Sedona/ Verde Valley Real Estate Insider Holly Grigaitis-Svercl Kenneth Svercl

In This Week's "Good News":

2009 Refinance Numbers Show Homeowner Savings of at least 2.5b over the Coming Year

According to Freddie Mac, refinance numbers for the first quarter of 2009, show that half of borrowers who refinanced their loan lowered their annual mortgage interest rate by at least 20 percent.

The report cites: "Mortgage rates for conventional conforming 30-year fixed-rate loans reached 50-year lows in the first quarter of 2009 in Freddie Mac's Primary Mortgage Market Survey®, and averaged just 5.06 percent over the quarter with 0.7 points.

Freddie Mac V.P. and chief economist Frank Nothaft stated: "With mortgage rates this low many people were able to make their mortgage payment a lot lower."   He went on to state that "The payment savings from ‘rate-and-term' refinancing done during the quarter is about $160 a month on a $200,000 loan and in aggregate this adds up to about $2.5 billion in extra spending cash in the pockets of those homeowners to spend over the coming year.

Statistically, if this pace keeps up for the rest of 2009, it would provide homeowners a total of about $10 billion in mortgage-payment savings during this year alone.

In This Week's "Take It How You Will" News:

Recession Shows Just a .2% Raise in Wages for First Quarter

While this is great news for companies trying to cut costs to survive the recession (with labor costs making up about 70% of a typical company's costs), the slow growth in wages is very hard hitting to workers - at least, the ones who still have a job.

After getting hit with trillions in losses of their personal wealth over the last several quarters, and seeing 5+ million of their family and friends losing their jobs, workers now face the prospect that their wages may actually decline in nominal terms.

This statistic is important because it is, typically, a leading indicator for assessing whether or not the U.S. economy is entering a ‘deflationary trend'.  Deflation is defined as a general decline in prices and wages. 

This current trend  has definitely caught the attention of the Federal Reserve policy board, due to the fact that if we entered into a ‘deflationary trend' it would make many debts impossible to pay, and would thusly make a recession infinitely more difficult to climb out of.

I will note here: despite a few signs of improvement in the economy since the beginning of the year, there's little hope for a strong 2009 recovery that would boost employment. Most analysts believe the unemployment rate will continue to climb throughout this year and into 2010.

The continuing weak labor market will likely put further downward pressure on wages. With so many people looking for work, some companies will be able to force workers to take pay cuts or risk losing their jobs to someone more desperate.

The threat of falling wages is one reason the Fed and the elected branches of government have been so aggressive in trying to bring the recession to an end. If wages do decline, it won't be just the workers who suffer.

"Hope Now" releases Workout Numbers

Foreclosure alliance Hope Now completed 249,000 loan workouts in March, up slightly from the 244,000 a month earlier.

A total of 134,000 loan modifications and 115,000 less favorable repayment plans were carried out during the month.

Repayment plans still fall under the "workout" umbrella, but may increase the principal balance of the loan as well as the monthly payment, so it's hard to call them solutions.

Loan modifications, on the other hand, may involve an interest rate reduction, forgiveness of a portion of principal, or an extension of the maturity date of the loan.

Unfortunately, foreclosure starts increased from 243,000 in February to 290,000 in March, the highest number since Hope Now began tracking data in 2007.

Conversely, completed foreclosure sales declined by 39 percent from February, dropping to 53,000 from 87,000, the lowest total since December 2007.

Hope Now's chief statistician Michael Bright said the sharp reduction in completed foreclosure sales in March may have been the result of servicers allowing troubled loans to be run through the Homeowner Affordability and Stability Program, but goes on to state: "It's too early to say this is a trend".

Of interesting note: prime borrowers again accounted for more than half of the foreclosure sales completed during the month, the second consecutive month they have outnumbered subprime related foreclosures.

Look for a spike in foreclosure sales in the coming months now that most of the mortgage servicing moratoria is at an end.

In This Week's "Wait and See" News:

So far this week, major U.S. markets have seen modest to moderate gains over last week's numbers. 

Shockingly, it appears that the biggest reason for the slight market gains came from the final Consumer Confidence Index number for March (39.2) coming in much higher than most economic predictions, and well above that of March (26.9). 

Markets ended today like this: DOW down @ 8168.12 (-17.61), NASDAQ up @ 1717.30 (+5.36) and the S&P down @ 872.81 (-.83). 

For the rest of this week: look for Initial Jobless Claims and Personal Spending numbers (released today), to put a slight damper on any further significant gains.   Also, look for Factory Orders numbers (May 1), as they will likely stabilize over last months slight gains, not adding significant momentum to any market rallies.

Of significance for next week: Look for the major market "sinner's and saint's" to be Construction Spending (May 4), ADP Employment Change (May 6) and Consumer Credit numbers (May 7), to have mild to moderate impacts on across the market gains or losses. 

Next week's Economic Calendar:

Week of May 4 - May 8

* 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:

Proposed "Safe Harbor" for Loan Servicers - Probably Not a Good Idea

Newly proposed legislation aimed at providing a so-called "safe harbor" for loan servicers will likely lead to more servicer abuse and abusive loan modifications, according to a report issued by Amherst Securities Group.

The bill is intended to give many loan servicers, including big banks like Bank of America and Citi, breathing room to modify loans more easily without having to worry about investor lawsuits due to lack of performance.

But what the report found was that many of the supposed loan modifications are simply repayment plans that actually increase the balance of the existing mortgages and result in bigger fees for the loan servicers to collect - big surprise, right?

Another example cited in the report claims one servicer modified loans that were "destined to fail" in order to keep the servicing fee revenue coming in.

A news release issued by the law firm Grais & Ellsworth LLP, alleges that the "safe harbor" agreement is simply a "second bailout" for the big four banks, which include Bank of America, Chase, Citi, and Wells Fargo.

In the report, the lawyers' claims are similar to the Amherst report, asserting that the big banks aim to keep principal balances high so they can take in more servicing fees, instead of providing more meaningful loan modification solutions that reduce loan balances.

They also argue, and in my mind rightly so, that the servicer "safe harbor" will hurt American's pensions, 401k plans, and savings that rely on the performance of these mortgages.

They, also, believe such a measure will make it more even more difficult than it currently is to obtain mortgage financing, as new investors will continue to steer clear.

But, perhaps the biggest reason the lawyers believe is behind the "safe harbor" bill is that banks want to protect their $400 billion in second mortgages, which by law should be modified before the investor-owned first mortgages.

"If the Big Four followed the law and modified their own junior mortgages first, they would lose so much money they would have to ask Congress for another bailout," the release said.

I will note here that nearly half of loans modified in the second quarter of last year were 60 days or more past due after just eight months (after implementation of the modification), mainly because many of the supposed workouts resulted in unchanged or higher monthly payments,

Mortgage Rate Trends:

The Week's National* Conforming Loan Averages:

30 year fixed: 4.85% Down

15 year fixed: 4.61% Same

5/1 ARM: 4.71% Down

30 year Jumbo: 5.25% Down

15 year Jumbo: 4.85% 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.

Great news for FHA/VA 30 year fixed interest, as they are down to near historic lows!!!  Expect rates to be in the range of 4.75 to 5.00 percent.

Rural Housing rates have taken a slight hike this week: look for the 30 year fixed to be in the range of 5.125 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 AZ 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.