Weekly Market Update

Thanks largely to the likelihood of passing a tax deal, interest rates have been climbing at a rapid pace and analysts have brought worries about rising future inflation back into the economic discussion. It may at first seem like just another swing-- from concerns about possible deflation to anxieties about rising inflation, and back again but this time the worries may have some staying power.



The two central issues here are extensions of tax benefits: first to the unemployed, second to higher-income taxpayers. What is remarkable about these two central issues is that, taken together, they amplify a few worrisome possibilities for the economy's future. Specifically extending unemployment benefits expands the economy's growth- a good thing but probably an inflationary thing. Further, foregoing receipt of higher taxes from wealthier citizens most likely means that we will have to auction even more Treasury securities which is also potentially inflationary.



Now, a strengthening economy, both of these measures should help the economy grow (in the short term, at the least). This nearly always translates into higher inflation and in anticipation of that our interest rates will start to climb as indeed they already have. Further, the likelihood of even more massive auctions of Treasury securities increases the near certainty that interest rates will rise (as demand for Treasury securities fails to fully cover the number of securities being auctioned; its a supply-and-demand equation).



The credit markets don't wait until after something has happened; they react in advance of whatever their investors believe will happen. Investors have begun to worry about inflation already and they anticipate that the seeds of higher interest rates are being sown. Thus Treasury security interest rates are already on the rise and may continue to rise for as long as the tax deal is in place or until something else captures the attention of traders, investors and economists.



It is difficult to predict what, if anything, will grab the markets attention so it seems relatively likely that the rising interest rate trend will be with us for quite some time. However, the bond guru Bill Gross of PIMCO Securities placed a $5.5 million bet on municipal bonds a few days ago. He apparently feels bond prices have fallen quite far and are likely to recover. (Bond yields decline as bond prices rise.)



The take away here is that while rates are clearly on the rise and could continue to rise, the economy is still reacting to external forces to government programs and legislation and not to forces inherent to the current economy itself.



KEY INDICATORS [12/14/10]



Gold $1401.60/ounce [down]

Crude Oil (Brent) $91.55/brl [up]

U.S. Dollar to&

Euro .7577 [up]

Japanese Yen 83.37 [up]

6-mo Treasury Bill Yield 0.18%

10-yr Treasury Note Yield 3.38%

[6-month up 1 bp, 10-yr up 30 bps]

11^th Dist Cost of Funds 1.654%[-]

30-yr Fixed-rate Mortgage 4.95%

15-yr Fixed-rate Mortgage 4.33%

1-yr ARM 3.82%

[HSH averages rates: 30-yr up 9 bps;15-yr up 7 bps; 1-yr ARM up 9 bps]



Mortgage Bankers Association Mortgage Applications Index

week ending 12/3

Overall

Down 0.9%; down 16.5% from the week prior

Purchase Money Loans

Up 1.8%; up 1.1% from the week prior

Refinancing Loans

Down 1.4%; down 21.6% from the week prior



Jobless Claims 12/4

421,000 prior week 436,000 (rev) total insured 4.086 million, down 191,000



Producer Price Index (PPI) Nov

Up 0.8% month-to-month with food/energy prices removed, up 0.3% (1.2% annualized)



Retail Sales Nov

Up 0.8% month-to-month without auto sales, up 1.2%

Home Affordable Refinance Program (HARP)- Refince up to 125% LTV

Fannie Mae will accept mortgages refinanced through the Home Affordable Refinance Program (HARP) with loan-to-value (LTV) ratios between 105.01% and 125%. The initiative is aimed at helping borrowers refinance their underwater mortgages. Loans owned or serviced by Fannie Mae or Freddie Mac are eligible for the program.

Loans modified through the program are required to either lower a borrower’s monthly payment or move them into a more stable mortgage, i.e. going from an adjustable-rate mortgage to a fixed-rate loan.

Guideline Highlights:

• LTV > 105% to 125% with an unlimited combined loan to value (CLTV) for existing subordinate financing.
  
• Owner Occupied Single Family Residences, including PUDs. (Condos are not eligible)
  
• 620 minimum credit score
  
• Conforming limits only (Loans < 417,000). This is not available for high balance loans.
  
• A full appraisal or interior/exterior 2055 is required.
  
• 30 year term only.

Program Uses Job-loss Coverage To Lure Home Buyers

Realtor Program Lets Californians Offer Unemployment Coverage As Home-sale Incentive

(AP) LOS ANGELES (AP) - With job-loss fears keeping many on the housing market's sidelines, California's real estate agents' association has devised a scheme that uses unemployment insurance to lure wavering buyers into the fray.The California Association of Realtors program allows home sellers to fund insurance plans that pay buyers up to $1,500 a month toward their mortgages for six months if they're laid off from their jobs.The so-called Home Payment Protection Program is a nod toward the role job concerns are playing in the housing market, especially in high-unemployment states such as California, where 12.4 percent of the population remains without work."Most people out today wanting to buy houses have a fear: What happens if I lose my job?" said CAR president Beth L. Peerce. "This takes some of that stress away."Mortgage payment protection programs are nothing new, but what distinguishes the California scheme is that the protection is being pitched as a selling point for reluctant buyers, which sellers advertise as part of their home listings.Under the program, which covers buyers who lose their jobs within 12 months of escrow closing, a seller can choose to pay $200 for six mortgage payments of up to $1,000 each, or $275 for six mortgage payments of up to $1,500 each.CAR began offering the service last month but doesn't plan to begin advertising it widely until January, Peerce said.National Association of Realtors spokesman Walter Molony said he knows of no other states that are offering similar incentives for job-fearing home-seekers.The focus on consumers wary of making big purchases in a shaky economy recalls Hyundai Motor Hyundai Motor America's offer to buy back cars from people who lose their jobs.Analysts have credited that program with helping boost Hyundai sales since its introduction in January 2009, despite the ongoing economic doldrums.University of Southern California business professor Lars Perner, who specializes in consumer behavior, thinks the realtors' program could embolden those who have been putting off buying a home because of job insecurities."Taking away some of that fear of getting into big trouble is something that could easily tip the balance," he said.But Howard Wial, who directs the Brookings Institution's Metropolitan Economy Initiative, said the plan would help only a limited number of borrowers with middling mortgage payments and relatively short amounts of time spent without work.Indeed, nearly half of the state's unemployed had been out of work for an average of more than six months, according to state statistics based on the year ending in September.Meanwhile, although the state's average mortgage payment was $1,055 in September, according to tracking firm MDA DataQuick, the insurance payouts wouldn't cover mortgages in higher priced counties where sales have been most sluggish.Average monthly mortgage payments in San Francisco and Orange County were $2,469 and $1,772 in September, DataQuick said."It could have some impact on home sales, but I wouldn't overstate it," Wial said of the CAR plan. "I think it's a small step."

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Is the "No Doc" and "Stated Income" loan DEAD!!!

Like many I can honestly say that the no doc loans and stated income loans were abused. Consumers, Brokers, Banks, Investors and anyone in the R.E. field took advantage of the market. There is no single person to blame but rather a compilation of faults, greed and people being naive. The lending business was taken so out of whack with no guidelines what so ever. Where common sense no longer was relevant were people alike were living in a fantasy world of more more more. Everyone was in the business of making money and the fact of the matter is Mortgage Brokers got the runt of it where in fact most of those who really made money were in fact not even licensed individuals. Any Joe Schmo off the street decided they were going to open a mortgage company. I ask the question as a licensed Real Estate Broker and Licensed Mortgage Originator where was the law then, where were the guidelines where were the laws and boards governing this Industry.

Now at a desperate attempt to bring stabilization to the market we have taken a 360 degree turn. Banks no longer want to lend , guidelines have changed, laws have formed that once again no longer make sense. People are developing this business who are not a part of it. How can one make laws about something when they do not do the steps. How can a dancer teach one to dance if they have no rhythm or have never danced. Although I am happy that the current market has pushed a lot of bad seeds out of the business the fact of the matter is that those of us that are left are professionals this is our career not a fad, not a trade, not a quick money making fix. We are here standing fighting to make the American dream of home ownership still a reality.

We wrote to the senator regarding no doc and stated income loans and were welcomed with the following response.


"Dear Mr. Vaziri: Thank you for contacting me to express your concerns about legislation to reform mortgage underwriting standards. I appreciate the time you took to write and welcome the opportunity to respond.

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) into law after many months of deliberation and debate. During the Senate's debate of this legislation, Senators Jeff Merkley (D-OR) and Amy Klobuchar (D-MN) offered an amendment that prohibits mortgage originators from receiving payments based on the terms of a loan. Additionally, it requires lenders to verify a borrower's ability to repay with income and asset documentation. I supported this amendment, which passed the Senate by a vote of 63-36.

I understand that you feel this amendment could limit mortgage options for home buyers and reduce profits for honest mortgage brokers. However, I strongly believe that more must be done to help protect consumers from predatory lending practices that contributed to the subprime mortgage crisis. This legislation accomplishes this objective and works to prevent originators from steering home buyers into more costly loans. More importantly, it prohibits the practice of issuing "no doc" loans, in which home buyers are not required to provide evidence showing that they can actually repay their mortgage.

Once again, thank you for writing. While we may not agree on this particular issue, please know that I will keep your concerns about mortgage underwriting standards in mind should the Senate consider relevant legislation in the future. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.

Sincerely yours,

Dianne Feinstein
United States Senator"

Although I agree this loan type may have been abused and stricter guidelines must be enforced there are some people who need this type of loan and they deserve to have it. You can't compare a person applying for a no doc loan who is putting more than 20% down, has a 720 fico score, reserves and who is over all an A paper client to someone who in the past said they were a factory worker making 100k plus with a 600 fico score and 100% financing. Like I say we have to find a medium we can't keep bouncing from one extreme to another.

So to answer the question for many yes the "NO DOC" and "STATED INCOME" loan is dead for now.

Please we welcome your responses and opinions.

Leila

Beware of Foreign Buyers Wanting Quick Closings

Recently there has been a flurry of inquiries from people over seas seeking to quickly buy residential property "in your area" priced in the $450,000-$650,000 range.

They request that you send them property information on these type homes for them to review via e-mail which is fine. Within two days they have selected one of the properties, want to pay cash, and want to close by the end of the month! They also provide you their financial planner's name and contact information to handle the funds transfer and request you recommend a local attorney to handle the escrow. This all sounds really good. Too good to be true?

Let the games begin. They will want to get the property under contract and transfer earnest money to the attorney's escrow account. They then decide to cancel and want money back which was really never there, thus basically seeking to rip off the attorneys' escrow account. These have popped up throughout the United States and an over excited agent could get taken in easily.

I was recently approached by these folks, sent them property information, received the "we must buy now" message and a request for an attorney to handle the escrow. Experience told me that this just seemed to be moving way too fast and seemed far too easy. I decided to do some investigating. Upon doing some research into the financial planner's firm, I uncovered the fact that this approach by these same "buyers" was in fact a scam. The financial planner was a fake name and I decided that no more of my time was to be spent with this, but I should take a few minutes to warn other real estate professionals.

Trulia has a lengthy series of comments from real estate professionals and their stories with this scam. Beware, be careful and do not fall for this creative scam. It could be very expensive.

Published on Monday, September 13, 2010 by Michael Davenport

Up to 3.5% HomePath Buyer Incentive and $1,500 Selling Agent Bonus on HomePath Properties

Fannie Mae is offering buyers up to 3.5% in closing cost assistance and a $1,500 selling agent bonus on HomePath® properties. To be eligible for this incentive:

*Initial offers must be accepted on or after September 23, 2010

*Property sales must close on or before December 31, 2010, and close within 60 days of offer acceptance

*Buyers must be owner-occupants and confirm that the property will be used as their primary residence by completing a certification form (investors are excluded); and

*Selling agents must represent owner-occupant buyers purchasing a HomePath property to receive the $1,500 bonus and offers must be submitted on or after the effective date.

The incentive reinforces Fannie Mae's commitment to stabilizing communities and assisting buyers. For more information about the incentive, visit HomePath.com, read the press release, or contact a Fannie Mae listing broker.

House Bill Would Force Lenders to Decide on Short Sales in 45 Days

Distressed homeowners looking for a way out of their mortgage that doesn’t involve foreclosure may find relief is on the way from a new bill introduced in the U.S. House.

The legislation would impose a deadline on lenders to respond to short sale requests, requiring them to return an answer to the borrower within 45 days.

The bipartisan bill, Prompt Decision for Qualification of Short Sale Act of 2010 (H.R. 6133), is sponsored by Reps. Robert Andrews (D-New Jersey) and Tom Rooney (R-Florida).

Lenders have taken a lot of heat for the elongated timelines it takes to get an approval on a short sale proposal.

“I have heard from many short sellers in Florida whose potential homebuyers have walked away because they couldn’t get a ‘yes’ or ‘no’ from their lenders,” Rep. Rooney said. “This bill would spur growth in the housing market by helping sellers and buyers complete short sales quickly.”

The number of potential short sale properties is rising across the country. According to data from the National Association of Realtors (NAR), in the second quarter of

2010, Nevada, California, Florida, and Arizona are states where significant shares of all properties on the market are potential short sales: 32 percent, 28 percent, 27 percent, and 24 percent, respectively.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Arizona, says her organization and Realtors across the country strongly support the Andrews-Rooney bill, and are urging Congress to pass the legislation quickly.

“Unfortunately, homeowners who need to execute a short sale are severely hampered because lenders (loan servicers) are unable to decide whether to approve a short sale within a reasonable amount of time,” Golder said.

“Potential homebuyers are walking away from purchasing short sale property because the lender has taken many months and still not responded. Many consumers have mentioned that the delay in short sale price approval exceeds 90 days, and in many cases never arrives,” Golder said.

According to Rep. Rooney, the lending community has worked to improve the size and training of their workforce that handles short sales, but “progress has been extremely slow,” he says.

Rooney argues that for homeowners who owe more than their home is worth and are in real danger of losing their home, the short sale can help relieve them of the overwhelming financial burden of their mortgage.

Golder agrees. “NAR believes that quicker attention to the short sales process is vital to help homeowners who are underwater and their communities, as well as the nation’s economy,” she said.

Homeowners who are upside down on their mortgage may still be able to refinance

Many homeowners are not aware of the special “Home Affordable Refinance Program (HARP)” offered through the government. HARP provides a refinance option to homeowners who owe more on their mortgage than their home is worth. This is great news for homeowners that are upside down on their mortgage who would like to take advantage of the current record-low mortgage rates.

Eligibility requirements for a refinance through HARP include:

• The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac.

• The amount you owe on your first mortgage does not exceed 125% of the current market value of your property.
NOTE: Some lenders may require a lower percentage.

• You are the owner-occupant of a one- to four-unit home.

• Your mortgage payments are current, at the time you apply.

• The refinance improves the long term affordability or stability of your loan.

Tax Credit Extension for Service Members

The $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers have expired. However, service members who were on official extended duty outside of the United States for at least 90 days between Jan.1, 2009 and May 1, 2010, may qualify for a one-year extension.

For home purchases where a binding sales contract was signed by April 30, 2010, otherwise qualified buyers now have until September 30, 2010 to complete the purchase. Congress has extended the closing date to provide buyers who had binding sales contracts in place by April 30, 2010, additional time to complete their purchases.

How your credit score is calculated and tips to help keep it in good standing

A recent report by FICO shows more than 25% of Americans have a credit score lower than 599. With a credit score that low, it makes it very difficult to take advantage of the current record-low interest rates. Below are the main factors, and the percentage of importance of each, that are used to determine your credit score.

1. Payment history = 35% – The most important thing is to pay your bills on time.

2. Amounts owed = 30% – This is the amount of money you owe versus the amount of credit you have available to you. A 20% debt-to-credit limit ratio is optimal.

3. Credit history = 15% – It’s better to keep old credit accounts than to close them.

4. New credit = 10% – Don’t apply for new credit without a good reason.

5. Credit mix = 10% – Try having a good mix of credit, such as credit cards, retail accounts, mortgage, installment loans, and consumer finance accounts.

Top 7 Tips for Using Credit Cards

1. Avoid paying debt at 17%

Credit cards can be very useful if you are able to pay off the balance. However, when you start paying interest at 17%, the advantages are easily outweighed by the very high interest payments. Therefore, always seek to pay off the balance and avoid these rates of interest. These are the best strategy’s for avoiding paying credit card debt interest.

* Avoid overspending. – Don’t get carried away, just because you are paying with plastic rather than cash.
* Transfer the debt to a lower interest paying loan like mortgage or personal loan.
* Don’t see credit cards as a way of borrowing. See it as a convenient way of borrowing.

2. Pay Electronically at latest date.

Many credit card companies give you up to 6 weeks to pay for your balances. When your statement arrives often you do not need to pay for 3 weeks. It is tempting to pay the account straight away. However, if you are short on cash, you can leave the payment until nearer the payment date. If you do pay close to the deadline make sure you:

* pay electronically for guaranteed payment (don’t rely on the post)
* Make sure you are not going to forget.

3. How to Deal with Missed Payment

If you don’t have a direct debit for minimum payment and you miss a payment by accident you should contact your credit card company as soon as possible. If you pay it as soon as you realize it may not incur a penalty for your credit rating. However, if is more than a few weeks late then it will count as a negative rating. In this case, the best thing to do is to try and challenge the negative rating. You could try write to the bank and apologize, saying it got lost in the post. If it is your first time they may agree to write off the negative credit rating

4. Use one Card for Collecting Points

Choose one credit card to put the majority of your spending on. It is best to choose a card that has an attractive points / reward system. This credit card you should always pay off at the end of the month.

5. Use 6 Month Interest Free offers

Many credit card companies seek to entice new customers through offering introductory periods of 0% interest. This can be very beneficial for consumers of credit cards. Personally I like to choose cards with 12 months interest free. They may charge a 2% balance transfer fee. But, this equates to only a 2% interest rate – you can probably get a better rate on savings. These 6 month interest free periods are ideal for dealing with periods of temporary cash shortfalls. It is a much preferable alternative than paying interest at 17%, the standard rate for some cards

6. Don’t overdo 6 month interest free cards.

It is tempting to take out as many interest free credit cards and invest the money elsewhere. However, I would definitely advise against this. Credit card companies are increasingly taking a dim view of people who do this. You may find it difficult to get cards in the future. The small gain of making 2% interest profit is not worth the negative standing with credit card companies.

7. Set Up Direct Debit to Pay Minimum monthly payment.

This means you will never miss the payment and is the easiest way to make sure you don’t damage your credit rating. Of course, you should try to pay the whole amount off. But, the main benefit of doing this is that you don’t need to worry about a missed payment which is very damaging for your long term benefit.