If you would like a copy of the full letter from hud on these changes, please email me or call me and I would be happy to get it to you.
Thursday, August 27, 2009
Tuesday, August 18, 2009
What is the Mortgage Disclosure Improvement Act Policy (MDIA) and How does it effect you?
As many of you know there have been many recent new changes that have gone into effect as of July 30, 2009. One of those changes is the MDIA which is the Mortgage Disclosure Improvement Act Policy.
There are a few things that you have to remember for this new policy:
1) There are now waiting periods that the buyer has in order to review the documents of 3 days, each time they are disclosed or re-disclosed.
2) You cannot close a loan for a min. of 7 business days from the first set of documents signed
3) Nothing other than credit can be ordered until we have signed documents. If the documents were marked "mailed" we have to wait 3 business days and on the 4th day, we can order appraisal etc..
4) Anytime the Truth in Lending changes .125% higher or lower we must re-disclose and then wait 3 business days.
5) A business day is considered any day other than Sunday and Federal Holidays.
Basically, what this boils down to is that the fees disclosed to the borrower can not be .125% (eighth) higher or lower than what was originally disclosed. If it is an eighth higher or lower, than we will have to re-disclose those fees and wait 3 business days before closing.
So you ask, what are the fees that will be included in the TIL that can effect and trigger off the 3 days waiting period of re-disclosure? I have included the list of items below for your review.
Many Realtors have also asked what they can do to help this along and make it smoother for us to make sure our numbers are as accurate as possible. A few things that you can do to help your loan officer are:
1)encourage your buyer to get with the loan officer as soon as they can to sign the application.
2)ANYTIME you have an addendum done, please send it over as soon as you can. especially if there are any changes to the purchase price in any way. this will trigger a re-discloser.
3)Short Sales can be another one that can bugger up the closing and trigger off a
re-disclosure. We all know that we can wait months sometimes for the official acceptance from a bank. And usually when they finally approve the offer there are changes to the purchase price or the closing costs that they will pay. And, usually the bank wants to close ASAP. This is all fine and dandy but if we have to change any of the numbers that are included in the TIL, a new re-disclosure has to be signed and 3 business days starts.
4)If the lender gets the file done early and everyone wants to close early... A new re-disclosure will have to be sent out since less interest days will need to be collected and this effects the TIL. So, this can be signed and 3 business days later you can close early.(because the original one will include the amount of days going off of the REPC (purchase contract).
Do you see the pattern? There are a lot of things that can trigger re-disclosure.
I estimate that borrowers will sign re-disclosed documents at least 3 times before closing. (this is the minimum) The first time will be for the Pre-qual with a TBD address. The second will be once they go under contract and the address and purchase price etc. is established. And thirdly, we will send out a re-disclosure 5 days before closing just to be safe.
So 3 times min. they will re-sign docs (luckily it is only a few docs that need to be re-signed)
I am preparing my borrowers when I sit down with them of how many times they will get to sign things so it is not a surprise. The agents can assist us by letting the buyer know that this is normal and part of the new MDIA law that was effective July 30, 2009.
If we didnt have enough to think about, well there is the HVCC (appraisal) new law that we have to add on top of these deadlines too. That is another entry, another day.
Once again, please let me know if you would like further information and assistance.
Cindee Stone
801-381-3863
www.cindeestone.com
Here is that list that I promised you.
Fees that affect the APR on the Truth in Lending (TIL)
Administration Fee
Closing/Settlement Fee
Courier Fee (Overnight delivery, courier, messenger fees)
Discount Points
E-mail/E-Doc Fee
Final Inspection Fee
Flood Cert Fee, if Life of Loan
Loan Origination Fee
Mortgage Broker Fee
Mortgage Insurance Premium (MIP, PMI, VA Funding Fee)
Payoff Processing Fee
Prepaid Interest (until 1st of following month)
Processing Fee
Reconveyance TRACKING Fee
Tax Service Fee
Underwriting Fee
Wire Fee
Fees that DO NOT affect the APR on the TIL:
Appraisal or Appraisal Waiver Fee
Credit Report
Doc Prep Fee
Endorsements
Hazard/Flood Insurance Premiums
HOA Dues
Reconveyance Fees (Not Tracking Fee)
Recording Fees
Reserves (Taxes and Insurance)
Termite/Pest Inspection Fees
Title Insurance Premium
There are a few things that you have to remember for this new policy:
1) There are now waiting periods that the buyer has in order to review the documents of 3 days, each time they are disclosed or re-disclosed.
2) You cannot close a loan for a min. of 7 business days from the first set of documents signed
3) Nothing other than credit can be ordered until we have signed documents. If the documents were marked "mailed" we have to wait 3 business days and on the 4th day, we can order appraisal etc..
4) Anytime the Truth in Lending changes .125% higher or lower we must re-disclose and then wait 3 business days.
5) A business day is considered any day other than Sunday and Federal Holidays.
Basically, what this boils down to is that the fees disclosed to the borrower can not be .125% (eighth) higher or lower than what was originally disclosed. If it is an eighth higher or lower, than we will have to re-disclose those fees and wait 3 business days before closing.
So you ask, what are the fees that will be included in the TIL that can effect and trigger off the 3 days waiting period of re-disclosure? I have included the list of items below for your review.
Many Realtors have also asked what they can do to help this along and make it smoother for us to make sure our numbers are as accurate as possible. A few things that you can do to help your loan officer are:
1)encourage your buyer to get with the loan officer as soon as they can to sign the application.
2)ANYTIME you have an addendum done, please send it over as soon as you can. especially if there are any changes to the purchase price in any way. this will trigger a re-discloser.
3)Short Sales can be another one that can bugger up the closing and trigger off a
re-disclosure. We all know that we can wait months sometimes for the official acceptance from a bank. And usually when they finally approve the offer there are changes to the purchase price or the closing costs that they will pay. And, usually the bank wants to close ASAP. This is all fine and dandy but if we have to change any of the numbers that are included in the TIL, a new re-disclosure has to be signed and 3 business days starts.
4)If the lender gets the file done early and everyone wants to close early... A new re-disclosure will have to be sent out since less interest days will need to be collected and this effects the TIL. So, this can be signed and 3 business days later you can close early.(because the original one will include the amount of days going off of the REPC (purchase contract).
Do you see the pattern? There are a lot of things that can trigger re-disclosure.
I estimate that borrowers will sign re-disclosed documents at least 3 times before closing. (this is the minimum) The first time will be for the Pre-qual with a TBD address. The second will be once they go under contract and the address and purchase price etc. is established. And thirdly, we will send out a re-disclosure 5 days before closing just to be safe.
So 3 times min. they will re-sign docs (luckily it is only a few docs that need to be re-signed)
I am preparing my borrowers when I sit down with them of how many times they will get to sign things so it is not a surprise. The agents can assist us by letting the buyer know that this is normal and part of the new MDIA law that was effective July 30, 2009.
If we didnt have enough to think about, well there is the HVCC (appraisal) new law that we have to add on top of these deadlines too. That is another entry, another day.
Once again, please let me know if you would like further information and assistance.
Cindee Stone
801-381-3863
www.cindeestone.com
Here is that list that I promised you.
Fees that affect the APR on the Truth in Lending (TIL)
Administration Fee
Closing/Settlement Fee
Courier Fee (Overnight delivery, courier, messenger fees)
Discount Points
E-mail/E-Doc Fee
Final Inspection Fee
Flood Cert Fee, if Life of Loan
Loan Origination Fee
Mortgage Broker Fee
Mortgage Insurance Premium (MIP, PMI, VA Funding Fee)
Payoff Processing Fee
Prepaid Interest (until 1st of following month)
Processing Fee
Reconveyance TRACKING Fee
Tax Service Fee
Underwriting Fee
Wire Fee
Fees that DO NOT affect the APR on the TIL:
Appraisal or Appraisal Waiver Fee
Credit Report
Doc Prep Fee
Endorsements
Hazard/Flood Insurance Premiums
HOA Dues
Reconveyance Fees (Not Tracking Fee)
Recording Fees
Reserves (Taxes and Insurance)
Termite/Pest Inspection Fees
Title Insurance Premium
Monday, August 17, 2009
Economic Calendar for August 17-August 21 2009
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 August 17 - August 21
Date ET Economic Report For Estimate Actual Prior Impact
Mon. August 17 08:30 Empire State Index Aug 2.20 -0.55 Moderate
Tue. August 18 08:30 Building Permits Jul 576K 570K Moderate
Tue. August 18 08:30 Housing Starts Jul 598K 582K Moderate
Tue. August 18 08:30 Producer Price Index (PPI) Jul -0.2% 1.8% Moderate
Tue. August 18 08:30 Core Producer Price Index (PPI) Jul 0.1% 0.5% Moderate
Wed. August 19 10:30 Crude Inventories 8/14 NA 2.52M Moderate
Thu. August 20 08:30 Jobless Claims (Initial) 8/15 553K 558K Moderate
Thu. August 20 10:00 Index of Leading Econ Ind (LEI) Jul 0.6% 0.7% Low
Thu. August 20 10:00 Philadelphia Fed Index Aug -2.0 -7.5 HIGH
Fri. August 21 10:00 Existing Home Sales Jul 5.00M 4.80M Moderate
Economic Calendar for the Week of August 17 - August 21
Date ET Economic Report For Estimate Actual Prior Impact
Mon. August 17 08:30 Empire State Index Aug 2.20 -0.55 Moderate
Tue. August 18 08:30 Building Permits Jul 576K 570K Moderate
Tue. August 18 08:30 Housing Starts Jul 598K 582K Moderate
Tue. August 18 08:30 Producer Price Index (PPI) Jul -0.2% 1.8% Moderate
Tue. August 18 08:30 Core Producer Price Index (PPI) Jul 0.1% 0.5% Moderate
Wed. August 19 10:30 Crude Inventories 8/14 NA 2.52M Moderate
Thu. August 20 08:30 Jobless Claims (Initial) 8/15 553K 558K Moderate
Thu. August 20 10:00 Index of Leading Econ Ind (LEI) Jul 0.6% 0.7% Low
Thu. August 20 10:00 Philadelphia Fed Index Aug -2.0 -7.5 HIGH
Fri. August 21 10:00 Existing Home Sales Jul 5.00M 4.80M Moderate
Volatility Accompanies Subdued Consumer Spending
Last Week in Review
There's no time like the present, so the famous saying goes. And that's certainly true when it comes to the good inflation news we saw last week. But, remember, things with inflation could change in the future as the economy continues to try to climb out of the recession...which could have a negative impact on Bonds and home loan rates. Here's what you need to know.
The Consumer Price Index (CPI) for July was unchanged, and, as you can see in the chart below, the year-over-year CPI fell 2.1%, the largest 12-month decline since 1950.
-----------------------
Chart: Consumer Price Index
There was also good news on inflation last week from the Labor Department. Worker Productivity came in better than expected, rising at its fastest pace in 6 years, as companies cut costs and try to maximize output from their current workforce. This efficiency helps curb inflation, which is good for Bonds and home loan rates.
So how does this news tie in with the economy overall? For one thing, consider last week's Retail Sales Report, which showed that Retail Sales dropped in July by 0.1%, well below the 0.8% gain that was expected. This report negated the better than expected Wal-Mart second quarter earnings report and signals that consumers are still saving more than spending.
Although low consumer spending may seem like a bad thing, it is actually not such bad news in terms of inflation because of a little known (and rarely discussed) but critical facet of the economy called the velocity of money.
The velocity of money concept is simple. It goes like this: when you buy a pair of shoes, the owner of the shoe store takes that profit and buys a big screen TV, then the TV store owner buys something else, etc. The same dollar passes through the economy over and over again, triggering growth, jobs and, ultimately, inflation. The latest Retail Sales Report tells us that the velocity of money effect has been stagnant...that shoe store owner is not running out to buy a big screen TV with the profits. Once consumer spending begins to increase and the velocity of money increases, inflation is likely to follow. This will be something to look for as the economy continues to stabilize.
Something else to look for is the approaching end of the Fed's Bond purchase program. Home loan rates have stayed historically low since the program began in January. So, this is another variable that could push Bonds down and home loan rates up in the future.
Bonds and rates did manage to end last week better than where they began, but there was a great deal of volatility along the way. Give me a call if you want to look at your situation and see if now is the time for you to act.
LAST WEEK MARKED MORE TREASURY PURCHASES AND ANOTHER RATE AND POLICY DECISION FROM THE FED. CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW TO LEARN EVEN MORE ABOUT WHAT THE FED DOES.
Forecast for the Week
While there will be a break in the Fed Treasury auctions this week, there will still be plenty of news that could affect the markets. Tuesday will bring more inflation news in the form of the Producer Price Index (PPI), which provides information about wholesale level price changes. We'll also get a read on the housing market with Tuesday's Housing Starts and Building Permits Report as well as Friday's Existing Home Sales Report.
Thursday brings both the Philadelphia Fed Report, which is one of the most-watched manufacturing reports overall, as well as the Initial Jobless Claims Report. We have seen three weeks of readings under 600,000 claims after 22 consecutive weeks of readings over that level. However, it may be that those numbers have dropped as a result of Claims benefits expiring, rather than people finding employment.
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 and home loan rates were helped last week by tame inflation readings and a strong demand for Treasuries. I will be watching closely to see what this week brings.
Chart: Fannie Mae 4.5% Mortgage Bond (Friday Aug 14, 2009)
The Mortgage Market View...
What the Fed Does
By Steve Sampson
The Fed provides banking services to America's banks and to Uncle Sam. That's the nitty-gritty part of its job. On the more glamorous side, it also develops and implements the nation's monetary policy--and in the process influences interest rates.
Mighty Money Supplier
The media often suggest that the Fed "sets" interest rates--as if the Fed chairman just says "let the rate be 4 percent" and the nation's banks make it so. But that's not how it works. Banks determine interest rates based on all sorts of factors, from recipients' credit histories, to the current money supply, to how low their competitors are willing to go.
The Fed has no control over many of these factors, but it can influence the money supply--in three ways. First, it loans money directly to banks, though only on a limited scale. Second, it occasionally changes how much money banks must keep on reserve. Third, and most important, the Fed uses what it calls "open market operations" to move money into and out of the banking system.
We're Banking on You
To get an idea how the Fed's open market operations work, imagine you're the manager of Knowledge News National Bank (it's OK, we trust you). Your job is to make as much money as you can for the bank, and one of the ways you do that is by making loans, on which the bank earns interest.
The Fed requires KNB (and all banks) to keep a certain percentage of customer deposits in reserve at all times. As KNB's manager, you use deposits to make loans. But you must also maintain the required reserves--and you never know how much money customers will deposit or withdraw each day. When you're short on reserves at the end of the day, you must find a way to cover the difference.
Luckily, you know where to go. Other bank managers have extra money on hand, and they want to loan it out to earn interest. It's a perfect match. All you have to do is agree on an interest rate. If lots of banks have money to loan and not many are shopping for it, supply and demand dictates that rates will go down. On the other hand, if lots of banks want to borrow money and not many have it, rates will go up.
Smooth Open Market Operator
Recognizing this, the Fed influences interest rates by buying and selling securities on the open market. If it wants rates to go up, it starts selling lots of securities. The buyers of those securities pay the Fed millions, even billions, of dollars. That money comes right out of the buyers' bank accounts, reducing the amount of reserves in the banking system. Money gets "tight," and the rate banks charge each other for overnight loans--the "federal funds rate"-goes up.
The same supply-and-demand rules apply in reverse. When the Fed buys securities, it pays millions, even billions, of dollars into the sellers' bank accounts, increasing the amount of reserves in the banking system. With more money out there to loan, the federal funds rate goes down.
Over time, changes in the federal funds rate lead to changes in short-term interest rates, followed by changes in long-term interest rates. When the Fed nudges those rates down, it's hoping for some good old-fashioned economic stimulation. When it nudges rates up, it's hoping to fight inflation.
This article was provided to you through collaboration with Every Learner.
Copyright © 2002-2009 Every Learner, Inc. All rights reserved.
There's no time like the present, so the famous saying goes. And that's certainly true when it comes to the good inflation news we saw last week. But, remember, things with inflation could change in the future as the economy continues to try to climb out of the recession...which could have a negative impact on Bonds and home loan rates. Here's what you need to know.
The Consumer Price Index (CPI) for July was unchanged, and, as you can see in the chart below, the year-over-year CPI fell 2.1%, the largest 12-month decline since 1950.
-----------------------
Chart: Consumer Price Index
There was also good news on inflation last week from the Labor Department. Worker Productivity came in better than expected, rising at its fastest pace in 6 years, as companies cut costs and try to maximize output from their current workforce. This efficiency helps curb inflation, which is good for Bonds and home loan rates.
So how does this news tie in with the economy overall? For one thing, consider last week's Retail Sales Report, which showed that Retail Sales dropped in July by 0.1%, well below the 0.8% gain that was expected. This report negated the better than expected Wal-Mart second quarter earnings report and signals that consumers are still saving more than spending.
Although low consumer spending may seem like a bad thing, it is actually not such bad news in terms of inflation because of a little known (and rarely discussed) but critical facet of the economy called the velocity of money.
The velocity of money concept is simple. It goes like this: when you buy a pair of shoes, the owner of the shoe store takes that profit and buys a big screen TV, then the TV store owner buys something else, etc. The same dollar passes through the economy over and over again, triggering growth, jobs and, ultimately, inflation. The latest Retail Sales Report tells us that the velocity of money effect has been stagnant...that shoe store owner is not running out to buy a big screen TV with the profits. Once consumer spending begins to increase and the velocity of money increases, inflation is likely to follow. This will be something to look for as the economy continues to stabilize.
Something else to look for is the approaching end of the Fed's Bond purchase program. Home loan rates have stayed historically low since the program began in January. So, this is another variable that could push Bonds down and home loan rates up in the future.
Bonds and rates did manage to end last week better than where they began, but there was a great deal of volatility along the way. Give me a call if you want to look at your situation and see if now is the time for you to act.
LAST WEEK MARKED MORE TREASURY PURCHASES AND ANOTHER RATE AND POLICY DECISION FROM THE FED. CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW TO LEARN EVEN MORE ABOUT WHAT THE FED DOES.
Forecast for the Week
While there will be a break in the Fed Treasury auctions this week, there will still be plenty of news that could affect the markets. Tuesday will bring more inflation news in the form of the Producer Price Index (PPI), which provides information about wholesale level price changes. We'll also get a read on the housing market with Tuesday's Housing Starts and Building Permits Report as well as Friday's Existing Home Sales Report.
Thursday brings both the Philadelphia Fed Report, which is one of the most-watched manufacturing reports overall, as well as the Initial Jobless Claims Report. We have seen three weeks of readings under 600,000 claims after 22 consecutive weeks of readings over that level. However, it may be that those numbers have dropped as a result of Claims benefits expiring, rather than people finding employment.
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 and home loan rates were helped last week by tame inflation readings and a strong demand for Treasuries. I will be watching closely to see what this week brings.
Chart: Fannie Mae 4.5% Mortgage Bond (Friday Aug 14, 2009)
The Mortgage Market View...
What the Fed Does
By Steve Sampson
The Fed provides banking services to America's banks and to Uncle Sam. That's the nitty-gritty part of its job. On the more glamorous side, it also develops and implements the nation's monetary policy--and in the process influences interest rates.
Mighty Money Supplier
The media often suggest that the Fed "sets" interest rates--as if the Fed chairman just says "let the rate be 4 percent" and the nation's banks make it so. But that's not how it works. Banks determine interest rates based on all sorts of factors, from recipients' credit histories, to the current money supply, to how low their competitors are willing to go.
The Fed has no control over many of these factors, but it can influence the money supply--in three ways. First, it loans money directly to banks, though only on a limited scale. Second, it occasionally changes how much money banks must keep on reserve. Third, and most important, the Fed uses what it calls "open market operations" to move money into and out of the banking system.
We're Banking on You
To get an idea how the Fed's open market operations work, imagine you're the manager of Knowledge News National Bank (it's OK, we trust you). Your job is to make as much money as you can for the bank, and one of the ways you do that is by making loans, on which the bank earns interest.
The Fed requires KNB (and all banks) to keep a certain percentage of customer deposits in reserve at all times. As KNB's manager, you use deposits to make loans. But you must also maintain the required reserves--and you never know how much money customers will deposit or withdraw each day. When you're short on reserves at the end of the day, you must find a way to cover the difference.
Luckily, you know where to go. Other bank managers have extra money on hand, and they want to loan it out to earn interest. It's a perfect match. All you have to do is agree on an interest rate. If lots of banks have money to loan and not many are shopping for it, supply and demand dictates that rates will go down. On the other hand, if lots of banks want to borrow money and not many have it, rates will go up.
Smooth Open Market Operator
Recognizing this, the Fed influences interest rates by buying and selling securities on the open market. If it wants rates to go up, it starts selling lots of securities. The buyers of those securities pay the Fed millions, even billions, of dollars. That money comes right out of the buyers' bank accounts, reducing the amount of reserves in the banking system. Money gets "tight," and the rate banks charge each other for overnight loans--the "federal funds rate"-goes up.
The same supply-and-demand rules apply in reverse. When the Fed buys securities, it pays millions, even billions, of dollars into the sellers' bank accounts, increasing the amount of reserves in the banking system. With more money out there to loan, the federal funds rate goes down.
Over time, changes in the federal funds rate lead to changes in short-term interest rates, followed by changes in long-term interest rates. When the Fed nudges those rates down, it's hoping for some good old-fashioned economic stimulation. When it nudges rates up, it's hoping to fight inflation.
This article was provided to you through collaboration with Every Learner.
Copyright © 2002-2009 Every Learner, Inc. All rights reserved.
This week in review of announcements....
We have a very busy housing news week ahead of us.
This morning we have seen the NY Empire State survey. The median expectations we're calling for growth of 5.0 follow -.6 decline the month before. According to the index the Business conditions have expanded by 13 points up 12, new orders up nearly 8 points to 13.4 and shipments increasing 3 points to 14.1. The employment index improved, employee payrolls up -7.5 versus a reading of -21.8 the month before.
At 1 PM today we received the housing market index.
Tomorrow
We will se housing starts which is looking for another strong advance. As well as PPI (producer price index).
Thursday
Jobless Claims
LEI (leading economic indicator)
Philly Fed Manufacturing survey
Friday
Existing home sales
This morning we have seen the NY Empire State survey. The median expectations we're calling for growth of 5.0 follow -.6 decline the month before. According to the index the Business conditions have expanded by 13 points up 12, new orders up nearly 8 points to 13.4 and shipments increasing 3 points to 14.1. The employment index improved, employee payrolls up -7.5 versus a reading of -21.8 the month before.
At 1 PM today we received the housing market index.
Tomorrow
We will se housing starts which is looking for another strong advance. As well as PPI (producer price index).
Thursday
Jobless Claims
LEI (leading economic indicator)
Philly Fed Manufacturing survey
Friday
Existing home sales
Friday, August 14, 2009
Should I Refinance Now?
The Fed's been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." But is this really what that means? Not so.
Here's the truth.
Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest rates. Why? First, see the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.
So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.
Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.
Here's the most important part.
Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.
The clincher is this:
Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.
I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.
Here's the truth.
Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest rates. Why? First, see the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.
So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.
Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.
Here's the most important part.
Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.
The clincher is this:
Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.
I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.
TGIF!
This morning we've seen the Consumer Price Index (CPI) which came in roughly unchanged. On average consumer prices are down 2.1% the largest decent since 1950. With this news mortgage prices are roughly unchanged.
Wednesday, August 12, 2009
There is quite a bit of news that can move rates today. This morning we've seen the trade balance which reached a total deficit in goods and services of $27 Billion due to a jump in Oil prices following a forecast of $28.5 billion. This would normally be bad for rates as it revises the GDP better showing signs of stabilization globally, however we are in pretty much a holding pattern until the FOMC adjourns. The major market mover today will be the results of the $23 Billion in 10 year notes auction at 1 PM (EST) today.
Have a great day!
Jay Cain
Have a great day!
Jay Cain
Tuesday, August 11, 2009
In the news this morning worker productivity grew to its highest levels seen in six years as employers require more out of their remaining staffs. Labor costs fell by the most in nearly 8 years at a decrease of 5.8% with productivity jumping 6.4%. The average hours worked fell at 7.6% while compensation rose .2%.
U.S. Wholesalers decreased inventories for the 10th straight month, showing a decrease of 1.7% which is the longest series of decline since recording begun in 1987. Sales we're up .4%.
In Fed news, today's begins the 2 day FOMC meeting, however no changes are expected and 37 billion in 3 year notes to be auctioned today.
Auctions are as follows
Today - $37 Billion 3 year notes
Tomorrow - $20 Billion in 10 year notes
Thursday - $15 Billion in 30 year bonds
Have a great day and hope for great auction turn outs!
Jay Cain
U.S. Wholesalers decreased inventories for the 10th straight month, showing a decrease of 1.7% which is the longest series of decline since recording begun in 1987. Sales we're up .4%.
In Fed news, today's begins the 2 day FOMC meeting, however no changes are expected and 37 billion in 3 year notes to be auctioned today.
Auctions are as follows
Today - $37 Billion 3 year notes
Tomorrow - $20 Billion in 10 year notes
Thursday - $15 Billion in 30 year bonds
Have a great day and hope for great auction turn outs!
Jay Cain
Thursday, August 6, 2009
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