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Were you surprised by the most recent drop in interest rates and the government shutdown?
How much of your income depends upon the direction of rates & the government?
Understanding Rates and the Secondary Markets
Wednesday, October 16
2:00 to 3:30 pm EDT
Free For Trial Members of
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The changes in the markets obviously affect your business more than any other single factor. But what do you really know about the influences of the markets? Get the latest economic commentary, plus...
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⇒ Understanding mortgage commodities: interest rate denominated instruments.
⇒ Understanding spreads that explain rate sheet variances -- such as servicing values.
⇒ The three risks that determine rates.
⇒ Warehouse lines and funding of loans.
⇒ The myths of points and fees.
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| October 8, 2013 ⇒ How Much Damage?
⇒ FHA Requests "Bailout" Funds
⇒ Getting an appointment with a Realtor
⇒ Existing Home Sales Soar
⇒ Foreclosure Rates Continue Improvement
How Much Damage?
Now that the shutdown has lasted at least a work week--we have to ask the most important question. How much damage was done to the economy because of the actions or inactions of Congress? And it was not just the government shutdown. What we are talking about here is also the threat of the shutdown which hovered over the markets and our populace for weeks. How much confidence do businesses and consumers lose when they are reminded that we have a government which is largely ineffective? While certain members of Congress were playing games, we had a military that was threatened with a withholding of their paychecks and homebuyers thinking that they would not get to close on the homes that they had contracted to purchase. We ask, how could these actions even be on the table?
The big news this week should have been the release in the employment numbers. But any release was likely to be less accurate anyway -- something which did not help the psyche of the stock market. It is now clearer why the Federal Reserve Board kept their stimulus plan in place for at least a while longer. This economic recovery is all about confidence and we must have confidence that our government will do what is right without playing games so that one sector of Congress can get their way or make political points. Don't get us wrong--not all the news is bad. The fight over the budget may bring a resolution to the upcoming mid-October issue of raising the debt limit to a head more quickly as we don't foresee Congress playing this game a week or so after they resolve the first issue. And as we pointed out last week, the threat of the shutdown also has caused some positive news. Interest rates are the lowest they have been in several months. Oil prices have eased back as well. We know we have said this before, but this may literally be the last chance in a very long time to purchase real estate or refinance at rates which are this low. And again, we can thank Congress for this opportunity .
More Breaking news: HUD Proposes QM Rules for FHA. More on these next week.
Rates fell for the third consecutive week in the midst of the government shutdown. Freddie Mac announced that for the week ending October 3, 30-year fixed rates decreased to 4.22% from 4.32% the week before. The average for 15-year loans also fell to 3.29%. Adjustable rates were mixed, with the average for one-year adjustables remaining at 2.63% and five-year adjustables decreasing to 3.03%. A year ago 30-year fixed rates were at 3.36%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac -- "With the onset of the federal government shutdown and declining consumer confidence, fixed mortgage rates fell for the third consecutive week. Consumer sentiment fell for the second month in a row in September to its lowest reading since April, according to the University of Michigan. Moreover, a recent Bloomberg survey of professional forecasters suggests that a partial federal shutdown lasting one week would shave 0.1 percentage points off of GDP growth in the fourth quarter and even more if the shutdown lasts longer." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated October 04, 2013
Index
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October 3
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August
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6-month Treasury Security
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0.05%
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0.07%
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1-year Treasury Security
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0.11%
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0.13%
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3-year Treasury Security
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0.61%
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0.70%
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5-year Treasury Security
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1.36%
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1.52%
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10-year Treasury Security
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2.62%
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2.74%
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12-month LIBOR
| |
0.688% (Aug)
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12-month MTA
| |
0.149% (Aug)
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11th District Cost of Funds
| |
0.956% (Aug)
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Prime Rate
| |
3.250%
|
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  The Ask The Expert Column is sponsored by NACSO. NACSO –- National Association of Credit Services Organizations -- advocates for strong industry standards, consumer protection, and ethical business practices for the credit repair industry. For more information of NACSO's Standards of Excellence and NACSO membership, Click Here. To read the latest blog article on NACSO's site, Why Disputing Credit Report Errors The Way The Experts Recommend Could Hurt, Not Help, Click Here
I read your column last week and I have a similar question. I have been referred to a Realtor and I want to make sure I get the appointment. How can I increase my chances of making this happen? Phil from Maryland
That is a great question. If this is a producing Realtor, they don't want to meet with you because they think you are going to strong-arm them for business and they should already have relationships with originators. So what should you do? Promise them you won't ask for the business! I know that seems perverse, but the goal here is to get an appointment and they are not going to give you deals until they are comfortable.
Start with flattery--______ speaks very highly of you and from my research (yes do the research first)--you are obviously a leader in the industry. I would love to have a few minutes (don't ask for more) to pick your brain a bit about your strategies and how you react to the challenges out there today. I promise I won't even bring up referring me business. The key here is to ask questions you are likely to get a yes answer to. More on this next week--including my "attorney" analogy.
Interested in learning how to move your database of your sphere from a few hundred to a few thousand? It is simple, but not easy. I go over how in my Sphere Marketing Webinar. If you would like to listen to a recording, Click Here for the free trial of the OriginationPro Marketing System which includes the Certified Mortgage Advisor Program and you will get access to the last two recorded CMA webinars, including Maximum Sphere Marketing.
Do you have a reaction to this commentary or another question you would like answered? Email us at success@hershmangroup.com.
 Breaking News :Mortgage bankers are warning of the increasing impact that the shutdown of the federal government will have on real estate finance the longer it lingers. The immediate impact is being felt most by furloughed federal employees who aren't receiving paychecks as lawmakers continue their standoff. But lenders are likely to feel the pain the longer the shutdown continues, according to Mortgage Bankers Association Chief Executive Officer David H. Stevens. "The longer it goes, the greater impact it will have on borrowers, the housing market and the national economy," he stated in an announcement. Stevens said that lenders won't be able to obtain tax transcripts and social security number verifications on loans in process as a result of impaired operations at the Internal Revenue Service and the Social Security Administration. They will also see delays on loans insured by the Federal Housing Administration as the Department of Housing and Urban Development has reduced functionality. Since different loans have different requirements, Stevens noted that disruptions will vary by lender -- creating confusion among borrowers about whether their loans will close. The MBA chief emphasized that the shutdown will have a significant impact on the roughly 100,000 weekly new and existing home sales. Delays due to 4506 needs, or social security safe scan alerts requiring confirmation from the SS administration, or more, could literally crumble the dominoes that make home sales work," Stevens said. "The one buyer who cannot close on time will trap the seller in his/her home, meaning they might not be able to be the home they were moving into, and so on. Moving trucks could sit idle, depleting income from these small business owners. Appliance sales will slow, and more as the broad eco system supported by the housing market contracts. "Even if temporary, this has significant costs to the fragile recovery." He added that if federal paychecks aren't distributed, then federal workers -- many who live paycheck to paycheck -- could begin defaulting on their loans. Source: Mortgage Daily
The Federal Housing Administration may need a $1 billion draw from the U.S. Treasury to cover a budget short fall. But that estimate by the Office of Management and Budget is based on the performance of FHA-insured loans back in December and does not recognize recent improvements, according to one consultant. Since December, FHA’s performance has only gotten better in terms of loan loss severity rate, loan delinquencies and home prices, according to mortgage consultant Brian Chappelle. “If OMB did a re-estimate, FHA would be $5 billion to $10 billion better off,” Chappelle said. “There would be no issue.” But OMB is “stuck” with the December estimate, he explained. Under the budget rules, a draw is technically necessary because OMB cannot update its December estimate, according to the founding partner of Potomac Partners. However, “the FHA fund is in better shape than implied by the draw. And it is a positive harbinger for the actuarial review,” Chappelle said. HUD is slated to release the annual FHA actuarial review in early November, which is used to determine FHA’s capital ratio. It is prepared by independent auditors who review the performance of FHA’s entire loan portfolio. In addition, senior administration officials claim FHA does not need this draw and the $1.7 billion will simply be moved from one account at Treasury Department to another at the department. Obama administration officials told reporters that FHA has $30 billion in cash in an off-budget account to pay claims on defaulted loans. FHA also is generating more revenues that it is paying out in claims and other expenses, an official said. On average, FHA is generating $8 billion to $10 billion in revenue per quarter and paying out $4.5 billion to $5.5 billion on claims and other expenses, the official said. Source: National Mortgage News
A bigger share of home loans were current last month, while the foreclosure rate also saw an improvement. Borrowers who were at least 30 days past due or in the process of foreclosure as of Aug. 31 accounted for 8.86 percent of the collective U.S. book of residential loans, Lenders Processing Service Inc. reported Thursday. The 30-day delinquency rate tumbled 37 basis points from a month earlier. In the same month during 2012, one-month delinquency on residential loans was much higher at 10.91 percent. The most recent rate reflected 4,465,000 past-due home loans. The highest rates of delinquency in August were in Florida, Mississippi, New Jersey, New York and Maine, according to LPS. Montana, Colorado, Wyoming, South Dakota and North Dakota had the lowest delinquency rates. Last month's total U.S. delinquency reflected a 6.20 percent 30-day rate excluding foreclosures, off from 6.41 percent in July and 6.87 percent in August 2012. The latest month also included a 2.66 percent presale foreclosure inventory rate, improving from 2.82 percent a month earlier and sinking from 4.04 percent a year earlier. Source: Mortgage Daily
Existing-home sales increased in August, reaching their highest level in 6 1/2 years. What's more, the median price shows nine consecutive months of double-digit year-over-year increases, according to the National Association of Realtors®. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums, and co-ops, rose 1.7 percent to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July. They're also 13.2 percent higher than the 4.84 million-unit level in August 2012. Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above year-ago levels for the past 26 months. Lawrence Yun, NAR chief economist, said the market may be experiencing a temporary peak. “Rising interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions,” he said. “Tight inventory is limiting choices in many areas, higher interest rates mean affordability isn’t as favorable as it was, and restrictive lending standards are keeping some otherwise qualified buyers from completing a purchase.” Total housing inventory at the end of August increased 0.4 percent to 2.25 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, down from a 5.0-month supply in July. Unsold inventory is 6.3 percent below a year ago, when there was a 6-month supply. “Limited inventory in some areas means multiple bidding remains a factor; 17 percent of all homes sold above the asking price in August, although 63 percent sold below list price,” said Yun. Source: NAR
The housing recovery goes deeper than just an improvement in home prices, with single-family home construction contributing approximately 500,000 jobs to the economy year-over-year, Regional Economic Models Inc. said in a press release. Additionally, the net gain in jobs accounts for a quarter of the approximately 2 million jobs added to the economy from July 2012 to July 2013. Furthermore, the biggest net growth occurred in Texas, with 59,600 jobs, and Florida, with 54,000 jobs, and California, with 30,200 jobs. “Construction of new homes is a major driver of our economy at the national and state levels,” said Frederick Treyz, CEO and Chief Economist of REMI. “We estimate that for every new house constructed, between four and five new jobs on average are created,” he added. Source: HousingWire |
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