The Fed Purchase Program is ending in March and the MBS (mortgage backed securities) market will be an open canvas to new investors.
At the moment, the Fed is 92% complete with their program, and when they back out of it, this is going to attract investors that are going to require more yield. Well more yield for them means higher rates for you (and me).
Be on the lookout here in the next month or so as things progress and wind down.
If you are a first-time homebuyer, have less than perfect credit, or simply just do not have a 20% down-payment, then an FHA loan may be for you.
We know everything there is to know about FHA loans. While FHA has been the hot and “new” topic for the past few years, we have been doing FHA loans for over 10 years.
We know how important it is to make your home affordable and this is why we have chosen to excel in the FHA loan program.
With an FHA Loan, you get:
Whether you are looking to simply learn more about how much you can get approved for or needing to refinance out of your high interest rate loan, we can help!
We make the FHA mortgage process simple and stress-free by offering you great advice, great rates, great service, and most importantly, and great experience.
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For the most current mortgage news, tips, and rate updates…
(via HUD)
New FHA Mortgagee Letter:
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D.C. 20410-8000
OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER
January 22, 2010
MORTGAGEE LETTER 2010-04
TO: ALL FHA-APPROVED MORTGAGEES
ALL HUD-APPROVED HOUSING COUNSELING AGENCIES
SUBJECT: Loss Mitigation for Imminent Default
The Helping Families Save Their Home Act of 2009 expanded the authority to use FHA Loss Mitigation to assist defaulted FHA borrowers avoid foreclosure to include those mortgagors facing ”imminent default” as defined by the Secretary. The purpose of this Mortgagee Letter is to define imminent default and provide guidance to FHA-Approved servicers on how to assist those FHA borrowers. At this time FHA is limiting the loss mitigation options that may be used to assist borrowers facing imminent default to forbearance and FHA-HAMP. The guidance provided in this Mortgagee Letter is effective immediately…
To read this mortgagee letters and any attachments in their entirety, please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ view the 2010 letters and click on the letter of your choice. Mortgagee Letters from previous years can be found on the same page.
Mortgage market is currently down 12 bps this morning, and equity markets are picking up the losses from last week.
Existing Home Sales report came in around 16% lower in December at 5.45M, a lot lower than the 6M expected.
The main thing in the news today is Ben Bernanke and his chances of a second term. From the way it looks, he will be reconfirmed as the Fed Chairman.
Tomorrow we have the Consumer Confidence report which should have some impact on rates, so I’d recommend floating any rate locks at the moment until tomorrow.
Long, but very helpful…
Increases in FHA UFMIP, monthly MI factor, and reductions in seller paid closing costs
I’m sure you’ve heard through the grapevine all the recent changes that are going to be implemented with FHA loans. Basically now, regardless of consumers’ credit score and down payment, people will start seeing an increase in the amount that they are going to finance (UFMIP). About a year ago, the higher the score, the less UFMIP they would have to pay (risk-based adjustments), but not now.
Another thing that may sway less “qualified buyers” in the door is the reduction in seller contributions. More often times than not, 6% was WAY more than enough needed to help a buyer absorb and finance some of the costs, but just like everything in the mortgage industry, a few bad apples spoil it for all. Mortgage lenders were jacking up fees, telling Realtors, “Yo we need that full 6% if you wanna close this deal!” and look where we’re at now.
RESPA
With all these new RESPA laws that have started off the year with a BANG, what is happening is a huge staffing spike for mortgage companies. Mortgage lenders are creating compliance departments so they don’t get wacked by RESPA, and title companies are having a complete overhaul of their title software to stay in compliance as well. Who do you think is going to be picking up the tab for this? Consumers.
Feds Purchase Program
So now everything is going pretty damn good with rates, and I’d think you’d agree. Well a major reason rates are so low is because the economy is still in the dumps and the Fed is buying up MBS (Mortgage Backed Securities). MBS is what control mortgage rates in case you didn’t know. Well this is not going to go on forever, and what is going to happen is the Fed is going to stop buying pools of BILLIONS OF DOLLARS of these securities? This week, the Fed’s buying was $0.4BB less than previous weeks, so we are already starting to see the reduction of their commitment and investment towards the MBS market.
Equity Markets
The stock market has been on a downward spiral for a long enough time already. People have been watching their money go “bye-bye” for the last few years, but signs of a market recovery are already on the horizon.
Usually when equity market’s do bad, mortgage rates do good, and vice versa.
The reason behind this is that money managers either invest in stocks or bonds. When stocks are being sold off, the money is then parked into bonds, which improves bond prices and causes interest rates to decline.
The same applies for stocks. If stocks are in favor, money is pulled from bonds, causing bond prices to drop and interest rates to rise.
Bottom Line for 2010 - be prepared for higher mortgage costs.
Yesterday was a pretty big day, and this morning even more.
The DOW is currently down about 133 points, and while several economic reports are out, the biggest one is, again, the Jobless Claims is in at 482k, that is the largest jump in claims in the past 8 months – a pretty big figure.
What does this mean for rates? Well, at the moment, we’re up about 25 bps so you should see a little drop – I’d say about .125% or so.
Remember- Economy bad, rates good.
The Treasury also just announced next weeks auctions:
Tuesday, $44B of 2 Year Notes
Wednesday, $42B of 5 Year Notes
Thursday, $32B of 7 Year Notes
Yesterday, plastered all over the media, were the changes in FHA financing. I don’t know about you, but I’m pretty sick and tired of all this “change” that has been going around lately.
While the majority of the details can be found on my blog, I also wanted to briefly outline them here as well.
So here’s what’s up:
1) Seller Contributions are going from 6% down to 3%.
a) This is apparently being done to further help the consumer avoid added loan fees and inflated home prices. (I personally thought RESPA and HVCC were solving this)
2) Up Front Mortgage Insurance Premiums are being increased from 1.75% to 2.25%, and talks of the monthly mortgage insurance (currently .55%) going up as well
a) Basically, it’s going to get a little bit more expensive for all borrowers regardless of credit score.
3) Down Payment of 10% on borrowers under a 580
a) Now while FHA has implemented a minimum credit score of 580, that doesn’t really mean anything because all lenders these days are at least at a minimum score of a 620, so this rule won’t really affect you.
Now as for the timeframe in which these are going to be put into practice by lenders, it’s not certain yet, but I should be getting something soon, in which case, I’ll post an update on here.
If you really think about it, the only biggie here is the seller contributions. It just means that consumers are now going to need a little bit more cash available when buying homes to help cover closing costs.
Let the finger pointing begin…
So I’m sitting here watching CNBC, and what do I hear?
FHA changes UFMIP to 2.25% and Down Payments are being increased!
If you recall, I have been writing about my outlook on FHA changes for a while now, and folks, I wasn’t that far off.
The Federal Housing Administration has been in some financial trouble due to other types of financing being unattractive, and because of all the rising defaults due to the job market, FHA’s tightening up.
Now this is going to take some time to get passed down through the funnel to the investors (banks/lenders), so I am not sure of when the changes will be effective, but take this a forewarning, and also, A HEAD START TO PREPARE. When it does go into effect, I will be the first to let you know.
In this morning’s mortgage bond market, we are up 16 bps and we’re hedged between both levels of resistance, as the FNMA 30 Year 4.5% coupon is currently being sold at $100.78.
Here are the results from today’s reports:
Have a great day, and I’ll be back with any significant changes!
***Connect with me on Twitter for the most up-to-date mortgage and market updates***
Well, we had a nice run from Jan. 14-15, but rates are taking a break from getting better…at least for now.
Mortgage bonds are currently down 16 bps, and mortgage rates should open a tad higher this morning.
There are no economic reports for today, but tomorrow we got a hell of a lineup:
All of these are going to have a significant impact on the mortgage bond market, and my gut feeling tells me that since we have broken (and are falling back down) from the 1st level of resistance (200 DMA), we may see an adverse effect on mortgage rates tomorrow.
Regardless of how tomorrow plays out though, the entire week is PACKED with data that can influence your mortgage and what you pay on it so make sure to follow me on Twitter or contact me for any up to the minute updates.
Have a great week!