The Mortgage Market Advisory™ The Week of January 11, 2010 Provided by Amy Arey Mortgage pricing ended the week slightly better by about .300 and kept the 30-year conforming fixed mortgage rate around 5.00%, The Employment report was weaker than expected last week and the unemployment rate remained at unchanged at 10.0%. The release of the Fed minutes was no surprise- they are committed to keep rates low “for an extended period of time.” The minutes also revealed they care contemplating the continuation or extension of the MBS purchase program which has helped keep mortgage rates low through 2009. If they do not, the market will have to organically absorb $15-$20 billion per month on it’s own- likely to increase rates due to supply/demand dynamics.

The Week Ahead: While this week will bring us a few data points that could move markets, it will mostly be about the Treasury Note auctions. We have 3yr, 10yr, and 30yr Note auctions this week (Tues-Thurs) that will be very important. If these auctions go well- we could see mortgage pricing improve slightly more this week, but if these auctions do not go well, we could see mortgage rates back on the path to going higher.

On Thursday we will get a look at how retail sales are going as well as the weekly jobless claims. On Friday we will get a look at how consumers are feeling and a view of how inflation is (or is not) working it’s way through the economy with the CPI report. Monday: No important data. We do have a 10-year inflation indexed note auction at 1:00. Tuesday: We have the 3-year note auction at 1:00 and this could set the tone for the rest of the week, although the markets will be watching the 10-yr and 30-yr much closer on Wed and Thurs. Wednesday: We get the very important 10-yr note auction at 1:00 and the Fed releases the Beige Book at 2:00. Thursday: Retail Sales – we get a look at the retail sales report and traders will be watching closely. We also get the Weekly jobless claims report at 8:30 and the 30-yr note auction at 1:00. Friday: We get a view of inflation at the consumer level with the CPI report at 8:30 as well as a look at how consumers feel with the Univ. of Michigan Consumer Sentiment report at 9:55.Mortgage pricing was a little volatile last week, but ended the week unchanged. However, mortgage rates moved up by .60 for the month of December, or down by about 200 bps in price/rebate. We are still hovering around 5.00% for a Conv. 30-Year fixed mortgage. It appears low mortgage rates will be with us at least until the Fed’s MBS purchase program comes to an end in March 2010 as scheduled.

 There are many speculating that the Fed may find a way to extend this program in some form to continue to support housing as it appears to be just getting legs under it. Low market rates in general will be with us for “an extended period of time” as committed by the Fed and Ben Bernanke. While there are discussions around possible exit strategies, none of the members seem to feel that any immediate or urgent action must be taken anytime soon relative to market rates. If the data continues to support an economic recovery, we expect mortgage rates to wander in a range from about 5.00% to 5.25% on the Conv. 30-year fixed, but to be choppy over the next 60 days.

Mortgage Market Advisory Disclaimer This is only our opinion and cannot be guaranteed to be in the best interest of any or all parties. This service is provided for informational purposes only and is not intended for trading purposes. None of the information provided constitutes a solicitation, offer, or recommendation by NHLA to buy or sell any security, or to provide legal, professional, tax, accounting, or investment advice. Every lender’s price desk has their own strategies and reactions to market movements. Our information is simply based on market movements and does not predict or report potential pricing adjustments by particular lenders.

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The inflation data will be the most important release this week. The recent inflation reports were mixed. The PCE price index will be carefully watched for any signs of inflationary pressures. The bond market will close early Thursday in advance of the Christmas holiday Friday. The shortened trading week may result in some market volatility coupled with thin trading conditions likely.

The Federal Reserve left interest rates unchanged last week as expected. The remarks were mixed and caused some mortgage market uncertainty. The Fed statement indicated, “subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.” The Fed’s challenge will be stepping out of the mortgage market without causing mortgage interest rates to spike uncontrollably higher. The housing sector is a vital component of the economy. The last thing the Fed needs is for mortgage interest rates to escalate causing the housing sector to suffer. While the most recent data shows positive housing trends across most of the nation, analysts attribute the positive movements to artificially low mortgage interest rates tied to the Fed buying of mortgage bonds. How this will all play out is still very uncertain.

More updates later!

I often get asked “what is really closing in commercial”. Sometimes I tell them generalities like SBA Loans, but I want to list some of our actual recent closings so you can see what really IS closing. These are just a sample of the loans Commercial Capital Ltd. has closed recently. These loans have been chosen for their diversity and to show you a range of the programs that are getting funded right now.

According to U.S. Attorney for the Eastern District of Michigan, Terrence Berg, in 2007 James Whitaker’s mortgage holder, Deutsche Bank, began foreclosure proceedings on a $970,000 mortgage Whitaker had obtained on the residence he occupied. However, he held title to the property in his sister-in-law’s name.

When the bank began eviction proceedings to take possession of the property, Whitaker had a bankruptcy petition preparer file several bankruptcy petitions in his sister-in-law’s name to halt eviction action. By doing this, the value of the property substantially decreased.

Whitaker, a former Orchard Lake, Mich., resident, pleaded guilty before U.S. District Judge Bernard A. Friedman to filing fraudulent bankruptcy petitions to defraud his mortgage lender and forestall foreclosure on his mortgage and take possession of his property. Sentencing for Mr. Whitaker is scheduled for Nov. 17, 2009.

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What events during your high school years left a lasting impression on you? Do you have moments that stand out in your mind? Recently I have had cause to remember one particular event from many years ago, that made a lasting impression on me.

My teenage passion

As a teenager I was involved in a 4-H horse club. My horse was my passion and I spent every moment I could steal with my horse. My friends and I performed in local 4-H horse shows and every summer anxiously anticipated spending a week at the Upper Peninsula State Fair. There we would bunk with 4-H kids from all over the U.P., we would groom and care for our horses daily and participate in various exhibitions. It was the highlight of my summers. Then sometime in my junior year, our club leaders gave us devastating news, the horse clubs were going to be eliminated from the fair to make room for more dairy cattle. No horses? How could this be? What could we do to stop this? My leaders response was, “you could write your Congressman.”

I still am not sure if my leader was serious when the remark was made but I took it very seriously. I went home from my 4-H meeting and did just that. I made my best argument for keeping the horse program and then sent my concerns off to my Michigan legislatures. Weeks passed, then one day, as I sat in algebra dreaming of anything but the figures on the blackboard, the high school secretary’s voice came over the intercom. I was being summoned to the principals office. Now let me clarify, this was not a regular occurrence. On the contrary, I had never been inside his office, so I was quite shook up by the order.

When I got to the principals office someone else was there as well, dressed in a suit and tie, there stood my Congressman. My Congressman! He had come to my high school to discuss the letter I had written. I then realized the power of every citizen and our individual ability to influence our government. I still believe in that power.

I want to encourage you, as a reader of this blog, to use your power to influence your US Congressmen. The House of Representatives passed HR 3288 late last week by a vote of 255-168. This bill includes three provisions for reverse mortgages. One of these provisions will lower the proceeds that seniors receive from the program. The reverse mortgage program has helped innumerable seniors stay in their home and live a more comfortable retirement. This program is in jeopardy. I urge you to contact your Congressman and urge him not to change the program. Let him or her know that you care about our seniors and their well being. Let Congress know that seniors cannot afford to be stripped of any more benefits. A reverse mortgage is a powerful financial tool that can make positive changes in the lives of seniors. It can enable seniors to age in place when they lack liquid assets to cover daily expenses. Congress is still contemplating huge reductions in medicare and medicaid. This is just one more lifeline that could be taken away. Please let your Congressman know that you support the reverse mortgage program and don’t want the benefits reduced. Don’t our seniors deserve better?

Write a letter or make a call to your Congressmen. You never know, maybe he or she will reach back out to you. Don’t be surprised, it can happen, I know, it happened to me!

P.S. The horse program was not eliminated at the Upper Peninsula State Fair, so you see, sometimes our government does work.