TEAM EMPOWERMENT MORTGAGE CHATTER: January 20: Freddie & Fannie conjecture; HUD Mortgagee Letters; Rates

“Habit is stronger than reason.” – by George Santayana

January is scheduled to be a big month for Freddie and Fannie, in that the Treasury is expected to release plans for their future. Merrill Lynch released some conjecture about upcoming news, which will probably come out after the State of the Union address on 1/25. Merrill reminds us that “The GSEs are in two very different and distinct businesses. One is in the Guarantee (or “G” fee) business which is essentially an insurance business and where a big chunk of the losses came from in the 2008-09 period. The second business is the retained portfolio business where they own mortgage products on their balance sheets and do so because it is accretive and where the bulk of the profits come. Incoming Republicans have been very vocal about GSE reform and all of the commentary seems to be negative for the retained portfolio business at a minimum, and currently, under the Senior Preferred Stock Purchase Agreement, Fannie and Freddie must shrink their retained portfolio’s at a 10% per annum clip.”

The report continues to opine, “Regardless of the content, Republicans will dismiss it as spin and cry for immediate action on reform that includes, among other things, a much more rapid wind down of the retained portfolios. The market is very complacent on the topic of GSE reform and few have gone through the calculus of, for example, what something like a 4 year wind down of the GSEs would mean to absolute rates, Agency debt and mortgage valuations, spreads and volumes. Or what an economic based mortgage insurance (or re-insurance) premium assessed by the government would do to housing prices and the macro economy in general.

HUD offered up a couple Mortgagee Letters yesterday, in what some would say are somewhat obscure topics. The first letter addressed “Claim Process for FHA Refinances of Borrowers in Negative Equity Positions (ADP Codes 821, 822, 831, or 832)”, and the second dealt with the “Elimination of the Master Appraisal Report (MAR).” Check them out at HUD

At least rates seem to have stabilized. Yes, MBS volumes are on the light side, as you’d expect with these pipelines, but MBS prices are doing ok. Yesterday lower coupon product gained ¼ in price, and about .125 on current coupon product while the 10-yr yield closed out the day at 3.34%. As we learned, Housing Starts fell, as expected, while Building Permits were up almost 17%, possibly due to changes in regulations in NY, PA, and CA but also due to a huge increase in multi-family permits. Builders continue to be faced with the economic reality of the high current and forecast future supply of homes on the market.

Today closes out this week’s “docket of data”. Initial Jobless Claims came out at 404k, down from 441k, a significant drop. Continuing Claims dropped slightly, and the 4-week moving average dropped 4k. At 7AM PST, 8AM MST we have Existing Home Sales (expected to show an increase), Leading Economic Indicators (expected +.6%) and the Philly Fed. At 11AM EST we find out the details of next week’s 2-, 5-, and 7-year Treasury auctions, and at 1PM a $13 billion 10-year TIPS auction. Currently the 10-yr is 3.39% and MBS prices are about .125 worse from Wednesday.

 

TEAM EMPOWERMENT MORTGAGE CHATTER: January 19:MBA Forecast for 2011, Freddie & Fannie Joint Initiative, Freddie eliminates streamline refi program, MOST AMERICANS SAY IT IS A GOOD TIME TO BUY A HOME

“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? 

Freddie Mac

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.

 

 

Bottom Line

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

TEAM EMPOWERMENT MORTGAGE CHATTER: January 18: HUD and the NMLS; Freddie lowers 2011 production estimates; Freddie Updated Servicers; QUESTIONS SELLERS SHOULD ASK BEFORE CHOOSING AN AGENT

“When it comes to eating right and exercising, there
is no ‘I’ll start tomorrow.’ Tomorrow is disease.” – Terri Guillemets: Quote anthologist

A few weeks ago HUD announced it will begin collecting NMLS identifier information for individuals and entities participating in the origination of loans submitted for insurance by the FHA. And recently the OCC issued a SAFE Act reminder notice of the expected start date for federal registration of residential mortgage loan originators employed by banks, savings associations, credit unions, and their subsidiaries. The registration period is expected to start at the end of this month and last for 180 days, after which any employee subject to registration under the SAFE Act will be prohibited from originating residential mortgage loans without having first met the registration requirements. Check out NMLS and the notice at SAFENotice

And as this commentary noted a while back, law firm BuckleySandler reminds us that HUD issued Mortgagee Letter 2011-02. “The letter reminds mortgagees that, since the FHA no longer approves or monitors Loan Correspondents, mortgagees now must perform quality control reviews on all sponsored third-party originators (TPOs) from whom they acquire loans. Additionally, the letter states that mortgagees must create a report documenting (i) the methodology used to review TPOs, (ii) the results of each review, and (iii) any corrective actions taken as a result of their review findings. This report must be kept on file for two years.” HUDQC

 

In its latest downward revision, Freddie Mac estimates that mortgage originations will total $1.05 trillion this year, down from its projected $1.2 trillion last month. Most of this, of course, comes at the expense of refinancing as rates are expected to grind higher in 2011. Per Freddie, refinancing made up 69% of the total $1.55 trillion in home mortgage originations last year, but are expected to constitute just 41% this year and 35% in 2012. FreddieVision

 

Freddie Mac released an update for servicers, and wannabe servicers, regarding new servicing technologies. (Freddie also extended its stay of foreclosure protections for service members.) “A dynamic, Web-based solution, the Service Loans application will provide greater operational efficiencies through a more intuitive and user-friendly servicing environment for investor reporting functions, including default reporting, when servicing Freddie Mac mortgages. Read all about the 6+ pages at: FreddieServicing

 

Given the lower supply, one would think that, relative to Treasury yields, mortgage rates and prices should be doing ok. And they are – MBS prices are about 1.5 points off their lows (worst) last week. Friday MBS prices finished the day about unchanged from Thursday’s levels, and the 10-year T-note closed off .250 in price hitting 3.33%.

Besides earnings, this week’s news includes some “Empire State” manufacturing data today, Housing Starts and Building Permits tomorrow, and weekly Jobless Claims, Existing Home Sales, Leading Economic Indicators & the Philly Fed on Thursday. There is zip scheduled for Friday. Today, so far, we’re seeing some improvement, with the 10-yr down to 3.29% and MBS prices better between .1225-.250.

Questions Sellers Should Ask Before Choosing An Agent

 

Once a homeowner decides to sell their home and hire a professional agent to market it for them, most sellers will interview a few agents before signing on the dotted line. That’s a good idea. However, most sellers don’t have a clue on who is the RIGHT choice. Many sellers pick and agent based on a “connection” or similar personalities.

Unfortunately, just a good personality match alone is rarely enough these days. You need an agent who is more effective in getting results than someone you “have a good feeling about”. You are not hiring a friend; you are hiring someone to do a job.

The average agent’s listing presentation is very similar to every other agent’s presentation. And as a result, the seller really has little to judge by and they reduce their decision down to the two questions they want answered.

  1. Which agent will sell my house for the most money? (That leads to overpriced listing inventory that sits unsold because today’s buyer is looking for a “deal” and NOT overpaying.)

    2.  

  2. Which agent will charge me the least to do it? (That results in getting an agent less likely to invest in improving their performance through education or technology or an agent with a limited budget to spend on the marketing of your home.)

    3.  

Of course, I understand the logic to those questions (make more, spend less), but focusing on these questions alone is shortsighted and eventually costly. Here are four questions that most sellers don’t think of- questions that actually WILL give you a better indication of the relative strength of your agent.

1.) “What percentage of your listings EXPIRE? How does your number compare to the average agent in our marketplace?”

 

Expired listings are listings that didn’t sell during the time agreed to between the seller and the agent. If one agent has 95% of their listings sell without expiring and another has 25%, wouldn’t you want to know that? ASK!

2.) “What is your Average Days On Market?”

 

If the average days for homes listed “For Sale” in your market is 180 days, and one agent is selling their listings in 90 days, wouldn’t you want to know what they do differently to get their results? Conversely, wouldn’t you want to avoid the person who is at 270 days?

3.) “What is your Average List Price to Sales Price Ratio?”

 

There are many agents who take overpriced listings with the plan to bring the price down as seller frustration goes up. They know it won’t sell at the overpriced number, but they get to have months to get it priced correctly because you have signed a listing agreement. But, you want to sell your home, not drag out a process. Agents with big gaps between List Price and Sales Price are not doing any favors for their client. Uncover their game early and save yourself the heartache. Great agents price correctly Day 1 because they know that price is the best possible marketing strategy.

4.) “What percentage of your own listings do you sell?”

 

Occasionally, agents and I battle on this point, because they feel that the methods they use to market your home to other agents (to bring their buyers to your home) are more important. But I believe, an agent’s ability to sell their own listings is evidence of the effectiveness of their marketing plan to the consumer (which is really what you are hiring them to do, isn’t it?).

If I were selling my home today, in my quest to find the best agent, I would be asking different questions- questions that prove effectiveness. You may be surprised to learn that some of the most “successful agents” in terms of “units sold” have a large percentage of listings that expire or a high number of days on market or a significant gap between list price or sales price or that after they list your home they are off looking for another listing and NOT for a buyer of your home. In a twist of the old adage, “Seller, Beware”.

DON’T FORGET ABOUT OUR CO-BRANDED STATEMENT – CALL ME FOR MORE DETAILS!

 

 

 

TEAM EMPOWERMENT MORTGAGE CHATTER: January 14: Great Local News Source; Federal Reserve; rates improving; TODAY’S RATES, CO-BRANDED STATEMENT
“If you go to work on your goals, your goals will go to work on you.
If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us.”
— Jim Rohn: Was an entrepreneur and motivational author and speaker

Folks wonder where the most reliable sources of mortgage news are. Besides Us, People, and Martha Stewart’s Living, this is quite amazing. Put your mouse on a city and see today’s newspaper’s front page: FrontPage

 

Speaking of news, in a paper published by the Federal Reserve Bank of San Francisco, In the years leading up to the financial crisis of 2008-2009, a combination of factors including low interest rates, lax lending standards, the proliferation of exotic mortgage products, and the growth of a global market for securitized loans promoted increased household borrowing. “Homebuyers with access to easy credit helped bid up U.S. house prices to unprecedented levels relative to rents and disposable income. The rapid rise in household net worth encouraged lenders to ease credit even further based on the assumption that house price appreciation would continue indefinitely. U.S. household leverage, as measured by the ratio of debt to disposable income, reached an all-time high of 130% in 2007.”  The research piece goes on to say that house prices in the United States have dropped on average by about 30% from their peak in 2006, but also that the personal saving rate trended up from around 1% to about 6% in the third quarter of 2010 while the ratio of household debt to disposable income dropped from 130% to 118%.

 

As has been written in the past, on the one hand “higher saving rates imply correspondingly lower rates of domestic household consumption growth so that a larger share of GDP growth would need to come from business investment, net exports, or government spending. On the other hand, an increase in domestic saving would help rebuild household nest eggs in preparation for retirement and also help correct the large imbalance that now exists in the U.S. current account.”

 

Turning to the interest rate markets…yesterday was a good day! Volumes picked up in MBS sales, which, when prices are moving up, is a good sign. But overall volumes are less than where they were a month or two ago, indicating that indeed a slow-down is occurring. On the demand side, traders are reporting good demand for MBS production – given how clean and well documented this paper is, who wouldn’t want to own it? Of course, that doesn’t help the foreclosure numbers for 2010, which set a new record

 

MBS prices closed up nearly 1/2 point on 3.5s to 1/4 point on 5.5s, rate-sheet mortgage prices improved by .250-.375.

Today we have already had a slew of economic news, which has moved rates lower. CPI saw its highest change going back to mid-2009, +.5%. The core rate was +.1%, and year-over-year the CPI was +1.2%. December Retail Sales were +.6%, less than expected and less than November’s +.8%, ex-auto it was +.5%. For the year Retail Sales were up 6.6%. For Capacity Utilization we had a 76% print, and Industrial Production was +.8%. JPM reported better than expected earnings this morning ($1.12 EPS vs. $1.00 est.), while Citi, BONY, and Wells report early next week. And 9:55AM EST brings the preliminary Michigan Sentiment report for January which is anticipated higher to 75.4 from 74.5 at the end of December. The 10-yr is down to 3.27% and MBS prices are better by .125-.250, roughly.

 

 

TEAM EMPOWERMENT MORTGAGE CHATTER: January 13: MBA Suite against US DOL, Feedback on reverse mortgages, Jobless Claims, Why Prices Will Soften in 1st half of 2011, CO-BRANDED STATEMENTS

  “You may have a fresh start any moment you choose,  for this thing that we call “failure” is not the falling down, but the staying down.” –  Mary Pickford

 
Mortgage Bankers Association filed suit against the U.S. Department of Labor under the Administrative Procedure Act which seeks to “set aside DOL’s Wage and Hour Division Administrator’s Interpretation No. 2010-1 that reversed and withdrew a 2006 opinion letter from DOL to MBA. The 2006 opinion letter interpreted DOL’s own regulations and concluded that typical loan officers were exempt from Fair Labor Standards Act (FLSA) requirements for overtime payments under the ‘administrative exemption’.” If you’re interested, check out MBASuit  
 
 I mentioned a drop in reverse mortgage business yesterday, and received, “I think one of the major reasons there was such a huge drop in the reverse mortgage product is simply a lot of people use this product to stop the monthly payments on the existing mortgage(s).  If there is not enough equity to pay off the existing loans, there is no reason for the reverse mortgage. The drop in reverse volume is not reflected in desire, but more the property values.” 
 
Income verification verbiage from The Frank-Dodd legislation: “A creditor making a residential mortgage loan shall verify amounts of income or assets that such creditor relies on to determine repayment ability, including expected income or assets, by reviewing the consumer’s Internal Revenue Service Form W-2, tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the consumer’s income or assets.” Notice the “income or assets.” 
 
MBS prices finished the day flat. Given that prices started off the day being worse than Tuesday’s close, some investors issued price improvements, especially after the Fed’s Beige Book showed continued economic weakness – especially in housing. One trader wrote, “We are going to look to get ‘long’ mortgages outright as we approach the long bond auction tomorrow with 3.5s and 4s our favorite coupons to express the long in.” Mortgage-backed security volume picked up a little, although it was still below “normal,” and the 10-yr, after hitting a high of 3.42% and the auction, closed the day around 3.36%.

  

Turning for a moment to the Fed’s latest Beige Book report on the recent state of the economy across the 12 districts, it generally was as expected. The report will be used for the next Fed meeting during the last week of January. There are signs of further expansion in the economy and even labor markets since the last report (which led stocks higher), but the real estate sector remained weak across all the Districts with a few reporting further weakness.

 

For today’s excitement, we’ve already had Jobless Claims, which were up 35k to 445k, continuing claims dropped, and the 4-week moving average was +5,500. December’s PPI came in at +1.1%, about as expected, and ex-food & energy it was +.2%. (Year-over-year this number is up 4%, relatively strong.) Lastly the Trade Balance figures came in at $38.3 billon. Later we have the $13 billion 30-yr auction. All of that has led to…not much. The 10-yr yield is still at 3.36% and MBS prices are roughly unchanged.  

WHY PRICES WILL SOFTEN IN THE 1ST HALF OF 2011

The big question facing real estate in 2011 is which direction are home prices headed. We agree with most experts who believe prices will continue to soften for the first half of the year. Supply and demand will determine this. Let’s look at where real estate sits entering this year compared to the beginning of 2010.

Demand

1.) Last year, The Home Buyers Tax Credit was both extended to the end of April and expanded to include move-up buyers. This increased demand to some degree. However, most now believe that the tax credit simply dragged demand forward from later in the year. What took place was a surge in sales prior to the deadline and then a dramatic fall off after April. This year, there is no such tax credit in place to drive demand. It also seems that there is no political will to revisit a homebuyers’ tax credit at this time.

2.) Last year, the Fed‘s purchase of mortgage-backed-securities was extended to the end of March. That increased demand by guaranteeing low interest rates through the first quarter. And economic conditions forced interest rates to new lows even after the Fed backed off the purchases. There was a full six months of historically low rates to bolster demand.  This year, interest rates are rising as we enter January and are projected to continue their upward climb. The National Association of Realtors, the Mortgage Bankers’Assoc and PMI are all calling for rates to continue to rise through the first half of 2011.

Supply

1.) Last year, the administration was taking the initial steps in implementing a comprehensive loan modification program. This program limited the number of foreclosures coming to the market at discounted prices. It also delayed the entrance to the market of many more distressed properties. According to the OCC and OTS Mortgage Metrics Report, we enter 2011 with “newly initiated home retention actions” down 32.4% from the same time last year. This year, the administration is touting their new ‘short sale’ program. This will increase the number of distressed properties hitting the market.

2.) Last year, state and local governments were declaring foreclosure moratoriums thereby limiting the number of foreclosures entering their markets. There doesn‘t seem to be the same political will to revisit moratoriums in 2011. This year, though the robo-signing mess will initially delay the entrance of some distressed properties to the market, most believe there will be a wave of discounted properties coming in the first quarter.

CNBC reported on economist Nouriel Roubini‘s predictions on this issue:

“There has been an effective moratorium on foreclosure,” said Roubini. And the beginning of the end of that moratorium means more housing supply is about to become available on the market. “The shadow inventory of not-yet-foreclosed homes”due to the moratorium” will surge in the next year,” Roubini says.

Bottom Line

Without the programs that encouraged buyers last year, we see a steady but slow growth in demand.

Without a strong commitment to limiting distressed properties, we believe that there will be a wave of discounted real estate entering the market in the form of ‘short sales‘ and foreclosures.

A limited increase in demand and a surge in supply will equate to lower home prices as we move into the year.

 

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
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January 20, 3:00 p.m. – 4:00 p.m., ET

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January 26, 2:00 p.m. – 3:00 p.m., ET

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January 27, 3:00 p.m. – 4:00 p.m., ET

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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.