News for Prescott AZ - AmericanTowns.com

Monday, September 28, 2009

FHA WAIFVES "FLIPPING" RULE, 90 DAY WAITING PERIOD FOR FORECLOSED HOMES

FHA Property Flipping Rules
On June 9, 2008, FHA temporarily waived the property flipping rule 90-day
waiting period, for homes that were foreclosed on and being sold by lenders
or by property disposition firms on the behalf of lenders.  The temporary
property flipping waiver has been extended to include purchase contracts
executed on or before May 10, 2010. 
There are some exceptions (these are the only exceptions that exist
presently):
1. Seller is Employer or relocation agency on the sale of home to relocation
employee
2. HUD REO re-sales
3. Seller is United States Government agency using NSP program
4. HUD REO properties that were purchased by nonprofit Organizations
5. Property acquired by the seller through inheritance
6. Properties sold by state or federally-chartered financial institutions
(Bank Owned), FNMA, or FHLMC
7. Seller is local or state government agencies
8. Property located within Presidential Declared Disaster Areas

CNN MORTGAGE received clarification today from the FHA resource Center
because of the memo that was distributed by HUD last week that caused so
much confusion.  This is the cliff notes version. Kathleen Gillis, MBA CNN
Mortgage, Inc.

Fed Decision Shakes Things Up

 

"BE WILLING TO MAKE DECISIONS." General George Patton. And that's exactly what the Fed did last week at their regularly scheduled Federal Open Market Committee meeting. But just what did they decide...and what do their decisions mean for home loan rates?

The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week's statement is the Fed's nice way of saying "no." They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.

It is a given that once the Fed ceases its purchases, that interest rates will climb significantly higher...most likely back above the 6% area. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.

Their decision also means that the Fed's remaining purchases will all be lower in quantity, as the remaining allotment for purchases will be spread over a longer period of time - and additionally, will not necessarily be spread out as evenly as their past purchases - which could lead to more volatility for rates in the near term.

In other news, Existing Home Sales and New Home Sales were reported slightly less than expected, but both reports continue to show signs of an improving housing market. The inventory of unsold existing homes fell to its lowest inventory level since April 2007, while the inventory of unsold new homes dropped to its lowest level since January 2007. While some of the decline in new home inventory may be due to builders constructing fewer homes - these reports indicate that the housing market is indeed showing signs of life.

Remember, with home loan rates still low - but slated to increase with the Fed's recent decision - as well as a juicy tax credit for First Time Home Buyers that is going to expire on November 30th, it makes sense to get off the fence if you've been considering a purchase or refinance. Or do you have a family member, neighbor, friend or coworker who might benefit from getting some good home loan advice? I'm always glad to get your referrals, so simply let me know who I might be able to help.


Traders on the New York Stock Exchange are pondering whether Stocks have topped out.

Also in the news, Durable Goods Orders for August unexpectedly fell 2.4% for the largest decline since January. The weaker than expected economic data helped fuel a rally in the Bond market and a late week improvement in home loan rates...while on the other hand, Stocks struggled, particularly with the increasing concerns of Iran's construction of nuclear sites. This kind of geopolitical unrest is troubling on many fronts, and if the situation continues to escalate, it could have a big impact on both the Stock and Bond markets.

THE DECISION TO BUY A HOME IS ONE OF THE MOST IMPORTANT FINANCIAL DECISIONS YOU CAN MAKE...AND OFFERS GREAT FINANCIAL BENEFITS AS WELL. WITH HOME LOAN RATES LOOKING TO MOVE HIGHER, CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW TO LEARN MORE ABOUT WHY HOMEOWNERSHIP MAKES SENSE.

 

Forecast for the Week

 

 

There are several important economic reports in store for this week, the biggest likely being Friday's Jobs Report for September. The Jobs Report for August showed a troublesome 216,000 jobs lost for the month, with prior months revised to show an additional 50,000 jobs lost. In addition, the last report showed that the Unemployment Rate for August jumped to the highest level in 26 years, at 9.7% from July's 9.4%. This is more than double the rate of unemployment from just two years ago and significantly higher than the 5.9% average during the past 40 years. The Unemployment Rate portion of the Jobs Report is often seen as more reliable than the job loss numbers since it is an actual survey, where about 60,000 households are contacted - so this is a particularly important element of the report, as we watch to see signs of an improving economy.

Also this week, we have a read on Consumer Confidence coming on Tuesday, while Thursday brings the Fed's favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report. Thursday will also bring another weekly Initial Jobless Claims Report, just ahead of the Labor Department's big Jobs Report coming on Friday.

It will most certainly be a full week of news, particularly as the aforementioned tension in the Middle East continues to simmer. There is a meeting scheduled for this Thursday with representatives from six nations to discuss this situation further.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds were able to mount a late-week rally through a key "ceiling of resistance", and this move higher for Bonds caused home loan rates to improve. I'll be watching closely to see if Bonds can hold their ground, and continue in this improving direction in the week ahead.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Sep 25, 2009)

Japanese Candlestick Chart

 

The Mortgage Market View...

 

 

Financial Benefits of Home Ownership

There are a number of personal and emotional reasons to buy a home. But there are also some strong financial reasons to make the investment. In addition to exceptional home affordability and near historic interest rates, here are some important financial benefits of owning a home:

Increased Net Worth: Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.

A Big Tax Deduction: One of the largest tax deductions available is the amount of interest paid on a mortgage. In fact, a $150,000 home at a 5.50% interest rate can add up to approximately $8,000 in first year's interest. This amounts to a significant savings - effectively reducing the amount of a homeowner's monthly loan payment.

Long-Term Appreciation: Over the last few years, home prices have corrected and become more affordable. While that's good news for potential buyers, it has overshadowed the long-term appreciation of a home's value. The reality is, despite market ups and downs, real estate historically appreciates around 6% per year. Even if you calculate a modest appreciation of 3%, a home purchased today for $150,000 should grow in value to $364,000 over 30 years.

$8,000 Tax Credit: Don't forget, the government is offering an $8,000 tax credit for first-time homebuyers - or for folks that haven't owned a home during the past three years. However, the program is scheduled to end soon. In fact, the Internal Revenue Service recently reminded potential buyers that they must complete their first-time home purchases before December 1, 2009 to qualify for the special credit, which means the last day to close on a home and qualify for the credit is November 30, 2009.

If you're considering purchasing a home or refinancing, this is an ideal time. Call or email me today to discuss your specific situation and how you can benefit from today's market.

 

The Week's Economic Indicator Calendar

 

 

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of September 28 - October 02

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. September 29

10:00

Consumer Confidence

Sept

57.0

 

54.1

Moderate

Wed. September 30

08:15

ADP National Employment Report

Sept

-200K

 

-298K

HIGH

Wed. September 30

08:30

Gross Domestic Product (GDP)

Q2

-1.2%

 

-1.0%

Moderate

Wed. September 30

09:45

Chicago PMI

Sept

52.0

 

50.0

HIGH

Wed. September 30

10:30

Crude Inventories

9/25

NA

 

NA

Moderate

Thu. October 01

10:00

ISM Index

Sept

54.0

 

52.9

HIGH

Thu. October 01

08:30

Jobless Claims (Initial)

9/26

NA

 

530K

Moderate

Thu. October 01

08:30

Personal Consumption Expenditures and Core PCE

YOY

NA

 

1.4%

HIGH

Thu. October 01

08:30

Personal Consumption Expenditures and Core PCE

Aug

NA

 

0.1%

HIGH

Thu. October 01

08:30

Personal Spending

Aug

1.1%

 

0.2%

Moderate

Thu. October 01

08:30

Personal Income

Aug

0.1%

 

0.0%

Moderate

Thu. October 01

10:00

Pending Home Sales

Aug

NA

 

12.9%

Moderate

Fri. October 02

08:30

Average Work Week

Sept

33.1

 

33.1

HIGH

Fri. October 02

08:30

Hourly Earnings

Sept

0.2%

 

0.3%

HIGH

Fri. October 02

08:30

Non-farm Payrolls

Sept

-188K

 

-216K

HIGH

Fri. October 02

08:30

Unemployment Rate

Sept

9.8%

 

9.7%

HIGH

 

 

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WEEK IN REVIEW

 

 

 

 

Volume 15, Number 36

Economic Highlights for the Week Ending September 25, 2009

MONDAY, September 21st

The index of leading economic indicators rose for the fifth straight month in August, gaining 0.6%. The gain was led a jump in stock prices, higher consumer expectations and an increase in building permit issuance. Weakness remains in jobless claims and equipment orders. The index has surged over the last six months or so indicative of moderate economic expansion over the next six to nine months.

TUESDAY, September 22nd

The FHFA purchase-only house price index increased 0.3% from June to July but remains 4.8% lower than in July 2008. The monthly gain in the index is encouraging and could signal the worst of the house price declines are over; however prices may not have bottomed yet, so declines could continue but may not be as severe.

WEDNESDAY, September 23rd

The MBA mortgage applications index increased 12.8% to 668.5% for the week ending September 18. The purchase index was up 5.6% on the week but declined 15.8% from last year. The refinance index gained 17.4% on a weekly basis and is up 41.0% from a year ago. Refinance activity accounted for 63% to total applications last week. Despite recent volatility, application activity is trending higher which is consistent with a modest recovery in the housing market.

The FOMC decided to keep rates in an exceptionally low range of 0% to 0.25% in order to support ongoing recovery in the economy at the conclusion of their two-day policy meeting today. The Committee acknowledged a pickup in economic activity, specifically in the housing sector but expected overall conditions to remain weak for a while longer. Inflation remained subdued since last meeting, thus it was not a major concern for the Fed at this time. Policymakers did start to outline their strategy for unwinding liquidity measures taken in response to financial and credit market crisis in the past year. It looks as though their purchase of Treasury securities will wrap up by the end of the month, as planned while MBS and agency purchases will conclude by the end of the first quarter.

THURSDAY, September 24th

Jobless claims fell 21k to 530k for the week ending September 19. Continuing claims also declined, falling by 123k to 6.138 million for the week ending September 12. These data indicate continued improvement in labor market conditions however movement remains slow. The economy continues to shed jobs but at a less alarming rate than in previous months.

Existing home sales fell 2.7% in August to an annualized pace of 5.10 million. Market expectations were centered on a gain to a rate of 5.35 million. The unexpected pullback last month does not alter the modestly rising trend over the last several months from extremely low levels earlier this year. Over the past year, existing home sales have increased by 3.4%, only the second yearly gain since November 2005. However, existing home sales remain 29.7% lower than their September 2005 record high. It was estimated that about 31% of total sales were distressed sales and about 30% were from first-time home buyers.

FRIDAY, September 25th

Durable goods orders sank 2.4% in August led by weak demand for civilian aircraft. The decline last month partially offsets a 4.8% gain in July. Recovery in the manufacturing sector is happening at an uneven pace. Declines at this stage are not out of the ordinary and are coming from the highly volatile transportation sector. Excluding transportation orders demand for big ticket items was unchanged from July.

New home sales rose 0.7% in August to an annual rate of 429k after a downwardly revised rate of 426k in July. Expectations were centered on an annual rate of 440k; despite missing the mark new home sales continue to trend modestly higher from a record low rate of 329k in January. Recovery continues in the housing sector, boosted by the fist-time buyer tax credit, low rates and falling prices, however gains remain mild and are not far from very depressed levels. Progress will continue to be slow and could possibly backslide a bit in coming months.

Stock Market Close for the Week

Index

Latest

A Week Ago

Change

DJIA

9665.19

9820.20

-155.01 or -1.58%

NASDAQ

2090.92

2132.86

-41.94 or -1.97%

WEEK IN ADVANCE

Lots of data on tap in the coming week, chief among the reports is the employment situation for September due out on Friday. The employment report always has great weight and sway but especially now that the overall recovery hangs in the balance.

Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago

Prime Rate

3.25

3.25

5.00

Fed Discount

0.50

0.50

2.25

Fed Funds

0.13

0.17

1.54

11th District COF

1.473

2.455

2.698

10-Year Note

3.32

2.74

3.84

30-Year Treasury Bond

4.09

3.66

4.40

30-Yr Fixed (FHLMC)

5.04

4.85

6.09

15-Yr Fixed (FHLMC)

4.46

4.58

5.77

1-Yr Adj (FHLMC)

4.52

4.85

5.16

6-Mo Libor (FNMA)

0.75500

1.80313

3.11750

Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco


Upward pressure on interest rates
Downward pressure on interest rates
No pressure to change interest rates
News worthy

 

 

 

Weekly Rate Lock Advisory

Rate Lock Advisory - Sunday Sep. 27th



This week brings us the release of six relevant economic reports for the bond market to digest. There is nothing of importance scheduled for release tomorrow, so look for the stock markets to influence bond trading and possibly mortgage rates. I would not be surprised to see a relatively calm day as traders prepare for this week's data, some of which is considered to be extremely important.

The first release of the week is September's Consumer Confidence Index (CCI) late Tuesday morning. This Conference Board index will be posted at 10:00 AM and gives us a measurement of consumer willingness to spend. It is expected to show an increase from last month's reading, indicating that consumers are more optimistic about their own financial situations than last month and more likely to make large purchases in the near future. This is bad news for the bond market and mortgage rates because consumer spending fuels economic growth. Analysts are calling for a reading of approximately 57.0, up from August's 54.1. If we see a larger than expected increase, the bond market should move lower and mortgage rates move higher Tuesday.





Wednesday's sole report is the final revision to the 2nd Quarter Gross Domestic Product (GDP). Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don't see this revision having much of an impact on the financial markets or mortgage pricing. It is expected to show a slight downward revision from the previous estimate of a 1.0% decline in GDP.

August's Personal Income and Outlays will be released early Thursday morning. It gives us an indication of consumer ability to spend and current spending habits. This is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is negative news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. It is expected to show a 0.1% rise in income and a 1.1% increase in spending due to auto sales.





The Institute for Supply Management (ISM) will post their manufacturing index for September late Thursday morning. This index gives us an indication of manufacturer sentiment. Analysts are expecting an increase from last month's 52.9 reading. The 50.0 benchmark is extremely important because a reading above that level means more surveyed executives felt business improved than those who said it had worsened. This data is important not only because it measures manufacturer sentiment, but it is also very recent data. Some economic releases track data that are 30-60 days old, but the ISM index is only a few weeks old. If we get a smaller than expected reading, I expect to see the bond market rally and mortgage rates fall Thursday morning.

The Labor Department will post September's Employment report early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.





If this report gives us weaker than expected readings Friday, bond prices should move higher and we should see lower mortgage rates Friday. However, stronger than forecasted readings could be disastrous for mortgage pricing. Analysts are expecting to see the unemployment rate at 9.8%, a decline in new payrolls of approximately 180,000 and a 0.2% increase in earnings.

The final report of the week comes late Fri day morning when the Commerce Department will post August's Factory Orders data. This manufacturing sector report is similar to last week's Durable Goods Orders release, but includes orders for non-durable goods. It can usually impact the financial markets enough to change mortgage rates slightly if it varies from forecasts by a wide margin, but due to the importance of the Employment report I doubt this data will heavily influence the markets. Current forecasts are calling for an increase in new orders of approximately 0.5%.

Overall, it is likely going to be a very active week in the markets and mortgage rates. The most important day will be Friday due to the employment report being scheduled, but Tuesday's and Thursday's data can also fairly heavily influence mortgage rates. With important data being released each day of the week except tomorrow, I would recommend maintaining contact with your mortgage professional.

If I were considering financing/re financing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

©Mortgage Commentary 2009

 

 

Inside Lending Newsletter From Theron Wall

 

For the week of September 28, 2009 – Vol. 7, Issue 39

>> Market Update 

INFO THAT HITS US WHERE WE LIVE  Well, it had to happen. After a four-month winning streak, Existing Home Sales dropped in August by 2.7% to an annual sales pace of 5.10 million. This offsets the big sales increase we had in July but the overall trend is still up by 3.4% over a year ago and the supply of existing homes is now down to 8.5 months.

Good news came from the Federal Housing Finance Agency, which monitors prices of homes financed with conforming mortgages. They reported prices UP 0.3% in July, their third straight monthly rise. The week ended with single-family New Home Sales for August UP 0.7%. This was slightly less than expected, but 30% above their January low. Best of all, the supply of unsold new homes, down five months in a row, is now at just 7.3 months!

Mortgage applications for purchase loans were up 5.6% from the week before. Applications for government-backed purchase loans were at their highest level ever. It seems many first-time homebuyers are making sure they get that $8,000 tax credit before it expires on November 30! All this was happening as the average interest rate for prime borrowers went below 5% on 30-year fixed-rate mortgages for the first time since May. Average points inched up to 1.12 (including the origination fee) for 80% loan-to-value ratio loans. 

>> Review of Last Week

TAKING A BREATHER... After a nice run up in prior weeks, the stock markets were down three days in a row, ending down for the week overall. But we have to point out that for the year, the Dow is still UP 10.1%, the S&P 500 is UP 15.6% and the tech-heavy Nasdaq is UP a whopping 32.6%! Pretty bullish performance. Problems worrying investors included the slip in Existing Home Sales covered above and Durable Goods Orders down 2.4% for August. That's actually less problematic than it appears, since the decline came mostly from a 30% drop in volatile aircraft orders –– in July, aircraft were up 25%. 

The Fed did not raise the rate at their meeting (no surprise) and came out with an FOMC statement that observed "economic activity has picked up" and "activity in the housing sector has increased." These indications of economic recovery were followed with the announcement the Fed would continue through the end of March 2010 their purchases of mortgage-backed securities, which help keep mortgage rates low.

Initial claims for unemployment fell yet again last week, this time by 21,000, to 530,000. The four-week average of continuing claims dropped as well. Meanwhile, the Richmond Fed Index, which gauges manufacturing in the mid-Atlantic region, stayed at +14 in September, the fifth straight month it's been positive. The week ended with the boost in New Home Sales mentioned above, plus University of Michigan Consumer Sentiment at 73.5 for September, its highest reading since January a year ago!

For the week, the Dow ended down 1.6%, to 9665.19; the S&P 500 was off 2.2%, to 1044.38; while the Nasdaq fell 2.0%, to 2090.92.

As usually happens when stock prices sink, bonds soar. The FNMA 30-year 4.5% bond we watch finished up strongly from the previous week's $100.44 close, finishing at $101.12. It was no surprise that mortgage rates moved down a bit more, hitting levels they haven't seen since last May, as noted above.

>> This Week’s Forecast

CONFIDENCE, SPENDING, JOBS... The week begins with Consumer Confidence and ends with the September Jobs Report. Along the way, on the day Q3 ends, we get the final number on Q2 GDP plus the Chicago PMI take on manufacturing in the Midwest. Thursday, we'll be looking at Pending Home Sales, while the Fed will be focusing on the personal spending PCE number to keep an eye on inflation.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of September 28 – October 2

 Date

Time (ET)

Release

For

Consensus

Prior

Impact

Tu
Sep 29

09:00

Consumer Confidence

Sep

57.0

54.1

Moderate

W
Sep 30

08:30

GDP–Final

Q2

–1.2%

–1.0%

Moderate

W
Sep 30

09:45

Chicago PMI Index

Sep

52.0

50.0

HIGH

W
Sep 30

10:30

Crude Inventories

9/25

NA

2.85M

Moderate

Th
Oct 1

08:30

Initial Jobless Claims

9/26

535K

530K

Moderate

Th
Oct 1

08:30

Personal Income

Aug

0.1%

0.0%

Moderate

Th
Oct 1

08:30

Personal Consumption Expenditures (PCE)

Aug

1.1%

0.2%

HIGH

Th
Oct 1

10:00

ISM Index

Sep

54.0

52.9

Moderate

Th
Oct 1

10:00

Pending Home Sales

Aug

1.0%

3.2%

Moderate

F
Oct 2

08:30

Average Workweek

Sep

33.1

33.1

HIGH

F
Oct 2

08:30

Hourly Earnings

Sep

0.2%

0.3%

HIGH

F
Oct 2

08:30

Nonfarm Payrolls

Sep

–180K

–216K

HIGH

F
Oct 2

08:30

Unemployment Rate

Sep

9.8%

9.7%

HIGH

 

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months. The FOMC statement coming out of last week's meeting confirmed the Fed intends to keep the funds rate down for an extended period. That could change, of course, as the recovery builds or inflation picks up. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on:

Consensus

Nov 4

0%–0.25%

Dec 15

0%–0.25%

Jan 27

0%–0.25%


Probability of change from current policy:

After FOMC meeting on:

Consensus

Nov 4

2%

Dec 15

4%

Jan 27

12%

 

This e-mail is an advertisement for Theron Wall. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is copyrighted by Wallick & Volk Mortgage and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of Wallick & Volk Mortgage.

.
Equal Housing Lender

 

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