REPOST FROM Sam Arrietta GEM MORTGAGE 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! http://www.cnbc.com/id/30824407 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 http://www.azcentral.com/arizonarepublic/business/ articles/2009/05/20/20090520biz-downpayment0520.html 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.