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TEAM EMPOWERMENT MORTGAGE CHATTER: Jan. 7: Fannie training on new data sets; unemployment drops but rates improve anyway; RENT vs. BUY
“If you are not willing to risk the unusual, you will have to settle for the ordinary.” — Jim Rohn: Was an entrepreneur and motivational author and speaker
 
 
New data requirements will be here before we know it, and Fannie Mae does not want you to be caught unaware. Information for the Uniform Mortgage Data Program (UMDP), Uniform Loan Delivery Dataset (ULDD) and Uniform Appraisal Dataset (UAD) resources can be found at some training sessions that Fannie has coming up – probably a must for Ops folks:
 

 

January 19, 2:00 p.m. – 3:00 p.m., ET
https://www.cvent.com/EVENTS/Register/IdentityConfirmation.aspx?e=470fa6a0-ecc9-4f57-b999-de7adb04b900

January 20, 3:00 p.m. – 4:00 p.m., ET

https://www.cvent.com/EVENTS/Register/IdentityConfirmation.aspx?e=9f7b0ed7-252e-49d0-8923-329573a39a11

January 26, 2:00 p.m. – 3:00 p.m., ET

https://www.cvent.com/EVENTS/Register/IdentityConfirmation.aspx?e=9830909e-a034-4787-9887-232212c52f39

January 27, 3:00 p.m. – 4:00 p.m., ET

https://www.cvent.com/EVENTS/Register/IdentityConfirmation.aspx?e=f3e35d2b-50df-45bc-8232-42663870b8aa

On to the market! Regardless of what happened yesterday, this morning we have had the monthly unemployment data. The number that will grab the headlines will be the unemployment rate dropping to 9.4% – the lowest in quite some time. But non-farm payroll rosters were lower than expected, at least lower than expected given the strong ADP number Wednesday. In terms of mortgage pricing, not only have mortgage spreads (to Treasury yields) tightened, but fixed income securities have improved in general – two bonuses! Faster job growth is needed to keep consumer spending accelerating and ensure the economic recovery becomes self- sustaining. Payrolls need to grow about double December’s pace to make further progress in lowering the jobless rate, one reason why Federal Reserve policy makers have reiterated they will stick to their plan for more monetary stimulus. Construction payrolls declined by the most since May and professional and business services added the fewest number of jobs in five months.

 

Taking a quick glance at yesterday, the 10-yr yield improved to 3.42% – right now we’re down to 3.38%. MBS prices improved by .250-.375 yesterday, and are doing better again today by the same. 

 RENT vs. BUY

We are starting to hear from real estate professionals that a growing number of purchasers are young adults being persuaded to buy now. Who are the people selling them on the American Dream? Their parents! It seems that parents of some adult children are strongly suggesting that their children take advantage of the low cost of homeownership available today. Some moms and dads are helping financially and are even co-signing for the mortgage. At first, it’s thought to be rather surprising. However, after thinking about it, it made complete sense. Here are the reasons why.

DO THE MATH

Let‘s look at the financial aspects of renting vs. buying. With house prices falling and rental prices rising in many markets, the possibility that owning a home could cost less than renting one is growing.

In an article from  CNN Money earlier this week, they looked at this issue as we move into 2011:

Perhaps not surprisingly, it makes more financial sense to rent than buy today in many U.S. cities…
 

But that may finally be about to change. Moody’s chief economist Mark Zandi expects the trend to reverse this year in many major cities.

“By mid 2011 and certainly by end of 2011, buying will be superior to renting in most parts of the country,” Zandi says. As one person said to us recently: “Rents are like adjustable rate mortgages. They adjust often and most times they adjust upward!“

 Talk to Mom

Middle age parents who have owned a home understand its true value. A home has always been a good long term financial investment. However, homeownership also has many other benefits.

As a matter of fact, Fannie Mae just came out with their National Housing Survey which asked the question directly: Is this a major reason to buy a home?The study broke up the answers into financial and non-financial reasons. The top four reasons and six of the top ten reasons were NON-FINANCIAL. The top four are below:

  1. It means having a good place to raise children and provide a good education.
  2. You have a physical structure where you and your family feel safe.
  3. It allows you to have more space for your family.
  4. It gives you control over what you do with your living space (renovations & updates).

Should this surprise us? Aren‘t these the same reasons our parents bought their home? Aren‘t these the same reasons we purchased our home?

These are the same reasons parents have suggested their children buy a home. They want the same things for their grandchildren that they believed to be important for their children.

Bottom Line

Now that the craziness of this housing market is beginning to show signs of settling, people are getting back to the core values that families have always embraced. Homeownership is definitely high on the list.

 

 

 

 

TEAM EMPOWERMENT MORTGAGE CHATTER: Jan. 6: Employment and the affect on the Market; HOW SHOULD YOUR HOME BE MARKETED?
“People with goals succeed because they know where they are going… It’s as simple as that.” 
–  Earl Nightingale

 

Fixed-income prices went down yesterday, and rates moved higher, after the private-sector jobs report from ADP painted a brighter picture of the U.S. economy. The 10-yr yield hit 3.50%, although it finally closed at 3.48%, and current coupon mortgage-backed securities dropped by about .75 in price. 4.5% conventional securities, which would include 4.75-5.125% 30-yr mortgages, are trading around a 1.5 point premium (101.50). .

The report showed an expansion of 297,000 jobs in December, according to payroll processor ADP. That was nearly triple economists’ consensus forecast, and caused economist to ratchet up their estimates for tomorrow’s nonfarm payrolls data. Estimates now are coming in around 175,000 for a pick-up in non-farm employment instead of the 140,000 prior to the ADP number. Still, keep in mind that historically the ADP number has not had the best track record for predicting the government’s official report. Should the payrolls report tomorrow turn out to be strong, it is likely to raise questions about how much longer the Federal Reserve will conduct its Treasury buying program to stimulate the economy, and stimulate conjecture about the Fed possibly raising short term rates.

 

We were seeing a little bit of bounce here this morning after Wednesday’s sell-off, and the yield on the 10-yr had moved from a close Wednesday of 3.48% down to 3.43%. At 5:30AM PST we had our usual weekly jobless claims, which is about the only scheduled economic news for the day aside from next week’s auction amounts. Weekly Jobless Claims came in at 409,000 from a revised 391k, up 18k. The 4-week moving average dropped 3,500. After the number we find the 10-yr still sitting around 3.43% and MBS prices better by about .250.

 

HOW SHOULD YOUR HOME BE MARKETED?

 

Differentiating a home from the massive inventory is difficult. In a world of information overload, building excitement about a single home (when there are “three just like it“ for sale on the same block) is a monumental task. Really, MARKETING a home is an agent‘s primary job. I mean, agents don‘t determine price (the buyer does that), but agents know the role that price pays in a home‘s marketing.

 

Marketing is what gets prospective buyers to look at a home. Better marketing, more prospective purchasers see a home. More prospective purchasers (i.e. more demand) ensures the highest possible sales price for the sellers (because they have limited supply- their one home).

 

Most agents take a shotgun approach. Market the home in general print publications. Get on the local MLS. Promote the house on 50 different internet search websites. Drive traffic to their personal or company websites. Run the standard Open House. And your home is now “present” among the 1000s of other homes that are competing for buyer attention. You can kill your prey (that ONE perfect buyer for your home) with a shotgun, but you are going to have more success with a rifle..a rifle with a laser guidance system.

 

Some “outside the box“ approaches to Target Marketing:

 

Geographic Marketing – The best agents are aware of migration patterns. They know that “most people who buy in a neighborhood, come from___________.“ Usually people move from one part of town to another (an in-town upgrade). They already know the schools, shopping and houses of worship. That is obvious, isn‘t it? But, top agents know what other towns historically are feeding new buyers into your neighborhood. And they have a marketing plan that addresses that phenomenon.

Employment Marketing – In most marketplaces, there is a type of buyer profile that is moving into a neighborhood. It‘s logical because of income levels, job security, proximity to the place of work, and so on. Maybe it is law enforcement personnel, or teachers, or doctors. Is your agent finding unique publications, websites or Facebook Pages to promote your home on to make the type of likely employment of a buyer be cognoscente of your home?

Generational Marketing – Most homes have an appeal to buyers at a certain stage of life. Single, married, married with kids, empty nesters, etc. How does your agent‘s marketing plan excite someone based on their stage of life? 50 websites isn‘t enough. Facebook Fan Pages? Print publications that target that segment? Segmented databases (of renters, as an example)? Text messaging? Public Seminars?

By marketing in non-traditional ways to TARGET the most likely buyer of a home, you can escape the clutter of the arena everyone else is competing in AND increase the likelihood of grabbing the attention of an actual buyer. Geography, Employment and Generational approaches need to be examined. The professional agent of today has incorporated some, or all, of these concepts into their business. And today, you need the most professional of agent working on your behalf.

TEAM EMPOWERMENT MORTGAGE CHATTER:Jan. 5: Primary dealer changes? Commercial debt issuance; not the best of news for residential originations; 3 QUESTIONS YOU MUST ANSWER BEFORE BUYING A HOME

“I will tell you how to become rich. Close the doors. Be fearful
when others are greedy. Be greedy when others are fearful.” – Warren Buffett:  Investor, billionaire, and philanthropist

The new Congress takes over today, and as was mentioned yesterday, has a lot of fiscal clean up to do. Of course, this is the same with every year’s Congress, but we keep hoping for something new. On of the huge issues is the deficit, which in turn correlates to the size of the regular Treasury auctions. A ”

primary dealer” is a designation given by the Federal Reserve System to commercial banks or broker/dealers who meet specific criteria, including minimum capital requirements ($150 million) and participation in the Treasury auctions. Currently, there are 18 primary dealers in the U.S. government bond market, including Goldman Sachs, Jefferies, Barclays, HSBC, Morgan Stanley, and J.P. Morgan. It is a nice thing to have on your resume for a variety of reasons, and the last new primary dealer was Nomura in mid-2009.

Maybe things are not so great, as Caroline Baum (Bloomberg) points out. “Homebuilder sentiment, new home sales and single-family housing starts, which, in that order, lead the complex of residential real estate indicators, are bumping along the bottom…There was a brief incentive-driven pick-up in sales in 2009 and the first half of 2010 that faded the minute the home purchase tax credit expired.” Aside from that, she points out, the news has not been rosy, nor will it be given the mediocre demand versus the high inventory of unsold homes and potential increased supply. “The U.S. just experienced the biggest speculative boom/bust in housing in history, a massive outward shift in the supply curve.

For mortgage applications

, the numbers did not do much for the last couple weeks of the year. Per the MBA, whose survey covers about half of all U.S. retail residential mortgage originations, the seasonally adjusted index of mortgage application activity rose 2.3% for the week ended December 31 and dipped 3.9 percent in the prior week. Refinancing is hovering around 70% of all apps – and if/when rates head higher, that will, of course, drop.

HUD sent out another Mortgagee Letter , 

providing “loss mitigation guidance for the resolution of Home Equity Conversion Mortgages (HECM) that are delinquent due to unpaid property charges and mortgages wherein due and payable requests were previously deferred by HUD.1.”

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-01ml.pdf.

After a couple days of being unchanged, we were seeing a little improvement in rates this morning – until the ADP employment numbers came out showing a much stronger than expected private jobs number. Yesterday’s Fed minutes did not move the market much. “Federal Reserve policy makers said that improvements in the economy did not meet the threshold for scaling back their plans to purchase $600 billion in bonds to help bring down the unemployment rate and stop inflation from falling too low” as one source put it – pretty much anticipated. In other words, the recovery is still weak, and needs stimulus.

As one would expect, heavy corporate bond issuance is affecting Treasury prices, which in turn impact mortgage rates: before bond deals are announced, issuers and underwriters often sell Treasuries to hedge their interest rate risks. But once a deal is priced, its participants often buy up Treasuries again. Factory orders for November were pretty strong. The 10-yr yield closed at 3.33%.

For today we have already had some news to move the markets around. ADP, who monitors jobs in the private sector, showed an increase of 297,000 – the 11th monthly gain and the largest jump that ADP has seen. Later this morning we’ll have some ISM non-manufacturing data, but this strong ADP number is setting the tone. After the news the yield on the 10-yr is hovering around 3.40% and MBS prices are worse .250-.375.

3 QUESTIONS YOU MUST ANSWER BEFORE BUYING A HOME

1. Why should I buy if house prices are still depreciating?

We believe that in most parts of the country prices will in fact soften in 2011. Price is the major concern for anyone selling a home. When you are buying, COST should be your primary concern however. Your monthly payment (cost) is definitely impacted by the price of the home you purchase. The other major component is the interest rate. Waiting for prices to bottom out while rates are increasing can wind up costing you more over the life of the mortgage

Over the last seven weeks, rates have increased over 1/2 a point going from 4.17 to 4.86. Looking at the attached chart shows this increase. Waiting for prices to bottom out seems to make perfect sense. Yet, at a time when rates are increasing, it might NOT make sense. Make sure you have a mortgage professional help you with this math before making a decision.

2. When will I begin to see appreciation if I buy now?

This is a great question. Macro Markets, LLC is a company that studies housing prices. They started their Home Price Expectation Survey in 2010. They ask 100+ housing industry experts to project housing prices through 2015. The most current survey shows that the experts are predicting prices to soften until 2012. The experts then project prices to rise reaching a cumulative appreciation of over 10% by 2015.

 Purchasing a home today makes great sense from a financial standpoint. Think of the old axiom: You want to buy low and sell high. We may be at the low point regarding the COST of a home. But, this decision should not only be a financial one.That leads us to our third and final question:

3. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe

      More space for you and your family

        • Control of space

         

        Bottom Line

        The COST of a home will probably remain relatively unchanged even if prices continue to depreciate. Don’t allow money to get in the way of you making the right decision for you and your family. In the long run, the finances will work in your favor anyway.

           

      What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the reason whether you decide to purchase or not.

      TEAM EMPOWERMENT MORTGAGE CHATTER: Jan. 3: BofA settles with Freddie & Fannie but has other legal woes; HUD’s Mortgagee Letters; covered bond chatter; QUANTITATIVE EASING EXPLAINED
      “You were born to win, but to be a winner, you must
      plan to win, prepare to win, and expect to win.”
      — Zig Ziglar: Motivational author and speaker

       

       

      Continuing the trend begun by many large and small lenders, Bank of America spread the word that it settled outstanding repurchase claims with Fannie Mae and Freddie Mac over residential loans sold to them by Countrywide. BofA said its home loans and insurance business is expected to “record a $2 billion, non-cash, non-tax deductible goodwill impairment. It also expects to take a provision of about $3 billion related to repurchase obligations for residential mortgage loans sold by Bank of America affiliates directly to Freddie Mac and Fannie Mae.” The company agreed, among other things, to a resolution amount of approximately $1.52 billion, consisting of a cash payment of $1.34 billion made by Bank of America on 12/31, and credits for payments recently made or to be made by them. The agreement substantially resolves outstanding repurchase requests on 12,045 loans sold to BofA by Countrywide, addresses 5,760 other loans sold to it by Countrywide and permits the #2 lender to bring claims for any additional breaches of our representations and warranties that are identified with respect to those loans.  Fannie Mae continues to work with Bank of America to resolve repurchase requests that remain outstanding. This agreement with Bank of America addresses approximately 44 percent of the $7.7 billion in repurchase requests (measured by unpaid principal balance) we had outstanding with all of our seller servicers as of September 30, 2010.”

       

      But that doesn’t stop other lawsuits. Allstate Corp has sued BofA, its Countrywide lending unit and 17 other defendants for allegedly misrepresenting the risks on more than $700 million of mortgage securities it bought from Countrywide. In a story out of Reuters, “Allstate, the largest publicly traded U.S. home and auto insurer, alleged it suffered ‘significant losses’ after Countrywide misled it into believing the securities were safe and the quality of home loans backing them was high. Allstate said that starting in 2003, Countrywide quietly decided to boost market share and ignore its own underwriting standards by approving any mortgage product that a competitor was willing to offer, in a ‘proverbial race to the bottom.’ Countrywide then passed on the added risks to investors who bought debt backed by the mortgages, Allstate said.BofAAllstate

       

      News hit last week of a “setback” at Bank of America over its lawsuit with MBIA. (MBIA is/was in the business of providing insurance that covered the principal and interest payments to investors if the borrowers defaulted.) “The bank lost a major procedural ruling in a lawsuit over its liability for allegedly toxic mortgages. The ruling will make it harder for the bank to defend itself in that case, and it could set a standard for similar disputes. Bank of America had tried to set a high bar for plaintiff MBIA Insurance by requiring that the files for each of 368,000 or more disputed loans be evaluated individually. That process would have cost MBIA $75 million, and it would have taken a team of 24 people more than four years, MBIA estimated.” But the New York State Supreme Court declared that MBIA can pursue its case by focusing on a statistical sample of 6,000 disputed loans. That could pave the way for a trial to proceed as scheduled in 2011. Of course, the MBIA must still prove its case, which focuses on loans issued by Countrywide.

       

      HUD brought out several administrative actions against mortgage companies and/or their branches. It is not a list you’d want to be on. AdminAction

       

      Late last week HUD sent out two Mortgagee Letters. The first deals with FHA Flood Zone requirements (“FHA now requires that all Mortgagees obtain a flood zone determination on all properties instead of strongly encouraging such action.”) The second Letter focuses on guidance concerning the use of the Federal Home Loan Bank Affordable Housing and Homeownership Set-Aside Programs. Read all about it! HUDLetters 


      Anyone involved in VA lending probably knows that the Department of Veterans Affairs requires all VA authorized agents to pay an annual recertification fee to each lender with whom they intend to have an ongoing relationship in the coming year. The $100 recertification fee is due by January 31 of each year.

      Will “covered bonds” be the thing of the future in mortgage banking? Unlike regular securities backed by [fill in the blank], where investors have no recourse to the issuing bank, the loans backing covered bonds remain on a bank’s books and are ring-fenced, protecting bondholders even in bankruptcy. Will the added protection take the place of Freddie & Fannie? Worldwide issuance of the bonds was up 20% in 2010 versus 2009, hitting $356.5 billion this year according to data from Dealogic. Most of the issuance has been by European banks. The extra security offered by covered bonds has been particularly helpful for banks in countries that might be considered a little “iffy” by investors.

       

      Well, let’s get back to what is going on with interest rates. Last Thursday we had a fair amount of economic news, but nothing on Friday. The Chicago ISM (Institute of Supply Managers) stats soared in December with its 4th consecutive gain and its highest level since the late 1980s. We also learned that Pending Home Sales, based on signed contracts, were up 3.5% from the previous month, as expected. Pending home sales climbed in the Northeast and West but slipped in the Midwest and South, and were up 10% in October but are still 5% below a year ago. (By the way, NAR’s Pending Home Sales Index measures the number of home purchase contracts that were signed in the monthly reporting period.) Rates are still decent, and houses certainly are more affordable than in previous years! Jobless Claims also dropped significantly, possibly indicating unexpected strength in the employment sector.

       

      MBS prices ended Thursday basically unchanged on very light volumes although the 10-year Treasury notes ended down about .250 in price to 3.37%. But on Friday, in spite of no news, volumes picked up a little bit as the 10-yr rallied with its yield dropping to 3.30%. MBS prices decided to tag along for the ride and current coupon prices improved by about .5.

       

      Today we have Construction Spending at 7AM PST, along with the Institute of Supply Management Index numbers for Manufacturing and Prices Paid. On tap for tomorrow is Factory Orders, along with the minutes from the last Federal Open Market Committee meeting. “Hump day” finds us with the MBA mortgage application data, along with the ADP private payroll numbers and ISM services number. That puts us into Thursday’s Initial Jobless Claims data and then Friday’s Unemployment data. Ahead of that, unfortunately for folks waiting to lock, the 10-yr yield is up to 3.37%, the 30-yr bond is off a full point, and MBS prices are worse .250-.375.

       

      Quantitative Easing Explained – Check out the link below if you haven’t seen it already, enjoy.

      http://www.youtube.com/v/PTUY16CkS-k&hl=en&fs=1

      TEAM EMPOWERMENT MORTGAGE CHATTER: Dec 30, 2011 The Year a House becomes a Home Again

           “Learn to see things as they really are, not as we imagine they are.”– by Vernon Howard

        For almost a decade now, every time we talked about real estate we immediately discussed money. We didn’t talk about the value of a home but instead about the price of the house. We didn’t worry about a roof over our heads but instead the ceiling on our interest rate. We didn’t care as much about where we raised our family as we cared about how much we increased our family’s net worth.

       That will change in 2011. I believe very strongly that real estate will return to what it has been for the 200+ year history of this country: a place for us and our families to live comfortably. It will also prove to be a great long term investment as it always has been.

       

       

      Our parents and our grandparents didn’t buy their homes as a short term financial investment. They bought it so they had a place of their own to come home to at the end of the day; a place to raise their family; a place they could feel safe.

      Sure they dreamed of a “mortgage-burning” party. They realized it was a form of forced savings. They were taught that, if they paid their mortgage every month, they would wind up with a little retirement account decades later.

      And, they realized that wouldn’t happen if they rented.

      However, in the last decade, we somehow forgot that the financial aspect was the serendipity not the major reason to buy. We believe that 2011 will be the year that people return to the historic reasons families purchased a home. This is the year when we again remember that homeownership is a major part of the American Dream.

      What about the challenges to a housing recovery? Let’s look at them.

      The Economy

      Most reports are showing that the economy is doing better than expected. This shopping season provided additional proof of this point. As the economy recovers, so will consumer confidence. This will be great news for housing.

      Unemployment

      There is much talk about a “jobless recovery”. We agree that unemployment will continue to be a challenge. However, when you talk about housing, it is not the unemployment rate that is all telling. Instead, it is the change in the rate. As unemployment skyrocketed, people started to worry about their own job. Any change creates concern. Unabated concern turns to fear. Fear causes paralysis. The spike in unemployment has plateaued. People no longer have the feeling that “they are next”. The fear will diminish and people will start moving on with their lives. This too will be great news for housing.

      Interest Rates

      It seems the bottomless pit in which rates have been falling does have a floor after all. And it seems we have found it. Those purchasers who had been waiting for the best interest rate may have already missed it.

      Prices

      Economists are projecting that prices will not see any appreciation in 2011. Sellers who had been waiting for 2006 to return will come to the realization that waiting any longer makes little sense. They will instead decide to get on with their lives and sell this year.

      Prices probably will soften further. However, the possible savings to potential buyers will be minimized by a rise in interest rates.

      Bottom Line

      This is the year that normalcy returns to real estate. People will buy and sell based on the desire for a better life for themselves and their families. They will realize that is the true value of homeownership and they will be willing to pay for that value.

      TEAM EMPOWERMENT MORTGAGE CHATTER: Dec 29, FHA – HECM Program; What Moved Interest Rates Yesterday

      “Entrepreneurship is living a few years of your life like most people won’t, so that you can spend the rest of your life like most people can’t.” — Unknown Author

       

       

       

      As the population ages and retirement savings are strained, assuming property values rise or are stable, home equity loans will continue to be in the press. The FHA runs the Home Equity Conversion Mortgage Program (HECM) whose purpose is to provide income to house-rich but cash-poor seniors. The HECM market constitutes over 90% of the entire US reverse mortgage market. Just like the bulk of FHA and VA loans are placed into GNMA (Ginnie Mae) securities, these loans can collateralize a HMBS (HECM Mortgage Backed Security) which is backed by our government.　 Each HMBS pool is from a single originator and contains exclusively fixed or adjustable rate loans.

      　

      Home Equity loan amounts are essentially based upon the borrower’s current home equity and age. A reverse mortgage does not have to be repaid until the borrower no longer occupies the property and the house is sold, which is the key difference between a HELOC and a reverse mortgage as the reverse mortgage allows the home owner to extract equity without ever incurring any loan payments. Since the borrower is not required to make monthly payments, the loan balance simply grows with the accretion of interest, service charges, insurance fees and draws. The loan pays off when the house is sold and the proceeds are then used to pay off the accreted loan balance. At maturity, GNMA will make up any shortfall between the accreted HECM loan balance and the home sale proceeds.

      For investors, research has shown that GNMA reverse mortgage loans “terminate at a fairly consistent multiple to mortality rates.” A research piece from Cantor Fitzgerald mentions that mortality and age are highly correlated (is that surprising?) and every pool has each loan’s borrower age information. But since it is impractical to apply a separate age dependent prepay curve to each loan within a pool, a base, pool level, prepayment curve was devised. This base prepayment curve applied to GNMA reverse mortgage pools attempts to capture the two age related termination features of these loans, mortality and mobility.

      　

      What moved interest rates yesterday? It was not entirely the fault of the Conference Board’s Consumer Confidence number, which unexpectedly dipped from 54.3 in November to 52.5 in December. Nor the October S&P/Case-Shiller Home Price Indices (used, along with a few dozen other home price metrics to track the price path of typical single-family homes located in each metropolitan area provided). According to the index, prices in October declined 0.8% year-over-year for the 20-City Composite Index versus an expectation of unchanged, while the 10-City Composite rose 0.2%. It was not the fault of the blizzard which impacted Monday’s trading, as many Wall Street folks managed to hire people to dig themselves out of the snow and head into work. (Volumes were still very light.) But the 10-year Treasury note plunged about a point and the yield finished at 3.48% primarily due to a weak 5-year note auction. MBS prices dropped 1 point on lower coupons and about .75 on 4.5 securities (which contain 4.75-5.125% mortgages).

      　

      Unfortunately the lower supply and cheaper prices in mortgages did not entice many mortgage security buyers. Supply has been relatively light over the past few sessions – averaging about $1.5 billion per day. Originators continue to deal with higher mortgage rates (than a month ago), along with tight credit conditions, capacity constraints, poor housing values, etc., which are all limiting supply. On the demand side, banks are expected to be buyers with the need for yield, amidst weak loan demand and possibly declining prepayment speeds.

      　

      There are no economic releases or Fed appearances scheduled for today. In fact, usually the MBA comes out with its weekly mortgage application survey, but it is closed this week and the survey for the week ending December 24 will be released next week. The only event is the $29 billion 7-year note auction at 1:00PM EST, along with the usual Fed POMO purchases. Currently the yield on the 10-yr is still sitting at 3.49% and MBS prices are roughly unchanged

       

      Where Will Your Sails Take You in 2011?

       

      It’s our philosophical set of the sail that determines the course of our lives. To change our current direction, we have to change our philosophy, not our circumstance.” ~ Jim Rohn 
       
      The big Christmas holiday is now behind us. It seems that the day builds up for weeks (months if you’re under 10-years-old) with shopping, baking, wrapping, traveling and then after a frenzy of wrapping paper, lots and lots of eating, smiles and hugs with family members and a few Alka Seltzers before laying down our heads, it’s all over.

      Take down the tree, put away the stockings and throw away the cookies you just can’t find any more room for in your belly. New Year’s Eve is will be here quickly and then…it’s on to 2011.

      This next week between Christmas and New Year’s Day we’re kind of like ships in a harbor, just waiting for our next excursion. Our anchors are down and we’re resting up. Some of us might be scraping some barnacles from our hull, adding some fuel to the tank or filling up the galley with needed items for our journey.

      Rest up this week because starting next week, it’s “Anchors Up!”

      When you take control of your sails in 2011,
      you WILL take control of your sales in 2011.

       

      TEAM EMPOWERMENT CHATTER: Dec. 27: Reg Z, Fannie changes LLPA prices

       “Much of the stress that people feel doesn’t come from having too much to do. It comes from not finishing what they’ve started.”

       — David Allen: Management consultant, trainer, and author

       

      Late last week the Federal Reserve Board approved a new interim rule amending Regulation Z, which implements the Truth in Lending Act (TILA) and which clarifies a previous interim rule issued in September. The September regulations focus on implementing provisions of the Mortgage Disclosure Improvement Act (MDIA), which amended TILA to require mortgage lenders to disclose examples of how a loan’s interest rate or payments can change, and kick in at the end of January. Starting then, “lenders’ cost disclosures must include a payment summary in the form of a table stating the initial rate and corresponding periodic payment and, for adjustable rate loans, the maximum rate and payment that can occur during the first five years as well as a “worst case” example showing the maximum rate and payment possible over the life of the loan. The new interim rule clarifies that creditors’ disclosures should reflect the first rate adjustment for a 5/1 adjustable rate mortgage, and should show the earliest date the consumer’s interest rate can change rather than the due date for making the first payment under the new rate for interest-only loans. The rule also clarifies which mortgage transactions are covered by the special disclosure requirements for loans that allow minimum payments that cause the loan balance to increase” per law firm BuckleySandler. For a copy of the press release, check out RegZ but for a copy of the actual notice go to FedResRegZ

       

      Fannie announced a set of pricing changes that will certainly echo through smaller investors , if they haven’t already. Fannie made changes to the loan level pricing adjustments (LLPA’s), changing LLPA’s for most mortgage loans with LTV ratios at or above 70.01%. “An LLPA will now be charged for mortgage loans with LTV ratios at or below 65% and CLTV ratios between 80.01 to 95%. The CLTV ratio range for loans that have LTV ratios greater than 65% and less than or equal to 75% and CLTV ratios less than 95% has been adjusted. In addition, the LLPAs have changed for the remaining LTV and CLTV ranges (with the exception of CLTV ratios above 95%). LLPAs will remain unchanged for DU Refi Plus and Refi Plus mortgage loans.  FannieChanges 

       

      Thursday MBS prices finished the shortened day worse between .250-.375. MBS prices are worse again this morning between .125-.250, based on China raising its rates (to head off inflation) and the fact that New York is suffering a bout of inclement weather – and we all know how hard it is to come to work after a 3-day weekend. It is a light week for news. Tomorrow we have the S&P/Case-Shiller indices, along with Consumer Confidence. Thursday we have Jobless Claims and the Chicago Purchasing Manager’s numbers. The Treasury is scheduled to auction $35 billion of 2-yr notes today, $35 billion of 5-yr notes tomorrow, and $29 billion of 7-yr notes on Wednesday.

      TEAM EMPOWERMENT CHATTER: Dec. 23: ARM Disclosures; 6 repay TARP funds, Home Sales

      “For here we are not afraid to follow the truth wherever it may lead…”
      — Thomas Jefferson

      The Federal Reserve, approved an interim rule that will require mortgage lenders to disclose examples of how a mortgage loan’s interest rate and monthly payment may change. The Fed has given us plenty of lead time: beginning on October 1, 2011, banks and lenders must alert borrowers to the risk of payment increases before they agree to take out mortgage loans with variable rates or terms, otherwise known as adjustable-rate mortgages. “They will be required to include a payment summary in the form of a table, including the initial rate, maximum rate that can occur in the first five years, and the “worst case” rate possible over the life of the loan, along with corresponding monthly mortgage payments.” The rule also clarifies which mortgage types are covered by the special disclosure requirements, including loans with minimum payment options that cause the loan balance to increase, such as teaser rates and negative amortization loans.

      Economists make their living off of forecasting the future, or explaining why their earlier predictions were incorrect. But by then, most have forgotten the earlier prediction, or at least, I usually do. Rarely do traders base decisions on what an economist will say, but in the mortgage banking arena, predictions by the MBA, Freddie, and Fannie carry a little more weight. (For example, in October the MBA announced its prediction that mortgage originations could be 30% lower in 2011 than in 2010.) Per Fannie Mae, the fourth quarter will not wind up being a memorable time for housing sales. Fannie has projected that existing sales will increase slightly, but that new home sales will drop significantly. Fannie expects 2010 housing sales to be down 7% from last year, and with slightly lower median prices across the nation. But it expects things to pick up in 2011.

      Taxpayers will find $2.7 billion in their stockings after news broke that six regional banks have repaid TARP funds. Can you believe that it has been two years since our government invested $389 billion in the financial system? “Hats off” to companies who have already repaid the money.

      Yesterday we learned that according to the NAR, Existing Home Sales rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November from October, but are about 28% below late 2009’s levels. MBS prices finished the day roughly unchanged, and the 10-yr closed at 3.35%. The market opened up slightly better bid overnight and into the New York open aided by a weaker than expected GDP (2.6% versus an expected 2.8%), but then gradually faded throughout the day.

      Today is a new day, and we finish the business week with Durable Goods, Personal Income and Consumption, Jobless Claims, and New Home Sales, along with the announcement of next week’s auction sizes for the 2-year, 5-year, and 7-year note auctions. Durable Goods, always volatile, was -1.3% in November, but ex-transportation it was strong. Jobless Claims came in at 420,000, down from a revised 423k. Personal Spending was +.4% in November, and Personal Income was +.3%. After the initial spate of news, the yield on the 10-yr is at 3.38% and MBS prices are roughly unchanged, maybe slightly worse.