Archive for November, 2007
For mortgage rate watchers, this is a busy week. Attention is focused on three key reports: tomorrow’s Producer Price Index (PPI), Thursday’s Consumer Price Index (CPI), and October retail sales.
The PPI measures inflation at the wholesale level, while the CPI reads inflation at the retail/consumer level. Both indices have an overall rate and a core rate that excludes volatile food and energy components. The bond market and mortgage rates will react to the difference between the expectation and the figures that actually materialize. The market is looking for an .2% increase in the overall and the core rates. If the rate is higher than that, mortgage rates will rise. A lower figure will suggest little threat of inflation and open the door for further Fed rate cuts.
If October retail sales disappoint, it will add to the dreary forecasts for Christmas sales and consumer spending. Since consumer spending is said to make up 2/3s of the economy, any sign that the consumer is running out of gas worries the market. Meanwhile, the benchmark 10 yr Treasury note yield fell to 4.266%, its lowest level in two years. Mortgage rates are most closely associated with this particular Treasure security.
Stay tuned…..
read comments (0)CountrywideHomeLoanSucks
I ran across this website the other day and got a big laugh. But it turns out there are a lot of people who are not laughing about Countrywide.
www.countrywidehomeloansucks.com
is a website where you can buy merchandise, join a class action law suit, post your personal Countrywide nightmare, or read the horror stories of other consumers.
Now, there are lots of reasons to dislike this company. For many years we refused to do business with them, since it was Anthony Mozilo’s expressed goal to put mortgage brokers out of business.
Later when forced to acknowledge that mortgage brokers held a lot of market share, he struck a more conciliatory pose and asked for our business through the wholesale channel. After opening relations, his reps vigorously promoted sub-prime loans as well as the 5–year Fixed Pay Option Arm—certainly the most worst loan program ever devised.
Sacramento Mortgage Rate Update: Rates Improve
Mortgage rates improved slightly this week, dropping to a national average of 6.24% with .4 points, according the Freddie Mac’s weekly survey.
Fed Chairman Ben Bernanke indicated in his testimony to Congress that the risks of inflation and a slowing economy are now in balance. However, there seemed to be an underlying concern about the economy that was underscored by Friday’s Consumer sentiment report. The reading fell below expectations to 75.0, the lowest point in 12 years.
While this pattern is often associated with a recession, it is usually accompanied by job losses. Unemployment remains lows and worker productivity rose this week. The November sentiment appeared to be largely the product of high gas prices and declining real estate values.
Interest rate forecast: mostly sunny with a chance of showers if inflation rears its head.
Real Estate forecast: I wouldn’t invest in rentals just yet and I certainly wouldn’t try to flip property, but now is a great time to buy a home in Sacramento. Two years into this decline, prices are attractive, choices abundant, competition non-existent, and sellers motivated. Sure, values may decline further before they turn the corner, but once we hit bottom buyers lose some of that advantage.
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Mortgage Reform, U.S. House Bill 3915, & YSP
This morning, the U.S. House of Representatives Financial Services Committee voted on H.R.3915, The Mortgage Reform and Anti-Predatory Lending Act of 2007.
While legislators attempt to erect a defense shield against mortgage lending abuse, this current law strikes wide of the target and is sure to inflict collateral damage upon the very group it seeks to protect.
YSP
One of the primary thrusts of the Act is to outlaw Yield Spread Premium (YSP). This is the mechanism by which consumers are able to obtain zero point and no cost loans. Borrowers elect a slightly higher interest rate in exchange for eliminating points and other closing costs. YSP is a rebate (the Premiumpaid by the lender to the broker for the higher interest rate (the Yield )on the loan. The amount of that premium is determined by difference or theSpread between current interest rates and the rate elected by the consumer. Mortgage brokers must disclose YSP.
It’s a simple trade-off and a valuable tool for consumers. Without YSP, buyers with limited cash may have to postpone purchasing a home. Existing homeowners might be unable to refinance to a better loan if they had to pay all their fees and points out of pocket.
I do a lot of loans for retiring folks relocating from the San Francisco Bay Area to Sacramento. Frequently, their plan is to sell the old homes once they are settled in and pay off the mortgage completely. It makes infinitely more sense to accept a higher interest rate over the short term to save thousands in costs. The math ain’t that hard.