HUD ANNOUNCES NEW FHA LOAN LIMITS TO TAKE EFFECT JANUARY 1, 2014

 

The Department of Housing and Urban Development (HUD) announced that it will implement new FHA single-family loan limits on January 1, 2014, as specified by the Housing and Economic Recovery Act of 2008 (HERA).

“As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play,” said FHA Commissioner Carol Galante. “Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved.”

The current standard loan limit for areas where housing costs are relatively low will remain unchanged at $271,050.  The new national-ceiling loan limit for the very highest cost areas will be reduced from $729,750 to $625,500.  Areas are eligible for FHA loan limits above the national standard limit, and up to the national ceiling level, based on median area home prices.

The mortgage loan limits for FHA-insured reverse mortgages will remain unchanged. The FHA reverse-mortgage product, known as the Home Equity Conversion Mortgage (HECM), will continue to have a maximum claim amount of $625,500, with actual loan limits based on property value, borrower age, and current interest rates. Reverse mortgages allow homeowners age 62 and older to age in place by borrowing against the value of their homes without any requirements for monthly payments; no repayment is required as long as a homeowner lives in the home. The reverse mortgage is repaid, with interest, when the homeowner leaves the home.

Weekly Market Review

The economic growth data released this week was mostly stronger than expected, which normally would push mortgage rates higher. After a large increase last week following strong Employment data, however, rates instead recovered some ground and ended the week a little lower.

This week’s economic data continued to demonstrate improvement in the economy. February Retail Sales jumped 1.1%, which was far above expectations. Retail Sales are closely watched because they account for roughly 70% of economic activity. There has been concern that higher payroll taxes and rising gas prices will slow consumer spending, but there have been few signs of this so far. February Industrial Production showed stronger than expected gains as well, and Capacity Utilization rose to the highest level since March 2008. Weekly Jobless Claims dropped sharply, and Continued Claims declined to the lowest level since the middle of 2008. This kind of strong economic growth should support continued improvement in the housing market.

The headline monthly inflation reports reflected large increases due to rising gas prices, but core levels remained well within the Fed’s comfort zone. The February Consumer Price Index (CPI) rose 0.7% from January. By contrast, Core CPI, which excludes food and energy, increased just 0.2%. Fed officials prefer to look at core readings of inflation, which exclude the most volatile components and present a better indication of long-term trends. According to the Fed statement, core inflation levels below 2.5% do not pressure the Fed to scale back its bond purchase program, which has helped keep mortgage rates low. This month, Core CPI was 2.0% higher than one year ago, while the Core Producer Price Index (PPI) was even lower at 1.7%.

The big story next week will be Wednesday’s Fed meeting. Investors will be interested in the Fed’s reaction to the recent strong economic data and whether it will affect monetary policy. The most significant economic data will be the housing reports. Housing Starts will be released on Tuesday, and Existing Home Sales will come out on Thursday. Leading Indicators and Philly Fed will also be released on Thursday. Budget talks also may be an influence on mortgage rates next week, as legislation is needed to fund the federal government past March 27.

Home Sales Increase to Near Two Year Highs

Contracts to purchase previously owned homes increased solidly to a near two-year high in March, suggesting the spring selling season got off to a firmer start and offering hopes of a pickup in housing.

The National Association of Realtors said on Thursday its Pending Home Sales Index, based on contracts signed in March, jumped 4.1 percent to 101.4, the highest level since April 2010.

March’s strong rise in signed contracts pointed to a pick up in home resales after they stumbled in the past two months.

“First quarter sales closings were the highest first quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” said Lawrence Yun, chief NAR economist.

Signed contracts were up 12.8 percent in the 12 months to March.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost just -1 basis point from last Friday to the prior Friday which caused mortgage rates to move sideways.   The highest rates of the week were on Wednesday and the lowest rates of the week were on Monday.  MBS traded in a very narrow range all week as we had a mixed bag of economic news.  Durable Goods Orders, New Home Sales, Initial Jobless Claims and the 1st quarter GDP were all worse than expected and provided some support for bonds. But Consumer Sentiment, Pending Home Sales and Fed action were negative for bonds and kept a cap on any material gains.   The Federal Reserve Open Market Committee (FOMC, aka “The Fed”) left their key interest rate alone and basically made a carbon copy of their last policy statement.  They basically told the market that there was no need for any additional stimulative measures at this time, nor do their projections show that further easing would be needed in the future. However, if the economy did turn from its current positive direction they are prepared to step in.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

Date	Time (ET)	Economic Release	Estimate	Prior
30-Apr	8:30 AM	Personal Income	0.20%	0.20%
30-Apr	8:30 AM	Personal Spending	0.50%	0.80%
30-Apr	8:30 AM	PCE Prices – Core	0.20%	0.10%
30-Apr	9:45 AM	Chicago PMI	60	62.2
1-May	10:00 AM	ISM Index	53	53.4
1-May	10:00 AM	Construction Spending	0.50%	-1.10%
1-May	2:00 PM	Auto Sales	5.4M	5.1M
1-May	2:00 PM	Truck Sales	5.7M	5.7M
2-May	7:00 AM	MBA Mortgage Index	NA	-3.80%
2-May	8:15 AM	ADP Employment Change	170K	209K
2-May	10:00 AM	Factory Orders	-1.80%	1.30%
2-May	10:30 AM	Crude Inventories	NA	3.978M
3-May	7:30 AM	Challenger Job Cuts	NA	-8.80%
3-May	8:30 AM	Initial Claims	375K	388K
3-May	8:30 AM	Continuing Claims	3300K	3315K
3-May	8:30 AM	Productivity-Prel	-0.60%	0.90%
3-May	8:30 AM	Unit Labor Costs	3.00%	2.80%
3-May	10:00 AM	ISM Services	55.5	56
4-May	8:30 AM	Nonfarm Payrolls	162K	120K
4-May	8:30 AM	Nonfarm Private Payrolls	167K	121K
4-May	8:30 AM	Unemployment Rate	8.20%	8.20%
4-May	8:30 AM	Hourly Earnings	0.20%	0.20%
4-May	8:30 AM	Average Workweek	34.5	34.5

 

 

 

Approved HARP 2 Program Lender

I am happy to announce we are an approved lender offering the Home Affordable Refinance Program (HARP), a program aimed to help borrowers lower their interest rate who may be upside down on their mortgage.  The HARP program is a rate/term refinance available to borrowers who have lost equity in their homes and are unable to refinance under existing loan programs.  The first lien being refinanced must be securitized by Fannie Mae or Freddie Mac.  This program is only eligible for the refinance of first liens that closed before June 1, 2009.  You can determine if the mortgage is owned by Fannie Mae by checking the following website http://www.fanniemae.com/loanlookup/  or by Freddie Mac by checking the following website https://ww3.freddiemac.com/corporate/ .Below are some guidelines for this program:

Eligible Properties

• 1-4 unit properties
• Warrantable Condos
• PUD’s
• Owner occupied, second homes, and investment properties

The transaction must benefit you in one of the following ways:

• A reduced principal and interest payment
• A more stable loan product (ARM to a fixed-rate mortgage)
• A reduction in the interest rate
• A reduction in amortization term

Mortgage Insurance

Mortgage insurance will not be required on loans with LTV’s great than 80% if the existing Fannie Mae loan had an original LTV less than or equal to 80% LTV.  In other words, if the previous loan did not need mortgage insurance, the new loan doesn’t need mortgage insurance.

To see if you qualify for this program, please feel free to contact me anytime.

Job Claims, Factory Data Suggest Recovery Picking Up Steam

Government reports on weekly jobless claims, manufacturing activity and inflation offered fresh evidence the U.S. economic recovery is picking up steam.
New U.S. claims for unemployment benefits dropped to a 3 1/2 year low last week, a government report showed on Thursday, suggesting the labor market recovery was gaining speed. Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 366,000, the Labor Department said. That was the lowest level since May 2008.

A gauge of manufacturing in New York State showed growth accelerated in December to its highest level since May as new orders improved, the New York Federal Reserve said in a report on Thursday. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. The gain in December added on to improvement last month that pulled the index out of a five-month contraction.

Wholesale prices rose a modest 0.3 percent last month, as companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.

Most economists say they think inflation has peaked and will slowly decline next year. That’s because prices for oil and many agricultural commodities have fallen from their highs this spring. Slower growth in China and a possible recession in Europe have reduced global demand for energy and other goods.
Lower price growth means consumers will have more buying power, potentially boosting consumer spending. The jump in gas and food prices earlier this year limited the ability of consumers to buy other goods, thereby slowing the economy.

Consumer spending rebounded in the July-September quarter as prices eased. The stronger spending helped increase growth to an annual rate of 2 percent from a slight 0.9 percent in the first half of the year. Economists expect consumer spending to rise again in the last three months of this year and think growth could top 3 percent. Federal Reserve policymakers, like many private economists, predict inflation will fall next year. That would give the central bank more latitude to hold down interest rates and potentially take other steps to stimulate the economy.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +67 basis points from last Friday to the prior Friday which moved mortgage rates lower. Once again, the U.S. saw much better than expected economic data.  Both the N.Y. Empire and Philly Fed manufacturing data saw big increases and the Initial Weekly Jobless Claims fell below 390K.  We also saw very tame results in both the Consumer Price Index and the Producer Price Index which point to reduced inflationary pressure.  MBS rallied in the later part of the week on the heels of to very successful U.S. Treasury auctions. Both the 10 and 30 year auctions saw very strong demand which pushed rates lower.

This was due to a growing concern that the recent agreement out of the European Summit would not be enough to stem the tide in Europe.  This concern caused investors to snap our bonds even though the interest rates and returns are very low. Foreign investors simply want a place to put their funds, knowing that they will get those funds back.

Mortgage Rates for the week of 11/21/2011

New Home Sales Rise – Fastest Pace in Five Months:

New single-family home sales rose in October and the supply of homes on the market fell to its lowest level since April of last year, showing some healing in the housing sector.

The Commerce Department reported on Monday that sales edged up 1.3 percent to a seasonally adjusted 307,000-unit annual rate, which was the fastest pace in five months.

The supply of new homes in the market would last 6.3 months at the current pace of sales. This report follows the trend set by last week’s gain of 1.3% for Existing Home Sales. Both market segments continue to perform better than analysts’ expectations and show some much needed strength in the housing market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost only -4 basis points from last Friday to the prior Friday which moved mortgage rates sideways. This was the second straight week where mortgage rates remained in a very narrow range. We had very successful 2, 5 and 7 year Treasury auctions as foreign investors snapped up our debt.

The U.S economy continued to receive positive economic news as Initial Jobless Claims came in below 400K for the third week in a row and Consumer Sentiment had its highest reading in the last several months.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date	Time	Economic Release
28-Nov	10:00	New Home Sales
28-Nov	10:00	New Home Sales (MoM)
29-Nov	9:00	S&P/Case-Shiller Home Price Indices (YoY)
29-Nov	10:00	Consumer Confidence
29-Nov	10:00	Housing Price Index (MoM)
30-Nov	9:00	Nonfarm Productivity
30-Nov	7:00	MBA Mortgage Applications
30-Nov	8:15	ADP Employment Change
30-Nov	8:30	Unit Labor Costs
30-Nov	9:45	Chicago Purchasing Managers’ Index
30-Nov	10:00	Pending Home Sales (MoM)
30-Nov	10:30	EIA Crude Oil Stocks change
30-Nov	14:00	Fed’s Beige Book
1-Dec	8:30	Continuing Jobless Claims
1-Dec	8:30	Initial Jobless Claims
1-Dec	10:00	Construction Spending (MoM)
1-Dec	10:00	ISM Manufacturing
1-Dec	10:00	ISM Prices Paid
1-Dec		Total Vehicle Sales
2-Dec	8:30	Nonfarm Payrolls
2-Dec	8:30	Unemployment Rate
2-Dec	8:30	Average Hourly Earnings (MoM)
2-Dec	8:30	Average Hourly Earnings (YoY)
2-Dec	8:30	Average Weekly Hours

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.