FHA's temporary waiver of the anti-flipping regulations may be extended to Decemeber 31, 2012

FHA lenders had reason for cheer and mirth at the end of last week. "In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Acting FHA Commissioner Carol Galante will extend FHA's temporary waiver of the anti-flipping regulations." With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days, but this rule is waived through December 31, 2012, unless otherwise extended or withdrawn by FHA.  "All other terms of the existing Waiver will remain the same.  The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.  The Waiver continues to be limited to sales meeting the following conditions: All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value. The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. For FHA technical support, please contact the FHA Resource Center."

Bill Proposed to Allow Homeowners to Dip Into 401K for Mortgage Payments

Two Georgia lawmakers have proposed a bill to allow people to use a part of their 401K in order to help pay their mortgage, according to a recent article in the San Francisco Chronicle. This would be a withdrawal from a 401K retirement savings without penalty.

Currently, there is a 10% penalty for withdrawing from a 401K prematurely. In addition, that money would be taxed as any withdrawn early is considered income. This bill would allow homeowners to avoid these fees.

Sen. Johnny Isakson (R-Georgia) and Rep. Tom Graves (R-Georgia) have introduced this bill, called the Hardship Outlays to protect Mortgagee Equity (HOME) Act, in hopes that people who have saved for retirement can use that money to avoid foreclosure.

The bill would allow withdrawal of up to $50,000 or half of the 401K, whichever is smaller. The income tax would still apply, but there would be no 10% penalty. What do you think about this idea, and would you withdraw from retirement savings to help pay your mortgage if it was passed?

Can Baby Boomers Boost the Market?

Baby Boomers – those between the ages of 47 to 65 – are in the best position to buy real estate that they’ve been in in years, according to a spokesperson for the National Association of Realtors, and could help revive the real estate market.

According to the Housing Affordability Index, affordability is at an all-time high, and many baby-boomers already have solid home equity to rely on.

The spokesperson said in an AOL Real Estate article that “the roadblock is really with first-time buyers… and many of them are being thwarted by credit issues.”

The article cites two major reasons that the baby boomer generation may boost the real estate market: that home equity, and a desire for ease of living factored into their real estate purchases.

A survey done by Met Life Mature Market Institute and National Association of Home Builders showed that 61% of those moving in to a 55+ community cited room layout as a decision-maker, as did 62% of those not moving into such a community, but in non-age-restricted communities. The vast majority of the generation falls in the second category, but the percentages are almost identical.

Room layout and the ease of living asks are not shared as a top priority with younger and first-time
buyers.

For more information on how the baby boomer generation may impact the real estate market, read the full article here.

Fed Looking to Further Lower Mortgage Rates

http://online.wsj.com/video/fed-seeking-to-lower-mortgage-rates-further/9ED6752D-3318-4397-BA0E-B22CBC0DC96A.html

Top Five Tips to Increase Your Home’s Appraisal Value

The importance of the appraisal in a real estate transaction can’t be overestimated. An appraisal can completely kill a deal if it does not turn out well.

The Wall Street Journal recently posted an article with tips on upping your homes value during an appraisal, and here are some of our top picks:

1. Spruce up the house
While a couple of dishes in the sink won’t make a difference, there are quick fixes that do. Overgrown landscaping should be trimmed, and things like marks on walls and stained carpets should be cleaned. These affect the home’s overall value in appraisal, according to the WSJ.

2. Curb appeal matters
Take the time to mow the lawn, trim the hedges, and pull out any weeds. A nice-looking yard is not only a great first impression, but it can offset any nearby foreclosed properties.

3. Note the neighborhood improvements
Location, location, location! Make note of any changes to the neighborhood that are positive, such as a new playground or a Whole Foods nearby.

4. Keep the $500 rule in mind
According to the WSJ, appraisers often value a home in $500 increments. This means that if there is a repair over $500 that can or ought to be made, do it, or it could count against the property’s value.

5. Maintain a list of all updates to home
All updates, major and minor, to the home should be listed. “Itemize each update with the approximate date and approximate cost,” recommends Matthew George, the chief appraiser of Eagle Appraisals Inc. Remember to include things the appraiser might not notice, such as insulation and roof updates.

This Week’s Market Commentary

This week brings us the release of seven economic reports and two relevant Treasury auctions for the bond market to digest. There is nothing of importance scheduled for release today, but we do have something to watch every other day.

The data ranges from low importance to extremely important so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they have been heavily influential on bond market direction recently. In other words, there is a pretty good chance of seeing noticeable movement in mortgage rates several days this week, especially if the major stock indexes rally or post sizable losses.

October’s Consumer Confidence Index (CCI) is the first release of the week and Tuesday’s only news. This Conference Board index will be released at 10:00 AM ET. It gives us a measurement of consumer willingness to spend and is expected to show a small increase in confidence from last month’s 45.4 reading.
That would mean that consumers felt a little better about their own financial situations than last month, indicating they are slightly more likely to make large purchases in the near future. As long as the reading doesn’t exceed the forecasted 46.0, we will likely see the bond market react favorably to this report. This data is watched closely because consumer spending makes up two-thirds of the U.S. economy.

Early Wednesday morning, the Commerce Department will post Durable Goods Orders for September. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a decline in new orders of approximately 1.0%. If we see an unexpected increase in orders, mortgage rates will probably rise as bond prices fall. A weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on bond trading or mortgage pricing.

Also Wednesday is the release of September’s New Home Sales at 10:00 AM ET. This data covers the remaining 15% of home sales that last week’s Existing Home Sales report didn’t include and is this week’s least important data. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Wednesday.

Thursday’s only monthly or quarterly data is not only the most important report of the week, but also the most important we see regularly. The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released early Thursday morning. The GDP is considered to be the benchmark measurement of economic growth because it is the sum of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Thursday’s release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 2.2% in the GDP, which would mean that the economy grew at a noticeably quicker pace than the 2nd quarter’s 1.3%. If this report does show a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Thursday.

There are three reports scheduled for release Friday that may affect mortgage rates. The first comes at 8:30 AM ET when September’s Personal Income and Outlays report will be posted. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see a 0.3% increase in income and a 0.6% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.

The second report of the day is the 3rd Quarter Employment Cost Index (ECI), also at 8:30 AM ET. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.6%. A smaller than expected increase would be good news for mortgage rates.
The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. Current forecasts show this index remaining nearly unchanged from the preliminary reading of 57.5. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. As with Tuesday’s CCI release, the lower the reading, the better the news for mortgage shoppers.

This week also has Treasury auctions scheduled each day except Friday. The only two that are likely to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand, particularly Thursday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to upward revisions to mortgage rates.

Overall, it will likely be an active week for the markets and mortgage rates. I believe that the single most important day will probably end up being Thursday with the extremely important GDP release in the morning and the 7-year Treasury Note auction in the afternoon, but Friday has three reports scheduled so it is expected to be active also. Today is likely to be the least important day, but we still could see some movement in rates as the markets prepare for the upcoming week. Accordingly, I strongly recommend maintaining contact with your mortgage professional this week, especially if still floating an interest rate.

This Week’s Market Commentary

This week brings us the release of only three monthly reports that are relevant to mortgage rates in addition to another FOMC meeting. None of the economic reports are considered to be of high importance. In fact, all of them are thought to be low or moderately important to the financial markets.

This should help limit the possibility of significant changes to mortgage rates most days this week, with exception to the FOMC meeting results.

There is nothing of concern scheduled for release tomorrow, so look for the stock markets to be the biggest influence on bond trading and mortgage rates. If the stock markets extend last week’s streak of gains, we may see pressure in the bond market and small upward changes to mortgage pricing tomorrow. However, if the week starts off with a weak opening in stocks, bonds and mortgage borrowers should benefit.

August’s Housing Starts will kick-off the week’s data early Tuesday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a decline in new home starts between July and August. I believe we need to see a significant surprise in this data for it to have a noticeable impact on mortgage rates Tuesday.

August’s Existing Home Sales report will be released late Wednesday morning. The National Association of Realtors posts this data, giving us an indication of housing sector strength by tracking home resales. It is expected to show a small increase from July’s sales, however, this data probably will be neutral towards mortgage pricing unless its results vary greatly from forecasts. Market traders will likely be more focused on the afternoon activities.

The FOMC meeting begins Tuesday and is a two-day meeting. Mr. Bernanke and friends will adjourn at 2:15 PM ET Wednesday. There is no chance of seeing any type of change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed’s next move may come.

Market participants are anxiously waiting to hear what the Fed has in mind to help stimulate economic activity. Many feel that there isn’t much that they can do at this point to quickly boost economic growth. This was originally scheduled to be a single day meeting, but was extended to a two-day meeting to allow more time for them to discuss their options. Needless to say, it will be an interesting afternoon Wednesday when the post-meeting statement is read.

The Conference Board will post its Leading Economic Indicators (LEI) for August late Thursday morning. The LEI index attempts to measure economic activity over the next three to six months. It is expected to show a 0.1% rise, meaning that it is predicting a slight increase in economic activity over the next several months. A larger than expected increase would be considered negative news for bonds and could lead to a minor increase in mortgage rates Thursday.

Overall, there really isn’t a specific report that stands out as the most important of the week. The most important day is Wednesday with the housing data and the FOMC meeting, but I don’t believe any of this week’s economic data has the potential to move the markets or mortgage rates heavily. However, we still may see some changes in rates day-to-day, especially if the stock markets move significantly higher or lower. If still floating an interest rate, continued contact with your mortgage professional is recommended, especially the middle part of the week.

This Week’s Market Commentary

This week brings us the release of five relevant economic reports that may influence mortgage rates in addition to two Treasury auctions. A couple of these reports are considered to be highly important to the financial and mortgage markets, meaning that we may see significant changes to rates this week. There is a very good chance of seeing noticeable changes in rates at least one day, if not several days.

The week’s first event is a 10-year Treasury Note auction Tuesday, which will be followed by a 30-year Bond auction Wednesday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating interest in longer-term securities such as mortgage-related bonds still exists, the earlier losses are usually recovered after the results are announced. The results of the sales will be posted at 1:00 PM ET each day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Tuesday and Wednesday.

The important economic data starts Wednesday morning when August’s Retail Sales report and Producer Price Index (PPI) will both be posted early morning. The sales report will give us a very important measurement of consumer spending, which is extremely relevant to the markets because it makes up two-thirds of the U.S. economy. Current forecasts are calling for a 0.2% increase in sales. Analysts are also calling for a 0.3% rise in sales if more volatile auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate economic growth.

One of the week’s two important inflation readings is the second report scheduled for release Wednesday morning. The Labor Department will post August’s Producer Price Index (PPI), giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices.

Analysts are predicting no change in the overall index, and a rise of 0.2% in the core data. Stronger than expected readings could fuel inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond’s future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices and higher mortgage rates.

Thursday also has two reports scheduled, but one is much more important than the other. The first is August’s Consumer Price Index (CPI) during early morning hours. The CPI is one of the most important reports we see each month. It is considered to be a key indicator of inflation at the consumer level of the economy. As with its’ sister PPI report, there are two readings in the report- the overall index and the core data reading. Current forecasts show a 0.2% increase in the overall reading and a 0.2% rise in the core data reading. As with the PPI, a larger increase in the core data would likely lead to higher mortgage rates Thursday.

August’s Industrial Production data will be posted mid-morning Thursday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could help change mortgage rates if there is a significant difference between forecasts and the actual reading. Analysts are expecting to see little change from July’s level of output. A sizable increase could lead to higher mortgage rates, while a weaker than expected figure would indicate a still softening manufacturing sector and would be considered good news for bonds and mortgage rates. However, the CPI is the key data of the day and will likely influence mortgage pricing much more than the production data will.

The last release of the week will be posted by the University of Michigan late Friday morning. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which hints at consumers’ willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 56.3, which would mean confidence rose from August’s level. That would be considered bad news for bonds and mortgage rates because strengthening consumer spending fuels economic growth.

Overall, I think we need to label Wednesday or Thursday as the most important day of the week with the Retail Sales and CPI reports being released respectively. However, Tuesday’s 10-year Treasury Note auction also has the potential to heavily influence bond trading and mortgage rates. Today will probably end up being the calmest day for mortgage rates, but we still may see minor changes if the stock markets show much movement.

This Week’s Market Commentary

This week brings us the release of four relevant economic reports in addition to another FOMC meeting and two relevant Treasury auctions. With all of the volatility in the markets of the past two weeks, it is difficult to say whether this will be an active week for mortgage rates. Under normal circumstances, it would be. But it is hard to label any week as active if comparing to the previous two.

The first economic data of the week is Employee Productivity and Costs data for the second quarter that will be released Tuesday morning. It will give us an indication of employee output per hour. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don’t see this being a big mover of mortgage pricing, but since it is the only data of the day it may influence rates slightly during morning trading. Analysts are currently expecting to see a decline in productivity of 0.6% and a 2.2% jump in labor costs. A stronger than expected productivity reading and a smaller than expected increase in costs could help improve bonds, leading to lower mortgage rates Tuesday.

The FOMC meeting is a single-day event that will be held Tuesday and will adjourn at 2:15 PM ET. It is expected to yield no change to key interest rates. Usually, the post-meeting comments seem to have more of an influence on the markets than the rate adjustments themselves, or a lack of one in many cases. Look for the statement to lead to volatility during afternoon trading if it hints at what the Fed’s next move may be and when it will come. Market participants will be looking for any indication of a move to help boost economic activity. If the statement does not give us new information, mortgage rates will probably move little after its release.

There is no important economic data on the calendar for Wednesday. June’s Trade Balance report will be released early Thursday morning. It gives us the size of the U.S. trade deficit but is the week’s least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $48.0 billion deficit, but it will take a wide variance to directly influence mortgage pricing.

Friday has the remaining two pieces of economic data, one of which is highly important to the markets and mortgage rates. July’s Retail Sales data is that report. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, potentially further slowing the economic recovery. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.5%.

The last report of the day will come from the University of Michigan, who will release their Index of Consumer Sentiment for August at 9:55 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. By theory, a drop in confidence should boost bond prices, but this data is considered moderately important and carries much less significance than the Retail Sales report does. Analysts are expecting to see a reading of 62.5, which would be a decline from July’s revised reading.
Also worth noting are two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as they are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

Overall, it is difficult to label one particular day as the most important. Friday’s sales data is the most important economic report, but Tuesday’s FOMC meeting has the potential to cause plenty of movement in the markets and mortgage pricing also. Tomorrow will also be interesting, especially considering the size of the sell-off in bonds Friday. I would not be surprised to see that negative tone extend into tomorrow’s bond trading and mortgage rates. I suspect the FOMC meeting will not have as much of an influence on mortgage rates as one may expect, but the markets can react wildly to a single word or omission of a word in the statement, so we need to be cautious. This is certainly another week that continuous contact with your mortgage professional is highly recommended if you are still floating an interest rate.

This Week’s Market Commentary

There are four relevant reports scheduled for release this week that are likely to affect mortgage pricing, but it may end up being news out of Washington that may have the biggest impact on the markets and mortgage rates. As of this evening, there appears to be much more progress being made on the debt ceiling issue than we have seen yet. There actually have been rumors of an agreement in general between the House and Senate, which could mean a finished deal by Tuesday’s default deadline is possible.

The stock markets took a beating last week, even before the surprisingly weak GDP reading Friday morning. The potential for a default on our debt and the credit downgrade that would have followed was expected to have a huge negative impact on our economy. That led to stock selling most of the week, and support in the bond market, although we did see softness in bonds at times also. The big day for bonds came Friday after the 2nd Quarter GDP reading fell well short of forecasts and a significant downward revision to the 1st Quarter reading fueled a sizable rally in bonds that gained momentum during afternoon trading. The yield on the benchmark 10-year Treasury Note fell below 3.80%, causing many lenders to revise rates even lower late Friday.

Friday’s rally caught us off guard a bit. That is one way of describing it. Another is to use the word unjustified. We certainly got bond-friendly news out of the GDP report, but I think we saw more flight-to-safety buying than long-term buying due to weak economic conditions. That is evident by the afternoon surge in bonds Friday that pushed yields below recent levels. The flight-to-safety is a bonus for mortgage shoppers closing in the very near future, but extremely problematic for borrowers that need a couple weeks or months before they go to closing. Time and time again (duplicate that many more times), we see gains from several trading sessions of flight-to-safety buying unwind in a single day of trading. In other words, rates can give back last week’s gains, and some, much quicker than they were able to capture them as soon as stocks appear ready to head higher. A resolution to the debt ceiling issue is definitely a strong enough event to do this. If the threat of a credit downgrade and default dissolves, I would not be surprised to see a couple hundred point gain in the Dow over a single, maybe two, trading sessions. That would likely cause most of the flight-to-safety funds to shift away from bonds and back into stocks. And a noticeable upward move in mortgage rates.

In addition to the debt ceiling topic, we do have a couple of extremely important economic reports for the markets to digest. The first important release is the Institute for Supply Management’s (ISM) manufacturing index for July late tomorrow morning. This index measures manufacturer sentiment by surveying trade executives about business conditions during the month and is considered to be of fairly high importance to the markets. A reading above 50.0 means that more surveyed executives felt that business improved last month than those who said it had worsened.

Wednesday morning brings us the release of June’s Factory Orders data at 10:00 AM ET. It helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to last week’s Durable Goods Orders report that tracks orders for big-ticket items only. Since a significant portion of the data was released last week, this report likely will not have as big of an impact on the markets as last week’s did. Analysts are expecting to see a decline in new orders of approximately 1.0%. A larger than expected drop would be considered good news for bonds and mortgage pricing.

There is no relevant monthly or quarterly economic news scheduled for release Thursday, but Friday is a different story. The most important piece of data this week and arguably each month is the monthly Employment report. This report gives us the U.S. unemployment rate, number of jobs added or lost during the month and the average hourly earnings reading for July. The ideal situation for the bond market is rising unemployment, a sizable loss of jobs and little change in earnings.

While the preliminary reading to the GDP is arguably the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Friday’s report is expected to show that the unemployment rate slipped 0.1% to 9.1% last month while approximately 78,000 jobs were added to the economy. The unemployment rate probably will not be much of a factor unless it moved much more than the 0.1% that is expected. However, due to the importance of these readings, we will most likely see quite a bit of volatility in the markets and mortgage pricing Friday morning if they vary from forecasts.

Overall, I am expecting to see another extremely active week for mortgage rates. I think that the most important day is tomorrow due to the debt ceiling crisis coming to a head and the ISM index being posted. Friday is also a key day with the monthly Employment report being released. We may see some pressure in bonds mid to late week ahead of Friday’s employment numbers (assuming Washington puts the debt ceiling issue to bed), but we also need to watch the stock markets for significant moves that can influence bond trading. We are getting key economic data during a period of great uncertainty about our economy with a major national crisis climaxing at the same time. If still floating an interest rate, I would definitely maintain constant contact with my mortgage professional. And hold on tight, it’s going to be quite an interesting week!

Low Mortgage Rates Make it a Good Time to Buy

With mortgage rates at a 30 year historic low, the Wall Street Journal is suggesting now is the best time to buy. Ken Rosen of the U.C. Berkeley Fischer Center for Real Estate said that mortgage rates will be much higher five years from now, and to take advantage of the current low rates.

The Wall Street Journal video below elaborates:

http://online.wsj.com/video/time-to-buy-housing-recovery-is-under-way/52EDA9A3-4F24-4600-A369-B32AF30C37D0.html

FHA Loans VS Conforming Loans

The FHA is insuring a greater percentage of loans than during any time in recent history. In 2006, it insured roughly 5 percent of the purchase mortgage market. Today, it insures one-quarter. "Going FHA" is more common than ever before -- but is it better?

The answer -- like most things in mortgage -- depends on your circumstance.
Like its conforming counterpart, an FHA-insured mortgage is available as a fixed-rate loan and as an adjustable-rate one. Payments are made monthly and come without prepayment penalties.
That's where the similarities end, however, and decision-making begins. For homeowners and buyers , FHA mortgages carry a different set rules as compared to conforming loans through Fannie Mae or Freddie Mac that can render them more -- or less -- attractive for financing.

For example:

• FHA mortgages can be assumed by a subsequent buyer. Conforming loans may not.
• FHA mortgages require mortgage insurance, regardless of downpayment. Conforming loans do not.
• FHA mortgages do not have loan-level pricing adjustment. Conforming loans do.

FHA mortgages also require smaller downpayment requirements versus a comparable conforming mortgage. FHA calls for a minimum downpayment of 3.5%. Conforming mortgages often require 5 percent or more.
And, lastly, FHA mortgages are priced differently from conforming ones. Since 2005, the average FHA mortgage rate has been below the average conforming mortgage rate more than 50% of the time, meaning that an FHA mortgage's principal + interest payment is lower than a comparable Fannie/Freddie loan.
Today, conforming mortgage rates are lower.

So, which is better -- FHA loans or conforming ones? Like most things in mortgage, it depends. FHA-insured loans can be big money-savers or money-wasters. To find out which is best for you, ask your loan officer for today's market interest rates and study the results.

With less than 20% equity, the answer is often clear.

Markets

Today marks the 21st anniversary of the signing of the Americans with Disabilities Act, which guarantees "equal opportunity for people with disabilities in public accommodations, commercial facilities, employment, transportation, government services and telecommunications." According to the Census Bureau, 36 million people here in the US have a disability - 12% of the population - which certainly includes existing and potential borrowers. (Disabilities include problems with hearing, vision, and difficulty concentrating, or walking.) State-wise, West Virginia leads the nation with almost 19% having a disability, while Utah has the lowest with 8.9% of its residents reporting a disability.

How do the budget crisis and a potential government shut down impact mortgage banking? One should remember that since 1976 there have been 17 shut downs, with the 1995/96 shutdown of 21 days the longest in modern history. If on August 2nd there is no budget deal, then we should see number 18. Oddly enough, the last shutdown occurred precisely when Italy and peripheral Europe were going through their last major crisis of confidence. If there is no deal in the early part of this week, the Treasury will issue a statement to the market and outline it's directive to the Fed as to the priority of payments and it will outline an alternative auction structure for Treasury notes and bonds . Most other governments never shut down as parties bicker over spending - in fact Belgium hasn't even had a government since 2010 and there has been no shutdown. The world will not end and the US government will eventually keep on spending, with the financial markets hoping for growth to cure the US debt problems combined with some spending cuts.

But markets (stocks, bonds, whatever) don't like uncertainty, and certainly would not like a downgrade of the United States. One can expect this uncertainty to continue to weigh on risky assets in the short-term - like the stock market. There is the potential that banks could see higher capital requirements for mortgage securities. (Currently, Ginnies are a zero risk weighting, while conventionals are 20%.) Banks may not rush to sell MBS's, but their appetite for the product could drop. Central banks could sell, or reduce their future purchases of, mortgages in a downgrade scenario. But from a cash flow perspective, few experts expect Ginnie, Fannie, or Freddie cash flows to be affected. But they could be downgraded if US government debt is downgraded, and this would lead to higher mortgage rates.

When will the housing market return to normal, per the SF Fed? "If the foreclosure inventory is worked off at this rate and house prices change as described above, then housing starts are predicted to return to normal levels by the beginning of 2014." Fed

Under the "what else can happen" category, Fannie downgraded its housing predictions for this year. Fannie's economists believe that mortgage interest rates will move up just slightly over the year to finish at 4.7% and rise again in 2012 to an average of 5%.  Total mortgage originations in 2011 will decline to $1.07 trillion from $1.51 trillion in 2010 (about 30%) and decline further still next year to $999 billion.  Single family mortgage debt will fall an additional 2.6 percent from $10.54 trillion to $10.26 trillion. Home prices are expected to decline further this year and next.  The median price in 2010 for a new home was $221,800.  This year it is expected to be $216,900 and in 2012 $214,100.  Existing homes are expected to sell for a median price of $165,600 this year and $163,700 next, compared to $173,000 in 2010.

Many in the industry wonder why the rating agencies seem to have escaped a good portion of the blame for mis-rating countless securities and helping to cause the credit crisis. It is a complex question, but some rating agencies are working to solve it. Kroll Bond Ratings, for example, recently published an "Investor Bill of Rights" for bond investors. "Article l: Kroll Bond Ratings will make its research reports, including criteria and analysis, supporting its published, non-subscriber ratings available to every fixed income investor without charge. Article II: Kroll Bond Ratings will make its transaction analyses available on its website in a timely manner and will provide a forum to respond to investor questions. Article III: All ratings and analyses will be clear, transparent and usable for investors, thereby avoiding rating conclusions derived from a 'black box.' Article IV: Kroll Bond Ratings will confirm that its analysis includes appropriate and professional due diligence as part of the rating process. Article V: All ratings will be subject to ongoing review throughout the life of the security or entity to ensure that the rating is accurate." For more information go to KrollBondRatings .

Looking at the markets, current coupon MBS prices ended Monday where they began: down/worse by about .250, and the 10-yr T-note was down about .375 to a yield of 3.00%. There were no economic releases, which is just as well since the focus is on Republicans and Democrats who continue to talk at and blame each other for the debt ceiling impasse with no resolution yet in sight. Tradeweb reported below normal volume at 84% of the 30-day average.

This Week’s Market Commentary

There are seven reports scheduled for release this week may affect mortgage pricing in addition to two relevant Treasury auctions, but despite all that, the current debt ceiling issue may take center stage. With no data scheduled for release today, the stock markets and updates out of Washington will drive the markets.
Friday evening’s collapse of talks on the topic happened after the markets closed, so it will be interesting to see how we fare this morning. I suspect it is going to be ugly if significant progress is not made in Washington. At posting time of this report, the Japan indexes are showing losses, but not by a concerning amount.

The economic data starts Tuesday when the Conference Board posts their Consumer Confidence Index (CCI) for July at 10:00 AM ET. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. If consumers are more confident in their own financial situations, they are apt to make large purchases in the near future. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, meaning that consumers were less confident than thought, we may see bond prices rise and mortgage rates drop Tuesday. Current forecasts are calling for a reading of 56.0, which would be a lower reading than June’s 58.5 and indicate consumers are becoming less comfortable with their finances.

June’s New Home Sales will also be released late Tuesday morning. It gives us a measurement of housing sector strength and mortgage credit demand. Analysts are expecting it to show a small increase in sales of newly constructed homes, indicating that the housing sector gained some strength. That would be considered negative news for bonds, but since this data tracks only 15% of all home sales it usually has little impact on the bond market and mortgage rates unless it varies greatly from forecasts.

Wednesday brings us two events that are relevant to mortgage rates. The first will come from the Commerce Department when they post June’s Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for an increase in new orders of 0.4% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. A stronger than expected number may lead to higher mortgage rates Wednesday morning. If it reveals a decline in new orders, mortgage rates should drop because it would indicate manufacturing weakness. It should be noted though that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.

The Federal Reserve will release its Beige Book report Wednesday afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke’s testimony to Congress two weeks ago gave us a recent update, I don’t think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates Wednesday afternoon as a result of this report.

There is no relevant monthly or quarterly data scheduled for release Thursday, but there are three releases scheduled to be posted Friday morning. The first is the preliminary reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic activity. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. This reading is arguably the single most important we get regularly. Current forecasts are estimating that the economy grew at a 1.6% annual rate during the second quarter. A faster pace will probably hurt bond prices, leading to higher mortgage rates Friday. But a smaller than expected reading would likely fuel a bond market rally and lead to lower mortgage pricing.

The second report of the day Friday is the 2nd Quarter Employment Cost Index (ECI) that measures employers’ costs for wages and benefits. It is considered to be an important measurement of wage inflation and can impact the bond market and mortgage rates if it varies much from forecasts. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.5%, but the GDP reading likely will have more of an influence on the markets and mortgage rates.

Friday’s third piece of data is the final revision to July’s University of Michigan Index of Consumer Sentiment that will help us measure consumer optimism about their own financial situations. As with Tuesday’s CCI release, this data is considered important because rising consumer confidence usually translates into higher levels of spending. This adds fuel to the economic recovery and is looked at as bad news for bonds. Friday’s release is an update to the preliminary reading we saw two weeks ago, so unless we see a drastic revision to the preliminary estimate, I think the markets will probably shrug this news off.

Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are Wednesday’s 5-year Note and Thursday’s 7-year Note sales. Results of this week’s auctions will be posted 1:00 PM ET each day. If investor interest is strong, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates Wednesday and Thursday afternoons. Unless progress is made on the debt ceiling prior to these sales, it is highly unlikely that they will go well.

Overall, I am expecting an extremely active week in the financial and mortgage markets. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day. The most important report of the week is Friday’s preliminary GDP reading, making it one of the most important days of the week. But it is difficult to say which day we can expect to see the most movement in rates as several of the releases and scheduled events have the potential to influence mortgage rates. The wild card is the debt ceiling. Any news on that topic will probably heavily influence the financial and mortgage markets. Therefore, I STRONGLY recommend maintaining contact with your mortgage professional this week if still floating an interest rate!

New Federal Program to Help Struggling Homeowners

The federal government has created a program to help the over four million unemployed homeowners behind on their mortgage payments – a loan that doesn’t need to be repaid.

According to an article in the Wall Street Journal, the effort by the Department of Housing and Urban Development will allow qualified homeowners that have lost their jobs to borrow up to $50,000 which they may never have to repay if they meet the requirements.

HUD’s goal with this $1 billion effort, called the Emergency Homeowners Loan Program, is to help people in the short-term who will likely be back on their feet soon. There are conflicting viewpoints on the chance of success of this program; some see it as a band-aid, others as not enough help.

Applications for the program will be accepted through July 22.

Creative Ways to Retire Without Savings

Like many baby-boomers today, you may be faced with an upcoming retirement and a lack of a retirement savings account due to the rough economic times of the past few years.

A recent CBS MoneyWatch article tackles this problem by suggesting resourceful ways to make retirement work for you.

One bold idea is to pair up with another married, retiring couple, pooling together Social Security income for a manageable budget. Social Security income at age 66 will be $2,000 per month, with an additional $1,000 per month for the spouse, resulting in a $36,000 per year income.

If you find a like minded couple, consider moving into a three bedroom house together, making the combined household income $72,000. This is higher than the 2009 national average income.

Another tactic is to delay retirement until age 70, in which case your monthly Social Security income will increase to $2,640 per month. In this situation, your spouse would not need to delay past age 66 to receive the $1,000 per month. “You’d want to file and suspend your Social Security income at age 66, so your spouse can start the $1,000 monthly spousal benefit income at age 66,” advised the article.

At age 70, your combined income would be $43,680 per year following this plan. If you were to pair up with another married couple, that Social Security income would increase to $87,360 per year.

Your circumstances may not be right for such an arrangement, but this is just one example of creative and resourceful ways to head into retirement in this economic climate.

This Week’s Market Commentary

This week is quite light in terms of relevant economic releases and events that are relevant to mortgage rates, especially if comparing to the past couple weeks. This doesn’t mean we won’t see movement in mortgage rates, but I believe it will be a much less volatile week in the markets unless something very much unexpected happens.

There are only three economic reports scheduled for the financial and mortgage markets to digest and none of them are considered to be of high importance to the markets. Considering that the 10-year Treasury Note again fell below and closed under the benchmark 3.00% last week, we have bond market yields at a point of potential downward movement or an upward spike.

The first economic report of the week comes Tuesday morning with the release of June’s Housing Starts. This data gives us an indication of housing sector strength by tracking construction starts of new homes, but is not considered to be of high importance.

Analysts are currently expecting to see a small rise in new starts. However, I don’t see this data having much of an impact on mortgage rates Tuesday unless it varies greatly from forecasts.

The National Association of Realtors will post June’s Existing Home Sales figures late Wednesday morning. This report gives us a measurement of housing sector strength and mortgage credit demand, but as with all of this week’s data it is not considered highly important. Current forecasts are calling for a small increase in sales from May’s totals.

A drop in sales would be considered good news for bonds and mortgage rates because a weak housing sector would make it difficult for the economy to recover anytime soon. However, unless this data varies greatly from forecasts it probably will lead to only a minor change in mortgage rates.

June’s Leading Economic Indicators (LEI) will be posted at 10:00 AM Thursday. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of moderate importance to the bond market. It is expected to show a 0.3% increase, meaning that we may see a gain in economic activity over the next few months. A smaller rise in the index would be good news for the bond and mortgage markets.

Overall, this is a moderately significant week for the bond market and mortgage rates. With no highly important economic data to drive the markets and mortgage pricing, we likely will see the stock markets influence mortgage rates. If the major stock indexes rally, funds will probably move away from bonds, driving yields and mortgage rates higher. But weakness in stocks would fuel bond buying and lower mortgage rates for borrowers.

I am going to remain pessimistic towards rates, at least near term until the 10-year Note yield remains under 3.00% for some time. It is my opinion that we are more likely to see it move back above 3.00% before we see a new downward trend start. Accordingly, this leads me to remain cautious towards rates, at least for the time being.

This Week’s Market Commentary

This week brings us the release of seven important economic reports for the bond market to digest in addition to the minutes from the last FOMC meeting, two relevant Treasury auctions and semi-annual Congressional testimony by Fed Chairman Bernanke.

Several of the economic reports are considered to be of high importance, meaning we will likely see more volatility in the financial markets and mortgage pricing over the next several days. There are also some heavily watched corporate earnings releases scheduled for the stock markets this week that can influence bond trading and therefore, mortgage pricing. In other words, we are in for a heck of a week.

The first data of the week is May’s Goods and Services Trade Balance report early Tuesday morning, which measures the size of the U.S. trade deficit. This data is not considered to be of high importance to the bond market and will not likely have an impact on mortgage rates. However, if it does vary greatly from analysts’ forecasts of a $44.0 billion deficit, we may see some movement in bond prices and possibly a slight change in mortgage pricing. This is the least important of this week’s economic data.

Also worth noting about Tuesday is the afternoon release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show unexpected dissention among some of its members during discussion and voting at the last meeting or give any indication of the Fed’s possible next move with monetary policy.

There is no relevant economic data scheduled for release Wednesday, but Fed Chairman Bernanke will present his semi-annual update about the economy and monetary policy before Congress. He will speak before the House Financial Services Committee Wednesday and the Senate Banking Committee Thursday, each at 10:00am ET. His testimony will be broadcast and watched very closely.

Analysts and traders will be looking for the status of the economy and his expectations of future growth, particularly inflation and unemployment concerns that will lead to changes in key short-term interest rates.

This should create a great deal of volatility in the markets during the prepared testimony and the question and answer session that follows. If he indicates that inflation may become a point of concern or anything that hints at rapid economic growth, we can expect to see the bond market fall and mortgage rates rise Wednesday.

We usually see the most movement in rates during the first day of this testimony as the Chairman’s prepared words for both appearances are quite similar to each other, meaning that the second day of testimony rarely gives us anything we did not hear during the first day. The general exception is something asked or answered during the Q&A portion of the second day’s appearance.

Wednesday also starts the first of the two important Treasury auctions when 10-year Notes will be sold. That sale will be followed by a 30-year Bond auction Thursday. These sales can influence market trading in bonds and possibly affect mortgage rates. If the sales are met with a strong demand from investors, particularly Wednesday’s sale, we should see afternoon improvements in bonds that could lead to downward revisions to mortgage rates. However, if concern about the amount of debt that is being sold keeps buyers on the sidelines, we may see bonds fall after results are posted at 1:00 PM ET and mortgage rates move higher those days.

In addition to the second day of testimony and the 30-year Bond auction, Thursday does have some key economic data being posted. The first is June’s Producer Price Index (PPI) from the Labor Department. It is a very important release because it measures inflationary pressures at the producer level of the economy. It is expected to show a 0.3% decline in the overall reading and a 0.2% increase in the core data reading. The core reading is the more important of the two because it excludes more volatile food and energy prices. The bond market should react quite favorably if we get weaker than expected readings, but a larger than expected rise in the core reading could send mortgage rates higher Thursday.

June’s Retail Sales report will also be posted at 8:30 AM ET Thursday morning. This data is considered to be of high importance because it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. The Commerce Department is expected to say that sales at retail establishments fell 0.2% last month. A larger than expected decline in sales could help fuel a bond rally and lead to lower mortgage rates because it would mean that the economy is likely weaker than thought.

Friday has the remaining three economic releases, beginning with what arguably is the single most important monthly report for the bond market. That is June’s Consumer Price Index (CPI) at 8:30 AM ET, which is a mirror of Thursday’s PPI with the exception that the CPI measures inflation at the more important consumer level of the economy. Analysts have forecasted a 0.1% decline in the overall index and a 0.2% rise in the core data. The core data is considered to be the key reading because it gives us a more stable measure of inflation. Higher than expected readings could raise inflation fears and push mortgage rates higher, while readings that fall short of forecasts should lead to lower rates Friday.

June’s Industrial Production data is the second report of the day at 9:15 AM ET. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. It is expected to show a 0.2% rise in production, indicating that the manufacturing sector strengthened slightly during the month. That would basically be bad news for bonds, however, the CPI will take center stage Friday morning.

The final report of the week is the University of Michigan’s Index of Consumer Sentiment. This index is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted late Friday morning and is expected to drop slightly from June’s final reading of 71.5. This would indicate that consumers were a little less comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more apt to make large purchases in the near future. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these. So, a decline in confidence would be good news for mortgage rates because it means many consumers will probably delay making a large purchase in the immediate future, limiting economic activity.

Also worth noting is the fact that tomorrow kicks off the corporate earnings reporting season when Alcoa posts their quarterly results. Market participants are anxiously waiting for these announcements to see how the economy is affecting earnings. Just as important as this past quarter’s results are their forward-looking estimates. If revenue, earnings and projections from the big-named companies exceed expectations, stocks will likely rally.

This would make bonds less appealing to investors and lead to bond selling. But if results are weaker than expected, indicating that the economy is stifling earnings, bonds will be more attractive to investors as stocks slide. That could help boost bond prices and help lower mortgage rates.

Overall, it is difficult to try to label one particular day as the most important this week. It is easy to say the least important will likely be tomorrow, but every other day has important data or other events that can cause significant movement in the markets and mortgage rates. The single most important report for the bond market is the CPI Friday morning, but Thursday’s data is not far behind. Wednesday’s Bernanke testimony could be huge also. The week’s corporate earnings also have the potential to heavily influence bond trading and mortgage rates via stock market swings. Therefore, it is highly recommended to maintain fairly constant contact with your mortgage professional this week if still floating an interest rate.

This Week’s Market Commentary

This week brings us the release of four economic reports for the markets to digest, with three of them being considered important.

One of those three is one of the more important reports we see each month.

There is relevant data or events scheduled for each day except Thursday, so it will likely be another active week for mortgage rates.

May’s Personal Income and Outlays data will be posted early this morning. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up two-thirds of the U.S. economy.

Analysts are expecting to see an increase of 0.3% in income and a 0.1% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market and mortgage rates.

June’s Consumer Confidence Index (CCI) is the second report of the week. It will be posted late Tuesday morning. It is important to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial situations, they are likely more apt to make large purchases in the near future.

Current forecasts are calling for a reading of 60.3, down from last month’s 60.8 reading. The lower the reading, the better the news for bonds and mortgage rates.

Friday has two reports scheduled, with the first coming from the University of Michigan who will update their Index of Consumer Sentiment for May. This index gives us a measurement of consumer willingness to spend.
As with Tuesday’s CCI, if consumers are more comfortable with their own financial situations, they are more apt to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data has the potential to affect bond trading and mortgage rates.

The second report of the day and the last data of the week is the Institute of Supply Management’s (ISM) manufacturing index for June late Friday morning. This index measures manufacturer sentiment by surveying trade executives on current business conditions. A reading above 50 means that more surveyed executives felt business improved during the month than those who felt it had worsened.

Analysts are expecting a reading of 51.1. That would indicate that manufacturers felt business worsened from the previous month, when we saw a 53.5 reading. Good news for bonds and mortgage rates would be a weaker than expected reading, particularly something below the recessionary threshold of 50.0.
Overall, tomorrow and Tuesday’s data should bring some volatility in trading and mortgage rates, but Friday’s ISM report is definitely the most important of the week.

How to Decorate Using Feng Shui

Feng shui is an ancient Chinese system of aesthetic arrangement believed to help improve life by receiving positive qi, sometimes spelled chi. In a new home, or when rearranging things in your current home, utilizing feng shui principles in decor is not very difficult.

The video below introduces concepts of arranging frniture using the principles of feng shui.

Tagged as: decor, feng shui, stress reduction

Mortgage California Ranked #3 Company to Work For In Bay Area

In the Sunday edition of the Mercury News, the Bay Area News Group published their February survey results of the Top Work Places. We were ranked #3 for mid-sized companies (150 to 500 employees). The rankings were based upon surveys completed by employees which makes this honor even more special.

We also received a special award in the area of Ethics for the way we conduct business. Below are links to the rankings, our profile, the special awards listing, and information about how the rankings were compiled.

Don’t miss the picture of the “worker bees” which was printed on the front page of the special section in the newspaper.


Mercury News Top Workplaces List
Mortgage California Profile
Ethics Award
Mortgage California mentioned in Open Communication article in SJ Mercury
Congratulations, and especially thank you, to all employees and clients for making this one of the best places in the Bay Area to work! Mortgage California is currently hiring loan officers; take a look at our website to get in contact and learn more.

“This is a huge honor, and purely reflective of all of [the employees'] individual efforts and dedication to each other,” said Rob Reid, CEO. “I am very honored to be part of this great team.”

Four Ways to Avoid Getting Outbid

Competition can be stiff when multiple offers are placed on a house or condo.

There are ways to get ahead in the bidding war that will help your offer be selected.

1. Be first
If you are not working with a buyer’s agent, you should be. Make sure that the agent knows that you want to jump on any appropriate properties as soon as it becomes available. Also, put a tight deadline on your offer so the listing agent can’t use it to solicit other offers from interested buyers.

2. Be pre-approved
Although you likely can’t pay all cash, if you have an approval from a lender saying you’ll qualify for the necessary loan, you’ll be in a stronger position. Because lending standards have toughened, be prepared to make at least a 20% down payment. To prove you’re serious about buying, offer the seller a substantial earnest-money deposit as well – up to 3% of the purchase price.

3. Be highest
Obviously, sellers want to the the highest price possible for their property, so a generous offer will trump an all-cash one. But ask your agent to do a comparative market analysis first so you don’t pay more than the market price. If you do, your deal could fall through – or you’ll be asked to put up more cash – once the lender has the property appraised.

4. Be Easygoing
A recent survey done by the California Association of Realtors found that three-quarters of all sellers are putting their property on the market because of financial difficulties. While it isn’t suggesting that you waive an inspection contingency, don’t demand any monetary concessions, like a decorator’s allowance, or help with closing costs.

Similarly, ask your agent to find out if some accommodations on time would suit the seller’s needs – perhaps a quick closing date for a seller who is having trouble paying the mortgage, or conversely, a long rent-back after closing for sellers who need time to find another place to stay.

This Week’s Market Commentary

This week is very light in terms of scheduled economic reports that are relevant to mortgage pricing.
There are also two Treasury auctions taking place that may influence mortgage rates, but we may see the stock markets drive bond trading and changes to mortgage pricing a good portion of the week.

There is no relevant data scheduled for release today or Tuesday. Fed Chairman Bernanke will speak at the International Monetary Conference in Atlanta this afternoon, but I don’t believe we should consider this a highly important event.

There could be reference to the some of the current financial crises overseas. However, unless something said by Chairman Bernanke is highly surprising, I suspect that his speech will have a minimal or no impact on today’s afternoon rates.

The first economic report of the week comes Wednesday afternoon when the Federal Reserve will release its Beige Book. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve to determine monetary policy during their FOMC meetings.

If it shows surprisingly softer economic activity, the bond market may thrive and mortgage rates could drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing or rapidly expanding economic activity in many regions, we could see mortgage rates revise higher Wednesday afternoon.

April’s Goods and Services Trade Balance report will be posted early Thursday morning. This data gives us the size of the U.S. trade deficit and will be released at 8:30 AM ET. It isn’t likely to cause much movement in the markets or mortgage rates, but nevertheless forecasters are expecting to see a $48.7 billion trade deficit. It will take a wide variance from this projection for the data to influence mortgage rates.

The two relevant Treasury auctions scheduled will be held the middle part of the week. The 10-year Treasury Note sale is scheduled for Wednesday while the 30-year Bond sale will take place Thursday.

Results of both auctions will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading, however, weak demand could lead to selling and an increase to mortgage rates. It is common to see some pressure in bonds right before these sales as investors prepare for them, but as long as the sales are not weak those pre-auction losses are usually recovered once they are completed.

Overall, it likely is going to be a moderately busy week for the mortgage market. The most action will likely come during the middle days, assuming that the stock markets don’t go into heavy selling or buying. In weeks like these where there is little factual economic data being posted to drive bond trading, the stock markets often take center stage.

Sizable stock gains should lead to bond weakness and higher mortgage rates, while stock weakness will likely allow improvements to mortgage pricing. I am considering Wednesday the best candidate for most active day in rates, but that is relying on the assumption the stock markets remain relatively calm this week.
To see daily market commentary, click here.

This Week’s Market Commentary

This week brings us the release of five important economic reports in addition to two Treasury auctions that may influence rates. Only two of the five reports are considered to be of fairly high importance to the bond market and mortgage pricing. The remaining reports are considered to be of moderate or low importance and will likely not heavily influence mortgage rates.

April’s New Home Sales data will be released late Tuesday morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing because it tracks only approximately 15% of all home sales. It is expected to show little change in sales from March’s level, meaning the new home portion of the housing sector was flat last month.

Wednesday has one of the week’s more important reports scheduled with April’s Durable Goods Orders being posted. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products.

It is currently expected to show a decline in new orders of approximately 2.0%, indicating manufacturing sector weakness. That would be good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts would likely have little impact on mortgage rates Wednesday.

The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM Thursday. The second revision to this report comes next month but isn’t expected to carry much importance. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month’s preliminary reading revealed a 1.8% increase in the annual rate of growth. Analysts expect a slight upward revision to this reading with the consensus being a 2.0% rate of growth. If the upward revision is much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter.

April’s Personal Income and Outlays data is the first of two reports due Friday. It will be posted at 8:30 AM and gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up two-thirds of the U.S. economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.4% increase in income and a 0.5% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.

The second report of the day and the last relevant data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show a small increase from this month’s preliminary reading of 72.4. A reading above 72.6 would be considered negative for bonds and mortgage pricing.

Overall, I think we have a fairly busy week ahead of us. The big report of the week is Wednesday’s Durable Goods Orders. If Thursday’s GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates. There are also a couple of Treasury auctions that are worth noting. The 5-year Note sale is Wednesday and the 7-year Note auction will be held Thursday. Both may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.

The bond market will close early Friday afternoon ahead of next Monday’s Memorial Day holiday. With all this, there is a pretty good possibility of seeing mortgage rates change several times this week- especially if there is more volatility in the stock markets. Accordingly, please proceed extremely cautiously if still floating an interest rate.

Creative Ways to Retire Without Savings

Like many baby-boomers today, you may be faced with an upcoming retirement and a lack of a retirement savings account due to the rough economic times of the past few years.

A recent CBS MoneyWatch article tackles this problem by suggesting resourceful ways to make retirement work for you.

One bold idea is to pair up with another married, retiring couple, pooling together Social Security income for a manageable budget. Social Security income at age 66 will be $2,000 per month, with an additional $1,000 per month for the spouse, resulting in a $36,000 per year income.

If you find a like minded couple, consider moving into a three bedroom house together, making the combined household income $72,000. This is higher than the 2009 national average income.

Another tactic is to delay retirement until age 70, in which case your monthly Social Security income will increase to $2,640 per month. In this situation, your spouse would not need to delay past age 66 to receive the $1,000 per month. “You’d want to file and suspend your Social Security income at age 66, so your spouse can start the $1,000 monthly spousal benefit income at age 66,” advised the article.

At age 70, your combined income would be $43,680 per year following this plan. If you were to pair up with another married couple, that Social Security income would increase to $87,360 per year.

Your circumstances may not be right for such an arrangement, but this is just one example of creative and resourceful ways to head into retirement in this economic climate.

This Week’s Market Commentary

This week brings us the release of four pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting.

None of the economic reports are considered to be highly important to the markets or mortgage rates, but they do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.

Nothing of importance is scheduled for today, so look for the stock markets to be a major influence on bond trading and mortgage pricing. If the stock markets open the week with sizable gains, bonds will likely suffer and mortgage rates will probably move higher tomorrow. However, more stock weakness could translate into slightly lower rates tomorrow. The mortgage market took a small turn for the worse Friday afternoon, so unless your lender revised pricing higher late Friday you may have a slight increase in rates waiting for you.

The week’s first data comes early Tuesday morning when April’s Housing Starts will be posted. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new starts from March’s readings.

Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.

The second report of the day is April’s Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.5% increase in production, indicating that manufacturing activity is growing.

A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is equally important to the markets as the earlier housing report, so they both will likely need to show unexpected strength or weakness for them to cause a sizable movement in mortgage rates.

Wednesday’s only relevant release is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading.

The National Association of Realtors will give us their Existing Home Sales report late Thursday morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for a small increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating further housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Thursday morning.

The last data also comes late Thursday morning with the release of April’s Leading Economic Indicators (LEI). This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show no change from March’s reading, meaning that economic activity is likely to remain flat over the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher Thursday.

Overall, it looks like we may see a fairly calm week in mortgage rates unless something unexpected happens or the stock markets make a big move upward or downward. I can’t really label one particular day as the most important one. If the stock markets remain fairly calm, I would guess the middle part of the week will probably be the most active for mortgage pricing. However, sizable gains or losses in the major stock indexes could influence bonds and mortgage rates more than this week’s economic data can.

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This Week’s Market Commentary

There are five pieces of relevant economic data scheduled for release this week that may affect mortgage rates, in addition to two important Treasury auctions.
The four most important four reports will be posted over two days, meaning the markets will have to rely on factors other than economic news for direction several days. There is no relevant data due today or Tuesday, so expect the stock markets to help drive bond trading and mortgage rates those days.
March’s Goods and Services Trade Balance report will be released early Wednesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $47.8 billion trade deficit, but it is the least important of this week’s data and likely will have little influence on Wednesday’s mortgage rates.
The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.
The first important piece of data this week is April’s Retail Sales, which will be released at 8:30 AM ET. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.6% increase in sales from March to April.
A weaker than expected level of sales should push bond prices higher and mortgage rates lower Thursday morning as it would signal that economic activity may not be as strong as thought. However, a larger increase could fuel fears of economic growth that would lead to bond selling and higher mortgage rates.
April’s Producer Price Index (PPI) will also be released early Thursday morning. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.
Friday has the remaining two reports. The first is April’s Consumer Price Index (CPI) at 8:30 AM ET. It is similar to Thursday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.4% increase in the overall index and a 0.1% rise in the core data reading. As with the PPI, the core data is the more important of the two readings.
The last report of the week is May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident of their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 69.8, which would be no change from last month’s final reading.
If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower, assuming the CPI does not give us a significant surprise. The CPI is much more important to the markets than the sentiment index is, so look for it to be the biggest influence on Friday’s mortgage pricing.
Overall, it likely will be another active week for mortgage rates. Besides the week’s important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Thursday with the Retail Sales and PPI reports on the agenda, but Friday’s CPI is extremely important to the bond market. It appears we will likely see the most movement in mortgage rates the latter part of the week unless the stock markets post sizable gains or losses the first part. With some very important data being posted this week, it would be prudent to be attentive to the markets if still floating an interest rate.
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