“Ask yourself ‘Where can I win?'”
— Stephen Pierce: Internet marketer and author
Of course, everyone in mortgage banking is hoping that 2011 is not a disaster. (Remember – borrowers still borrowed money even when rates were in the high teens.) That being said, not only did Freddie Mac recently lower its production estimates for 2011, but the Mortgage Bankers Association (of America) came out with its forecast for 2011: 30yr conforming conventional fixed rates at 5.5% by year end, and $966 billion total single family originations in 2011. How’s your business plan? MBAforecast
Regarding volumes, this morning we learned from the MBA what many lock desks could tell us: that apps picked up by 5% last week, with refinancing applications up almost 8%. Purchases dropped about 2%.
Will any mortgage with an LTV of 70% or less avoid the future 5% risk retention situation for issuers? That LTV level, which continues to pop up in the press, could be the new basic level for a “safe mortgage” – check out this story in the Wall Street Journal: WSJ
FHFA, which obviously has a great interest in the future of Freddie & Fannie, announced a “joint initiative” between the two and HUD for “Alternatives for a New Mortgage Servicing Compensation Structure.” “(It) will consider alternatives to the traditional servicing compensation structure. The goals are to improve service for borrowers, reduce financial risk to servicers, and provide flexibility for guarantors to better manage non-performing loans, while promoting continued liquidity in the To Be Announced mortgage securities market. Alternatives for consideration may include a fee for service compensation structure for non-performing loans as well as the possibility of reducing or eliminating the minimum mortgage servicing fee for performing loans, or other structures. Many of these issues have been the subject of discussion within the mortgage industry for years.” Before servicing employees begin wringing their hands, nothing expected until the summer of 2012. ServicingValue?
Although the supply of MBS’s is sliding, and the demand is still decent, yesterday “rate sheet” mortgage-backed security prices finished off Tuesday worse by about .250 after beginning the day better by .250. Tradeweb reported that volumes averaged 87% of the 30-day average, up from a daily average last week of 73%. Our 10-year Treasury notes closed worse by .250 in price and at a yield of 3.37%. “Lower and wider didn’t draw in significant buying as many real money types held closer to the sidelines waiting for stabilization in the market and volatility, said sources” per one trader.
Most Americans Say It Is a Good Time to Buy a Home
We have been making two major points for several months. If you are selling a house, you must do it now AND if you are buying one, you must also do it now. This sounds crazy - but it is true. PRICE is the most important thing to a seller. With prices projected to fall through the first half of 2011, if you want to sell, do it now. The alternative might be to wait over a year just for prices to recover to current values.
Even the Gallup people weighed in on the subject:
Overall, there is good reason for most Americans to think now is a good time to buy a house. Interest rates remain near historic lows. Home prices are down sharply, providing many incredible buys.
There may be people advising you to use caution before buying a home right now. That is probably good advice. However, there is a difference between caution and fear. Fear could paralyze you and prevent you from making a good decision. Caution will make sure you make the right decision. And remember: if you do think it makes sense to buy your home today, 2 out of 3 people agree with you.
We also had Housing Starts and Building Permits for December; starts were expected to decline and permits pick up. Starts were indeed down 4.3%, possibly with some influence from weather, and permits were up 16.7%. Regardless, housing is slow, and continues to grapple with a foreclosure overhang. After the news the 10-yr yield is chopping around 3.34% and MBS prices are a shade better.
The second point revolves around the fact that buyers are more concerned about COST (price AND interest rate). Fannie Mae, the National Association of Realtors, the Mortgage Bankers Association and the PMI Company are all projecting interest rates to rise this year. If you want to buy, your best time to purchase could be right now.
We have had people question us on the second point. We truly believe it is a good time to buy however. And a new survey says that the majority of Americans agree with us. Gallup just released a poll showing that 67% of Americans think this is a good time to purchase a home. The interesting thing is that the same poll showed that more people believed that prices would decrease (27%) than increase (21%). Most people realize that this is a opportune time to purchase even if prices continue to soften.
turned some heads yesterday by announcing that it is “revising certain refinance mortgage eligibility and underwriting requirements, and announcing the elimination of Freddie Mac-owned streamlined refinance mortgages.” After May 1 Freddie is, “Requiring verification of funds for all refinance mortgages. This requirement will apply to all refinance transactions except for certain Relief Refinance Mortgages – Same Servicer. The elimination of Freddie Mac-owned streamlined refinance mortgages and requiring that a purchase money mortgage be seasoned for 120 days in order to be refinanced as a “no cash-out” refinance mortgage. If the new mortgage is refinancing a purchase money transaction, the note date of the original mortgage must be at least 120 days prior to the note date of the “no cash-out” refinance mortgage.” See all the details, and more including news on PACE obligations, at FreddieChanges