FHA Adjustments

Can these changes to the FHA program help you home buyers?

The FHA has recently released new information that they have now shortened the waiting period after a foreclosure, short sale, or bankruptcy for a prospective buyer to qualify for an FHA insured home loan.  The waiting period used to be 2 years for bankruptcy and 3 years for either a foreclosure or a short sale.  Now, if your buyer can show evidence that they had experienced an "Economic Event" (any occurrence beyond the borrower's control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower's Household Income of 20% or more for a period of at least 6 months), they may be eligible earlier to re-enter the home buying market.

This change isn't going to help everyone who had a bankruptcy, short sale, or foreclosure - but it certainly does help increase the buyer pool

For more information about this, ask your Loan Professional about FHA Mortgagee Letter 2013-26, and click the image below to read the actual Mortgagee Letter or follow this link: http://goo.gl/0zuUkW .

-Michael Corboy

www.specialtyfinancialmtg.com

MBS Update

Last week saw mortgage rates begin and end almost the same, with only a small change in rebate pricing.  However, that belies the real action for the week, where almost every day the MBS (Mortgage Backed Securities) market experienced movements of at least 50bps, and pricing changes came fast and furious all through the week.  Last week was a perfect example of why it is so important to monitor the pricing in real time, as some consumers saw a difference of .125% or even .25% in interest rate from day to day and sometimes within the same day.  Last week's volatility was mostly caused by the trader reaction to economic data released through the week as the markets looked for signs of if the Fed will begin tapering in September.

We had a fairly light week in terms of the number of economic releases and there were no major U.S. Treasury auctions to guide bond trades.

It was a very choppy week as MBS sold off on Monday, rebounded Tuesday and then sold off again on Wednesday, only to rally once again on Friday. We had a conflicting housing data as Existing Home Sales were much stronger than expected, while New Home Sales were much weaker than expected.


The FOMC released the minutes from their last meeting, while not providing any clear direction on the Fed's time table to start reducing their monthly bond purchases, it did appear as though a larger percentage of the voting members were open to some sort of taper in September.

Friday's rally gave you the best rates of the week.  This was due to the Fed's Bullard making a comment that the Fed can "afford to be deliberate" about their timing of reducing their monthly bond purchases.  The rally was accelerated by a much weaker than expected New Home Sales report.

This week begs a close eye to the market as we have a huge week full of economic data releases and reports.  It appears that the markets have moved away from the idea that the Fed will begin QE3 tapering in September; the economic outlook still looks positive but there are some signs of cracks in the armor that may keep the Fed from acting in September as they wait for more consistent data that the economy is truly out of the woods.

This mornings release of the Durable Goods Orders came in much weaker than expected.  This is a big-time miss and will have some traders thinking that the taper will be moved back.  This allowed MBS to gain from Friday's close, but this mornings pricing is likely to be the best of the day, with more data due to be released.  GDP will get center stage as we get our second revision for this number.

There are three Treasury auctions this week, with the most important being the 7 Yr. Note on 8/29.
The head line news is positive for bonds but the prior revision will reduce the impact on bonds.

You can view the updated Real Estate Report at:

http://www.newsletterproonline.com/newsletter/originationpro/?newsletter=true&nid=476&uid=10671

Having your mortgage rates hinge on a speculative and jumpy market doesn't make for a fun ride.  Severe volatility looks to be the continued pattern, making real time data extremely important.  Depending on your scenario, it may be prudent to lock your loan and move on.  The best way to know for sure is to talk to the Mortgage Professional who shared this information with you.

- Michael Corboy

www.specialtyfinancialmtg.com

Rate Update

Initial Weekly Jobless Claims came in at 336K which was higher than estimated and the prior week was revised slightly higher. Still, the more closely watched four week moving average fell another 2,250.

News out of Jackson Hole has been very conflicting with one opinion of, “could get comfortable with some type of movement in September”.  This would seem to support the concept of tapering in September.  As a result, MBS sold off.  The other side stating that the Fed had time to be “deliberate” in the timing and scope of a taper.  This would seem to support the Fed tapering after September.  As a result MBS rebounded back into positive territory.

Next up, we have the San Francisco Fed President speaking, which is the district that released their research that showed QE2 having a very minimal impact on the economy.

The biggest economic release today was the release of the New Home Sales Report, which showed an increase of 2.1%. 

Today’s pricing is going to be completely driven by news out of Jackson Hole.

- Michael Corboy

FOMC Minutes

Yesterday, the Existing Home Sales came in much stronger than expected. This shows some good strength in the housing market because this data included closed loans with the higher interest rates. This positive economic news was negative for MBS and MBS sold off immediately.

The minutes from the last FOMC meeting were released at 2:00EDT. You can read them at: http://www.federalreserve.gov/newsevents/press/monetary/20130731a.htm

Just prior to the release, the benchmark FNMA MBS climbed off their lows of -26BPS to get all the way back to even. But then MBS sold off -44BPS immediately following the release of the minutes. Why? The minutes still do not provide a clear and definitive timeline for a pull back in MBS purchases, and about half of the members support a move now and half need more data to decide.

The minutes still do not provide a clear and definitive timeline for a pull back in  MBS purchases, and about half of the members support a move now and half need more data to decide. The minutes said “almost all” FOMC members agreed the Fed should begin reducing its purchases of bonds later this year, and conclude QE by the middle of 2014. However, one member said the central bank should signal it will begin cutting its purchases in the “near future.” Broadly speaking, the FOMC said the economy was expanding at a “modest” pace in the first half of the year, but worried about excessively light inflation. The dollar gained across the board, while stocks and bonds were hit negatively.  While a clear plan was not outlined, a report issued by Bloomberg breaks down the meeting:

http://mobile.bloomberg.com/news/2013-08-21/fomc-minutes-show-broad-support-for-bernanke-tapering-timeline.html

The FOMC minutes may seem like indecision, but bond traders look at the fact that a couple of months ago only one voting member supported a tapper, then there were three, now it is half. So, that growing momentum is why MBS specifically sold off. We recommended that you should lock ahead of any investor re-price for the worse.

On Deck for Tomorrow:

Initial Jobless Claims - a strong reading here could seal the deal for a September taper.

The Jackson Hole, WY symposium starts and any info or commentary out of that meeting for the next couple of days could cause some volatility.

Stay ahead of any negative market swings by staying in touch with a qualified Mortgage Professional.

 

- Michael Corboy 

www.specialtyfinancialmtg.com

Market Snapshot

Yesterday, MBS lost 68 bps from Friday's closing, resulting in the worst levels of 2013 resulting in the highest rates in 2013.  The stock and bond markets both moved in the negative direction.

There are no economic major economic releases or Treasury auctions today.

The FNMA 3.5% coupon is trading too far below par, so many analyst's are now using the FNMA 4% coupon as the benchmark.

Pricing will improve today, but will not get back to yesterday's opening levels.

Contact a mortgage specialist today to stay on top of the market and ahead of the curve.

www.specialtyfinancialmtg.com

- Michael Corboy

Last Week's Recap and This Week's Updates

Last week saw mortgage rates lose an average of .25% in rate among most lenders as MBS (Mortgage Backed Securities) lost 182 basis points in trading pricing. This increase saw us hit the second highest level of mortgage rates in 2013. The market continues to solely focused on economic reports and concerns about the Fed tapering down on QE3's purchase of MBS and Treasuries.  We had a -239 BPS sell off from our weekly highs to our weekly lows, which clearly shows you the market's pull-back in appetite for MBS.  Both the stock market and the bond market are trying to position themselves in advance of the withdrawal.

Last week was very busy with a large amount of economic data released.  Most of the data including Retail Sales, PPI and CPI were all close to market expectations and didn't really impact rates.  But we did have a much better than expected Initial Weekly Jobless Claims report and that helped to pressure MBS.  The preliminary reading for the Consumer Sentiment Index was much weaker than expected and normally would have helped rates, but the market was under too much pressure from two big factors.
            1.  Strength in Europe

            2.  Speculation that the Fed would begin to decrease their monthly bond purchases in September. 

Those two factors are likely to be the major driving force in mortgage rates this week too.

This week we have a very light week for economic releases with Existing Home Sales and Weekly Initial Jobless Claims being the most important.  The most imperatively events this week will not economic reports, but Fed events. Wednesday's FOMC minutes will be a major driving force in pricing as traders look to see how much traction tapering talk had at the last FOMC meeting. 

Thursday and Friday the market will focus on the Jackson Hole Wyoming meeting as Central Bankers and economists from around the world attend the retreat.  Traders will be focusing on any discussion on the timing of the Fed's tapering of bond purchases and who the next Fed Chair will be.

Sentiment continues to mount that the Fed will taper in September.  We will need some new commentary from the Fed's Chairmen that changes trader's minds from expecting a taper in September to December for MBS to see any improvement in pricing.

The Housing Market is trying to find balance, according to Realtor.com's National Housing Trend Report for the month of July 2013, the nation experienced a 5.24% decline in housing inventory in a year-over-year comparison; however it was an increase of 1.41% in a month-over-month comparison. While we have seen significant rebounding in the housing industry over the last year, we are now seeing that slow down as it finds balance. Out of all of the variables that make up housing market pricing, it is most likely the dramatic increase in mortgage rates that have led to the turnaround in inventory. While it is easy to take this as a negative, one must remember that lack of inventory poses its own problems, and that the best thing for sustainable business is balance.

Read more:

http://investor.move.com/2013-08-13-Realtor-com-National-Housing-Trend-Report-Shows-Dramatic-National-Year-Over-Year-Inventory-Declines-are-Easing

You can also view the updated Real Estate Report at:

http://www.newsletterproonline.com/newsletter/originationpro/?newsletter=true&nid=474&uid=10671

We are currently having another negative pricing adjustment.  Contact us today so that we can get out ahead of any future declines and be in place to capitalize on any market improvements.

www.specialtyfinancialmtg.com

- Michael Corboy