Weekly Commentary on Loans & Mortgages

Weekly Commentary - November 12th, 2008

Thumbnail Sketch: Interest rates bounce like jumping beans, without any trend other than continuing volatility. The reason? Most likely, the investment community is not persuaded that the economy’s continuing problems will do anything but continue, bail-out programs notwithstanding.

Next year, meanwhile, remains a guessing game. The Office of Federal Housing Enterprise Oversight (OFHEO) recently added some areas to its list of expensive-housing markets, meaning they will qualify for the largest “expanded jumbo” loans. At the same time, though, some areas were demoted.

The important change to remain aware of is that the areas qualifying for this year’s $729,850 maximum “expanded jumbo” and FHA loans will slip back to a $625,500 maximum on January 1, 2009. Buyers wanting to take advantage of the higher ceiling should do so as soon as possible, before it falls.

In spite of buyers’ needs to act on the maximum ceiling for mortgages, the mortgage applications index to the left showed a marked decline in the week ending October 31 (before the presidential election, and therefore based less on politics than on economic conditions). Taken together, all applications for mortgages were down by a stunning 20.3%, with refis plummeting 28.3%. To pour salt in the wound, consider the fact that tough lending requirements mean a good percentage of these applications will end up on the “cutting room floor.”

This suggests, quite plainly, that the lending process has not received much of a boost from the attempted bail-outs. Lending is still a very strict process; few investors are interested in putting their money into the resulting loans and mortgage-backed investments; and the financial giants themselves appear to be more mindful at this point of engineering favorable mergers with ailing financial institutions (given the new tax advantage in doing so) than of re-entering the lending game, though there are some who are paying laudable attention to the continuing needs of distressed borrowers.

One suspects that we will see far stricter treatment by the federal government in the near future, with stronger programs designed to help those facing foreclosure and stronger requirements on lenders to make mortgages from the infusions of taxpayer-funded capital they are receiving. If it is correct that there are many reasons for the real estate market to continue improving—as we believe there are, though they are fragile—then such purposeful programs may result in (1) favorable responses in the investment markets and (2) a faster strengthening of the real estate market. It may be good to prepare for these possible eventualities.

Buying a foreclosure (REO), lender or bank owned property is the way to go. FEW lenders will do 100% fnancing anymore. ZERO down loans are a thing of the past, but there is ONE lender still allowing it. They are a private lender lending at stellar rates as long as you can prove you can afford the monthly payment. For more information, go to 100% financing. Zero down mortgages.

You may also contact Laura Boyajian with DPR Realty, LLC directly at 602-400-0008 and visit her award-winning website at www.HistoricCentralPhoenix.com.


November 12, 2008

KEY INDICATORS

Gold $731.20/ounce [down]
Crude Oil (Brent) $55.77/brl
[down]
U.S. Dollar to…
Euro .7968 [up]
Japanese Yen 97.76 [down]
6-mo Treasury Bill Yield 0.91%
10-yr Treasury Note Yield 3.74%
[6-mo down 16 bps, 10-yr down 16 bps]
11th Dist Cost of Funds: 2.769%
30-yr Fixed-rate Mortgage 6.74%
15-yr Fixed-rate Mortgage 6.38%
1-yr ARM 6.26%
[HSH averages rates: 30-yr down 39 bps, 15-yr down 32 bps; 1-yr ARM up 8 bps]

Mortgage Bankers Association Mortgage Applications Index
week ending 10/31
Overall
379.9 (down 20.3%; up 16.8%
the week prior)
Purchase Money Loans
260.9 (down 13.9%; up 8.5%
the week prior)
Refinancing Loans
1075.4 (down 27.8%; up 28.5%
the week prior)

Weekly Jobless Claims 11/1 481,000 first computation –
485,000 prior week (with 6,000 upward revision)

Employment Report Oct
Payrolls down 240,000 (tenth consecutive monthly decline) – unemployment rate jumped to 6.5%

Consumer Credit Sept
Up 3.2% - revolving up 1.2% - non-revolving up 4.5%