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MLS 931442
Smart Mortgage Update
Effective December 12, Fannie Mae is lowering their maximum allowable debt to income ratio for borrowers. Their current 55% maximum will be lowered to 45%. A debt to income ratio is determined by taking a borrowers monthly debt (PITI mortgage payment + Auto Payments + Student Loan payments + Minimum payment on credit cards) divided by their Pre-Tax monthly income. A borrowers monthly income is still determined by underwriting rules. Bonus/Commission/Overtime require a 2 year average and Self Employed/1099 borrowers base income on their tax returns (usually the Adjusted Gross Income). Also, Fannie will no longer allow fico scores under 620 regardless of any other loan factors.
This is not the opinion of Brad Bergamini, Realty Executives Northern Arizona or any of its affiliates. This post is for informational purpose only and is not guaranteed and does not render as legal advice. Buying and selling Real Estate in Arizona or Prescott Arizona is a serious task and should be consulted with personally with Realtor or Real Estate Attorney. Please visit my website for contact information
Weekly Rate Lock Advisory
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Rate Lock Advisory – Sunday Nov. 22nd
This holiday-shortened week brings us the release of seven relevant economic reports for the markets to digest. All of the week’s data is being posted over just three days, so the first part of the week should be interesting for mortgage shoppers. October’s Existing Home Sales data will be posted late tomorrow morning. This report, along with Wednesday’s New Home Sales data are the least important reports of the week. They give us a measurement of housing sector strength and mortgage credit demand, but the bond market generally does not rely heavily on their results. They both are expected to show increases in sales, indicating that the housing sector may be strengthening. The first important data comes early Tuesday morning when the first revision to the 3rd Quarter Gross Domestic Product (GDP) will be posted. The GDP revision is expected to show a downward revision from last month’s preliminary reading of a 3.5% annual rate of expansion. Curre nt forecasts call for a reading of approximately 2.9%, meaning that there was less economic growth during the third quarter than previously thought. This would be good news for the bond market and mortgage rates, but it will likely take a smaller than expected reading for this report to improve mortgage rates. November’s Consumer Confidence Index (CCI) will be released by the Conference Board late Tuesday morning. It gives us a measurement of consumer willingness to spend. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This raises inflation concerns and usually pushes mortgage rates higher. Analysts are expecting to see little change from last month’s 47.7 reading, meaning consumer were just as concerned about their own financial situations as they were last month. A weaker than expected reading should be good news for mortgage rates, but a stronger than expected reading could push mortgage rates higher Tuesday. There are four reports scheduled to be posted Wednesday morning. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.5% increase in new orders. A smaller than expected rise would be considered good news for the bond market and mortgage rates. The second is October’s Personal Income and Outlays data. This data is thought to measure consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show that income rose 0.2% and that spending increases 0.5%. Smaller than expected readings would be good news for bonds and could lead to improvements in mortgage rates. The revised November reading to the University of Michigan Index of Consumer Sentiment will also be posted late Wednesday morning. Analysts are expecting to see an upward revision to the preliminary reading of 66.0. Unless we see a significant variance from the forecasted reading, I don’t think this data will cause much movement in mortgage rates Wednesday. October’s New Home Sales is the last report, but it is the least important. I don’t think this data will influence mortgage rates unless it varies greatly from forecasts and the rest of the day’s news matches forecasts. The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but they will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday , but we will likely see little change to mortgage rates that day. Overall, I believe that it is going to be an active week for the mortgage market, particularly the first half. Friday will be the least important day of the week and either Tuesday or Wednesday will be the most important. I expect to see plenty of movement in rates the first couple of days, so please be careful and maintain contact with your mortgage professional if you have not locked an interest rate yet. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other b orrowers. | ||||||||
This is not the opinion of Brad Bergamini, Realty Executives Northern Arizona or any of its affiliates. This post is for informational purpose only and is not guaranteed and does not render as legal advice. Buying and selling Real Estate in Arizona or Prescott Arizona is a serious task and should be consulted with personally with Realtor or Real Estate Attorney. Please visit my website for contact information
Here is some good information on the new home buyer tax credit.
Here is some good information on the new home buyer tax credit.
First Time Home Buyer Tax Credit
· A First Time Home Buyer is defined as someone who has not owned a Primary Residence in the past 3 years
· Once you marry a homeowner you automatically become a homeowner regardless of who is on the title and the loan (IRS rules, not my rules)
· The buyer must have an accepted purchase contract by April 30, 2010 and fund/record by June 30, 2010 to qualify.
· In Arizona, there is no way to use this money upfront for down payment or closing costs unfortunately
· The Tax Credit is the lesser of 10% of the purchase price or $8000
· The Tax Credit is “real money” that you get as part of your tax refund
· This credit does not need to be repaid if you live in the home for 3 years
· The credit begins to “phase out” for Singles with income above $125k/year and Married above $250k/year
· The max purchase price of the home is $800k.
· If Mom and Dad (that own a home) Co-Sign for their child to help him qualify, the child can still take the Tax Credit. Perfect for an FHA loan!
· This Tax Credit is a Tax Related issue and therefore you should consult a tax professional for advice. Two good websites for info are www.federalhousingtaxcredit.com and http://www.irs.gov/newsroom/article/0,,id=206294,00.html (IRS site still needs to be updated for the move-up buyer tax credit).
· To claim the credit the buyer must include IRS tax form 5405 along with a Final Stamped HUD-1 Settlement Statement issued by the title company after a successful close.
”Move-Up Buyer” Tax Credit
· A “Move-up Buyer” is defined as a home owner who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date.
· The buyer must have an accepted purchase contract by April 30, 2010 and fund/record by June 30, 2010 to qualify.
· In Arizona, there is no way to use this money upfront for down payment or closing costs unfortunately
· The Tax Credit is the lesser of 10% of the purchase price or $6500
· The Tax Credit is “real money” that you get as part of your tax refund
· This credit does not need to be repaid if you live in the home for 3 years
· The credit begins to “phase out” for Singles with income above $125k/year and Married above $250k/year
· The max purchase price of the home is $800k.
· This Tax Credit is a Tax Related issue and therefore you should consult a tax professional for advice. Two good websites for info are www.federalhousingtaxcredit.com and http://www.irs.gov/newsroom/article/0,,id=206294,00.html (IRS site still needs to be updated for the move-up buyer tax credit).
· To claim the credit the buyer must include IRS tax form 5405 along with a Final Stamped HUD-1 Settlement Statement issued by the title company after a successful close.
· Loan underwriting guidelines still state that a move-up buyer needs to qualify with both mortgage payments unless the primary residence that the borrower is vacating has 25%/30% (FHA/Conventional) equity along with a rental contract and proof of security deposit.
Take Care,
YOU COULD BE A JAILBIRD IF…
I was sent an email the other day with the following. Please read all the way through. This in not scare tacticts just scary.
JAIL FOR NO INSURANCE UNDER PELOSI BILL
The nonpartisan Joint Committee on Taxation reported that the House version of the health care bill specifies that those who don’t buy health insurance and do not pay the fine of about 2.5% of their income for failing to do so can face a penalty of up to five years in prison!
The bill describes the penalties as follows:
* Section 7203 – misdemeanor willful failure to pay is punishable by a fine of up to $25,000 and/or imprisonment of up to one year.
* Section 7201 – felony willful evasion is punishable by a fine of up to $250,000 and/or imprisonment of up to five years." [page 3]
That anyone should face prison for not buying health insurance is simply incredible.
And how much will the stay-out-of-jail insurance cost? The Joint Committee noted that "according to a recent analysis by the Congressional Budget Office, the lowest-cost family non-group plan under HR 3862 (the Pelosi bill) would cost $15,000 by 2016."
Obama’s bill only provides subsidies to help pay this enormous sum after families making about $45,000 have paid 8% of their income for insurance and after those earning a household income of about $65,000 have kicked in 12%.
The Joint Committee on Taxation noted that while the Senate Finance Committee version of the bill did not include criminal penalties, "The House Democrats’ bill, however, contains no similar language protecting American citizens from civil and criminal tax penalties that could include a $250,000 fine and five years in jail."
Remember that simply buying catastrophic insurance, which may be all the young uninsured family needs, does not constitute having adequate insurance under the Obama bill. It has to be total, all inclusive insurance for one to avoid the penalties in the legislation. That is because Obama wants to use these premiums from the currently uninsured to subsidize his program.
So Ms. Pelosi is requiring Americans to pay these steep premiums, or a fine of 2.5% of their income for not doing so, or, potentially, go to prison!
Anyone who is familiar with the U.S. prison system can attest to the large number of people incarcerated for similar white collar offenses. That the House bill would treat failure to carry health insurance or pay the fine as tax evasion or willful nonpayment is amazing!
And where is the constitutional basis for requiring everyone to buy insurance? It is OK for a state to make drivers pay for automobile insurance. Driving is not a right, it is a privilege, and the state may regulate it by demanding insurance. Banks can require homeowners to buy insurance as a condition of their lending. But how does the federal government get the right to require a family to buy health insurance or face a civil penalty and, failing that, to face either a criminal fine or jail?
The tough penalties in the House bill are designed to keep insurance companies from opposing the bill. It was the relaxation of these penalties in the Senate Finance Committee version of the legislation that led the companies to reverse field and come out in opposition to the legislation. The insurance companies want to see their coffers swell when tens of millions of new customers are required to buy insurance. The more draconian the penalties for failing to pay them large sums of money to pad their bottom lines, the better.
The more you read this bill, the worse it gets.
Man Stroke Woman – Estate Agent
I know this is funny, but what sales skills…nice.
Tax Credit
By COREY BOLES and JOHN D. MCKINNON
WASHINGTON — Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain.
The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.
The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.
Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.
The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.
While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn’t been finalized.
While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.
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Time to Read Between the Lines
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Last Week in Review |
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"THE DEVIL IS IN THE DETAILS…" Or so the famous saying goes. And when it comes to really understanding the various reports and events unfolding in the economy, it’s important to take a look at the details – not just the headlines. Here’s what you need to know. On the inflation front, the Producer Price Index, which measures wholesale inflation, unexpectedly fell due to a drop in energy prices. While that seems like good news on the surface, keep in mind that next month’s number could climb higher again, as oil and natural gas have both been on a tear higher lately. In housing news, Housing Starts and Building Permits both came in a bit below expectations, but this may be a sign that builders are exercising some caution – particularly in the face of the $8,000 tax credit for first time homebuyers that is presently set to expire on November 30th. Existing Home Sales came in better than expected – and a whopping 45% of those homes were sold to first time homebuyers – rushing to move in on that credit. Recent studies have shown that many who qualify for this tax credit aren’t even aware of it…so please let me know if you or someone you know needs more information – the clock is ticking! Additionally, the level of existing homes inventory shrunk to a 7.8 month supply, down from a recent high of 10.1 months in April. ———————–
In other news, 3rd quarter earnings season continues, where companies report their status as of the end of September. While many companies are beating expectations, it’s important to realize that many of those companies achieved better earnings by cost cutting and layoffs, not from increased sales. This is a big disconnect between Wall Street and "Main Street". Stocks are rocketing higher based on these "positive" reports, but the cost cutting and job cutting measures can only go so far…you can’t simultaneously grow the ranks of unemployment – and then grow your business, hoping for increased sales to those same people who are without jobs. Last week’s Jobless Claims numbers seem to confirm this as Initial Jobless Claims rose more than expected. In addition, the number of individuals continuing to receive unemployment benefits fell to the lowest level since March, but this is likely the result of people’s unemployment benefits expiring, without them having been able to find jobs. Also worth noting is the news that ratings agency Moody’s lead analyst, Steven Hess, said that the US needs to cut its deficit or it could lose its "AAA" rating in the next 3 to 4 years, which we have maintained since 1917! Think of all we’ve been through – two World Wars, the Depression, three Wall Street collapses and major terrorist attacks…yet our credit quality has maintained that AAA rating, allowing us to issue debt at the most favorable rates. Hess went on to say that if the US doesn’t "get the deficit down in the next 3-4 years to a sustainable level, then the rating will be in jeopardy." And just like on a mortgage when the credit rating gets reduced, interest rates move higher. This will definitely be something we’ll keep an eye on in the months ahead. After all the week’s action, Bonds and home loan rates ended the week slightly worse than where they began. AS THE PRESIDENT HAS DECLARED H1N1 – "SWINE FLU" – TO BE A NATIONAL EMERGENCY – GETTING THE FACTS IS MORE IMPORTANT THAN EVER. DO YOU KNOW HOW TO TELL WHAT’S JUST A COLD…AND WHAT IS ACTUALLY SWINE FLU? READ THIS WEEK’S MORTGAGE MARKET VIEW – AND PASS ON THE DETAILS TO YOUR FRIENDS AND COWORKERS. |
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Forecast for the Week |
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Another record sized round of Treasury auctions are on tap this week – and the massive amounts of supply that continue to flood the market can cause home loan rates to move higher, if there is ultimately not enough demand to sop up all the supply. Additionally, there are several economic reports which could be market movers. Tuesday brings both the Consumer Confidence and Durable Goods Reports, the latter of which gives us an update on consumer and business consumption and buying behavior via data on items that are non-disposable, such as cars, furniture, appliances, games, cameras, business equipment, etc. On Wednesday, there will be more news on the housing front with the New Home Sales Report, while Thursday brings another Initial Jobless Claims Report. Thursday also brings a read on the economy with the Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. And the week could end with a bang, as Friday brings the Fed’s favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds held their ground for most of the week but ultimately were unable to remain above a key technical support level. I’ll be watching closely to see what happens in the week ahead – and as always, reach out to me if you or others in your network need more information or questions answered…I’m here to help. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 23, 2009)
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The Mortgage Market View… |
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H1N1: Information is the Best Defense! Despite predictions from researchers at Purdue University that the H1N1 outbreak will peak this week, the reality is that it won’t be going away any time soon. Let’s not forget that the news is filled with shortages of the vaccine, as the number of H1N1 cases continues to surge across the country. And federal officials have warned that a second, larger outbreak could occur in early January. The reality is that the best way to stop the spread of H1N1 is to know the symptoms and to take steps to protect yourself-and others-from it. The following information can help. What are the symptoms of H1N1… and how are they different from the common cold?
If you think you have the H1N1 flu, you should take a few common-sense steps to protect your friends, family members, and coworkers. For instance, if you feel sick, stay home until you feel better and have gone at least 24 hours without relying on medicine to break your fever. In addition, wash your hands, linens, dishes, and so on thoroughly. And cover your mouth and nose with a tissue when you cough or sneeze–and then throw the tissue away immediately. Finally, if you have to share a small space with other people, consider wearing a facemask to help make sure you don’t spread the flu to the people around you. Follow these steps and monitor your symptoms to help stop the spread of H1N1…and remain happy and healthy! |
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The Week’s Economic Indicator Calendar |
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Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of October 26 – October 30
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Is The FDIC Killing Short Sales? PLEASE READ-MICHAEL DOUGHERTY
Interesting perspective from someone who knows.
Is The FDIC Killing Short Sales?
As some of you already know, I blogged recently about being interviewed recently by our local NBC news affiliate.Â
Basically, IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure. For the life of me, I couldn’t figure out why they were doing this. The BPO came in at the contract price of $275k, with a net to IndyMac of $241k. What advantage could there possibly be for them to proceed to foreclosure?
Yesterday, I figured it out. You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).Â
Now, listen to the deal they got from the FDIC….
Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!
Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following: For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan.  Let’s use my clients situation as an example:
Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200
OneWest pays $334,600 for the loan
We have an all cash offer of $241,000, net to OneWest.
So, let’s do the math, shall we? The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. In this case, $485,200-$241,000, or $244,200. Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss". So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).
Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360. Remember, OneWest paid $334,600 for the loan. So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Folks, that is over $100k of our hard-earned tax dollars!
So, you ask…Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO’s, upkeep, utilities/maintenance, legal fees, etc.)
So, If I’m OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?
What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!
Can you say "GREED"?
The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc.Â
This entire agreement between the FDIC and OneWest can be found here, on the FDIC website. It’s all there, for the world to see! They have it all layed out. All of the formulas, worksheets, etc.Â
Now, it’s up to us to bring it to the attention of our elected officials and the media. Enough is Enough!
UPDATE 9/18/09: I JUST READ AN AWESOME ARTICLE ON THIS, THAT GOES INTO WAY MORE DETAIL THAN MY BLOG ABOVE. TAKE THE TIME TO READ IT WHEN YOU GET A CHANCE! CLICK HERE TO READ IT.
Wait, it gets better…The FDIC just announced that it needs to start borrowing money from the U.S. Treasure in order to replenish it’s deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements). Go Figure!Â
Robert G. Hertzog
Phoenix Real Estate Consultant
Thanks Robert for sharing
Existing Home Sales Surge
There were few major surprises in the economic news this week, and little
change in the stock market. While there was a great deal of daily
volatility, mortgage rates ended the week nearly unchanged. A flood of
housing market data was released during the week, and most of it reflected
improvement in the sector. The biggest unexpected news came from the
September Existing Home Sales report, which jumped 9% from August to the
highest level since July 2007. Inventories of unsold existing homes dropped
sharply to a 7.8-month supply from a 9.3-month supply in August. This marked
the lowest inventory levels in two and one-half years. September Housing
Starts remained at depressed levels, which removes pressure on future
inventory levels. Building Permits, a leading indicator, also held at low
levels. In short, home sales improved, while inventory levels moved lower
with a relatively light supply of new homes in coming months. If there is a
note of caution, though, it's that much of the activity has been spurred by
exceptionally low mortgage rates and the first-time homebuyer tax credit,
and the future is uncertain on both fronts. The Fed is scaling back its
purchases of mortgage-backed securities, which might push mortgage rates
gradually higher, and lawmakers are currently debating whether to extend the
first-time homebuyer tax credit.
The Mortgage Bankers Association (MBA) also released its forecasts for this
year and next. According to the MBA projections, purchase originations will
decline slightly in 2009, but will then increase by 12% in 2010. Similarly,
the MBA forecasts that existing home sales will rise by 11% in 2010. The
chief economist of the MBA suggested that the timing of the economic
recovery and the level of mortgage rates are the biggest variables
influencing the results for 2010.
Also Notable:
* September Core PPI inflation rose at a tame 1.8% annual rate
* The Fed's Beige Book reported modest improvement in "many sectors" of the
economy
* The Treasury will auction a record $116 billion in 2-yr, 5-yr, and 7-yr
securities next week
* The Fed purchased $18 billion in agency MBS during the week ending 10/21
Average 30 yr fixed rate:
Last week:
+0.15%
This week:
+0.01%
Stocks (weekly):
Dow:
10,000
+50
NASDAQ:
2,160
+10
Week Ahead
The final week of October will be packed with important economic data. The
most highly anticipated will be Thursday's release of third quarter Gross
Domestic Product (GDP), the broadest measure of economic activity. Durable
Orders, another major indicator of economic activity, will come out on
Tuesday. The New Home Sales report is scheduled for Wednesday. Chicago PMI,
Personal Income, and Core PCE inflation will be released on Friday. Consumer
Confidence and Consumer Sentiment will round out the busy week. In addition,
the Treasury will auction a record $116 billion in 2-yr, 5-yr, and 7-yr
securities on Tuesday, Wednesday, and Thursday.
Inside Lending Newsletter From Theron Wall
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Smart Mortgage Update
Interest rates jumped a bit this week as the stock market has rallied. The industry standard for Jumbo loans these days has become a 25% down payment. While Jumbo ARM’s still carry competitive rates, it is hard to find 30 Year Fixed Jumbo under 6%. Jumbos also carry higher fico requirements (typically 720) and low debt to income ratios requirements (normally under 45%). The reason for all of this is that Jumbo loans (loans above 417k in Maricopa & Yavapai) are not government backed and therefore banks are on the hook for 100% of the loan. This means that in order to offer a Jumbo loan the lender will require that it is basically a perfect loan.
As of 10/16/2009 based on a 200k Primary Residence Purchase (or a no cash out refinance), 720+ Credit, Full Doc Income Verification, paying one “point.” Please note, this information is intended for Real Estate Professionals.
80% 30 year Fixed = 5%
90% 30 Year Fixed = 5% (Requires PMI)
90% 15 Year Fixed = 4.375% (Requires PMI)
80% 15 Year Fixed = 4.375%
96.5% FHA 30 Year Fixed = 5% (Requires MI)
100% VA 30 Year Fixed = 5.25% (No PMI required)
100% USDA/Rural 30 Year Fixed = 5.5% (No PMI required)
90% 5 Yr ARM = 4% (Requires PMI)
80% 5 Yr ARM = 4%
75% 5 Yr ARM up to $900k = 4.55%
75% 30 Year Fixed up to $900k = 6.65%
Refinances up to 105% of appraised value are available
Take Care,
Jerome

Fed Chairman Gives Feedback
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For the week of Oct 12, 2009 — Vol. 7, Issue 41 |
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Last Week in Review |
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"LISTEN TO WHAT THE MAN SAID." And those aren’t just the words from Paul McCartney’s hit song of the same title…they’re also words of advice for anyone who’s considering buying a home or refinancing. Last week, Federal Reserve Chairman Ben Bernanke said that as the economy heals, the Fed will be very vigilant to protect against inflation. While inflation is not a problem at present…it will most certainly become a problem down the road. So why does this matter if you are considering purchasing or refinancing? Because inflation is the arch-enemy of Bonds and home loan rates, and just the knowledge of it coming has been causing both Bonds and home loan rates to worsen in recent days. Along with the fear of inflation, the Fed’s purchasing program of Mortgage Backed Securities is already slowing down, with the end of their buying in sight – and the reduced demand for these Bonds is also driving home loan rates higher. Bottom line: home loan rates are already on the rise, and we won’t likely see these low historic levels again. Interest rates are still very near historic lows – George Washington couldn’t have gotten a better interest rate – and the opportunity these low rates present is huge for homebuyers or people looking to refinance. If we haven’t talked recently about your own home loan situation – or if you have a friend, family member, neighbor or coworker who needs advice – please call or send me an email. There’s no time to waste. ———————– On the topic of inflation – Gold has been on a tear higher of late, reaching a record high of $1048 an ounce. Remember that Gold is seen as a "safe harbor" or hedge against a falling Dollar and inflation – as Gold is not likely to lose much value in periods of rising prices. Again, fears of future inflation are pervasive, particularly in light of the massive economic stimulus that has been injected into the US economy…and inflation will drive home loan rates higher. The latest spike in Gold is more likely attributable to the Dollar’s recent decline, but both factors are somewhat at play. Also last week, the Initial Jobless Claims Report came in better than expected. According to the report, 521,000 new applications for unemployment benefits were received. That number was lower than the 540,000 that were expected, and marked the fewest number of new claims since the first week in January. However, that good news must be tempered by a look at the big picture…the reality is that despite a better-than-expected number, more than half a million people per week are still applying for new unemployment benefits. That’s a sign that the labor market is still very weak. In fact, just last week former Fed Chairman Alan Greenspan also commented that he sees unemployment rising beyond 10%. IN LIGHT OF THE ONGOING WEAK LABOR MARKET, NOW MAY BE A GOOD TIME TO MAKE SURE YOU’RE DOING EVERYTHING YOU CAN TO BE AS PROFICIENT – AND EFFICIENT – AT YOUR JOB AS POSSIBLE. TAKE A LOOK AT THIE MORTGAGE MARKET GUIDE VIEW ARTICLE BELOW FOR HELPFUL INFORMATION ABOUT A BETTER WAY TO EVALUATE YOURSELF AND MAKE IMPROVEMENTS WHERE NECESSARY. |
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Forecast for the Week |
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Despite the Bond market being closed on Monday in observance of Columbus Day, the Stock market will be open, and the week ahead has plenty of market-moving economic reports on tap. On Wednesday, the Retail Sales Report will be released. This is the most-timely indicator of broad consumer spending patterns, so the markets will be watching to see if it comes in near expectations. Thursday brings us inflation news when the Consumer Price Index (CPI) is reported. After Bernanke’s comment last week about the Fed protecting against inflation, the markets will be watching this report closely. On Friday, the Preliminary Consumer Sentiment Index will be reported. This survey is conducted by the University of Michigan and measures consumer attitudes regarding present and future economic conditions. The index rose at the end of September, so the markets will be watching to see if that boost in confidence continued into this month’s preliminary report. In addition to the important economic reports described above, industry experts and traders will be paying close attention to the release of the Meeting Minutes from the Fed’s most recent Open Market Committee meeting. Once again, any talks about future inflation could move the markets – particularly after Bernanke’s comments last week. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see from the chart below, Mortgage Bonds were unable to close above a tough technical ceiling of resistance last week and were ultimately pushed lower, causing home loan rates to rise. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 09, 2009)
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The Mortgage Market View… |
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By Marty Nemko, Contributing Columnist, Kiplinger.com For years, I’ve been pushing my clients to get a 360-degree evaluation — that is, asking their boss, co-workers and supervisees for anonymous feedback on their work. I’ve also suggested using a 360-degree evaluation as a fast track to personal growth, getting feedback from friends, relatives and romantic partner(s). But to be candid, few of my clients have responded to my exhortations and — hypocrisy alert — neither had I. An easy evaluation Because I want to practice what I preach and because — especially as I get older — I want to do everything I can to avoid becoming stagnant, I decided to get a 360-degree evaluation. A new Web site, Checkster.com, makes it easy to get anonymous, work-related feedback. I did a five-minute self-evaluation at the site and then entered the e-mail addresses of eight people from whom I wanted feedback (you can choose from three to eight). They included my six most recent career-coaching clients, plus my editors at Kiplinger.com and U.S. News & World Report. Checkster.com sent each person an e-mail inviting him or her to give me feedback anonymously, using the five-minute questionnaire. They were given a week to reply. Five of my six clients responded; neither of my bosses did. Hmmph. (Once three or more people responded, I was notified of who did and didn’t respond but was not told which questionnaire corresponded to which person.) What I learned My evaluations confirmed a number of positive aspects about me, which I’ll refrain from recounting to prevent suspicious readers from thinking that I devised this column as an opportunity to toot my own horn. On the negative side, I got a few useful nuggets:
I’m not sure I’ll act much on the last one. I know that I can’t solve all my clients’ psychological problems, and perhaps I should consider referring a few more to therapy. But too often I’ve seen therapy actually make clients worse. Yes, therapy patients may gain insight into the causes of their problems, but their life is often no better for it. Yet frequently, in just a few minutes, I’m able to help a client identify irrational beliefs and even the childhood roots of those beliefs that have kept the client stuck. Clients are then able to move forward and implement their action plan. How to react The way I responded to the last client’s feedback illustrates an important principle. Some people feel the need to act on all feedback, while others reflexively reject all criticism. The sweet spot is to consider feedback and then accept or reject it on its merits. I understand that you may still be reluctant to do a 360-degree evaluation. You could get bad news or criticism in a tough-to-improve-on area — for example, being told you’re "too intense" or you often "don’t get it." But it’s worth the risk. A 360-degree evaluation is arguably the most potent way to become a better professional and usually a better person. And, especially in this lousy economy, it could even save your job. (See A Career Survival Kit for more tips.) Still unwilling? Here’s a second-best solution: Do a self-SWOT. Write down your strengths, weaknesses, opportunities and threats. Now what, if anything, do you want to do differently? More of? Less of? Marty Nemko is a career coach and author of Cool Careers for Dummies. Reprinted with permission. All Contents © 2009 The Kiplinger Washington Editors. www.kiplinger.com |
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The Week’s Economic Indicator Calendar |
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Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of October 12 – October 16
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Inside Lending Newsletter From Theron Wall
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Good news for first time home buyers, Expanding Tax Credit Possibility
This may be some good news for first time home buyers.
NY Times is reporting on the possible expansion of the housing tax credit to existing homeowners…..
October 8, 2009
Democrats May Extend Tax Credit for Homes
WASHINGTON — Democratic Congressional leaders are working with the White House to extend an expiring $8,000 tax credit for first-time home buyers, and aides said Wednesday that they were considering making it available to current homeowners who purchase a new residence.
Extending and possibly expanding the popular home-buyers credit, which is due to expire after November, is high among options for further stimulating the economy and creating jobs, Congressional aides said, though a White House official said it was only briefly mentioned on Wednesday in an Oval Office meeting between President Obama, Speaker Nancy Pelosi of California and Senator Harry Reid of Nevada, the Senate majority leader.
The Democratic leaders met with the president to discuss a broad range of options to combat persistent high unemployment, officials say. The existing credit for first-time home buyers will expire at the end of next month if not extended, and two other components of the economic safety net — unemployment compensation and health care benefits for those who have been out of work for long periods — will expire at the end of the year.
Besides the likelihood of extending those measures, which were part of the $787 billion stimulus law earlier this year, the president and Congress were also weighing additional steps, given projections that jobs will continue to be lost into the middle of next year despite signs of economic recovery, possibly driving the unemployment rate above 10 percent. But they insist that any package will not add up to a second stimulus package, a prospect that would invite Republicans’ attacks on the effectiveness of the first.
Keeping the home-buyers credit and broadening it has been a priority for real estate agents and the home builders lobbies, and for Mr. Reid, who faces a tough re-election race next year in a state that has been among the hardest hit by the housing crisis since mid-2007. In a statement after the White House meeting, Mr. Reid said the government should “continue efforts to strengthen the housing market by extending the home-buyer tax credit.”
By the time it is scheduled to expire, for home purchases that close before Dec. 1, the home-buyers credit will be responsible for nearly 400,000 sales of new and existing homes, out of total sales of 1.4 million, said Mark Zandi, chief economist at Moody’s Economy.com. That is roughly in line with estimates from the National Association of Realtors.
Mr. Zandi, who formerly advised Senator John McCain, Republican of Arizona, and is now consulted by Democrats in the administration and in Congress, has advocated extending the credit through next August and making it available to all home buyers.
Allowing the credit to expire this year would result in a decline in sales of homes that are not facing foreclosure just as sales of foreclosed homes are expected to pick up, Mr. Zandi said in an interview, “putting further downward pressure on house prices.”
“The economic recovery will not evolve into a self-sustaining economic expansion and risks unraveling back into recession until house prices stop falling,” he added.
But the tax break is not cheap. Congressional analysts put the cost in lost tax revenues at about $1 billion a month. Mr. Zandi said that expanding the availability of the credit to more home buyers through August would cost perhaps $30 billion. While some in the housing industry have proposed nearly doubling the credit to $15,000, Mr. Zandi said $8,000 “seems to have been a sufficiently powerful incentive.”
While Democrats in Congress and the White House emphasize that no decisions have been made about the home buyers credit or any other measures, two officials said that the cost of extending the credit could be covered by redirecting money in the two-year $787 billion stimulus package that was scheduled to be spent after this year.
The current credit is limited to buyers who earn up to $75,000 a year, or couples who make $150,000; in gradually smaller amounts the credit is available to individuals with income from $75,000 to $95,000 and to couples making from $150,000 to $170,000. While the housing industry supports lifting the income caps so that even wealthy home buyers are eligible, White House and Congressional aides say that is not under discussion.
On Thursday, the House is expected to pass legislation from Representative Charles B. Rangel, Democrat of New York and chairman of the House Ways and Means Committee, to extend the credit through 2010 for people who have been out of the country this year in the military or intelligence or foreign services.
Mr. Reid is a co-sponsor of a bipartisan Senate bill that would extend the existing credit for six months, through May.
The home-buyers credit has come in for criticism similar to that lodged against another popular stimulus program, the “Cash for Clunkers” subsidy that went to people who traded in vehicles for more fuel-efficientmodels — that the credit persuades people to act faster on purchases, depressing activity later.
Industry officials counter that expediting home sales helps to stabilize home values now, which is essential for sustaining economic growth. And unlike car sales, home sales have a multiplier effect that spurs job-creating growth throughout the economy. Lawrence Yun, chief economist for the National Association of Realtors, said each house sale on average yielded $63,000 spent on goods and services, like moving vans and furniture.
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Jobs Report Shows No Love for Labor
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Last Week in Review |
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"WORK, WORK, WORK…IT’S A LABOR OF LOVE." The words to Sammy Kershaw’s country song sound pretty good right now to a number of Americans…much better, in fact, than the recent employment numbers do. Last week, the Labor Department’s Jobs Report didn’t show much love for US workers. As you can see in the chart below, the Labor Department reported 263,000 jobs lost in September, which was quite a bit worse than expectations. Compounding the bad news was an up-tick in the unemployment rate to 9.8% as well as downward revisions to prior Jobs Reports, showing an additional 13,000 jobs lost in July and August. Also within the Jobs Report were declines in the Average Workweek and in Average Hourly Earnings, both of which came in below expectations. The shortening of the Average Workweek may be telling us that the amount of people forced to accept part time work is growing. The decline in the Average Hourly Earnings underscores the weakness in the labor market, as it indicates that companies have no pressure to raise wages…particularly with unemployment near 10%. An improvement in Hourly Earnings will likely give us the first sign of labor recovery, so this will be important to watch in upcoming Jobs Reports. ———————–
Personal Spending was also reported last week, indicating that spending rose in August at its fastest monthly pace in almost 8 years! And while the news appears to be good for the economy, we have to take it with a grain of salt, since a large part of that spending was the result of the "Cash for Clunkers" vehicle purchasing incentive program, which is no longer in effect. Finally, the housing industry received some good news last week, as Pending Home Sales were up significantly at 6.4%, which was far above expectations. Some of the increase is likely due to folks working fast to take advantage of the $8,000 First-Time Homebuyer Tax Credit, which is currently set to expire on November 30th…and be sure to ask me about this, if you or any of your friends, family members, neighbors or coworkers could benefit from this great incentive. The Case-Shiller Home Price Index also came out last week with news that home prices fell less than expected. The report, which looks at the 20 largest cities, also showed that only 2 cities (Las Vegas and Seattle) experienced price declines when compared to the previous month. Overall, the numbers appear to indicate that the worst of the housing price declines may be behind us. SPEAKING OF THE HOME, IF YOU HAVE AN EXTRA ROOM THAT YOU’VE BEEN CONSIDERING TURNING INTO A HOME OFFICE, TAKE A LOOK AT THE MORTGAGE MARKET GUIDE VIEW ARTICLE BELOW. YOU’LL FIND TIPS TO MAKE SURE YOU GET THE MOST OUT OF YOUR SPACE AND CREATE AN OFFICE THAT’S COMFORTABLE AND EFFICIENT. |
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Forecast for the Week |
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There are only a few economic reports due out this week, but that doesn’t mean it won’t be an exciting week. The action kicks off with the ISM Services Index on Monday morning. This report is typically less of a market mover than the ISM Manufacturing Index that came out last week, but with so few reports due out this week, the markets may be watching it closely. Thursday will bring another weekly Initial Jobless Claims report. This weekly report continues to be important to watch as the job market plays a key role in our economic recovery. In last week’s report, Initial Jobless Claims increased by 17,000 to 551,000-which was higher than the 535,000 expected. Such huge numbers underscore the weakness in the labor market. Finally, on Friday the Balance of Trade for August will be reported. Expectations are that the trade deficit will be reported at -32.9 Billion. Remember, a negative balance of trade-or a trade deficit-occurs when imports surpass exports. Despite the small number of economic reports, the markets may see some volatility as the Treasury Department auctions off longer-term maturities this week, which are competitive with Mortgage Backed Securities. With the Fed scaling back their purchases of Mortgage Backed Securities, there may be less support for Mortgage Bond prices, so this week’s auction could result in more of a wild ride than previous auctions. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. Last week, Stocks closed lower, and the Dow marked its worst week since mid-June. However, as you can see in the chart below, Mortgage Bonds finished the week at levels not seen since May 21, pushing home loan rates to near historic lows. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 02, 2009)
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The Mortgage Market View… |
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Creating the Perfect Home Office These days, more and more people are working all or part of the time from home, making a home office a necessity. Here are some tips for creating the perfect home office. Layout – There is no bigger mistake you can make than purchasing office furniture or equipment without knowing exactly where you’ll be placing it in the room. Before you buy any new furniture, make sure you measure and plot where each piece will go, and don’t forget to account for electrical and cable outlets. Furniture – A desk that’s roughly 60-inches wide, 30-inches deep, and 29-inches high is not only conducive to work, but it’s highly functional in terms of storing the items you use regularly. Your chair should be comfortable, but its primary function should be to promote healthy posture. Good posture will facilitate strong mental focus and will help to alleviate back and neck pain. Lighting – Don’t underestimate the importance of quality lighting. If you’re lucky enough to have a window in your office, this should serve as your primary light source during the day. Natural light is easy on the eyes and promotes physical energy as well as a good mood. It’s also free. Large lights like floor lamps and ceiling lights should have the ability to be dimmed. Also, make sure your desk lamp is equipped with a light bulb that’s easy on the eyes. These "soft" light bulbs can be found anywhere, from office supply stores to grocery stores. Storage – Identifying the type of items you need to store, as well as the quantity, will help you to determine an appropriate course of action. Here are a few helpful hints.
Wall Organizers – Dry erase boards, chalkboards, corkboards, and magnetic boards are fantastic tools for keeping clutter off your desk. They are inexpensive and available everywhere in a variety of sizes. There are even combination boards that provide countless options. Cords – Never underestimate the importance of power strips as they provide the ability to plug multiple devices into one outlet. The better power strips also provide surge protection to the equipment that’s plugged into them. In addition, cord covers are a great way to not only hide cords but to keep them from becoming a tangled mess. They can be purchased quite cheaply at any electronics store. Décor – Last but not least, once you’ve got all the necessities in, don’t overlook decor. Certificates, diplomas, awards, trophies, and pictures not only complement an office, but they also help to personalize it. Follow these simple steps, and more organization, function, and focus could be right around the corner. |
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The Week’s Economic Indicator Calendar |
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Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of October 05 – October 09
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The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors. As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you. If you prefer to send your removal request by mail the address is: Meghan Knoy is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. does not grant to you a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.
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Legislative Update
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FW: Weekly Rate Lock Advisory
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Rate Lock Advisory – Sunday Oct. 4th
This week brings us only one monthly economic report for the markets to digest and it is not considered to be of high importance. This means that the week will be left mostly up to the stock markets and other influences since there is a lack of factual data for bonds to trade on. In addition to the one report, we also have two relevant Treasury auctions that can also cause movement in rates if demand for them is particularly strong or weak. The first relevant event of the week is Wednesday’s 10-year Treasury Note auction. This sale will give us an important measure of investor interest in longer-term U.S. debt, particularly from international buyers. If there is a strong demand in the sale, we should see the broader bond market rally and mortgage rates move lower. However, a lackluster interest in the sale would likely lead to higher mortgage rates Wednesday afternoon. The second important sale is Thursday’s 30-year Bond sale. It is not as impor tant to mortgage rates as Wednesday’s 10-year Note sale is, but it is important enough to influence trading and bond market sentiment. As with Wednesday’s sale, a strong demand would be good news for mortgage pricing while a weak interest may lead to upward revisions to rates Thursday afternoon. The only factual economic data of the week will be posted Friday morning. August’s Goods and Services Trade Balance will be released that day, but is not likely to cause much of a change in mortgage pricing. It will give us the size of the U.S. trade deficit, but usually does not lead to significant movement in bond prices or mortgage rates. It is expected to show a $32.9 billion trade deficit. Overall, I suspect this is going to be fairly quiet week for the bond market and mortgage rates, especially compared to last week. For the most part, I believe the week will be left to the stock markets and the Fed auctions. The most important day of the week is likely W ednesday due to the 10-year Treasury Note sale, but any day of significant stock volatility may make that particular day the most eventful. The bond market will be closed next Monday in observance of the Columbus Day holiday, but there will not be an early close in trading Friday. The only recognition of the holiday comes next Monday. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers. |
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FHA WAIFVES "FLIPPING" RULE, 90 DAY WAITING PERIOD FOR FORECLOSED HOMES
FHA Property Flipping Rules
On June 9, 2008, FHA temporarily waived the property flipping rule 90-day
waiting period, for homes that were foreclosed on and being sold by lenders
or by property disposition firms on the behalf of lenders. The temporary
property flipping waiver has been extended to include purchase contracts
executed on or before May 10, 2010.
There are some exceptions (these are the only exceptions that exist
presently):
1. Seller is Employer or relocation agency on the sale of home to relocation
employee
2. HUD REO re-sales
3. Seller is United States Government agency using NSP program
4. HUD REO properties that were purchased by nonprofit Organizations
5. Property acquired by the seller through inheritance
6. Properties sold by state or federally-chartered financial institutions
(Bank Owned), FNMA, or FHLMC
7. Seller is local or state government agencies
8. Property located within Presidential Declared Disaster Areas
CNN MORTGAGE received clarification today from the FHA resource Center
because of the memo that was distributed by HUD last week that caused so
much confusion. This is the cliff notes version. Kathleen Gillis, MBA CNN
Mortgage, Inc.
Fed Decision Shakes Things Up
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"BE WILLING TO MAKE DECISIONS." General George Patton. And that’s exactly what the Fed did last week at their regularly scheduled Federal Open Market Committee meeting. But just what did they decide…and what do their decisions mean for home loan rates? The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week’s statement is the Fed’s nice way of saying "no." They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions. It is a given that once the Fed ceases its purchases, that interest rates will climb significantly higher…most likely back above the 6% area. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate. Their decision also means that the Fed’s remaining purchases will all be lower in quantity, as the remaining allotment for purchases will be spread over a longer period of time – and additionally, will not necessarily be spread out as evenly as their past purchases – which could lead to more volatility for rates in the near term. In other news, Existing Home Sales and New Home Sales were reported slightly less than expected, but both reports continue to show signs of an improving housing market. The inventory of unsold existing homes fell to its lowest inventory level since April 2007, while the inventory of unsold new homes dropped to its lowest level since January 2007. While some of the decline in new home inventory may be due to builders constructing fewer homes – these reports indicate that the housing market is indeed showing signs of life. Remember, with home loan rates still low – but slated to increase with the Fed’s recent decision – as well as a juicy tax credit for First Time Home Buyers that is going to expire on November 30th, it makes sense to get off the fence if you’ve been considering a purchase or refinance. Or do you have a family member, neighbor, friend or coworker who might benefit from getting some good home loan advice? I’m always glad to get your referrals, so simply let me know who I might be able to help.
THE DECISION TO BUY A HOME IS ONE OF THE MOST IMPORTANT FINANCIAL DECISIONS YOU CAN MAKE…AND OFFERS GREAT FINANCIAL BENEFITS AS WELL. WITH HOME LOAN RATES LOOKING TO MOVE HIGHER, CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW TO LEARN MORE ABOUT WHY HOMEOWNERSHIP MAKES SENSE. |
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Forecast for the Week |
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There are several important economic reports in store for this week, the biggest likely being Friday’s Jobs Report for September. The Jobs Report for August showed a troublesome 216,000 jobs lost for the month, with prior months revised to show an additional 50,000 jobs lost. In addition, the last report showed that the Unemployment Rate for August jumped to the highest level in 26 years, at 9.7% from July’s 9.4%. This is more than double the rate of unemployment from just two years ago and significantly higher than the 5.9% average during the past 40 years. The Unemployment Rate portion of the Jobs Report is often seen as more reliable than the job loss numbers since it is an actual survey, where about 60,000 households are contacted – so this is a particularly important element of the report, as we watch to see signs of an improving economy. Also this week, we have a read on Consumer Confidence coming on Tuesday, while Thursday brings the Fed’s favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report. Thursday will also bring another weekly Initial Jobless Claims Report, just ahead of the Labor Department’s big Jobs Report coming on Friday. It will most certainly be a full week of news, particularly as the aforementioned tension in the Middle East continues to simmer. There is a meeting scheduled for this Thursday with representatives from six nations to discuss this situation further. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds were able to mount a late-week rally through a key "ceiling of resistance", and this move higher for Bonds caused home loan rates to improve. I’ll be watching closely to see if Bonds can hold their ground, and continue in this improving direction in the week ahead. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Sep 25, 2009)
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The Mortgage Market View… |
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Financial Benefits of Home Ownership There are a number of personal and emotional reasons to buy a home. But there are also some strong financial reasons to make the investment. In addition to exceptional home affordability and near historic interest rates, here are some important financial benefits of owning a home: Increased Net Worth: Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400. A Big Tax Deduction: One of the largest tax deductions available is the amount of interest paid on a mortgage. In fact, a $150,000 home at a 5.50% interest rate can add up to approximately $8,000 in first year’s interest. This amounts to a significant savings – effectively reducing the amount of a homeowner’s monthly loan payment. Long-Term Appreciation: Over the last few years, home prices have corrected and become more affordable. While that’s good news for potential buyers, it has overshadowed the long-term appreciation of a home’s value. The reality is, despite market ups and downs, real estate historically appreciates around 6% per year. Even if you calculate a modest appreciation of 3%, a home purchased today for $150,000 should grow in value to $364,000 over 30 years. $8,000 Tax Credit: Don’t forget, the government is offering an $8,000 tax credit for first-time homebuyers – or for folks that haven’t owned a home during the past three years. However, the program is scheduled to end soon. In fact, the Internal Revenue Service recently reminded potential buyers that they must complete their first-time home purchases before December 1, 2009 to qualify for the special credit, which means the last day to close on a home and qualify for the credit is November 30, 2009. If you’re considering purchasing a home or refinancing, this is an ideal time. Call or email me today to discuss your specific situation and how you can benefit from today’s market. |
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The Week’s Economic Indicator Calendar |
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Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of September 28 – October 02
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is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. does not grant to you a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.
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WEEK IN REVIEW
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Weekly Rate Lock Advisory
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Rate Lock Advisory – Sunday Sep. 27th
This week brings us the release of six relevant economic reports for the bond market to digest. There is nothing of importance scheduled for release tomorrow, so look for the stock markets to influence bond trading and possibly mortgage rates. I would not be surprised to see a relatively calm day as traders prepare for this week’s data, some of which is considered to be extremely important. The first release of the week is September’s Consumer Confidence Index (CCI) late Tuesday morning. This Conference Board index will be posted at 10:00 AM and gives us a measurement of consumer willingness to spend. It is expected to show an increase from last month’s reading, indicating that consumers are more optimistic about their own financial situations than last month and more likely to make large purchases in the near future. This is bad news for the bond market and mortgage rates because consumer spending fuels economic growth. Analysts are calling for a reading of approximately 57.0, up from August’s 54.1. If we see a larger than expected increase, the bond market should move lower and mortgage rates move higher Tuesday. Wednesday’s sole report is the final revision to the 2nd Quarter Gross Domestic Product (GDP). Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don’t see this revision having much of an impact on the financial markets or mortgage pricing. It is expected to show a slight downward revision from the previous estimate of a 1.0% decline in GDP. August’s Personal Income and Outlays will be released early Thursday morning. It gives us an indication of consumer ability to spend and current spending habits. This is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is negative news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. It is expected to show a 0.1% rise in income and a 1.1% increase in spending due to auto sales. The Institute for Supply Management (ISM) will post their manufacturing index for September late Thursday morning. This index gives us an indication of manufacturer sentiment. Analysts are expecting an increase from last month’s 52.9 reading. The 50.0 benchmark is extremely important because a reading above that level means more surveyed executives felt business improved than those who said it had worsened. This data is important not only because it measures manufacturer sentiment, but it is also very recent data. Some economic releases track data that are 30-60 days old, but the ISM index is only a few weeks old. If we get a smaller than expected reading, I expect to see the bond market rally and mortgage rates fall Thursday morning. The Labor Department will post September’s Employment report early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings. If this report gives us weaker than expected readings Friday, bond prices should move higher and we should see lower mortgage rates Friday. However, stronger than forecasted readings could be disastrous for mortgage pricing. Analysts are expecting to see the unemployment rate at 9.8%, a decline in new payrolls of approximately 180,000 and a 0.2% increase in earnings. The final report of the week comes late Fri day morning when the Commerce Department will post August’s Factory Orders data. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but includes orders for non-durable goods. It can usually impact the financial markets enough to change mortgage rates slightly if it varies from forecasts by a wide margin, but due to the importance of the Employment report I doubt this data will heavily influence the markets. Current forecasts are calling for an increase in new orders of approximately 0.5%. Overall, it is likely going to be a very active week in the markets and mortgage rates. The most important day will be Friday due to the employment report being scheduled, but Tuesday’s and Thursday’s data can also fairly heavily influence mortgage rates. With important data being released each day of the week except tomorrow, I would recommend maintaining contact with your mortgage professional. If I were considering financing/re financing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers. ©Mortgage Commentary 2009 |
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Inside Lending Newsletter From Theron Wall
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