Archives for May 2012

Mortgage Interest Rate Update 5.24.12

Mortgage Backed Securities (MBS) have struggled a bit this week.  Yields were up Monday and Tuesday, a bit of a rally as yields dropped on Wednesday and today MBS are selling off as yields are rising.  What does all this mean for mortgage interest rates?  Overall the market has been flat….a little down, a little up but not much movement in mortgage rates.  Considering the turmoil in Europe, the selling pressure in equities, gold and oil I would like to see a bit more buying interest in the MBS market so that mortgage rates could continue to move down however buying interest just isn’t that strong.

The refinance market has been strong with rates at an all time low.  The purchase market is doing okay, but with rates as low as they are and home prices still soft you would expect a bigger pop in the purchase market. The Mortgage Bankers Association raised it’s origination estimates by $200 billion dollars and the Freddie Mac report on interest rates shows stability with interest rates.

Mortgage Interest Rate Update 5.17.12

Bonds in general continue to perform well this week and mortgage rates remain stable.  News out of Greece last week caused the world markets to rethink the European recovery and thus bonds continue to benefit from that uncertainty. Industry average mortgage rates are improving however the improvements are minimal at best.  China is also making waves in that it appears their economy is slowing and this could have a significant impact on the US economy.  California reported that they will have a 16 billion budget shortfall and the governor is requesting a tax increase to “save” the government from having to drastically cut education, health and law enforcement spending.  This has little impact over California mortgage rates and loan programs offered by lenders but does lend an insight as to the health of state governments.  Perhaps the biggest news of last week was the revelation that Chase lost $2billion in the derivatives market, and that number could increase significantly over the next several months as investors take aim at their mistake.  Just a month ago the CEO was saying their large bets were hedges and that they were confident in their decision to risk so much capital.  Its been rumored that Chase placed trades totaling in the “hundreds” of billions and that it will be very difficult to unwind the trades.

This morning Spanish banks are being hit hard as it’s being reported over 20 banks will be downgraded due to weakness in their economy.  gold and oil continue to sell off in dramatic fashion.  Demand for gold in India is off dramatically as the government imposes a higher tax on the sale/purchase of gold.  Mortgage rates for the next several weeks should remain stable, provided the economic uncertainty continues, and we may see a bit of improvement if we see a dramatic turn for the worse in both the domestic and international economy.

Fannie Mae Turns a Profit

For the first time since the 2008 financial crisis Fannie Mae made a profit.  In Q1 the troubled  mortgage giant earned $2.7 billion dollars. This is welcomed news since for nearly 4 years, and billions of dollars, Fannie Mae has been loosing money.  Last year in Q1 they lost nearly $7 billion.  Out of the $116 billion Fannie Mae has borrower from the US government, they have now repaid $23 billion.  Does this mean the troubles are over for Fannie Mae?  Simply put…no.  It will be many years before the mortgage giant returns to a consistent profit, and much of that depends on the health of the US economy.  Fannie Mae guarantees more than half of all mortgages in the entire country.  Along with other federal housing agencies they provided approximately 90% of all new loans in 2011.  Does this affect mortgage rates for fixed rate and/or adjustable rate mortgage loans?  Unfortunately not however mortgage rates remain stable and at all time lows.

HARP 3.0

I know what you’re thinking….HARP 2.0 just started so what is the point of a HARP 3.0?  Recently there have been some hearings in Washington along with general industry “chatter” that HARP 3.0 is in the works.  My first impression was why so soon?  Harp 2.0 just got started and seems to be a decent success so far but the fact is there are still millions of people who will not be able to get loan under HARP 2.0.  The main issue with HARP 2.0 is that lender’s are still placing restrictions on the program and there are a lot of loans out there that don’t qualify simply because they are not backed by Fannie or Freddie Mac.  HARP 1.0 had minimal success and Harp 2.0 is having a bit more so maybe the industry does need a third version of the program.  The main two hurdles (mentioned above) need to be address because without that there simply is no point in doing a HARP 3.0.  Fixed rate and adjustable rate mortgages are both offered under HARP 2.0 and it is expected that they will be offered in HARP 3.0 (if it ever passes Congress).

What is a realistic timeline for HARP 3.0?  Well that is hard to say but let’s say something passes Congress in the Fall of 2012.  If that happens then the earliest adoption of the program probably won’t be until late Spring 2013 or early Summer 2013.  Provided rates remain low there could be a big benefit to borrowers who do not qualify under HARP 2.0.

Mortgage Interest Rate update 5.8.12

Terms are generally a bit better today however the improvement is small and not as large as one might think considering the NFP report from Friday and the political turmoil in Europe.  Mortgage rates could benefit more if the turmoil in Europe continues to get worse over the coming weeks.  Harp 2.0 continues to be a popular program and lenders are offering both fixed rate mortgages and adjustable rate mortgages under the program.  With the 10 year well below 2.00 MBS are performing well.  Some of the most aggressive interest rates are in the 7/1 ARM program.