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Freddie Mac: Borrowers Take Advantage of Low Rates, Choose Fixed-Rate Mortgages
By Michael Kraus on May 14, 2012

Refinancing borrowers are overwhelmingly choosing fixed-rate mortgages, according to a press release from Freddie Mac this morning. In the first quarter of 2012, more than 95% of those refinancing opted for fixed-rate mortgages over adjustable-rate ones.

Frank Nothaft, Freddie Mac chief economist commented:

“Fixed mortgage rates averaged 3.92 percent for 30-year loans and 3.19 percent for 15-year product during the first quarter in Freddie Mac’s Primary Mortgage Market Survey®, well below long-term averages. The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.1 percent during the first quarter of 2012. It’s no wonder we continue to see strong refinance activity into fixed-rate loans.”

Record low mortgage rates are also causing an increasing number of people to refinance into shorter-term mortgages. Thirty-one percent of those refinancing in the first quarter replaced 30-year mortgages with 15- or 20-year mortgages.

Freddie Mac’s Primary Mortgage Market Survey hit record lows last week, with the average rate on 30-year fixed-rate mortgages falling to 3.83%. It looks as though we could see another record low this week as fears of an economic catastrophe in Europe and an apparently slowing U.S. economy depress interest rates.

Category: Mortgage Rates
Mortgage Rates: Records Made to Be Broken
By David Coster on May 14, 2012

Today is likely to see new record lows for mortgage rates as concerns about Europe and China create a negative market for stocks and a positive market for bonds, including mortgage-backed securities. With no US economic data scheduled for release today, the negative vibes from outside the country are likely to dominate the markets today.

The situation in Greece continues to be quite uncertain. With the inability Greek President Karolis Popoulias to form a government, it is increasingly likely that new elections will be necessary and that Greek will ultimately leave the Eurozone currency block. The impact of such a development is largely unknown as no country has ever left a currency behind in such a manner. Leaders of other European nations are meeting this week to discuss the potential of a Greek exit and what can be done to soften the blow on other nations and European banks.

Overnight China reported much slower industrial growth than expected. In fact the growth reported was the slowest in 2 years suggesting that the Chinese economy is still contracting despite recent signs to the contrary. In response to the data the Chinese government reduced the reserves that Chinese banks must hold in hopes of stimulating lending and growth. The silver-lining for the US economy may be a decline in some crucial commodity prices such as oil, gas and copper.

While today is likely to see ne record low mortgage rates, the balance of the week’s rates will be determined by US economic data. Tomorrow’s retail sales report is crucial as it may confirm strong consumer sentiment in the country thanks to lower gas prices. Also tomorrow is the release of the Consumer Price Index the best measure of inflation at the consumer level. Wednesday delivers industrial production figures and the minutes of last month’s Federal Reserve Open Market Committee meeting. As always Thursday includes jobless claims data, but this week it will also include the Philadelphia Fed Index (manufacturing) and the leading indicators report.

There has never been a better time to lock-in a mortgage rate for purchase or refinance!

Category: Compare Mortgage Rates, Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance
Bill Introduced in Senate to End Too-Big-To-Fail
1 By Michael Kraus on May 11, 2012
Senator Sherrod Brown of Ohio has introduced a bill that would end too-big-to-fail. The bill, entitled that Safe, Accountable, Fair, & Efficient Banking Act of 2012 would take the following steps in order to achieve this goal:
- Imposes a strict 10 percent cap on any bank’s share of the total amount of deposits of all insured banks in the U.S. This would eliminate loopholes in the existing statutory cap.
- Imposes a strict 10 percent cap on the liabilities that any one financial company can take on, relative to the U.S. financial sector. Like the deposit concentration limit, this closes loopholes in existing law.
- Imposes a limit on the non-deposit liabilities (including off-balance-sheet (OBS) exposure) of a bank holding company of 2 percent of GDP. No bank holding company could exceed $1.3 trillion.
- Imposes a limit on the non-deposit liabilities (including OBS exposure) of any non-bank financial institution of 3 percent of GDP. No non-bank financial company could grow larger than $436 billion.
- Codifies a 10 percent leverage limit (including OBS exposure) for large bank holding companies and selected nonbank financial institutions into law.
One of the primary impacts of this legislation would be to break up or reduce the size of our four largest banks – Wells Fargo, JP Morgan, Citi, and BofA. I believe this would be a very positive step in the right direction.

Calls for the end of too-big-to-fail have grown louder in recent months. Most notably, the Dallas Fed recently produced an awesome report written by Harvey Rosenblum titled ‘Choosing the Road to Prosperity – Why We Must End Too Big to Fail – Now‘. The report does a great job of establishing how TBTF banks were “a primary culprit in magnifying the financial crisis” and “continue to play an important role in prolonging our economic malaise.” It’s well-written and easy to read, and I highly recommend reading it.

This bill is essentially the same as a bill that Brown proposed in 2010. That bill only received 33 votes. According to a New York Times article by Simon Johnson, this bill seems to have more support from both sides of the aisle. I hope it passes. Short of re-instating a strong Glass-Steagall Act, I think this is one of the better reforms we could undertake.
Category: Mortgage Rates
Current Mortgage Rates for Friday, May 11, 2012
By Michael Kraus on May 11, 2012

Yesterday we saw mortgage rates rise a little bit, following more than a week of rallying. Rates are more or less flat this morning, and I don’t anticipate there will be any significant changes over the course of today.

We had a few pieces of economic data reported this morning. Consumer sentiment hit the highest levels since early 2008 in May, although frankly I have no idea why this is the case. If anything most economic indicators have become weaker over the past two months or so. Gasoline prices are still high, as is unemployment. On a historical basis, consumer sentiment is still pretty weak, however. The Producer Price Index fell by 0.2% in March, which was pretty much in line with expectations. Core PPI rose by 0.2%. This would seem to indicate that inflation is more or less under control. Neither of these numbers are really enough to move the needle in one direction or the other.

At this point I think we are all tired of hearing about Europe (at least I am). Not a lot has changed since yesterday, suffice it to say that the region is a disaster. We may get details of a Spanish bank bailout today, but we might not. Even if we do, I don’t expect that there would be much influence on mortgage rates (or the markets generally). A Spanish bank bailout isn’t going to fix any of the fundamental issues that face the region.

There is a ton of economic data due out next week, and we should get a better idea of whether or not the U.S. economy is continuing to slow. In the meantime, rates will probably sit around current levels. Enjoy the weekend!

Total Mortgage is committed to getting you the lowest possible rate. To get information on our rates and products, call us today at 877-868-2503, or fill out the form to the right.

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Category: Mortgage Rates
Producer Price Drop to Pave Way for Mortgage Rate Drop?
By David Coster on May 11, 2012

The April 2012 Producer Price Index from the US Bureau of Labor Statistics indicated a drop in prices of goods used as inputs into the production of goods or services. The PPI is one of two primary measures of inflation in the US economy. The other the Consumer Price Index or CPI will be released next week. This report’s drop is being viewed as a potentially positive development for mortgage rates. Why?

The lack of inflation in the US economy is viewed by many analysts as providing the US Federal Reserve with room to provide additional stimulus if the economy continues to show signs of stalling or slowing. A growing, strong economy typically produces increasing inflation and higher rates. With little inflation present now, the view is that the risks of additional stimulus igniting inflation to an unacceptable level are reduced.

Category: Compare Mortgage Rates, Current Mortgage Rates, General, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance, Stimulus
Major Trading Blunder Helps Mortgage Rates
By David Coster on May 11, 2012

It is rare that news from a single company has an impact on mortgage rates. Today, however, JP Morgan Chase’s $2 billion trading mistake is sending banking stocks and the stock market generally lower today. A very positive Producer Price Index, which could be interpreted either positively or negatively, is also working to support low mortgage rates today.

Huge Bank Error

A failed hedging strategy in a JP Morgan Chase trading group has shocked market participants today. The company is widely considered to be the best, most efficient traders in the business. The unit that made the mistake had previously expected to earn $200 million for the quarter, yet now is forecasting a multi-billion dollar loss. The error is causing calls for even tighter regulation of bank trading activities, which could impact the manner that they treat their mortgage operations in the future.

Prices Drop Thanks to Fuel Costs

The Producer Price Index (PPI), which measures the costs of inputs in the production process showed a significant decline in April. Lower energy costs dramatically lowered producers’ costs of manufacturing goods and performing services. Generally, a low PPI is an indication that inflation is under control, which can also be a sign of weakness in the economy (growing economies produce inflation). However, since this month’s PPI decline was due to a drop in fuel costs most analysts consider this a positive sign for the economy as businesses may grow profits and could use them to expand production and their workforces. Some analysts also believe that lower inflation may give the Federal Reserve more room to pursue additional stimulus should the US economy show further signs of slowing.

Overall the mortgage rates on purchase and refinanced home mortgages have seen a drop to all-time low levels. The best execution rate on a 30 year fixed rate mortgage has fallen to near 3.8% according to surveys.

Next Week’s Mortgage Rate Moving Events

Next week a great deal of new economic data will be available to guide the markets. Most important next week are Tuesday’s retail sales report and Consumer Price Index and Wednesday’s industrial production reports. Of course Thursday’s jobless claims report will also be an important report.

Category: Compare Mortgage Rates, Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance
Proposed CFPB Mortgage Rules Could Have Unintended Consequences
1 By Michael Kraus on May 10, 2012

I’m not one of those people that rails against regulation for the sake of it. Generally speaking, I believe that if we learned anything from the financial crisis, it should be that lack of regulation can be more detrimental than over-regulation. One thing that constantly galls me is the knee-jerk anti-regulation response any time the government seeks to regulate an industry. All this said, I think new proposed rules for mortgage origination from the CFPB could have a deleterious effect on consumers.

We’ve known for a little while that the CFPB is going to be reviewing (and likely changing) loan officer compensation rules. Today we received a little clarity on what some of the proposed changes are likely to be. From the New York Times:

“The Consumer Financial Protection Bureau said it planned to propose tighter mortgage lending regulations that would limit the ability of banks and mortgage brokers to charge certain transaction fees, possibly ending one of the most abusive costs levied on consumers when they buy a house.”

The proposed rules are part of an effort to satisfy certain Dodd-Frank requirements designed to curtail mortgage origination abuses that were rampant during the bubble years. While I believe these regulations are well-intention-ed, I think we could see some unintentional consequences from the changes. Specifically, the change that requires mortgage brokers to only be allowed to charge a flat origination fee regardless of loan size.

Here’s the problem: smaller or independent mortgage brokers (as compared to those working at large banks who frequently make a salary from the bank in addition to fees) depend upon these fees to earn a living. So while these proposed rules are designed to create more competition and more transparency in mortgage lending, they may actually create a less competitive environment where smaller players are forced out of the industry.

These are just proposed rules, and not expected to be finalized until early 2013. It does not seem that the public comment period has opened, or if it has, I cannot seem to find that link on the CFPB’s website. If anyone can find one, feel free to post a link in the comments section below.

Category: Mortgage Rates
Current Mortgage Rates for Thursday, May 10, 2012
By Michael Kraus on May 10, 2012

Mortgage rates are up a little bit this morning, moving just above the record low levels set earlier this week. I do not anticipate that they will continue to rise, and will most likely end the day close to flat. I suspect this morning’s stock rally may just be traders buying the dip, because nothing particularly positive happened this morning.

The most important piece of economic data this morning was the weekly initial jobless claims report. Weekly claims ticked down by 1,000, and the more important 4-week moving average was down by over 5,000. This was just about in line with expectations, and really doesn’t move the needle too much in either direction. I don’t think this represents any sort of real firming of the U.S. job market.

As has been the case for the last couple of weeks, European problems loom over everything. Industrial production reports show broad decreases across many European states, with Germany really being the exception. There are ongoing discussions about a Spanish bank bailout, and of course Greece is an utter mess. Now it seems as though everybody is predicting a “Grexit” (Greek exit from the Eurozone). Of course, this writing has been on the wall for some time. The next Greek election will be on June 17th, and it is going to be contentious. I’m certainly not a expert in Greek politics, but I think the Greek people are likely going to want to throw out of office the politicians that agreed to the austerity policies that have essentially sent Greece into a depression. The potential for some form of disorderly default is definitely in play, and who knows what the ramifications of that would be. What I’m driving at here is that there is chaos in Europe that could have a huge impact on our markets in the near future.

Tomorrow the Producer Price Index and Consumer Sentiment will be reported, but the initial projections don’t show either of these numbers being particularly strong. I think rates will probably sit around current levels barring any big surprises.

Total Mortgage is committed to getting you the lowest possible rate. To get information on our rates and products, call us today at 877-868-2503, or fill out the form to the right.

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Category: Mortgage Rates
MERS Critic Christopher Peterson Appointed to CFPB
By Michael Kraus on May 10, 2012

I do not like the Mortgage Electronic Registration System. I have written about it extensively over the past couple of years, and don’t really want to recap it all here. If you’re totally unaware of it, MERS is a system owned by banks designed to make mortgage securitization easier. It also allowed those involved in mortgage transactions to avoid billions of dollars in county filing fees that were associated with real estate transactions. It is at the center of a slew of foreclosure-related lawsuits, and may be responsible for clouding the title of millions of homes (Harper’s wrote an excellent article about it called “Clouded Title – The Gross Illegality of MERS” that I would love to link to, but cannot because Harper’s appears to be stuck in the 1970s).

Anyway, the point of this post is not to bash MERS further, but to point out that Professor Christopher L. Peterson (S.J. Quinney College of Law at the University of Utah), a big-time critic of MERS, was appointed to the CFPB yesterday, which I became aware of due to an article on Housing Wire yesterday. The Professor has testified in Congress about foreclosures and MERS, and has written a series of academic articles on the subject. In his congressional testimony, Peterson said that “MERS is a deceptive and anti-democratic institution,” and that MERS’ “corporate structure is so unorthodox as to be considered fraudulent.” I think it is pretty clear on where he stands on this subject.

So what does all this mean? That’s really an excellent question. On the one hand, it gives me a grain of optimism that the CFPB is indeed serious about going after some of the entities that helped contribute to the economic mess that we find ourselves in. On the other hand, we have seen this administration attempt to totally whitewash an enormous fraud in the recent mortgage settlement, so I don’t know how much leash the CFPB is going to have to go after MERS.

The only thing I really feel confident saying is that I feel that it is unlikely that Peterson, an academic, backs off his well-established positions after joining the government agency (unlike the presumably more politically motivated NY AG Eric Schneiderman, who talked a big game about pursuing mortgage fraud right up until he capitulated and joined the administration’s efforts). I have no idea if he (or the agency) has any plans to pursue MERS-related issues. Still, I like this appointment.

Category: Mortgage Rates
Does Increase in US Trade Gap Signal Higher Mortgage Rates?
By David Coster on May 10, 2012

US Import and Export data released today by the US Census Bureau were disapointing to many analysts and traders. The huge gap between imports and exports continues and even grew. However, both measures indicated records for a single-month. Mortgage rates have ticked higher on this news. Why?

There may be a silver-lining in the data that is positive for the US economy. An increase in imports and in exports, irrespective of the gap between the two, is a sign of increasing demand. Moreover, the increase in exports may actually help stimulate job growth, which would, in turn stimulate even more demand. Sometimes the real news lies deeper than than headline. Such is the case today.

Category: Compare Mortgage Rates, Current Mortgage Rates, General, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance