The House and Senate both approved H.R. 3081 which included the extension of the increased conforming loan limit in high cost areas. This extension covers conforming loans limits that are backed by Fannie Mae, Freddie Mac and FHA (Federal Housing Administration) and will be in effect through the new fiscal year which ends September 30, 2011.  The maximum amount of conforming and FHA loans will remain as high as $729,750.  Here are some of the conforming loan limits in Virginia:

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Richmond City MSA $528,750
Washington DC Metro $729,750
Charlottesville MSA $425,000
Winchester MSA $475,000
VA Beach/Norfolk MSA $428,750

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It is expected that President Obama will sign the legislation.

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Beginning this week, Fannie Mae and Freddie Mac are trying to sell off 150,000 foreclosed homes by offering low down payments, no requirement for mortgage insurance, and up to $30,000 added to the mortgage for renovations. In addition, the real estate practitioner selling the property gets a $1,500 bonus.
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In some neighborhoods, these properties undercut the average listing by $100,000.
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Fannie and Freddie already have repaired the biggest problems with the property including roofs, plumbing, and electrical work.
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Buyers who plan to live in the properties get a 15-day chance to view the homes before investors can purchase them. Investors with cash will likely snap up any properties remaining at the end of the grace period.

“Our goal is to recover as much as we can to offset our loss and not to be low balling properties just to move them,” says a Freddie Mac spokesperson. “We absolutely have no motivation to be leading a downward spiral in home prices.”
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Source: Smart Money, Anna Maria Andriotis (09/28/2010

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Considering an FHA loans to purchase or refinance your home.  Contact your Loan Officer prior to October 4th.  We’ve been talking about, The new hidden price on FHA loans that is equal to a rise in the mortgage interest  rate of one-third of one percent.  This may make the difference on whether someone will be able to qualify to purchase a home or not purchase a home.  It will also make the payment on FHA refinances higher:

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Upfront Premiums (Case Numbers Issued 10/04/2010 and later):

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October 4, 2010, for FHA traditional purchase and refinance products, the upfront premium, shown in basis points below, will be charged for all amortization terms.

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Mortgage Type Upfront Premium Requirement
Purchase Money Mortgages and Full-Credit

Qualifying Refinances

10013PS
Streamline Refinances (all types) 100 BPS

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Annual Premiums

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Effective for FHA loans for which the case number is assigned on or after

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October 4, 2010, FHA will increase the annual premiums collected on a monthly basis. For FHA traditional purchase and refinance products, the annual premium, shown in basis points below, is to be remitted on a monthly basis, and will be charged based on the initial loan-to-value ratio and length ol’the mortgage according to the following schedule:

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LTV Annual Premiums for Loans > 15 Years
= or < 95 percent 85 BPS
>95 percent 90 BPS

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The annual premium for amortization terms equal to or less than 15 years remains unchanged and is collected according to the following schedule.

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LTV Annual Premiums for Loans = or < 15 Years
= or < 90 percent -None
>90 percent 25 131’S

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Cancellation of FHA’s Annual Mortgage Insurance Premiums

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The cancellation policies defined in Mortgagee Letters 2000-38 and 2000-46 remain unchanged.

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Mortgage Market Review

Sep 27, 2010

Mortgage rates ended last week pretty much unchanged from the beginning of the week.  As expected the Fed left rates unchanged and want to keep rates low for some period of time.  Mortgage bonds gained some ground in the mid week, which was lost due to some positive data and a rising stock market.  Generally speaking, stock market strength makes bonds less appealing to investors and leads to higher mortgage pricing.

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This Week:

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Date Time (ET) Statistic For Market Expects Prior
09/28/10 09:00:00 AM Case-Shiller 20-city Index Jul 3.30% 4.23%
09/28/10 10:00:00 AM Consumer Confidence Sep 53 53.5
09/29/10 10:30:00 AM Crude Inventories 09/25/10 NA 0.970M
09/30/10 08:30:00 AM GDP – Third Estimate Q2 1.60% 1.60%
09/30/10 08:30:00 AM GDP – Deflator Q2 1.90% 1.90%
09/30/10 08:30:00 AM Initial Claims 09/25/10 457K 465K
09/30/10 08:30:00 AM Continuing Claims 09/18/10 4450K 4489K
09/30/10 09:45:00 AM Chicago PMI Sep 56 56.7
10/01/10 08:30:00 AM Personal Income Aug 0.30% 0.20%
10/01/10 08:30:00 AM Personal Spending Aug 0.30% 0.40%
10/01/10 08:30:00 AM PCE Prices – Core Aug 0.10% 0.10%
10/01/10 09:55:00 AM U MI Consumer Sentiment – Final Sep 67 66.6
10/01/10 10:00:00 AM Construction Spending Aug -0.50% -1.00%
10/01/10 10:00:00 AM ISM Index Sep 54.8 56.3
10/01/10 02:00:00 PM Auto Sales Sep 3.8M 3.7M
10/01/10 02:00:00 PM Truck Sales Sep 4.9M 4.96M

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This week the bond and mortgage markets don’t have much data to look at until the end of the week; in the meantime Treasury will borrow $100B in 2 yr notes, 5 yr notes ands 7 yr notes on Monday through Wednesday. Interest rates on treasuries declined last week when the Fed said it would do more quantative easing to keep the economic recovery moving, if necessary. Markets jumped on the statement as if it is reality. Stock investors drove the DJIA up 253 points, sent the 10 yr note yield down 14 basis points in rate to 2.62%, while mortgage rates held generally unchanged.

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This week’s data has consumer confidence, the final Q2 GDP expected unchanged from previous reports at +1.6% growth, weekly jobless claims on Thursday expected to hold steady but down about 8K. Claims still hovering in the 450K a week range. Friday the critical Sept ISM manufacturing index is expected top have declined a little, from 56.3 to 54.5; the ISM report is one of the month’s more critical. With the Fed poised for more easing the 10 yr note, driver for mortgage rate direction, is likely to run out to test the low rate set back in August (25th) at 2.45%, trading at 2.62% at the end of last week. Mortgage rates however, are not likely to move much lower until the 10 yr can break into new low rates and that will require actual Fed easing. The elections so far haven’t had much impact on the bond market, but as the calendar ticks off investors will likely become a little more edgy—-both bullishly and bearishly

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Yesterday – The Fed.

Sep 22, 2010

The FOMC statement yesterday, that the Fed is increasingly concerned that inflation is too low and that the Fed is ready for another round of QE to boost economic recovery, is fueling a huge decline in the dollar, lower interest rates and strong increases in commodity prices. In the statement, for the first time, the Fed made clear its concern that inflation levels are too low and that the US may be on the edge of deflation ala Japan. While saying the economic recovery is moving along, but too slow and possibly stagnating, the obvious focus on inflation is moving the Fed into position to add to its balance sheet with more US treasuries in another easing attempt that may or may not help economic recovery. The first QE from the Fed, using pay downs on its MBS portfolio to buy treasuries, hasn’t shown much success, skeptics don’t believe any additional QE will do much either.

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It is highly likely now, based on the strong signal sent yesterday, that the Fed will increase its balance sheet with QE 2 at the next FOMC meeting in mid-Nov. On the heals of the US move the Bank of England will join in with its increase in QE. At the end of the day we are left with the question—-will easing rates more have anymore positive impact than QE 1 that did not help that much for the overall economy? We don’t believe it will, but doing something is better than fiddling while the house burns; the administration has been fiddling and the house is in danger.

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One of the benefits, likely a consideration by the Fed to signal more easing, is the impact on the dollar. The dollar took another hit yesterday and is weaker again this morning; the benefit of a weaker dollar is that it will help US exports to be more competitive in global markets, one thing the Pres has said is part of his plan for recovery. Theoretically a weaker dollar makes sense, practically however it won’t deliver much to increasing exports, global trade doesn’t adjust to swings much on currency movements unless the movements are structural and long lasting.

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This Week opens with more pressure on the rate markets. The end of the drive to continual lower rates appears finished, though we still do not expect mortgage interest rates to increase a lot. Mortgage rates did not fall nearly as much as treasury rates as investors stampeded to safety on worries the economy would fall back into recession, so it is unlikely mortgage rates will ratchet up in lock step with treasury rates. The 10 yr note yield has increased 40 basis points in rate over the last three weeks while mortgage rates although higher now, have not increased much.

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This week has a full plate of economic data; the first round of a lot of key August data. Retail sales, four reports on the manufacturing and business sector, both PPI and CPI for August and Congress back in play. We expect market volatility will continue driven by uncertainty that still hangs over the economic outlook and elections coming up. The 10 yr note is approaching oversold short term readings, given any weaker data we would expect the note and mortgage prices will increase but the wider perspective now is negative for rates. Use any improvement in mortgage prices to lock in clients that have been floating looking for better rates. Keep a closer look on the rate markets this week

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Date Time (ET) Statistic For Market Expects Prior
09/13/10 02:00:00 PM Treasury Budget Aug -$95.0B -$103.6B
09/14/10 08:30:00 AM Retail Sales Aug 0.30% 0.40%
09/14/10 08:30:00 AM Retail Sales ex-auto Aug 0.30% 0.20%
09/14/10 10:00:00 AM Business Inventories Jul 0.70% 0.30%
09/15/10 08:30:00 AM NY Fed – Empire Manufacturing Survey Sep 6.4 7.1
09/15/10 09:15:00 AM Industrial Production Aug 0.30% 1.00%
09/15/10 09:15:00 AM Capacity Utilization Aug 75 74.80%
09/15/10 10:30:00 AM Crude Inventories 09/11/10 NA -1.85M
09/16/10 08:30:00 AM Initial Claims 09/11/10 460K 451K
09/16/10 08:30:00 AM Continuing Claims 09/04/10 4450K 4478K
09/16/10 08:30:00 AM PPI Aug 0.30% 0.20%
09/16/10 08:30:00 AM Core PPI Aug 0.10% 0.30%
09/16/10 10:00:00 AM Philadelphia Fed Sep 2 -7.7
09/17/10 08:30:00 AM CPI Aug 0.20% 0.30%
09/17/10 08:30:00 AM Core CPI Aug 0.10% 0.10%
09/17/10 09:55:00 AM Mich Sentiment Sep 70 68.9

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August’s Retail Sales report will be posted early Tuesday morning. It will give us a very important measurement of consumer spending, which is extremely relevant to the markets because it makes up two-thirds of the U.S. economy. Current forecasts are calling for a 0.3% increase in sales. Analysts are also calling for a 0.3% rise in sales if more volatile auto sales are excluded. Larger th an expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate economic growth.

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Wednesday’s Industrial Production report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could help change mortgage rates if there is a significant difference between forecasts and the actual reading. Analysts are expecting to see a 0.3% increase in production. A higher level of output could lead to higher mortgage rates, while a weaker than expected figure would hint at a soft manufacturing sector and would be considered good news for bonds and mortgage rates.

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One of the week’s two important inflation readings will posted by the Labor Department early Thursday morning. This is August’s Producer Price Index (PPI), which gives us an important measurement of infla tionary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.3% increase in the overall index, and a rise of 0.1% in the core data. Stronger than expected readings could fuel inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond’s future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices and higher mortgage rates.

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Friday has two reports scheduled, but one is much more important than the other. The first is August’s Consumer Price Index (CPI) during early morning hours. The CPI is one of the most imp ortant reports we see each month. It is considered to be a key indicator of inflation at the consumer level of the economy. As with its’ sister PPI report, there are two readings in the report- the overall index and the core data reading. Current forecasts show a 0.2% increase in the overall reading and a 0.1% rise in the core data reading. As with the PPI, a larger increase in the core data would likely lead to higher mortgage rates.

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The second report of the day and last of the week will be posted by the University of Michigan during late morning trading. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which hints at consumers’ willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can im pact the financial markets. It is expected to show a reading of 70.0, which would mean confidence rose from August’s level. That would be considered bad news for bonds and mortgage rates, but the CPI is much more important to the markets than this data is. Therefore, expect to see the CPI results drive the markets and mortgage pricing much more than this data.

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Tuesday and Friday may have the biggest rate swings week with the Retail Sales and CPI reports being released respectively. However, Thursday’s PPI release is also extremely important to the markets, so it cannot be ignored either. Tomorrow will probably end up being the calmest day for mortgage rates, but we still may see minor changes if the stock markets show much movement. Maintain fairly constant contact with your mortgage professional if still floating an interest rate.

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Jobless numbers and retail sales dominate the news for the upcoming week.  Also congress is back in session, primaries in several states.  News from Kraft, RIM (the maker of Blackberry),  and more.  All this will have an impact on mortgage rates.



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www.paulcantor.info

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This week brings is a quite week for the economic calendar, However; two Treasury auctions that may play a role in this week’s mortgage pricing.

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Date Time (ET) Statistic For Market Expects Prior
09/08/10 10:30:00 AM Crude Inventories 09/04/10 NA 3.42M
09/08/10 02:00:00 PM Fed’s Beige Book Sep NA NA
09/08/10 03:00:00 PM Consumer Credit Jul -$5.25B -$1.3B
09/09/10 08:30:00 AM Initial Claims 09/04/10 470K 472K
09/09/10 08:30:00 AM Continuing Claims 08/28/10 4445K 4456K
09/09/10 08:30:00 AM Trade Balance Jul -$47.3B -$49.9B
09/10/10 10:00:00 AM Wholesale Inventories Jul 0.40% 0.10%

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Wednesday afternoon. The Federal Reserve will release its Beige Book report at 2:00 PM ET Wednesday. This report details current economic conditions in the U.S. by Federal Reserve regions. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next move. Most likely thou gh, it will be a non-event and will not lead to a noticeable change in mortgage rates.
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Also Wednesday is a 10-year Treasury Note auction, which will be followed by a 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating interest in longer-term securities such as mortgage-related bonds still exists, the earlier losses are usually recovered after the results are announced. The results of the sales will be posted at 1:00 PM ET each day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Wednesday and Thursday.
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July’s Goods and Services Trade Balance data will be posted early Thursday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $47.2 billion, which would be a decline from June’s $49.9 billion. However, I would consider this the least important of this week’s events, meaning it will likely have little impact on bond trading or mortgage rates unless it varies greatly from forecasts.
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Overall, this week looks like it will be much less active for mortgage rates than last week.

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After the post tax credit months of dropping home sales, the National Association of Realtors announced a modest increase in pending sales of existing homes in July.

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Low mortgage rates and lower home prices  have  made buying a home  extremely affordable.

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Credit Geeks.

Aug 31, 2010

I do a lot of seminars and counseling my clients on credit scores. But these people need a life, take a look at this video:

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www.paulcantor.info

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