(Edition April 22, 2009) Vol. 96
In This Week's "Good News":
97% Mortgage Financing is Back - Seller Can Contribute the 3%
Yes, that is right. Some investors are allowing 97 percent financing again for the purpose of purchasing a home and for rate and term refinances.
For the purpose of purchasing, the Seller can once again contribute the 3% down-payment, and in some cases can contribute up to 6% of the purchase price.
This program can also be used for 2-unit Owner occupied properties.
This is welcome news for borrowers who do not have cash reserves or cash to put down toward the purchase price.
This will fill a void that has existent, since the program went away and FHA requires 3.5% of borrower's own funds be tied to the mortgage transaction.
Again, please keep in mind that not all investors are carrying this product. If you have any questions or want further details, please feel free to drop me an e-mail or give me a call.
Unexpected Home Prices Rise in February
According to a report just issued by the Federal Housing and Finance Administration (FHFA), home prices unexpectedly rose in February.
Statistically, the report showed a 0.7% month-over-month increase in U.S. house prices, following a downwardly revised 1.0% increase in January. Economists were expecting a 0.7% drop overall.
Increases by region look like this:
Pacific region - home prices rose by 3.8%,
West South Central region - up 1.9%
West North Central region - rose 1.5%
New England - up 2.2%
I will note here that on an annual basis, house prices are down 6.5% from February 2008, but the above news does show a move in the right direction - at least for the areas that I have listed.
In This Week's "Take It How You Will" News:
JPMorgan: Banks another $215B in Mortgage Losses - likely
Well, here we go again, after a few weeks of tepid optimism across economic markets', it appears that we are going back into negative territory.
Corporate quarterly reports are due again, and in the latest barrage of numbers came some bad news from JPMorgan Chase.
Matthew Jozoff, a JPMorgan bond analyst, wrote in a report recently released that banks are expected to lose another $400 billion related to bad loans, mainly those tied to souring real estate.
Jozoff said banks are expected to set aside $215 billion to bolster reserves against their deteriorating stable of $2.1 trillion in U.S. home loans that have not yet been packaged into securities.
Banks worldwide have already taken write-downs and losses of roughly $920 billion, while raising about $900 billion in capital, meaning more must be raised, likely with government assistance - go figure.
Of course, Jozoff spared his own bank by remarking that healthier institutions may not need more capital, and could raise it privately.
As of the fourth quarter of 2008, banks have set aside $85 billion in reserves for residential mortgages on their books, according to accounting rules that require allowances for losses expected within the next year.
However, as we knew it would come into play, things like foreclosure moratoriums and loan modifications, coupled with falling home prices, are likely skewing the numbers and giving the banks more time to write off what looks to be inevitable losses.
Of note, last week a pair of analysts argued that Bank of America and Wells Fargo were in need of capital (just two name a few), citing their heavy exposures to risky residential mortgage loans.
First Six Mortgage Servicers Named by Administration for $9.9 Billion in Foreclosure Help Funds
The White House has named the first six loan servicers participating in a $75 billion foreclosure assistance program, setting aside nearly $10 billion to encourage them to help struggling homeowners.
The six companies will receive up to $9.9 billion in incentives, which is intended to push along mortgage companies toward lowering their borrowers' current mortgage payments, the administration stated.
The greatest portion will be distributed to Chase Home Mortgage, a subsidiary of JPMorgan Chase & Co. (no big shock here), in amounts up to $3.6 billion.
The other five beneficiaries: Wells Fargo & Co. ($2.9 billion), CitiMortgage - Citigroup Inc.'s mortgage unit ($2 billion), GMAC ($633 million), Saxon Mortgage Services ($407 million) and Select Portfolio Servicing - SPS ($376 million).
"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," a spokesman for Wells Fargo said.
I will note here that there is a cap on payments to servicers from the Treasury Department in order to allow additional companies in the future to partake in the benefits of this plan.
Meant to work in tandem with the above plan is the Obama's administrations plan known as "Making Home Affordable" with a total budget of $75 billion in federally funded bailout money in order to help rescue those troubled homeowners.
The plan is being funded from the $700 billion financial rescue program, where $50 billion is being utilized to facilitate the modification plan, and the additional $25 billion will be generated from reported sources Fannie Mae, Freddie Mac and HUD (Department of Housing and Urban Development).
According to the Obama administration, the loan modification program is designed to help up to 9 million borrowers stave off foreclosure.
Not shockingly, there is much opposition on the long term effects of these modified loans from borrowers and consumer groups claiming the restructuring helps very little in relieving strapped homeowners, despite the push from public regulators.
Statistically, at the end of 2008 less than half of the modified loans actually lowered the homeowner's mortgage payment by more than 10 percent, data released in last month showed.
In This Week's "Wait and See" News:
As you have probably noticed, it has been another ‘wild ride' for Wall Street since the last "Mortgage Market Weekly" last week.
Most economists are attributing this to greater than expected profit across the financial sectors, especially for banks with large holdings of mortgage backed securities.
For the rest of this week: look for Initial Jobless Claims and Existing Home Sales numbers (April 23). Also look for New Homes Sales numbers (April 24) to have a mild to moderate impact on the DOW.
Markets ended today like this: DOW up @ 7886.57 (-82.99), NASDAQ up @ 1646.12 (+2.27) and the S&P up @ 843.55 (-6.53).
Of significance for next week: Expect Consumer Confidence numbers (April 28), GDP (Gross Domestic Product) numbers (April 29), and Personal Income/Personal Spending numbers (both April 30) to create negative sentiment across the markets.
Watch for greater than normal market volatility due to profit taking by investors that will be hedging on the above news - this may lead to increases in mortgage interest rates across the board.
Next week's Economic Calendar:
Week of April 27 - May 01
Date | ET | Release | For | Actual | Briefing.com | Consensus | Prior | Revised From |
Apr 28 | 09:00 | Consumer Confidence | Apr | | NA | NA | 26.0 | |
Apr 29 | 08:30 | Gross Domestic Product. | Q1 | | NA | NA | -6.3% | |
Apr 29 | 08:30 | Chain Deflator-Adv. | Q1 | | NA | NA | 0.5% | |
Apr 29 | 10:35 | Crude Oil Inventories | 04/24 | | NA | NA | +3857K | |
Apr 29 | 14:15 | FOMC Rate Decision | | | NA | NA | 0.00%-0.25% | |
Apr 30 | 08:30 | Initial Jobless Claims | 04/25 | | NA | NA | NA | |
Apr 30 | 08:30 | Personal Income | Mar | | NA | NA | -0.2% | |
Apr 30 | 08:30 | Personal Spending | Mar | | NA | NA | 0.2% | |
Apr 30 | 08:30 | Employment Cost Index | Q1 | | NA | NA | 0.5% | |
May 01 | 10:00 | Factory Orders | Mar | | NA | NA | 1.8% | |
May 01 | 10:00 | ISM Index | Apr | | NA | NA | 36.3 | |
May 01 | 14:00 | Auto Sales | Apr | | NA | NA | 3.3M | |
May 01 | 14:00 | Truck Sales | Apr | | NA | NA | 3.8M | |
* Remember, typically, weaker than expected news is beneficial to a mortgage rate decrease and an increase in bond yields, and more positive than expected news will cause mortgage rates to increase and stocks to increase in value.
In This Week's "Not So Good Right Now" News:
Poll Shows that Nearly 80% of Americans Not Interested in Buying or Selling
Although this may be a temporary state of mind due to the current economic turmoil in the U.S. I thought that I would write about it - after all ‘knowledge is power'.
A few weeks ago there was a survey by a well known real estate company (who's name is not important), which stated that most "potential first-time homebuyers" felt it was a good time to buy a home.
As this may have been true, it is becoming more and more apparent to would-be home buyers that, even with near historic low interest rates and deflating home prices, qualifying for a mortgage has become increasingly more difficult.
In a recent poll conducted by Harris Interactive on behalf of the American Institute of Public Accountants, statistics showed that 79 percent of Americans (not simply prospective homebuyers) said they have no plans to buy or sell a home anytime soon.
Seventy percent of those polled, said they intend to wait one to two years before entering the real estate market. Good news for commercial and private landlords.
Carl George, chair of the AICPA's National CPA Financial Literacy Commission stated, "For most Americans, their home is the largest investment they will make in their lifetimes and declining values are a threat to their financial well-being".
He went on to state: "The U.S. economy is not likely to return to health until the housing market rights itself. This latest survey shows an increasing number of Americans are delaying buying a home because of fears about the economy and real financial pressures they face now."
In other words, with job security in question, 401(k)'s declining and otherwise outright pessimism when it comes to the economy, many think that it might not be the best time to be tinkering with the largest investment of your lifetime.
When it comes to the selling end, two-thirds appear to be ‘waiting out' the housing crisis in the hopes that property values will climb back up to suitable levels before attempting to put their homes on the market. Not to mention those borrowers' that are ‘underwater' on their mortgage(s) due to current market values, and thus can not sell.
In the meantime, current homeowners with enough equity are just looking to refinance to a lower rate, taking advantage of the historically low mortgage rates.
Of further interest, two-thirds of those surveyed also said they have seen home values fall in their local real estate markets, with 23 percent estimating declines greater than 30 percent over the past two years.
Hopefully the release (in this case re-release) of loan programs allowing higher Loan-to-Values (LTV's), like that listed in "This Week's Good News", will prompt more activity by ‘would be' homebuyers'.
Mortgage Rate Trends:
The Week's National* Conforming Loan Averages:
30 year fixed: 4.86% Down
15 year fixed: 4.61% Down
5/1 ARM: 4.73% Down
30 year Jumbo: 5.98% Down
15 year Jumbo: 5.62% Down
* Keep in mind that these rates are national averages', rates may be lower in your region of the country. If you would like a ‘real time' quote, give me a call, or drop me an e-mail.
FHA/VA 30 year fixed interest rates continue to hang in there!!! Expect rates to be in the range of 4.875 to 5.125 percent.
Rural Housing rates continue to stay low: look for the 30 year fixed to be in the range of 5.00 to 5.25 percent.
If you have a client(s) that you are having trouble getting qualified through your normal channels, or questions/comments regarding any information contained in this newsletter, please feel free to contact me.
Sincerely,
Richard Shreeve, Editor
Direct: 480-332-4547
Toll Free Direct: 1-800-466-1809 (Your Lender of Choice)
The purpose of this newsletter is to help all real estate professionals, their potential clients and current mortgage borrowers stay up-to-date with current market news. So, feel free to post this newsletter to your website (all I would ask is that you post it in its entirety).
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, there is no guarantee it is not without errors.