Blog - Archive for February, 2011

Mortgage Market Update

February 28th, 2011

Global unrest, higher fuel costs, continued unemployment are big concerns as we enter the home buying season. The article below helps shed some light on our current economic situation. Paul Cruz

“Fear comes from uncertainty,” wrote the poet William Congreve. Last week, however, the markets were moved by fear and by uncertainty that were unrelated. On the one hand, unrest in the Middle East drove up Oil prices and pushed investors into the safety of Bonds – while on the other hand, fear of inflation limited the gains that Bonds experienced. To see how those elements impacted home loan rates, let’s take a deeper look at each.

First, the global unrest in the Middle East continues to impact the markets. The protests that started a few weeks ago in Tunisia and Egypt have now spread to Bahrain, Yemen and Libya. Libya is of particular concern to the markets, since it is the largest holder of oil reserves in Africa.

With the thought of Oil fields at risk and with no foreseeable resolution in the near term, Oil spiked as much as $12 a barrel higher last week – climbing over the mark of $100 per barrel. Remember, high oil prices aren’t good for anything; they’re tough on the economic recovery, and they’re inflationary. And in terms of your wallet, the recent spike in oil has only just begun to translate to pumps across the country, so you can expect to see higher prices in the coming weeks.

In addition to higher Oil prices, the unrest is creating fear and doubt in Traders’ minds about what might happen. And when Traders are uncertain, they tend to move money into the relative safety of Bonds, which offer lower returns but also lower risks. This flood of money into Bonds – including Mortgage Bonds – helps prices and home loan rates improve. And sure enough, last week Mortgage Bonds traded higher, as protests and uncertainty permeated throughout the Middle East.

On the other hand, those gains in Bonds have been limited by fears of inflation down the road. That’s because investors demand a higher yield now to offset their concerns that future inflation will eat into their returns. That was evidenced by the tepid buying demand in last week’s Treasury auctions. And as the economy continues to slowly expand and inflation fears grow, rates will gradually move higher over time.

The bottom line is that global unrest has been a driving force behind improvement in the Bond market… and that it may continue to do so in the coming weeks. But at the same time, it’s important to remember that those gains are fleeting and have even been limited by inflation fears – so the positive picture for Mortgage Bonds and home loan rates won’t last long.

Now’s the time to look at your unique situation and take action. It only takes a few moments to sit down and see how the national and international news may help you benefit from a refinance or the purchase of a new home. Call or email today to get started.

Forecast for the Week
In addition to monitoring the unrest in the Middle East, we have a big week of economic reports on our hands – with the big news coming on Friday! Here’s a highlight of what to watch: 

  • The week starts off Monday morning with reports on Personal Spending and Personal Income, as well as Pending Home Sales. The Pending Home Sales report comes after last week’s Existing Home Sales release, which came in better than anticipated… but the National Association of Realtors who reports all these numbers is under fire for possible overestimation in the past few years.
  • On Monday, we’ll also see the Personal Consumption Expenditures (PCE) Index, which is the Fed’s favorite gauge of inflation. Remember, inflation fears have grown and have been limiting the gains that Bonds experience. In fact, the inflation reading in last week’s GDP release was hotter than previously reported – and that coincides with the recent Consumer Price Index trend, which saw a hot 0.4% month-over-month gain during each of the past two months. So the markets and the Fed will definitely be keeping a close eye out for the PCE report this week!
  • Manufacturing reports will also hit the newswires this week. On Monday, we’ll see the Chicago PMI, which reports on manufacturing in Chicago and is a good indicator of overall economic activity. Then on Tuesday, we’ll see the ISM Index, which is the king of all manufacturing indices and is considered the single best snapshot of the factory sector.
  • The big topic of the week will be employment. First up is the ADP National Employment Report on Wednesday, which measures non-farm private employment, followed by another round of Initial Jobless Claims on Thursday. In last week’s report, Initial Jobless Claims were reported lower than the expectations. Normally, this would have applied pressure on the Bond market, but again the unrest in the Middle East is trumping this data.
  • Finally, the busy week culminates with the highly anticipated monthly Jobs Report on Friday. This report features new data regarding job growth and the unemployment rate – needless to say, this report can be a big market mover!

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.

Newsletter Provided by Dana Dukelow, Prospect Mortgage Cell: 323-394-1909


Catalyst Lending Market Recap

February 28th, 2011

This is a copy of the Catalyst Lending Market Recap.  I do post this and other mortgage news letters here to share information I receive from my lending partners. Enjoy. Paul Cruz

Keeping you updated on the market!
For the week of

February 28, 2011


Getting a read on the direction of housing is always tough, especially in the winter. This winter has been exceptionally difficult, given that large swaths of the country have been either buried in snow or frozen over.

Perhaps the weather explains the latest news on home sales. In January, existing-home sales rose 2.7 percent to a higher-than-expected annual rate of 5.36 million units, though it appears there was significant discounting. The median price fell to a nine-year low of $158,000. The good news was that supply declined to 7.6 months at the current sales rate from 8.2 months, which may or may not be related to the foreclosure moratorium.

It’s more plausible that weather was the reason new-home sales declined to an annual rate of 284,000 units in January, but we are not sure. Homebuilders might simply be embracing more austerity. The supply of new homes fell 0.5 percent to 188,000 units, while the median sales price rose to $230,600. This suggests that homebuilders are tired of discounting. They would rather reduce output than sell at prices that fail to produce a reasonable return on investment.

Pricing remains a national concern. The closely watched S&P/Case-Shiller home price index reported that national home prices declined 3.9 percent in the fourth quarter of 2010. After the index was released, Robert Shiller, the index’s co-creator, made the rounds to various media outlets to let everyone know that he’s concerned that home prices will continue to fall, and not just a little. Shiller sees prices dropping 15 to 25 percent in real terms.

It’s important to note Shiller’s qualifier, “real terms,” which means prices before inflation and in comparison with other goods and services. It doesn’t mean list prices will fall 15 to 25 percent, because we transact in nominal terms, or in inflation-adjusted dollars. Inflation is very much an issue these days: gas is over $3 a gallon in most states and food prices continue to invoke sticker shock. Inflation alone will put a brake on falling real estate prices.

This same concept applies to mortgage rates. Yes, rates have stabilized over the past two weeks, as Treasuries have regained their haven status because of Middle East unrest. However, 2 to 4 percent yields on Treasury securities won’t be considered a haven when inflation consumes all the return. It is only a matter of time before credit investors demand higher lending rates.


Date and Time
Personal Income
& Outlays
Mon., Feb. 28,
8:30 am, et

Income: 0.3% (Increase)
Outlays: 0.4%

Important. The increase in outlays is being driven by higher food and energy prices.

Home Sales

Mon., Feb. 28,
10:00 am, et

92.9 Index

Moderately Important. The index is expected to post lower on inclement weather.
Construction Spending
Tues., March 1, 10:00 am, et


Moderately Important. Spending on single-family construction will likely ease after recent gains.

Mortgage Applications

Wed., March 2,
7:00 am, et
Important. Refinances are surging on steady rates, while purchases are trending higher.
Federal Reserve Beige Book Wed., March 2,
2:00 pm, et
Important. Price inflation could shift the Fed’s stance on maintaining low interest rates.
Employment Situation
Fri., March 4,
8:30 am, et
Unemployment Rate: 9.1%
Payrolls: 172,000 (Increase)
Very Important. After posting mixed results last month, credit markets will be vetting the data for an employment trend.
Reality Over Perception

It’s easy to lose focus on what is really occurring. A lot of nonsensical speculating and erroneous punditry muddies the waters; therefore, it’s worthwhile to step back to perceive the forest through the trees.

For example, many commentators repeat the notion that housing prices have to reach 2006 levels before the economy will recover. Sure, we would all like to see home prices hold steady and at least appreciate with the rate of inflation. However, we need to remember that the housing market five years ago was an anomaly. Today’s prices are tough for sellers who bought during the market peak, to be sure, but they are good news for today’s buyers, who are helping to clear excess inventory from the market.

Defaults and foreclosures are contributing factors to this inventory overhang, which is why we shouldn’t encourage more inventory. Defaulting on a mortgage does not necessarily reflect an inability to pay. The current rules – as well intended as they may be – have produced a new phenomenon: homeowners who default by choice. Moratoriums actually encourage more people who are able to pay to walk away from their obligations, thus producing more distressed inventory.

On a more positive note, national foreclosures are a problem (and predominantly a sun and sand state problem), not a crisis. Real estate is local, and it is even local within our own locality. It’s not unusual to see markets not even a mile apart display wildly divergent pricing trends. Fortunately, more commentators are catching on to this reality and are tempering the imperative to make every national problem a local one.


Pending homes sales rise

February 24th, 2011
Article from the California Association of Realtors”Newstand”
California pending home sales rise in January

LOS ANGELES (Feb. 23) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today debuted its Pending Home Sales Index and released key distressed property data.

Pending home sales index:

Pending home sales in California increased in January, according to C.A.R.’s Pending Home Sales Index (PHSI)*.  The index was 93.6 in January, rising 13.6 percent from December’s index of 82.4, based on contracts signed in January.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

“Pending sales typically rise in January from a seasonally slow November and December,” said C.A.R. President Beth L. Peerce.  “January’s pending sales should be reflected in higher existing sales activity in February and March and serve as a precursor to the spring home buying season.”

Distressed housing market data:

  • The total share of all distressed property types sold statewide in January was 54 percent, up from 50 percent in December, but down from 56 percent in January 2010.
  • Conventional sales made up the remaining share at 46 percent in January, down from 50 percent in December, but up from 44 percent in January 2010.
  • Of the distressed properties sold statewide, the total share of REO (real estate-owned) sales was 32 percent in January, up from 30 percent in December, but was down from 37 percent in January 2010.
  • The statewide share of short sales increased to 22 percent in January, up from 20 percent in December and up from 19 percent in January 2010.
  • The median price of homes sold in the state differed dramatically depending on the property type, with non-distressed properties selling for much higher prices than short sales and foreclosures.
  • The statewide median price of conventional properties sold in January was $367,150, 38 percent higher than the short sale median price of $265,500 recorded in January, and 85 percent higher than the January REO median price of $198,000.


Share of Distressed Sales to Total Sales

Type of Sale Jan-10 Dec-10 Jan-11
REOs (real estate-owned) 37% 30% 32%
Short Sales 19% 20% 22%
Total Distressed Sales 56% 50% 54%

Distressed Sales by Select Counties
(Percent of total sales)

County/Region Jan-10 Dec-10 Jan-11
CA 56% 50% 54%
San Diego 34% 28% 33%
Marin 37% 34% 43%
Orange 41% 38% 43%
San Luis Obispo 49% 46% 47%
Los Angeles 54% 50% 54%
Mendocino 49% 57% 55%
Napa 68% 54% 59%
Sonoma 54% 55% 61%
Kern 69% 71% 70%
Sacramento 68% 66% 73%
Riverside 78% 67% 73%
San Bernardino 76% 72% 74%
Solano 76% 74% 81%

California homes sales rose in January…..

February 21st, 2011

LOS ANGELES (Feb. 15) – California home sales rose in January, marking three consecutive monthly increases and posting their highest level since May 2010, while the statewide median price declined to its lowest level since June 2009, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

“With lower home prices and rates edging up from their historic lows of late last year, prospective home buyers should consider the opportunities in today’s market,” said C.A.R. President Beth L. Peerce.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 546,420 in January, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide, representing 90 percent of the market.  January’s sales were up 5.1 percent from December’s revised pace of 520,080 and up 2.5 percent from the 532,870 sales pace recorded in January 2010.  It was the first year-over-year sales increase since May 2010.  The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the January pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

The statewide median price of an existing, single-family detached home sold in California was $278,900, down 8.6 percent from a revised $305,020 in December and was down 2.0 percent from the $284,600 median price recorded for January 2010.  The January 2011 median price was the lowest since June 2009, when it was $274,640.

“Although prices typically fall seasonally in January and February of each year, the decline in the median price can primarily be attributed to the aftereffects of last fall’s foreclosure moratoria,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “More distressed properties are coming on to the market, which led to an uptick in sales of distressed properties during January.  We expect this trend to continue as lenders expedite the disposition of these properties,” she said.

Here are other highlights of C.A.R.’s resale housing report for January 2011:

  • The Unsold Inventory Index for existing, single-family detached homes was 6.7 months in January, up from 5.0 months in December 2010.  The index was 5.7 months in January 2010.  The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
  • Thirty-year fixed-mortgage interest rates averaged 4.76 percent during January 2011, compared with 5.03 percent in January 2010, according to Freddie Mac. Adjustable-mortgage interest rates averaged 3.25 percent in January 2011, compared with 4.33 percent in January 2010.
  • The median number of days it took to sell a single-family home was 61.8 days in January 2011, compared with 32.9 days for the same period a year ago.
  • View Unsold Inventory by price point.

Cash Buyers Lift Housing by S.Mitra Lalita

February 11th, 2011

Cash Buyers Lift Housing

Bargain Hunting Boosts Prices in Depressed Cities; Broader Asset Rebound Spreads



Richard Stoker, with wife, Jane, is buying three Miami Beach condos.

Buyers in markets around the U.S. are snapping up homes in all-cash deals, betting that prices are at or near bottom and breathing life into some of the nation’s most battered housing markets.

Cash buyers represented more than half of all transactions in the Miami-Fort Lauderdale area last year, according to an analysis from real-estate portal In the fourth quarter of 2006, they represented just 13% of deals. Meanwhile, downtown Miami prices rose 15% in 2010 from a year earlier, according to the Miami Downtown Development Authority.

WSJ’s Mitra Kalita reports more and more homebuyers are selling investments to pay cash for real estate, sensing a bottom in the housing market.

The percentage of buyers in Phoenix paying cash hit 42% in 2010—more than triple the rate in 2008, according to Raymond James’s equity research division.

Nationally, 28% of sales were all-cash transactions last year, according to the National Association of Realtors. The rate was 14% in October 2008, when the trade group began tracking the measure.

The jump in real-estate purchases made with cash is another sign of the revival of animal spirits in the U.S. economy.

The Dow Jones Industrial Average rose 69.48 points Monday, or 0.6%, to 12161.63, and the Standard & Poor’s 500-stock index rose 8.18 points, or 0.6%, to 1319.05.

Monday’s announcements of $13 billion in acquisitions lifted stocks on hopes of more deals, share buybacks and dividends as companies regain momentum in an improving economy.

The two stock indexes have soared more than 80% since early March 2009.

The Federal Reserve reported that Americans increased their use of credit cards in December for the first time since August 2008, showing that consumers are getting less skittish about opening their wallets. Investors also were soothed Monday by encouraging signs in Egypt, including last weekend’s reopening of banks.

Residential real estate has been slower to bounce back than stocks, but the presence of apparent bargains is luring in newly confident buyers.

Richard Stoker, a retired sales executive, recently plunked down cash for two condominiums in Miami Beach, and plans to close on one more in coming days. He loves the complex’s ocean views, four swimming pools and activities such as yoga and Pilates.

But what also motivated the purchase, said the 73-year-old, was that “the prices were just irresistible. Florida’s been hit pretty hard.” To pay the $1.8 million, $1.2 million and $1 million prices on the condos, Mr. Stoker and his wife, Jane, cashed out of some financial investments and sold a Roy Lichtenstein painting and an Alexander Calder mobile.

Mr. Stoker could have taken out mortgages, but decided to pay cash. “It was a good time to lighten up in the art market and take on real estate at a favorable price,” he said.

The harder a market has been hit, say economists, the higher the percentage of cash deals. Last summer, piano teacher Virginia Hall-Busch told a real-estate agent she met through the Rotary Club to keep her posted on deals on historic houses in Stone Mountain, Ga.

A few days later, Ms. Hall-Busch, 62, got a call about a 1918 bungalow with three bedrooms and one bathroom listed for “short sale,” which in the real-estate world means at a price lower than what’s owed on it. The home had been on the market for $159,000, then dropped to $129,000 and then to $79,900.

“I offered them 50,” she said. “I figured, it wasn’t like I needed a place to live. I can afford to be a little cocky here.”

Ms. Hall-Busch closed in October for $52,500 and began renovations within weeks.

“When you have a bad economy, it’s hard on lots of people,” she said. “But right now if you’ve got the money to put down on a house, long term it’s going to be good thing.”

Some of the cash purchases reflect a tight lending environment, where even people with good credit and ample down payments are sometimes turned away for conventional borrowing.

“The rates are great but the underwriting is brutal,” said Henry Schlangen, an agent with real-estate firm Pacific Union International who buys and sells for clients, mainly in Napa Valley, Calif.

“They hang these people upside down and shake them till they see what falls out of their pockets. So people are buying with cash and maybe they’ll ‘refi’ later.”

Mr. Schlangen, who deals in higher-end properties such as vineyard estates, estimated that 95% of his deals last year were all-cash, up from about half in previous years. “The deals that are consummating, these are buyers who feel they got a great deal,” he said, noting a surge of buyers from China.

Cash buyers can often command 5% to 10% more off the asking price than a potential buyer using a mortgage, said Mohammed Siddiq, a real-estate professional in Fort Lauderdale, Fla. Sellers prefer cash deals since they close more quickly and avoid risks such as a buyer’s job loss or a bank’s changing its mind.

And while many buyers making low-ball offers dig their heels, Mr. Siddiq said he has started to see bidding wars and slightly increasing prices.

Nationally, it isn’t clear whether prices have bottomed. The Case-Shiller index of housing prices in 20 cities showed a steep decline in prices until 2009, when they appeared to bottom and began to trend upward. But in the second half of last year, prices began falling again. A Zillow index, meanwhile, never noted the uptick.

Since mid-October, Canyon Ranch in Miami Beach, the development Mr. Stoker bought into, has sold 35 units, with a third of the buyers from overseas and many others retiring from the Northeast.

The Stokers have a home in Potomac, Md., but spend most of the year in Florida. Mr. Stoker doesn’t plan to rent out any of his new properties, saying he and his wife will live in one with two dogs, his son might live in another and the third will house an older dog and guests.


Shadow Inventory Update S & P

February 10th, 2011

Fourth-Quarter Shadow Inventory Update: Drop In Liquidations, Stable Cure Rates Indicate Increased Foreclosure Timelines

Publication date: 25-Jan-2011 15:17:17 EST

The volume of distressed nonagency residential mortgage properties in the U.S. continues to fall, but at an ever-slowing pace. Standard & Poor’s Ratings Services currently estimates that the principal balance of these distressed homes amounts to about $450 billion, representing nearly one-third of the nonagency residential mortgage-backed securities (RMBS) market currently outstanding. We define this yet-to-be absorbed “shadow inventory” of distressed properties as outstanding properties whose borrowers are (or recently were) 90 days or more delinquent on their mortgage payments, properties currently or recently in foreclosure, or properties that are real estate owned (REO).

At the end of fourth-quarter 2010:

  • We estimate it will take 49 months, or more than four years, to clear the supply of distressed homes on the market in the U.S. as a whole. This is an 11% increase over the previous quarter and a considerable 40% increase from fourth-quarter 2009 for the average time to clear these properties in the U.S.
  • Miami is the only top-20 metropolitan statistical area (MSA) for which our estimate of the time to clear the inventory of distressed properties remained stable since the fourth quarter of 2009.
  • Although the Los Angeles MSA has the largest current overhang balance, the shadow inventory in the New York MSA will take the longest to clear–130 months as of fourth-quarter 2010. That is at least twice as long as it will take in any of the other top 20 MSAs and 2.7 times the average time to clear for the U.S. as a whole. This is primarily due to very low liquidation rates in New York.

Table 1

Shadow Inventory For The Top 20 U.S. Markets
      Months of inventory at end of quarter (No.)    
MSA Orig. bal outstanding (bil. $) Current overhang bal (% of bal. outstanding) 4Q10 3Q10 2Q10 1Q10 4Q09 Course of inventory levels since last quarter (%) 2010 Year-to-date course of inventory levels (%)
Atlanta 25 29.58 49 44 41 40 35 Up 13 Up 41
Boston 20.5 31.53 71 62 60 59 54 Up 14 Up 30
Charlotte 4.8 26.55 65 52 47 48 44 Up 26 Up 49
Chicago 37.2 39.55 59 52 48 45 42 Up 14 Up 41
Cleveland 4.1 34.53 57 47 43 40 36 Up 20 Up 60
Dallas 16.4 21.39 56 46 41 43 41 Up 24 Up 39
Denver 14.3 21.78 38 35 33 32 28 Up 10 Up 36
Detroit 12.1 33.72 31 30 27 25 22 Up 3 Up 43
Las Vegas 22.9 48.80 33 30 28 24 20 Up 9 Up 62
Los Angeles 173.1 31.47 50 45 43 41 36 Up 11 Up 38
Miami 57.8 56.11 60 60 64 64 60 Stable Stable
Minneapolis 13.3 28.43 38 35 32 27 21 Up 10 Up 77
New York 116.7 36.75 130 119 115 107 100 Up 9 Up 31
Phoenix 29.4 36.80 25 23 21 20 17 Up 10 Up 49
Portland 10.5 27.40 51 45 38 34 31 Up 12 Up 65
San Diego 45.8 28.38 39 35 32 31 27 Up 12 Up 43
San Francisco 77 23.26 42 38 34 32 28 Up 11 Up 53
Seattle 24.4 28.03 59 54 48 45 42 Up 10 Up 42
Tampa 15.8 47.96 57 55 55 55 51 Up 3 Up 12
Washington 60 26.47 50 44 40 37 33 Up 13 Up 52
Total U.S. market 1,358.80 33.15 49 44 41 39 35 Up 11 Up 41
MSA–Metropolitan statistical area.

Overall, the value of the Federal Housing Finance Agency (FHFA) home price index indicates that home prices have fallen 20% from their heights in early 2007. Moreover, prices are likely to fall further as the distressed properties comprising the inventory are sold and the backlog clears (see chart 1).

Chart 1

Prior to first-quarter 2008, in which our estimates of months to clear the shadow inventory reached peak levels, the increases in months to clear were primarily attributable to sharp increases in overall distressed property levels that resulted from higher default rates. However, our recent estimates of months to clear have increased primarily because of the deceleration of the distressed property liquidation rate rather than a rise in overall distressed property levels (see chart 2). Our estimate of months to clear for the overall U.S. market has increased by five months since the third quarter.

Chart 2

Liquidation rates are falling in part because of increasing timelines for resolving troubled assets. Relative to the volume of distressed properties overall, REO assets, or those that are bank owned, remain at minimal levels (see chart 3). It seems that 90-plus-day delinquent loans and foreclosed properties are taking longer to become REO, which is lengthening the overall timelines for resolving troubled assets.

Chart 3

Despite the size of the shadow inventory, some of the recent news is good:

  • The overall level of distressed loans continues to decline; and
  • Loan cure success rates have been improving since the second half of 2008, and the recidivism rates for loans cured or modified in fourth-quarter 2009 were significantly lower than for previous periods. Almost 80% of the loans modified or cured for the first time during first-quarter 2008 re-defaulted within the first year of modification, compared with 45%-50% of those modified or cured in fourth-quarter 2009 (see chart 4). Nonetheless, the volume of modified loans (about 17% of the total overhang) is minimal relative to the balance of the remaining loans that are still distressed (see chart 3).

Chart 4

Managing Director, Global Surveillance Analytics: Diane Westerback, New York 212-438-8646;
Primary Credit Analysts: Nancy Reeis, New York (1) 212-438-1643;
  Brian Grow, New York (1) 212-438-1555;
  Jacques Alcabes, New York 212-438-7438;
Contributors: Vidhya Venkatachalam;
CRISIL Global Analytical Centre, an S&P Affiliate, Mumbai
  Madhura Karnik;
CRISIL Global Analytical Centre, an S&P Affiliate, Mumbai
Investor Relations Contacts: Ted Burbage, New York (1) 212-438-2684;
  Ernestine Warner, New York (1) 212-438-2633;
ernestine_warner@standardandpoors.comShadow Inventroy Update

News Flash from Empyrean Funding

February 9th, 2011
News Flash from Empyrean Funding –
Good Afternoon.  I have taken a lot of calls lately about the rapid rise in rates.  Mortgage Bonds have really suffered of late and the losing streak has now been extended to 7 days pushing rates up to levels not seen in over a year!
The recent losses have been magnified as inflation concerns have really heated up. Discussions are also surfacing about 4% growth in GDP for 2011 as quarterly reports are exceeding expectations pushing the stock market to multi – year highs.   While I think the Bond selloff is overblown, I’m not one to try to get in front of a bull market as money continues to come out of bonds and in to stocks. Even a major geo-political event like Egypt hasn’t been able to slow the stock market down as normally a flight to quality would prevail.
For now, I’m playing it safe as i think rates will continue their climb as the stock market pushes forward but I’m not so sure that the increased rates will be sustained in to the 2nd or 3rd quarter of 2011.   As always, I will keep you posted on events that impact mortgage rates!
P. Jacob Yadegar
Empyrean Funding Inc.
Your Mortgage Loan Specialist
Commercial and Residential
310-571-3681 fax
Your referrals are the lifeblood of our business!

2011 Housing market update

February 5th, 2011

2011 housing market will be pancake flat By Les Christie, staff writerJanuary 26, 2011: 12:43 PM ET

NEW YORK (CNNMoney) — Housing markets will remain flat, flat, flat in 2011, according to forecasts from the Mortgage Bankers Association.

The organization, which represents more than 80% of the nation’s mortgage business, predicts that overall home sales will inch down 0.1% during the year. Sales of existing homes will fall 1% to 4.82 million, and new home sale will rise 10% to 358,000.

The MBA attributes the sales decline mostly to slow economic recovery and high unemployment. Until hiring picks up, the market will continue to struggle.

The MBA has also reduced its forecast due to recent credit liability issues affecting banks, according to its chief economist, Jay Brinkmann.

Investors in mortgage backed securities have started demanding that lenders repurchase loans that are in default. The threat of having to repurchase these loans has made banks reluctant to lend, especially, Brinkmann said, to borrowers without the highest qualifications.

“That will hold down originations, on the edges, until the issue is resolved,” he said.

Rising interest rate will also remove some potential home purchasers from the market, although not many. Rates, according to the MBA forecast, will rise very little in 2011, to an average of 5.3% from 4.7% in 2009.

Still, that increase adds more than $36 a month to mortgage payments for every $100,000 borrowed.

All these factors will contribute to a whopping 36% decline in mortgage origination dollar volume in 2011, to $966 billion.

0:00 /3:08Housing prices likely to fall in 2011

The biggest culprit will be a nosedive in mortgage refinancing. During 2010, refis accounted for about 69% of all mortgages issued. In 2011, the MBA expects that to drop to 36%.

With rates at or near historic lows during 2010 — near 4% for the benchmark 30-year fixed-rate loan — most borrowers who could refi higher interest loans have already done so. And with rates set to top 5% this year, the number of borrowers who would benefit from a refi will drop.

With home sales slow and inventories still high, the MBA does not anticipate much movement in home prices. It forecasts the median existing home price to decline $200 in 2011 to $172,800. Prices for new homes will drop 1.3% to $214,600.

The organization does not expect a strong recovery in 2012 either. It anticipates a median home price of $174,900 that year, a 1.2% rise compared with 2011, for existing homes. For new homes, it sees a 1.7% increase to $218,400.

Sales volume believes sales volume will jump 16.4% to more than 6 million homes sold in 2012, but that’s still a far cry from the boom years, when more than 8 million homes were sold at the peak.  To top of page

Mortgage costs rise

February 4th, 2011

Costs for home mortgages rise as Fannie, Freddie hike fees

By Julie Schmit, USA TODAY

The cost of getting a mortgage is rising as higher fees hit more borrowers, including those with stellar credit.

  • Fannie Mae headquarters in Washington.

By Win McNamee, Getty Images file

Fannie Mae headquarters in Washington.

For the first time since 2009, Fannie Mae and Freddie Mac are raising risk fees they charge lenders on loans they buy for resale to investors. The mortgage giants are also adding risk fees to more loans extended to people with stellar credit. To avoid a fee or to get a discount, most borrowers will need FICO scores of 740 or better and down payments of 25% or more. Lenders could absorb the cost, but most are expected to add it to loan costs within days, if they haven’t already, says Cameron Findlay, LendingTree economist. The increases affect most loans with longer than 15-year terms sent to Freddie starting March 1 and to Fannie on April 1.

For example, a buyer of a $200,000 house who has a 700 FICO credit score and 20% down payment will pay $1,600 for the Fannie risk fee vs. $1,200 before. If the borrower’s score is 680, the fee will be $2,800. Borrowers can pay fees upfront, or lenders will price them into interest rates.

While not huge, the new fees are notable in that they’re being added to more loans to borrowers with higher credit scores.

FICOs generally go from 300 to 850; the median is 711. With few exceptions, risk fees hadn’t applied before to borrowers with FICO scores of 740 or above.

Now, they’ll face the smallest fee, 0.25% of the loan amount, if they put down less than 25%. “For the first time, these fees apply to virtually everybody,” says Keith Gumbinger of mortgage research firm For single-family home buyers and standard refinances, the fees will hit 88% of the borrower categories set by Fannie and Freddie, up from 70%, he says.

Freddie and Fannie announced the changes last year. They’re “intended to more accurately reflect changing risks in the housing market,” says Amy Bonitatibus of Fannie Mae. Before the change, loans to borrowers with 740-plus FICO scores paid risk fees on some loans, such as cash-out refinances, says Freddie Mac spokesman Brad German.

Freddie says the increases will have a “nominal effect” on affordability. A 0.25% fee would add less than $10 to the monthly payment on a 5%, 30-year fixed-rate loan for $200,000, it says.

Yet, higher fees will make it harder for some consumers to qualify, Findlay says. For those that do, the fees aren’t likely to scare them off, given today’s low interest rates, he adds.

The latest on home prices

February 4th, 2011


Associated PressWeak demand and tight credit are contributing to the fall in home prices. Above, trying to sell in Atlanta.



Home values are falling at an accelerating rate in many cities across the U.S.

The Wall Street Journal’s latest quarterly survey of housing-market conditions found that prices declined in all of the 28 major metropolitan areas tracked during the fourth quarter when compared to a year earlier.

The U.S. housing market may take five or six more years to recover, TrimTabs Investment Research warned recently. Madeline Schnapp, director of macroeconomic research at TrimTabs, talks to MarketWatch’s Alistair Barr about what that means for the world’s largest economy.

The size of the year-to-year price declines was greater than the previous quarter’s in all but three of the markets, the latest indication that the housing market faces considerable challenges.

Inventory levels, meanwhile, are rising in many markets as the number of unsold homes piles up.

Home values dropped the most in cities that have already been hard-hit by the housing bust, including Miami, Orlando, Atlanta, and Chicago, according to data from real-estate website But price declines also intensified in several markets that so far have escaped the brunt of the downturn, including Seattle and Portland, Ore.

Where Housing Is Headed

[hagerty_quarter]See housing data for 28 major metro areas.

Falling prices are a reflection of weak demand and tight credit conditions that reduce the number of potential buyers.

“There are just not a lot of renters with confidence, with a down payment, with good credit, and without a lot of additional debt,” said John Burns, a homebuilder consultant in Irvine, Calif.

On the inventory front, New York’s Long Island had enough homes on the market at the end of December to last 15 months at the average sales pace. The supply of unsold homes stood at 14 months in Charlotte, N.C., and Nashville, Tenn., and at nearly 13 months for northern New Jersey.

Markets are generally considered balanced when the supply is around six months.

A few markets, including Sacramento and San Diego, are seeing inventories fall to healthier levels as low prices spur interest from first-time buyers and investors, while others, such as Washington, D.C., and Boston, have been cushioned by more stable economies.

“We’re still running at half speed,” said Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm. “Sales are below year-ago levels and inventory is higher than it was a year ago.” Far-flung suburbs continue to fare worse than homes located closer to core metro centers, he says.

Economists say that the biggest risk to the housing market is that job growth doesn’t pick up. “Without improvement in unemployment, confidence stays low. Purchasing stays low,” says Stan Humphries, chief economist at Zillow.

Market conditions could get worse in the months ahead. Millions of homeowners are in some stage of foreclosure or are seriously delinquent on their mortgages, and millions more owe more than their homes are worth.

Real-estate agents are bracing for an uptick in distressed properties hitting the market, including foreclosures being sold by banks and homes sold by owners via a short sale, in which banks agree to a sale for less than the amount owed.

Sales of foreclosed homes are partly responsible for reducing home values because banks tend to reduce prices quickly to sell the homes. Sales of foreclosures slowed in some markets at the end of last year as document-handling problems raised questions about the integrity of their foreclosure processes. But that could change as banks pick up the pace of foreclosures.

Real-estate agents say that the threat of future price declines has led to a months-long standoff between buyers and sellers.

Sellers spurn what they see as low-ball offers, while buyers are demanding discounts because they are “convinced prices will drop further, and they don’t want to feel like suckers six months later,” says Glenn Kelman, chief executive of Redfin Corp., a Seattle-based real-estate brokerage that operates in nine states. The result is that “it’s high noon at the O.K. Corral on every single transaction.”

Agents say that sluggish housing markets are requiring sellers to become much more realistic about setting prices that will spur dealsthe prices they set.

After receiving no offers on a three-bedroom home in Oceanside, Calif., during the first week on the market, real-estate agent Jim Klinge convinced the seller to slash $30,000 from the price, to $420,000.

That drew two full-price offers, and the home sold last week in an all-cash deal. “The drop in price was critical to reignite urgency for buyers,” said Mr. Klinge.

Some sellers have opted to pull their homes from the market rather than lower their prices, either because they believe values will improve or because cutting the price would mean selling for less than the amount owed to the bank.

“I know so many people here who are unwilling landlords,” said Mr. Kelman. “They’re now spending their Friday nights fixing leaky faucets for the tenants they’ve brought into their house.”