on June 17, 2010

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Today TaxMama hears from Al  Tompkins at Poynter.org . Al says, "I generally don't get too excited about little movements in interest or mortgage rates, but they are moving into record-low territory. It could truly be worth considering refinancing if you are going to stay in your home awhile."

 

My friends,

Al is right. When rates are as low as 4.72%, with 15-year rates down at 4.1%, it's time to start looking at your mortgage. Do some shopping around to see if you can cut your current payment.

Last time they were this low, we refinanced our mortgage. We rolled about $30,000 of other debt into the new mortgage - and took out a new loan for 10 years at 4.375%. By making the same payments we made on the old loan - we are paying that 10 year loan off in under 7 years. After all, we are paying much less interest so the money reduces the principal more quickly.

Here are some guidelines and warnings:

1)       When you refinance, if you consolidate your debt into your new loan, your interest deduction may be limited. You may only deduct interest on up to $100,000 of mortgage debt above the original loan (plus costs of improvements and remodels).

2)       Do NOT get a variable rate loan, no matter how tempting the initial rate. The whole purpose of this refinance is to lock in a low, fixed rate.

3)       If you can, get a 30 or 40 year loan with no prepayment penalty. Pay more than the minimum payment when you can afford to. When you can't, your monthly obligation will be lower. So, the minimum payment is easier to afford in the lean months or years.

4)       Shop for loans with no costs or fees if possible.

5)       Do NOT prepay any costs. Those are rip-offs and there might not even be a loan forthcoming at the end. Keep shopping.

6)       Start your loan hunt with your own lender. They may have a program for you with less red tape for existing customers who has proven to meet their obligation consistently.

7)       Do NOT cash out all your equity. That's why so many  people are in trouble today. Don't be a pig. But if you anticipate needing some money to cover expenses (or even loan payments) within the coming year, cash out enough to cover that - and put the money into savings until you need it.

Be smart and money wise. Take advantage of opportunities when they come.

And remember, you can find answers to all kinds of questions about mortgage interest and other tax issues, free. Where? Where else? At www.TaxMama.com.