The US Economy Generated 243,000 new jobs while the unemployment rate dropped to 8.3 percent, according to government data released Friday. Both numbers were much better than consensus, which expected a growth of 150,000 jobs and a steady unemployment rate of 8.5 percent. The unemployment rate was last this low in February 2009.
Mortgage Bonds initially lost 60 basis points on the jobs report news and ended down 34 basis points for the day. Typically, a decrease of 22 basis points in the bond’s price equals an increase of .125% in the interest rate and vice versa. This is a good example of how quickly the mortgage interest rate market can change. This is a volatile market and you must be nimble. Hence, I cannot stress enough the importance of locking in quickly when rates are low. I am recommending locking short term and floating longer term.
This Chart shows the loss in Bond Price on Jobs Report News
Looking Forward- Could Rates Move Back Down?
Yes. One good Jobs Report does not mean we’re out of the woods. Plus, there is still much uncertainty, especially with regards to the Euro debt crisis. The 25, 50 and 100-day moving averages and Rising Support Line remain in an uptrend (Down Trend for Rates). However, it may be choppy over the short term as the Bond could drop another 50 basis points to test the 25-day moving average. Longer term looks good as long as support levels hold.
Another White House Refinance Plan
There were mixed reactions to the mortgage refinance plan announced during President Obama’s speech on Wednesday. Meanwhile top Republicans say the plan will be
“dead on arrival” in the House. So underwater borrowers of non-Fannie/Freddie loans will likely have to hang on until after the November elections. The plan won’t be responsible for a recovery in the real estate market, but will help more people refinance into lower rates. It seems the White House continues to put forth plans that they know will be rejected by the congress and fail to understand that it is over regulation that is keeping banks from lending. I continue to promote my plan of tax write off’s for home owners and would be home buyers as a solution for the recovery of the real estate market.
To be eligible for the recent plan put forth by the White House, borrowers must be current on their mortgages for the past six months without missing any more than one payment in the prior six-month period. They must also have at least a current credit score minimum of 580 and their loan cannot be larger than the current conforming limits by FHA. While limits vary from state to state, the median area home price is set at $271,050 in the lowest-cost areas and as high as $729,750 in the highest-cost areas. Additionally, loans eligible for refinancing are strictly for single family, owner-occupied homes.
For example, a borrower who purchased their home in 2005 for $300,000 with a non-GSE loan and 6% interest rate makes a monthly payment of roughly $1,800. Today, the
outstanding balance is now $272,000 and the borrower’s home is now worth $225,000 — a loan to value ratio of 120%.
By being able to refinance under the president’s plan, the borrower would be eligible to refinance into a 4.25% 30-year loan, reducing payments by roughly $460 a month.
Borrowers will apply through a streamlined process aimed at making refinancing less costly for borrowers. Lenders will be required to confirm that a homeowner is employed, but those borrowers won’t need to submit a new appraisal or tax return helping to eliminate previous
barriers.
Department of Housing and Urban Development Secretary Shaun Donovan said;
“In the end, what the president wants to do is give families the choice,
to give them the power to make the decision. The bank will have no ability to
say no to homeowners if we get this bill passed and get this program
established,” Both Donovan and the White House said lenders will have to reduce the principal on mortgages with loan-to-value ratios above
140% before the new loan is refinanced into an FHA one. And the plan sets up a separate FHA fund for the program that would not impact its overall capital
ratio, which slid to 0.2% last year.
Opponents of the plan including Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee claims the program would unnecessarily
shift risk to the Federal Housing Administration and wouldn’t do enough to help. “This is not a serious plan to help the nation’s housing market. This is just more of the same from an administration that offers expensive program after expensive program, none of which have worked to help struggling homeowners,” Bachus said. “President Obama
is proposing to get out of the hole we’re in by digging deeper.”
But Anthony Sanders, an economist at George Mason University, said like other refinancing programs before it, the result simply shifts the savings to
borrowers from MBS investors. “So, will a wealth redistribution of $5 billion to $10 billion revive the housing market? It is highly doubtful,” Sanders said. “Will it lower defaults? It will not lower defaults in any meaningful way. To be sure, the borrowers that receive the lower interest rates will be happy, but they should ask their neighbors if they want to pay for
it.”
Home Sales in New York State rebounded a bit, finishing 3.9% behind the 2010 numbers which were stronger in part due to the federal tax credit, according to the New York State Association of Realtors. “The housing market sales comeback in the fourth quarter builds hope for an improving 2012 market,” said Duncan MacKenzie, the association’s CEO. “The continued stabilization of the statewide median sales price is a positive sign for homeowners and a signal for would-be buyers that it’s time to focus on advantages such as record-low mortgage rates and solid affordability factors rather than price declines.” 72,058 existing single-family homes were sold by New York Real Estate Agents in 2011, down from the 74,970 in 2010. For the fourth quarter, 18,345 existing homes sold, up 4.2% from 17,607 sales in the 2010 fourth quarter. When looking at just the month of December, sales jumped 10.7% over November numbers and were up 2.4% over December 2010. The 2011 statewide annual median sales price was $212,500, down 0.7% from the $214,000 median in 2010. The fourth quarter 2011 median was $205,000, a decrease of 5.1% from the 4Q 2010.
NY Attorney General Sues Big Banks, MERS for Foreclosure Fraud
Still think getting your home loan from one of the big banks is a good idea? Don’t Reward Bad Behavior.
New York Attorney General Eric Schneiderman filed a lawsuit Thursday against the nation’s three biggest banks and Mortgage Electronic Registration
Systems over allegedly fraudulent foreclosure actions.
Schneiderman, who also named Bank of America, JPMorgan Chase and Wells Fargo as defendants, said the banks “created the MERS system as
an end-run around the property-recording system.” The lawsuit alleges the system of recording mortgages electronically resulted “in a wide range of deceptive and fraudulent
foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process.”
In a pending deal to settle charges of improper home foreclosures by banks…
There’s more glitz than guts. Banks will agree to write off $20 billion in homeowners’ debt on about 1 million mortgages that are currently underwater. They’ll pay states an additional
$5 billion in penalties, fees and other charges. It won’t go far toward stanching the tidal wave of foreclosures in the works. About 11 million mortgagees still owe more on their loans that their homes are worth, and the average difference between value and outstanding principal is $50,000. But the deal has good public relations value. States get billions in penalties and can claim they’ve helped homeowners. The White House can say it hit back at abusive lenders. And banks can say they’re doing penance, while avoiding the risk of pricey civil suits and taking
little more loss than the market would extract anyway. -source Kiplinger Letter
Economic News
January ADP private employment at 170K vs the 200K expected. ADP revised Dec job growth from 325K to 292K.
Gold Prices rose
11% in January, its best January since 1980.
Jobless Claims Fall More Than
Expected, Down by 12,000 to 367,000, Estimates Called for Decline
of 7,000.
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