Mortgage rates improved last week as the price of mortgaged backed securities rose.  The price of a rate for thirty-year fixed rate mortgages improved by about ½ of a discount point.  However, the long term outlook for mortgage rates continue to be bearish.  The near term outlook has shifted from solid bearish reads to a more neutral pattern. This week both existing and new home sales in Jan are expected to have declined from Dec but whatever slippage we see will likely be seen as weather related distortions.

US financial markets are closed Monday for President’s Day. The week has two housing reports, existing and new home sales, Jan durable goods orders and the weekly jobless claims as the main data points. Treasury will auction $99B of notes; Tuesday $35B of 2 yrs, Wednesday $35B of 5 yrs and Thursday $29B of yr notes totaling $99B the same as the past four months.

Date Time (ET) Statistic For Market Expects Prior
02/22/11 09:00:00 AM Case-Shiller 20-city Index Dec -2.40% -1.59%
02/22/11 10:00:00 AM Consumer Confidence Feb 67 65.6
02/23/11 10:00:00 AM Existing Home Sales Jan 5.23M 5.28M
02/24/11 08:30:00 AM Initial Claims 02/19/11 410K 410K
02/24/11 08:30:00 AM Durable Orders Jan 3.00% -2.30%
02/24/11 10:00:00 AM New Home Sales Jan 310K 329K
02/25/11 08:30:00 AM GDP – Second Estimate Q4 3.30% 3.20%
02/25/11 09:55:00 AM Michigan Sentiment – Final Feb 75.1 75.1

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Tuesday morning brings us the first of this week’s data with the release of February’s Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. If consumers are feeling good about their own financial situations, they are more apt to make large purchases in the near future. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show an increase in confidence from 60.6 in January to 65.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

The National Association of Realtors will post January’s Existing Home Sales report late Wednesday morning. It tracks home re-sales, giving a measurement of housing sector strength. It is expected to show a small decline in sales of existing homes, meaning the housing sector remained fairly flat during the month. Ideally, the bond market would like to see a sizable decline in sales because weak housing is one of the hurdles that the economy must overcome to recover from the recession. The longer it takes for the housing market to recover, the longer it will take the economy to do the same.

Thursday’s first of two releases is January’s Durable Goods Orders data will provide a measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A smaller increase than the 3.0% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.

The economy based on recent data continues to improve, all but employment and housing. Inflation concerns are slowly mounting as global inflation ticks higher. The outlook for inflation remains on the minds of investors, who are not likely to sit and wait for confirmation, putting pressure on long term rates. Both the improving economy and inflation concerns however are being overlooked to some extent with increasing violence and protests spreading across the Mideast. After Tunisia and Egypt over through their rulers people in most of the region are taking to the streets. Safety moves into US treasuries are countering inflation worries and strengthening economic data points.

January’s New Home Sales report will be posted late Thursday morning. This is one of the least important reports of the week, and is the sister report to Wednesday’s Existing Home Sales release. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates unless they show significant surprises. This report is also expected to show a decline in sales.

The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts’ forecasts currently call for an annual rate of growth of 3.3%, indicating that the economy was slightly stronger in the last quarter of the year than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market, while a sizable downward revision would be good news and could lead to improvements in mortgage pricing

The last piece of data scheduled for release this week is the University of Michigan’s revision to their Index of Consumer Sentiment for February. Current forecasts show this index not changing much from its preliminary estimate of 75.1. This index is fairly important because it helps us measure consumer confidence that translates into consumer willingness to spend.

Look for continued volatility in bond prices and mortgage rates this week, especially Tuesday, Thursday and Friday. This would be a very good week to maintain contact with your mortgage professional.

To find out about applying for a mortgage call Paul Cantor (804) 719-1515 or click here.

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Considering an FHA loan to buy or refinance a home? If so you should move fast. HUD has announced new annual FHA mortgage insurance premium (MIP) rates starting April, 2011. This means that the initial payment on FHA mortgages will feel like the note rate has increased .25%. These new monthly premiums are double what they were last year.

New FHA Annual Mortgage Insurance Rates

The following is the table for the new rates

Transaction Type LTV Loan Term UFMIP Annual MIP(% ÷ 12)
PurchaseStreamline (All Types)

Rate-Term Refinances

<= 95% > 15 Years 1.00% 1.15%
> 95% > 15 Years 1.10%
<= 90% <= 15 Years 0.25%
>= 90% <= 15 Years 0.50%

This may mean it may be harder to qualify to purchase a home and some FHA Streamline refinances will not make sense.

Apply for an FHA mortgage

If you are thinking of buying your first home or refinancing your current FHA loan with a streamline refinance start by sending a email by clicking here an email by clicking here..

Paul Cantor
(804) 719-1515

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FHA announced the extension of the anti-flipping wavier through the end of 2011.  This will help stabilize the market and make financing foreclosed homes easier..

FHA regulations typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days.   FHA today posted a notice extending this waiver through the remainder of 2011.  The wavier allows buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales..

Read the full notice.

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Here are some interesting Home sales statistics for 2010 in the metro Richmond, Virginia market:

•        Homes sales under $250,000 were down 7%.

•        Homes sales priced between $250,000 and $500,000 were down 15%.

•        Homes sales priced between $500,000 and $750,000 were up 4%.

•        Homes sales priced above $750,000 were up 24%.

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Last Friday mortgage prices increased a little, but not much; holiday trade generally doesn’t amount to much. This morning the bond and mortgage markets opened better with no data points today; this week however, is filled with data beginning tomorrow. The dollar is stronger again this morning, not what equity markets want to see, the stock index futures were lower as a result. The US rate markets are supported on concern the rescue for Ireland will fail to contain Europe’s sovereign-debt crisis, increasing demand for the safety of U.S. government debt. Next up are Portugal and Spain as Europe’s debt issues show little signs of being contained. The tensions between South and North Korea continue to be a concern but so far as these kinds of face offs go, it hasn’t been a major impact on the markets.

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Christmas shopping (yes, I said Christmas) was slightly stronger than last year. Consumer spending on Black Friday was up about 0.3%, with most retailers better but still remains an unfinished story. Not anyway scientific, I was out briefly on Sunday and wasn’t impressed with what I saw at the most prestigious malls in Indy, not as much traffic as one would have expected. Most analysts expect stronger Christmas sales than last year, but refrain from becoming too optimistic.

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More QE 2 Fed buying today; the Fed is scheduled today to buy $1.5B to $2.5B of Treasuries due from February 2021 to November 2027 and $6B to $8B in government debt maturing from May 2013 to November 2014. The central bank plans to focus about 86% of its purchases on notes due in 2.5 years to 10 years, leaving the 30- year bond as the security that most closely reflects market expectations for inflation. Since the Fed’s Nov. 3 announcement, the 30-year yield rose 0.28 percentage points, suggesting growing investor confidence in the central bank’s efforts to avoid deflation as the economy expands.

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Date Time (ET) Statistic For Market Expects Prior
11/30/10 09:00:00 AM Case-Shiller 20-city Index Sep 1.00% 1.70%
11/30/10 10:00:00 AM Consumer Confidence Nov 52 50.2
12/01/10 08:15:00 AM ADP Employment Report Nov 58K 43K
12/01/10 08:30:00 AM Productivity-Rev. Q3 2.40% 1.9
12/01/10 10:00:00 AM ISM Index Nov 56.5 56.9
12/01/10 10:00:00 AM Construction Spending Oct -0.50% 0.50%
12/01/10 02:00:00 PM Auto Sales Nov 3.71M 3.68M
12/01/10 02:00:00 PM Truck Sales Nov 5.35M 5.59M
12/01/10 02:00:00 PM Fed’s Beige Book Dec
12/02/10 08:30:00 AM Continuing Claims 11/20/10 4200K 4182K
12/02/10 08:30:00 AM Initial Claims 11/27/10 422K 407K
12/02/10 10:00:00 AM Pending Home Sales Oct 0.00% -1.80%
12/03/10 08:30:00 AM Nonfarm Payrolls Nov 130K 151K
12/03/10 08:30:00 AM Nonfarm Private Payrolls Nov 140K 159K
12/03/10 08:30:00 AM Unemployment Rate Nov 9.60% 9.60%
12/03/10 10:00:00 AM Factory Orders Oct -1.30% 2.10%

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Overall, the most important day of the week is Friday with the employment figures being released, but we may also see sizable movement in rates Wednesday. Friday’s employment data could cause a significant change in rates, but Wednesday’s ISM index is also one of the more important reports we see each month. If Friday’s data reveals stronger than expected results we may see rates spike higher after its release, possibly erasing any gains from the week. It will probably be the key to rates moving lower or higher for the week. I suspect it will be another fairly active week for the markets and mortgage pricing, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.

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Reprieve after six straight days of worsening fixed mortgage rates. Rates on 15 and 30 year fixed rate purchase and refinance loans ended yesterday, October 28th in a positive (lower rate) direction.

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www.PaulCantor.info

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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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www.paulcantor.info

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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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The National Association of Realtors released exsisting home sales numbers today and they dropped to 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July.    This is the lowest level since May of 1995.

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www.paulcantor.info

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