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Rates Recover From Last Week December 8, 2009

Tip of the week.  Remember to include the HO6 cost into your customer's qualifying ratios if they are buying a PUD.  All lenders are requiring the Home owners master policy to cover "the wall in in"  or the borrower is required to get a HO6 (condo policy) to cover these replacement costs.  This extra amount is required to be escrowed as well. 

While rates increase last week. Bernanke's comments lead to lower rates starting the end of yesterday.  Sparking the rise were some bond-friendly comments made yesterday by Fed Chairman Ben Bernanke, who said inflation will remain subdued, interest rates will stay low and that the economic recovery faces "formidable headwinds". Since the speech, we have seen Stocks, Oil and Gold trade lower with the money seeking the safehaven of Bonds.

You can read Mr. Bernanke's comments at this site:

http://www.federalreserve.gov/newsevents/speech/bernanke20091207a.htm


 

The Valeo-Croy Team -  (704) 366-7711
Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421
@ The Valeo-Croy Team, we are here for you. 


Seller Held 2nd Mortgages May help to Sell Your House/Listing December 14, 2009

Deanna and I just passed our Nationwide Mortgage Licensing System & Registry exam and have passed with flying colors. The exam does not have to be taken and passed until next June but we wanted to get this out of the way. 

Basically any loan originator that does not work for a depository institution (bank, credit union or other savings and loan) has to pass this test. The test covers Federal Mortgage-related laws, General mortgage knowledge, Mortgage loan origination activities and Ethics. 

So as I like to say you get an opportunity to work with people who know more than rate and that can make the difference in getting your loan closed on-time (or at all).

Tip of the week.  A seller held second mortgage may be the right thing to help sell your house.  Conventional loans allow for seller held second mortgages.  For the right seller this may be the right solution.  Often if very little is owed the seller can still get most of their equity out of their home.  And then create a stream of income from a seller held second mortgage.  The loan at a minimum cannot be callable before 5-years and the buyer must qualify debt/income ratio wise.  Now days this is the best way to sell a home that is outside of the FHA loan limit range where the seller has a strong equity position.

Economic news; we have seen rate pressures beginning last week and continuing into today with very strong consumer spending dollars. The Fed has jumped in to buy Mortgage Backed Securities (MBS) to help bring yields down. But know that we are nearing the end of their purchasing of MBS; this initiative is scheduled to expire at the end of Q1 2010.
 
Last Friday stronger than expected November Employment report released this after December 4th when, Bernanke came out repeated the Fed's plans to maintain the fed funds rate at extremely low levels for an extended period of time.

According to Bernanke, the Fed still expects the labor market to improve very slowly, so they are reluctant to remove monetary stimulus by raising rates. Fed officials believe that inflation will remain low for the next couple of years, meaning that there is little short-term pressure to raise rates.
 
Based on the results of last week's Treasury auctions, investors appear to agree with the Fed that there is little risk of higher inflation in the short-term, as demand was stronger than average for the 3-yr auction. Investors are far more worried about the risks of inflation in the longer-term, however, and the demand for the 10-yr and 30-yr auctions was very disappointing. The Treasury was forced to offer higher than expected yields to persuade investors to purchase the longer-term securities. Increasing yields reflect concern that the current deficit spending and monetary stimulus needed to help the economy recover will lead to higher inflation down the road. Since investments in mortgages have long-term time horizons as well, inflation expectations have a similar influence on mortgage rates.
 
Bottom line higher yields on Treasuries should lead to higher long term mortgage rates. Institutional investors (banks and others that can borrow at the Fed funds window) will buy treasuries .vs. MBS as the yield gets closer together. US Treasury Bonds are considered risk free investments while MBS have a risk premium due to the possibility of default on the underlying collateral of the homes.


100% or Repair Costs can be folded into a USDA loan December 21, 2009

Tip of the week:  The USDA program to allows home repairs and closing costs to be included in the loan amount up to the property’s appraised value. This is ideal for people buying foreclosures/short sales which often need a little work and are bought below the appraised value. What’s more, there’s no limit to the amount the Seller can contribute and no down payment is required. Properties must be USDA eligible which is easily ascertained by going to http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp&NavKey=property@11.

Economic Update: As expected, the Fed held the fed funds rate steady last week and made no indication that it will raise this rate any time soon. Its statement contained no surprises. Of note, it described improvement in the job market since the last FOMC meeting, as the "deterioration in the labor market is abating." The Fed expects inflation to remain low. Finally, the statement reminded investors that the $1.25 trillion mortgage-backed securities purchase program will conclude at the end of the first quarter of 2010.

The Wall Street Journal today expected 10YR Bonds to jump to 4.125% since the MBS purchase program will expire and spreads between the risk free 10 YR Bond and MBS is usually closer to 2% we should see rates over 6% later in the year (if the prediction holds true). Looks like now is the right time to lock your rate in for the long term.

The housing sector data released during the week was mostly favorable. November Housing Starts rose 9%, and Building Permits, a leading indicator, showed similar results. The December NAHB Homebuilders Sentiment index surprisingly dropped slightly, to the lowest level since June. Given the passage of the extension and expansion of the homebuyer tax credit, the index was expected to rise.

This week, a significant amount of economic data will be released.

Existing Home Sales and the final reading for third quarter GDP will come out on Tuesday. Wednesday will be the biggest day with New Home Sales, Core PCE inflation, Personal Income, and Consumer Sentiment. Durable Orders will be released on Thursday. In addition, the Treasury will announce the size of upcoming auctions on Wednesday. Mortgage markets will be closed on Friday in observance of Christmas


A Seller Held Second May Get Your Listing Sold Quicker December 28, 2009

Tip of the week: For houses outside of the FHA loan limit. Seller held second mortgages may be a great way for sellers with large amounts of equity to sell their homes to more people. The second mortgages will improve the monthly cash flow for buyers and therefore open up the number of buyers that can buy your sellers home.
This is a great way for "move down sellers" to get most of their equity out of the house if they are having trouble selling. Fannie and Freddie allow these types of loans, they must be balloon in less than 5-years and in most cases buyers will want 10-years before it is callable. 
We can help to structure this for your client and show your client the difference in payment between PMI and no PMI. This seller held second can be put into MLS and may attract additional buyers. In this competitive market sellers need all the advantages they can get.
Economic News: The PPI inflation report was higher than expected, but the more closely watched CPI report was right on target, remaining at low levels. Economic troubles in some developing nations produced a flight to safer assets, which helped mortgage markets late in the week.

As expected, the Fed held the fed funds rate steady and made no indication that it will raise this rate any time soon. Its statement contained no surprises. Of note, it described improvement in the job market since the last FOMC meeting, as the "deterioration in the labor market is abating." The Fed expects inflation to remain low. Finally, the statement reminded investors that the $1.25 trillion mortgage-backed securities purchase program will conclude at the end of the first quarter of 2010. Mortgage investors were generally pleased that there was no unfavorable le news from the Fed meeting.

Rates saw a sharp move up over the past 10-days then stabilized. This week will be a slow trading week. Expect the stock market to drive rates up – if the market is up and down if the market is down.

Have a wonderful New Year celebration and we will see you in 2010 if not sooner.

The Valeo-Croy Team -  (704) 366-7711
Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings
@ The Valeo-Croy Team, we are here for you.