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Hey all, This is going to be a little long. However, it will enlighten you!

For those of you wondering what just happened to mortgage pricing, I will
summarize what we saw today. We had a pricing move of over 2 points in 90
minutes. That is over .50% in rate to the borrower. OUCH! Investors are frozen
in place and have all moved to live pricing for those that offer this. And when in
live price mode, the price is raised substantially from a posted price until a clear
market direction is determined. For those of you that do not know this, our
mortgage pricing is dependent upon how the treasury auctions are received. If
there are no buyers for the auction, the only way to attract bidders is to raise the
price. So apparently, not enough people showed up to buy the five year auction
today, including the Chinese and our federal government. The support level fell
through and rates kept going higher, and the rest is history as they say. This is
overdone and it should relax, but volatility is going to be the issue anytime large
auctions occur or other major news items become the catalyst to market
movement. International tensions may come into play, given the N, Korea issue
 So in news right
gettingsummary: now, but it did not have an effect our pricing today.
 No bidders show up for large 5 year treasury auction. Large 7 year auctions
scheduled for tomorrow. Traders unsure if anyone will bid for this auction.
Federal government and Chinese do not show up to buy auction today. Traders
panic and price goes out of sight. Hopefully the G men will show up and buy
MBS and bring some relaxation to rates.

Call this number to find out where the market is at any given time: 800-388-0991
type in the code 1609122

Market Color: GM failed to get 90% of its bondholders to agree to swap their
bonds for stock ahead of the government imposed June 1st deadline to
reorganize. GM will most likely have to declare bankruptcy by Monday, which has
been the ongoing threat. According to 74% of economists in a National
Association for Business Economics survey, the US economy will begin to
expand in the 3rd quarter. If accurate, this may be the start of higher rates. (just
like today) Right now, the futures market is pricing in an 84% chance that the Fed
keeps rates somewhere between 0% and .25% through September 23rd, 2009.
Currently, the Ten Year yield is at 3.52% (3.42% yesterday). 30 year fixed rate
mortgages opened up favorable and are now sliding off.
Moody, one of the three credit rating agencies is reporting this morning that the
U.S. government’s Aaa credit rating is stable “even with a significant
deterioration” in the nation’s debt position. The U.S.’s credit rating is supported
by “a diverse and resilient economy, strong government institutions, high per
capita income, and a resilient economy,” Now remember this was the same
agency that said the sub prime mortgage backed bonds were also Aaa rated.
So, there might be just a smidgen of skepticism by other world investors. But
they are affirming our rating anyway. Let us hope so, because the cost of credit
is dependent upon it.

One of the market commentators summarized some analysts position about the
direction of interest rates: Most analysts feel that the only reason that
mortgage interest rates have remained as low as they have is because the
government continues to buy mortgage backed securities. And until the
private sector starts to buy larger volumes, the situation remains uncertain
at best - just look at the jumbo loan market which continues to suffer from
the lack of investors. (And yes, I know that there are buyers of jumbo loans
out there, but the historical spread between conforming and jumbo has
been about .25-.5%, and now it is over 1.0%. Banks, who are the owners of
jumbo product, can charge more because these loans must remain on their
books thus eating up their capital. If, going forward, the economy is going
to rebound - and most expect it will - look for rates to continue higher.(just
like we saw today)
Market News: Most market areas are reporting resale's activity is quite strong.
Given the purchase transactions. We are expecting another foreclosure wave in
all markets as most have been deferred by federal and state governments and 3
and 5 year ARM resets as well as option ARM delinquencies add to the amount
of homes for sale. We expect rates to remain somewhat low, but as the debt
begins to increase, pressure for buyers of our debt increases as well. Over a
month ago an economist said the 10 year would be in the 3.25 to 3.5% ranges
and we are now at 3.52% and still climbing.
New rules for the credit card industry that are designed to protect consumers from
surprise charges, such as over-the-limit fees and costs for paying a bill by phone,
are part of a bill President Barack Obama is set to sign into law. Obama plans to
sign today an overhaul of credit card regulations that he blames in part for the
economic downturn. Despite opposition from financial companies, the bill cleared
Congress with broad support. What you can expect is higher costs being passed
onto people who pay their credit card bills off monthly. Link attached suggests
that we can expect increased annual fees, curtailment of cash back and reward
cards and some credit card companies returning to immediately charging interest
on cards the moment you post a charge. You got to love this quote from the
article. “It will be a different business,” said Edward L. Yingling, the chief
executive of the American Bankers Association, which has been lobbying
Congress for more lenient legislation on behalf of the nation's biggest
banks. “Those that manage their credit well will in some degree subsidize
those that have credit problems.” I think this is the same thing that is
occurring with mortgages as well. Hmmmm!
Now, I have been receiving several phone calls in regards to the news about the
ongoing saga of the $8,000 tax credit, get a bridge loan, for the down payment
that was announced then said it is not available. Still floundering about, but not
dead. HUD spokesman Brian Sullivan insists an agency program will be
launched to allow first-time home buyers to use the $8,000 federal tax credit
toward their down payments on FHA-insured mortgages via "bridge loans." It
remains to be seen, however, when the loans will be made available. There was
talk that the initiative had been tabled, but Sullivan says lenders in the Phoenix
area "misinterpreted" the recent withdrawal of a Mortgagee Letter detailing the
program which had been sent out. So for now, the $8,000 tax credit is to be
received on next years income return. We will have to see if they figure this one
out. Here is the news article. I have also read some other articles that state that
the grand country of California will not be allowed for this bridge loan
What is the scoop on the DU refinance plus program? We have tried to help
several clients that fit the parameters. However, the rates seem to be higher for
the higher loan to values. And in some cases private mortgage insurance is
required, when a current owner is not paying any at all. So with this new program,
it has not made sense for anyone to refinance. Some clients have chosen to
modify their loans instead. And getting better results. We will keep you informed
once we have experienced more favorable results.
And for some review of guidelines. All conventional loans, purchase or refinance,
require two appraisals. You or your borrower will pay for two appraisals. Minimum
down payment for a conventional loan is 10%. The problem that most borrowers
are having is that the private mortgage insurance companies require a minimum
score of 720-700. so if they do not have those scores then they are better off
doing a FHA loan. if a borrower is purchasing another home and going to rent out
their existing home with no prior rental experience. They will be dinged for the full
payment to qualify on the existing mortgage and then the new home. They also
will be required to have 6 months reserves for that payment and two months
reserves for the new home. That is also a requirement for investment property.
FHA loans require only one appraisal, unless it is a cash out refinance up to 85%
loan to value. Then it is required to have a second appraisal. Any other FHA
refinance will require an appraisal review. This cost a lot less than a second
appraisal. If you or anyone you know has an existing FHA loan, have them call
me. we have a streamline FHA refinance program that does not require an
appraisal or income qualifications. The requirements are, on time payment history
on existing mortgage and a minimum credit score of 620.

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