TEAM EMPOWERMENT MORTGAGE CHATTER: April 21; News & Headlines; Existing-Home Sales Up In March; 5 Reasons to Get FHA Mortgage; Mortgage Applications Bounce Back Up 5.3%

“You, too, can determine what you want. You can decide on your major objectives, targets, aims, and destination. “ – W. Clement Stone



In the first quarter the four largest banks here in the US saw average loans outstanding drop 7% from a year earlier, but deposits increase by 5%. From a bank’s point of view, the demand for credit has dropped and may not pick up again until the economy shows more improvement.

Fannie Mae has recently announced a special incentive effective with offers submitted on or after April 11th…Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through June 30, 2011. The HomePath property buyer must meet the following qualifications to be eligible: Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible. The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive. The sale must close on or before June 30, 2011. No exceptions will be made to this deadline. Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive. Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum. If a buyer’s total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.”

Today we had Jobless Claims, and two weeks ago we had the release of the employment numbers. A story from the Wall Street Journal recently noted, “If you want to understand better why so many states-from New York to Wisconsin to California-are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments are the $1 trillion-a-year tab for pay and benefits of state and local employees.

By the time the dust settled yesterday, not much had happened – again. Volatility is dying down, usually a good thing. The 10-yr ended around 3.40%, and current coupon MBS prices were worse by .125. Per the NAR numbers, sales of previously owned U.S. homes rose more than expected in March, +3.7%. All-cash sales set a record market share at 35% in March; investors accounted for 22% of sales activity, while distressed homes accounted for 40%. Sales rose in the Northeast, South and Midwest, and were down slightly in the West.

Later today we have the Leading Economic Indicators, a measure that tracks changes in the business cycle. In February it rose 0.8%, the seventh consecutive month of improvement in the index. Nine of the 10 components of the indicator were in positive territory for the month. Most economists feel that the LEI is supporting the notion of slow, albeit uneven, growth in the US economy. For today, expectations are for a slight improvement again. With the early bond market close and ahead of tomorrow’s market holiday, we had the usual Initial Jobless Claims (which moved from 416k down to 403k), Leading Economic Indicators, the Philly Fed, and another housing price index – the FHFA HPI. We also will have the Treasury’s announcement for next week’s auction of 2, 5, and 7-yr notes. So far the 10-yr yield is slightly better at 3.38% and agency MBS prices are also a shade better.


After stumbling in February, sales of existing homes rose 3.7 percent in March from the month before, according to a National Association of Realtors report released today.

Completed sales of existing single-family homes, townhomes, condominiums and co-ops fell 6.3 percent compared to March 2010 — when a federal homebuyer tax credit program elevated sales — to a seasonally adjusted annual rate of 5.1 million units.

“With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain — primarily because some buyers are finding it too difficult to obtain a mortgage,” said Lawrence Yun, NAR’s chief economist, in a statement.

He said the generally upward trend in monthly existing-home sales suggests the housing market is “clearly on a recovery path.”

The median price for existing homes nationwide fell 5.9 percent year-over-year in March, to $159,600. Distressed properties, typically sold at a discount, made up 40 percent of sales last month, compared with 35 percent in March 2010.


With the likely installation of QRM looming, it is clear that FHA mortgages will clearly become more popular merely because of the lesser down payment requirements. And as we have all learned, when the demand for something goes up, and the supply remains constant, prices go UP…that is, it becomes more expensive.

Talking Point One

The FHA is permitted each year to insure a specific dollar amount of loans by Congress. I find it unlikely that anyone has factored the increased demand for FHA that QRM will create. Further, getting Congress to allocate more money to HUD in these days of deficits is not a sure thing. I could see a fourth quarter of 2011 with little financing available (or much more expensive financing) to people with less than 20% down.

Talking Point Two

We hear, almost daily, that FHA is only semi-solvent…that they don’t have sufficient reserves. Foolishly, the MIP schedule was altered to give them less cash today (lowering the Up Front MIP) and increasing the longer term collection of monies (the Monthly MIP). To me, that almost insures another MIP change this year…one in which the UFMIP is hiked to get more money in the reserves now, making mortgages more expensive.

Talking Point Three

The FHA is floating rumors about tightening guidelines. Maybe it will be an increase in minimum down payment from 3.5% to 5%. Maybe a cut in seller paid closing costs from 6% to 3%. Maybe both. Regardless, it is going to get harder to qualify. Understand with increased demand and steady supply, lenders will be choosier.

Talking Point Four

Rates are creeping up anyway. With inflation making a strong comeback (fueled by high gas prices), the Fed will look to hike rates to control inflation.

Talking Point Five

The current loan limits are going to be slashed. Presently, FHA will insure loans up to $729,250 in high cost areas. That number is huge when compared to historic loan limits and was instituted when desperate times called for desperate measures. And while we still might be semi-desperate, look for those loan limits to be lowered by at least $100,000 come the end of the year (when Congress sets them for the next year).

For buyers, waiting can be expensive, or worse. You might not even get a loan. For sellers, more expensive loans and less buyers who qualify, will force you to lower your prices even further. ACT NOW!


The number of mortgage applications are back on the rise again after a monthlong decline in filings, according to the Mortgage Bankers Association.

Mortgage applications increased 5.3 percent the past week, with most of the increase attributed to a surge in applications for government loans. Government loan applications increased 17.6 percent.

“Purchase application volume jumped last week largely due to another sharp increase in applications for government loans,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Borrowers were likely motivated to apply for loans before the scheduled increase in FHA insurance premiums.”

The seasonally adjusted purchase index rose by 10 percent, while applications for refinancing increased 2.7 percent from the previous week, MBA reports.

“Refinance activity increased somewhat, as rates dropped to their lowest level in a month towards the end of the week,” Fratantoni said.

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