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Mortgage rates held steady last week as economic news continued to show some signs that the recovery may be gaining some small amount of traction. The news from Europe offered little hope one way or another, so markets were focused on domestic issues. Both Retail Sales and Industrial Production came in slightly higher than expected, and both the Producer and Consumer Price Indices revealed signs of moderated inflationary pressures. Even with the LEI leaping ahead by 0.9%, rates continue to be held in check despite concerns for the global economy and the Operation Twist.
In this holiday-shortened week, markets will have a few items to digest, but most analysts are expecting mortgage rates to continue holding fairly steady. We will get the second estimate of last quarter’s GDP. As long as GDP is not adjusted more than 0.2% either way, it may not move mortgage rates too much. The Fed’s most recent meeting minutes could hold a surprise or two, but unless we see serious concerns regarding the Fed’s efforts the impact on rates should be minimal
Year-Over-Year CPI Falls
The Consumer Price Index (CPI) fell 0.1% in October. The 12-month reading of 3.5% comes in lower than September’s reading of 3.9%. This chart displays the year-over-year CPI readings for the last 10 months. Generally, as inflation eases, bond prices rise. Higher bond prices can have a beneficial effect on home loan rates as they could potentially push lower.
October Job Gains
According to the Labor Department, 80,000 jobs were added for the month of October. Though down slightly from expectations, there was good news regarding employment as both the September and August readings saw large revised increases. August was revised up 47,000 to 104,000, while September was revised up 55,000 to 158,000. The revised September data is the largest jobs gain since April.
Though jobs are still being created at slow pace, the revised numbers continue a recent trend of faster growth since a slow early part of the summer.
It’s that time of year again. Don’t forget to set your clocks BACK 1 hour this Saturday night.
Most lenders do not require their buyers to have a new survey done in preparation for closing. The lenders have title insurance protection for survey problems. Keep in mind that lenders also do not require buyers to get owner’s title insurance, but they do require lender’s title insurance to protect the lender!
Most buyers have learned that it is a good idea to get owner’s title insurance, and there are many situations where it is also smart to get a new survey done.
What properties should definitely have a new survey?
1. New construction – the builder may have a survey in connection with the construction loan, but make sure that the survey includes driveways, walkways, boundary fences and walls, parking pads, patios, and sundecks.
2. Properties that have been rebuilt or remodeled – many builders are squeezing large houses onto small lots, and only a survey will show if any building lines and setbacks have been violated.
3. Older properties with small frontage or narrow width – many of these houses have been enlarged over time, plus there are often encroachments of driveways and fences.
4. Properties with long legal descriptions (metes and bounds) rather than short legal descriptions (lot number, plat book and page). It is very helpful if the long legal description refers to the previous survey that was used to write the long legal; in this case a copy of the previous survey may suffice.
5. Any properties that are made up of more than one “tract” or “parcel”, usually because the parcels were acquired at different times or because neighbors have “swapped” some property to accommodate a driveway encroachment or fence encroachment.
Neel & Robinson is Dedicated to Keeping You the Smartest Agent on the Block!
To schedule your next closing please call us at 404-459-9600
Leigh Clack, Partner
Neel & Robinson Attorneys at Law, LLC
Atlanta, Georgia 30342
www.neelandrobinson.com
Friday, October 28th
The Dow Jones Industrial Average and S&P 500 saw historic gains in the month of October. The Dow advanced 13.5%, it’s biggest gain since January 1987. The S&P 500 saw an increase of 12%, it’s largest gain since October 1974. Optimism surrounding Europe, positive economic data and better than expected earnings reports all helped these indexes to huge monthly gains.
How does this affect home loan rates? Home loan rates pushed up in October in large part due to the meteoric rise in stocks. As investors looked to take advantage of favorable stock conditions, money flowed out of bonds. With all the money coming out of bonds, home loan rates took a hit.
Featured Chart for Wednesday, October 26th
According to the U.S. Census Bureau and the Department of Housing and Urban Development, new home sales for September climbed to 313,000. This is up nearly 6% from the revised August rate of 296,000. As you can see from this chart, September comes in just below the 2011 high of 316,000 set in April.
The median sales price of a new home sold in September was $204,000 while the average sales prices was $243,900.
In advance of a speech in Nevada later today in which President Obama is expected to expand on the initiative, the Federal Housing Finance Agency (FHFA) has announced major changes to the Home Affordable Refinance Program (HARP). FHFA unveiled what is essentially a widening of HARP to reach more borrowers in another effort to reverse the continuing flood of delinquent mortgages heading down the pipeline to foreclosure.
HARP is unique among programs designed to assist distressed borrowers in that it is intended to help those who are current on their mortgages but underwater, that is who owe more on their mortgages than the current market value of their homes. Several studies have identified these borrowers as being likely to strategically default on or walk away from their mortgages. Although Fannie Mae and Freddie Mac, the two government sponsored enterprises (GSEs) which are under FHFA conservatorship, have assisted about 9 million homeowners to refinance into lower-cost mortgages over the last few years, only about 10 percent of those were aided through HARP. HARP, like the other major government foreclosure prevention initiative HAMP, the Home Affordable Modification Program, has been impeded by a lack of enthusiasm among lenders and servicers integral to the programs’ success. In the case of HARP, the lenders objected to the possibility they might have to buy back delinquent loans if they weren’t scrupulously underwritten. They thus tended to cherry pick the best loans which in turn limited borrowers from refinancing with other than their current lenders.
The current HARP limits the loan-to-value (LTV) ratio for a new loan to 125 percent (the program originally had a limit of 105 percent). This effectively eliminates the most underwater homeowners and even leaves whole states, such as Nevada where large percentages of homeowners have negative equity above that amount, out of the program.
While regulations and guidance for the plan won’t be finalized for several weeks, relevant changes to HARP that were announced today include:
- Removing the current 125 percent loan-to-value ceiling on refinanced mortgages;
- Waiving risk-based fees on borrowers who take shorter term mortgages and reducing those fees for others;
- Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the GSEs;
- Eliminating certain representations and warranties required of lenders to obtain the GSE guarantee. This will protect lenders from many of the buy-back requirements they face under current guidelines.
- Extending availability of the program through the end of 2013.
FHFA said the changes to HARP were made with input from lenders, mortgage insurers, and other industry participants. According to The Wall Street Journal, among the concessions made by the industry are agreements from private mortgage insurers to facilitate the transfer of existing mortgage insurance coverage and from most of the major lenders to ease the process of subordinating existing second mortgages to the new loans.
The changes in the program may double the number of borrowers using HARP according to some estimates, but still will serve only those borrowers who are current in their loans and who have loans owned or guaranteed by one of the GSE’s that were delivered to Fannie or Freddie prior to July 2009. Thus it will impact only a small percentage of distressed borrowers in the country.
”We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach,” said FHFA Acting Director Edward J. DeMarco. “Building on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises. Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.”
Charles E. “Ed” Haldeman, Jr., Chief Executive Officer of Freddie Mac released the following statement on the program. “This new phase of the Home Affordable Refinance Program (HARP) will help reach more borrowers with negative equity so they can refinance into new Freddie Mac mortgages at today’s historically low-rates. These changes mark another step on the road to recovery for the nation’s housing market and underscore Freddie Mac’s vital role in making affordable mortgage financing available to America’s homeowners and future homebuyers.”
Philly Fed Has Positive Reading The Philadelphia Fed Index rose to 8.7 for the month of October, the first positive reading since July. As you can see in this chart the readings have bounced around in recent months, with very low readings the two months prior. The Philly Fed Index has a high market impact, with a 78% positive correlation with the national ISM index (which monitors employment, production, orders and delivers by manufactoring firms). A positive Philly Fed Index, and a corresponding positive ISM reading generally favor stocks, which can move money out of bonds and affect home loan rates.
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