Mortgage Update:

 Did you know that Fannie Mae  allows for a seller to carry back a second mortgage?

 A small seller second mortgage with a conforming first mortgage can often eliminate the need for a jumbo mortgage or eliminate the need for mortgage insurance by keeping the loan to value on the first mortgage at 80% or less.

As many of you are aware, the term of the second should be at least five years.

 Although there are many challenges in mortgage financing, there are also many financing strategies which will help your clients to finance their home purchase.

 Economic Update:

It is a time of sound and fury, signifying little--other than confusion. Meanwhile, the possibility of recession grows larger, as do the problems with sovereign debt in Europe.

And yet, as we look at the numbers, only the rising value of gold and falling Treasury securities rates seem to warrant close examination. It is a great time to arrange financing--and vast numbers of refinancers are paying attention to that fact at the moment, while homebuyers maintain a wait-and-see attitude. There is, though, is good possibility that rates will continue to edge slightly lower, tempting fence-sitters into the real estate market. It may become a better time to sell, at last, as well as an astonishingly good time to finance a purchase.

At this moment, though, there is little happening beyond the gyrations of the stock markets and the buzz of refinancing. We need to be patient and alert, ready to act on rapid changes. 

Commentary ~

August 17, 2011

Most of us have probably already read more theoretical commentary on the recent market crash and the volatility that has followed it than we can absorb. Theories abound, most of them intended to prove each group’s existing viewpoint. Let’s look instead at what the markets themselves are saying.

 We begin with the obvious: The price of an ounce of gold appears to be racing toward an unprecedented $1800, as investors translate much of their wealth into the safe-haven precious metal. Investors are clearly doing the same with Treasury securities, particularly 10-year Treasury notes. And as a slightly delayed reaction, fixed mortgage rates—which tend to track the 10-year Treasury—have been falling toward record lows.

 

The markets are reflecting intense levels of fear, therefore. But the stock markets are dizzyingly volatile—up and down by 1% to 2+% every day. This is both fascinating and confusing. It is as if the investors of this nation, unwilling to miss out on potentially big gains, are jumping aboard every rumor and whim. Over the long term, stock prices aren’t moving that much, but the day-to-day and hour-to-hour movements tend to make our heads spin. What we have, then, is the illusion of great activity, but it vanishes when we look backward at the end of the week.

 Though U.S. Treasury securities remain strong, the dollar is relatively weak. Still, dollar-denominated interest rates continue to edge toward record lows, making it very attractive to borrow money in dollars…but very unattractive to receive today’s interest rate yields. The Fed all but promised to keep rates low until mid-2013, maintaining its current target of 0% to .25% for overnight lending (the fed funds rate), and though this has caused a gentle sigh of relief in the credit markets, the Fed has remained very quiet about anything else it might do to keep money available and to help ward off another recession. Many analysts are still looking for a third round of “quantitative easing” (QE3), which would again involve the magic trick of creating vast sums of money out of thin air, but the Fed appears reluctant to pursue a course that clearly is offering less and less bang for the buck.

 Refinancings, with interest rates plunging so low, are keeping lenders very busy. Meantime, the number of new claims for unemployment insurance may be trending lower, possibly remaining below 400,000 a week at long last. Good news, and that news may be joined by decent housing sales new in the coming days.

 Still, it’s all rather like watching an automobile that is stuck in the mud, its tires whirring frantically and its back side skidding out of control to the right and left—getting nowhere. We can only wait until the markets gain some traction and some sense of where they are headed next. Meanwhile, a difficult brand of patience is required.

 

KEY INDICATORS
[08/16/11]

Gold
$1778.10/ounce [up]

Crude Oil (Brent)
$109.60/brl [up]

U.S. Dollar to…
Euro   .6912 [down]
Japanese Yen   76.751 [down slightly]
Chinese Yuan   6.383 [down slightly]
Canadian Dollar  .9812 [down]

6-mo Treasury Bill Yield  0.06%

10-yr Treasury Note Yield  2.28%
6-month up 1 bp
10-yr down 1 bp

11th Dist Cost of Funds  1.338% [down]

HSH average mortgage rates

    Index includes jumbo rates

30-yr Fixed-rate Mortgage  4.53%

15-yr Fixed-rate Mortgage  3.76%

1-yr ARM  3.52%  
30-yr down 12 bps
15-yr down 11 bps 
1-yr ARM up 3 bps

Freddie Mac weekly average rate
4.32% [down 7 bps]

Mortgage Bankers Association

Mortgage Applications Index
week ending  8/5

Overall

    Up 21.7%;
[Up 7.1% the week prior]

Purchase Money Loans
Down 0.9%;
[Up 5.1% the week prior]

Refinancing Loans
Up 30.4%;
[Up 7.8% the week prior]

Jobless Claims  8/6
395,000
[prior week 402,000 (revised)]
4-week moving average 405,000

Monthly Retail Sales July

    Up 0.5% month-to-month – also up 0.5% without auto sales data

 

NAHB Housing Market Index Aug

    Unchanged at 15

 

Housing Starts July

    Down 1.5% - up 9.8% from year ago – new permits down 3.2%

 

 

COMING INDICATORS

 

Thursday, August 18

    Consumer Price Index

    Existing Home Sales

    Index of Leading Indicators

 

Tuesday, August 23

    New Home Sales