Category → FHA Mortgages
January 2012 Economic Calendar
| Date | (GMT) | Event | Actual | Cons. | Previous |
| Jan 01 | 00:00 | New Year’s Day | |||
| Jan 03 | 15:00 | Construction Spending (MoM) | 1.2% | 0.5% | -0.2% |
| Jan 03 | 15:00 | ISM Manufacturing | 53.9 | 53.2 | 52.7 |
| Jan 03 | 15:00 | ISM Prices Paid | 47.5 | 47.9 | 45.0 |
| Jan 03 | 19:00 | FOMC Minutes | |||
| Jan 04 | 12:00 | MBA Mortgage Applications | -4.1% | 0.3% | |
| Jan 04 | 15:00 | Factory Orders (MoM) | 1.8% | 2.0% | -0.2% |
| Jan 04 | 21:00 | Total Vehicle Sales | 13.60M | 13.50M | 13.63M |
| Jan 05 | 13:15 | ADP Employment Change | 165K | 206K | |
| Jan 05 | 13:30 | Continuing Jobless Claims | 3.522M | 3.601M | |
| Jan 05 | 13:30 | Initial Jobless Claims | 375K | 381K | |
| Jan 05 | 15:00 | ISM Non-Manufacturing | 53 | 52 | |
| Jan 05 | 16:00 | EIA Crude Oil Stocks change | 3.899M | ||
| Jan 06 | 13:30 | Average Hourly Earnings (MoM) | 0.2% | -0.1% | |
| Jan 06 | 13:30 | Average Hourly Earnings (YoY) | 2.1% | 1.8% | |
| Jan 06 | 13:30 | Average Weekly Hours | 34.3 | 34.3 | |
| Jan 06 | 13:30 | Nonfarm Payrolls | 150K | 120K | |
| Jan 06 | 13:30 | Unemployment Rate | 8.7% | 8.6% | |
| Jan 09 | 20:00 | Consumer Credit Change | $7.65B | ||
| Jan 10 | 15:00 | IBD/TIPP Economic Optimism (MoM) | 42.8 | ||
| Jan 10 | 15:00 | Wholesale Inventories | 1.6% | ||
| Jan 11 | 12:00 | MBA Mortgage Applications | -4.1% | ||
| Jan 12 | 13:30 | Continuing Jobless Claims | |||
| Jan 12 | 13:30 | Initial Jobless Claims | 381K | ||
| Jan 12 | 13:30 | Retail Sales (MoM) | 0.2% | ||
| Jan 12 | 13:30 | Retail Sales ex Autos (MoM) | 0.2% | ||
| Jan 12 | 15:00 | Business Inventories | 0.8% | ||
| Jan 12 | 15:30 | EIA Crude Oil Stocks change | |||
| Jan 13 | 13:30 | Trade Balance | -$43.47B | ||
| Jan 14 | 13:55 | Reuters/Michigan Consumer Sentiment Index | 69.9 | ||
| Jan 16 | 00:00 | Martin L. King’s Birthday | |||
| Jan 17 | 13:30 | NY Empire State Manufacturing Index | 9.53 | ||
| Jan 18 | 12:00 | MBA Mortgage Applications | |||
| Jan 19 | 13:30 | Continuing Jobless Claims | |||
| Jan 19 | 15:30 | EIA Crude Oil Stocks change | |||
| Jan 25 | 12:00 | MBA Mortgage Applications | |||
| Jan 25 | 19:00 | FOMC Minutes | |||
| Jan 25 | 19:15 | Fed Interest Rate Decision | 0.25% | ||
| Jan 26 | 13:30 | Continuing Jobless Claims | |||
| Jan 26 | 15:30 | EIA Crude Oil Stocks change | |||
| Jan 31 | 14:00 | S&P/Case-Shiller Home Price Indices (YoY) | -3.4% |
Wednesday’s Wash
Treasuries and mortgage markets rallied yesterday on weaker equity markets and Japan raising the disaster index to 7 on the nuke problems. This morning stock indexes, as they seem to do on any declines, are better pushing rate markets higher in yield. Yesterday the 10 yr note rallied nicely taking its yield down 8 bp to 3.50% where we noted resistance would occur, mortgage rates fell about 5 bp. Yesterday gold decline and crude oil fell $4.00, this morning in early trading gold up recovering all of the decline yesterday, crude up about $1.00 at 9:00. At 9:00 the DJIA +84 in pre-market trading after declining 117 points yesterday.
At 8:30 this morning March retail sales were generally in line with forecasts; up 0.4% overall and ex auto sales +0.8%. March sales were the weakest since June 2010; Feb sales revised to +1.1% from +0.7% ex auto sales. Excluding gasoline sales in March sales were up just 0.1%, in Feb ex gas up 1.1%. The rapid increase in gasoline prices as we have noted will cause a decline in consumer spending on discretionary items.
At 9:30 the DJIA opened +64, the 10 yr -11/32 at 3.54% +4 bp and mortgage prices -.18 bp frm yesterday’s close.
At 10:00 Feb business inventories, expected +0.8%, increased 0.5%; sales were +0.2% the lowest since June 2010, the inventory to sales ratio 1.24 months unchanged from Jan.
Earlier this morning at 7:00 am the weekly MBA mortgage applications for last week. Mortgage applications decreased 6.7% from one week earlier, weekly mortgage applications survey for the week ending April 8, 2011. The Refinance Index decreased 7.7% to its lowest level since February 11, 2011. The seasonally adjusted Purchase Index decreased 4.7% from one week earlier. The Purchase Index decreased 4.1% compared with the previous week and was 11.4% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market Index is down 3.3%. The four week moving average is up 0.7% for the seasonally adjusted Purchase Index, while this average is down 5.3% for the Refinance Index. The refinance share of mortgage activity decreased to 60.3% of total applications from 61.2% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity decreased to 5.9% from 6.1% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased for the fourth consecutive week to 4.98% from 4.93%, with points increasing to 0.93 from 0.69 (including the origination fee) for 80% loans. This is the highest average contract rate reported since February 18, 2011. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.17% from 4.14%, with points increasing to 1.22 from 1.09 (including the origination fee) for 80% loans. The effective rate also increased from last week.
At 1:00 this afternoon Treasury will auction $21B of 10 yr notes; yesterday’s $32B of 3 yr notes went OK, like the Three Bears—not to hot, not too cool, just right. Today’s 10 yr should be decently bid but recent Treasury borrowing over the past few months has been a mixed bag, some auctions well-bid while others not so strong.
At 1:30 the President is going to lay out his sketchy ideas for cutting the budget deficit. Likely he will not want to cut entitlements, the path for Democrats to regain power. The budget battles are going to be contentious between Republicans and Democrats and will carry on through most of the summer. Regardless of how the cuts come and whether tax revenue increases occur, the end of it all will be another serious political miss. Our politicians are all about themselves and being re-elected; we do not expect a budget that will be meaningful until we have another election when our elected officials get the temperatures of the country—-again.
The Progressive Change Campaign Committee is calling for a “donor strike” by 2008 supporters of Obama if he puts Medicare and Medicare “on the table for potential cuts.” Obama is expected to discuss those programs during his speech this afternoon on ways to reduce the federal debt. Conservative Republicans, meanwhile, are already criticizing Obama’s planned speech for proposals to eliminate tax loopholes, and end George W. Bush-era tax cuts for wealthy Americans. It is going to be a real Cluster…
And finally today; at 2:00 the Fed will release its Beige Book on the economy from the 12 Fed districts.
With the Pres speaking at 1:30 and the Fed’s Beige Book at 2:00 the financial markets will likely not move much this morning. The bond and mortgage markets are technically bearish but as we have noted we are not expecting a spike higher in rates, rates will increase through the rest of the year as long as the economic outlook continues to be positive. That said, the IMF lowered their estimates for growth in the US from 2.0% to 1.5% this year, and lowered growth rates for Europe and Asian economies. The lowered forecasts have opened the door for those that are not so optimistic. A change in the outlook would of course support the rate markets as investors exit equities, that however, at least at this time, isn’t the consensus.
Let’s Talk About EEM’s – Be Green!
EEM’s or Energy Efficient Mortgage is a product that has been around for some time but is not widely used or understood. This is a way for someone purchasing an older home or a rough REO to improve features of the home at a very low cost. The program allows for borrowers to finance energy efficient improvements to the home as part of the first mortgage and the additional amount financed are NOT factored into the LTV or the DTI calculations. With an EEM, you can finance up to the greater of $4,000 or 5% of the property’s value not to exceed a total of $8,000. This allows for the purchase and installation of energy efficient appliances, weather stripping and dual pane windows to lessen the homes green footprint.
So why is this program not more popular? Because:
- Not many Originators and/or lenders know about it of understand the product.
- Since they do not understand it – they don’t tell anyone about it!
Imagine purchasing a 30 year old home and all of the kitchen appliances are run down and out dated. Apply for and get approved on your standard convention or FHA loan, add the cost of the new appliances on to the loan amount, and post close have a completely updated kitchen. The cost is financed into your first mortgage at the same rate and the interest is now fully tax deductible. Not a bad option and one that more home buyers would take advantage of “if” they knew it existed.
We do know it exists and we wnat YOU to know it exists so we can continue to offer solutions and incentives to home buyers. The EEM can be used in conjunction with conventional and FHA financing and we have even successfully paired it with VA financing asa well! If you are interested in finding out more abouty this product then please comment on this post and I will follow up with additional information on the program.
Lastly, remember that LQI (Loan Quality Initiative) is coming June 1 and may have a profound impact on transactions going forward. For a refresher on the program and a little entertainment you can click on this LINK to view a video synopsis of what is coming down the pike!
Have a great Memorial Day Weekend!!
ARM’s are not ALWAYS a Dirty Word!
With the continued run of low interest rates there is a phenomenon that has gone largely unnoticed lately. That is the fact that the spread between the benchmark 30 year fixed mortgage and ARM’s (adjustable rate mortgages) has become quite large. This leaves an opportunity for perspective home buyers to buy more house and/or have a significantly reduced payment for a 3 to 10 year period. This can be a great option if you are looking at an ownership period that fits within the fixed rate period of the ARM. I am not referring to any of the “exotic” products that helped lead us into this economic mess but rather good, old fashioned, full doc, sanity based ARM’s!
Let’s take a look at what is available under the FHA loan program. I’ll concentrate on these as these are the most attractive adjustable products on the market today. FHA offers bot a 3/1 and a 5/1 ARM with as little as 3.5% in down payment requirement. The index they are tied to is the 1 year treasury constant maturity and they carry a margin of 2.00 to 2.250 (very low by conventional loan standards). Centering on ythe 5/1 ARM, currently we have a start rate of 3.750%! This is how a typical ARM works:
- Current Index Value .390%
- Margin 2.250%
- Implied Rate 2.640%
The loan itself has caps of 1/1/5. This means at the first adjustment the rate can go up or down no more than 1% (this would be at the end of the 5 year fixed rate period). Thereafter, the loan adjusts every 12 months with a maximum movement of 1% each adjustment and can never go up more than the 5.000% cap over the life of the loan (maximum lifetime interest rate in this example would be 8.750%). When looking at the implied rate above, if you were at the end of your five year fixed period and were to adjust today, your rate would move towards the implied rate or in this case would go down from the starting 3.750% rate to 2.750%! Over time there is likelihood that the ARM rate will go up but on this particular FHA program any borrower would safe for a targeted ownership period of 5 to 7 years and could save significantly on interest costs.
With a comparable fixed rate loan at 4.875%, the interest savings on the 5/1 ARM over the first 5 years would be approximately $13,883 and your actual loan balance on the ARM would be $3,968 lower when compared to the fixed rate loan. These numbers are based on a $250,000 loan amount.
No negative amortization, no dangers of recast, no prepayment penalties, no hidden whammies, just a good old fashioned conservative ARM that can save money in the form of reduced monthly payments, reduce interest costs, and make that dream home more affordable and comfortable!
What is a Flip and Why is it SO Difficult?
What is a flip? No not the one in the picture but the one related to Real Estate that has created so much trouble recently. A flip transaction is one in which an investor purchasers a home (typical at trustees sale), performs some clean up and renovation work, and then lists the home and sells it for a profit. In many cases, investors are turning these properties in as little as 1 to 2 months and generating profits to the tune of 50% appreciation and more!
These are difficult because the lending world is scared to death of them in the current market. Why? Because of the “shadow inventory” that everyone talks about but we have yet to see hit the market. Lenders are afraid that if they lend on a flip that has generated a large amount of appreciation and the “shadow inventory” floods the market, then we will see a second round of downward spiraling home prices. This could leave the lender with a whole new batch of maximum financed homes that have declined in value and the homeowner ends up underwater. The resulting fear is another round of walk always and another round of foreclosures down the road!
The big question is if this fear is grounded in reality.Currently, flip transactions where the property is being turned in less than 90 days and the appreciation is greater than 20% are virtually impossible with an FHA loan and takes an act of congress to get done on a conforming loan product. If the flip is greater than 90 days then the road is a little less bumpy but still requires a 4 wheel drive vehicle to get the job done. Most flips will require 2 appraisals, documentation as to what improvements were performed that justifies the appreciation, and in some cases a lender ordered home inspection.The disconnect in the industry is that while HUD has lifted the old 90 day moratorium on flip transactions for the next year there is a lack of lenders willing to fund these transactions. So while HUD giveth, investors taketh away!
The insanity of our market continues and good legitimate transactions remain on the table with few if any lending sources. If the lending community is so worried about the shadow inventory and another round of falling home prices then the counter to that would be looser credit (within reason) and promoting home buying activity. By holding their cards close to their vest and not availing themselves of the programs offered via the secondary market it seems the lending community is setting themselves up for a self fulfilling prophecy. The shadow inventory will come and we will have more homes on the market. The way to counter another dip in values is to have lenders willing to lend under the current guidelines so qualified buyers and sellers can meet in the market and do business.I welcome your thoughts and comments on this subject.
Get Your FHA Mortgage Application Started — Fees Increase 1/2 Percent Starting Monday, April 5, 2010
Starting Monday, April 5, 2010, getting an FHA mortgage will be more expensive for borrowers.
In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio.
The changes include the following:
- Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
- A plan to reduce seller concessions from 6 percent to 3 percent
- An increase in minimum downpayment for FICOs 580 or lower
For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010. That means you’ll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.
But don’t leave your application to the last minute.
Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.
Also worth noting is that the FHA isn’t done with its changes.
In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums. The FHA’s formal request, in summary:
- Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
- Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing
For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections. Either way, it means higher costs for consumers.
The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.