Fixed Rates Unchanged Adjustable Rates Slightly Lower Tuesday, September 11, 2007

McLEAN, VA - Freddie Mac released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 6.46 percent with an average 0.5 point for the week ending September 6, 2007, up from last week when it averaged 6.45 percent. Last year at this time, the 30-year FRM averaged 6.47 percent. The 15-year FRM this week averaged 6.15 percent with an average 0.5 point, up from last week when it averaged 6.12 percent. A year ago, the 15-year FRM averaged 6.16 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.32 percent this week, with an average 0.6 point, down from last week when it averaged 6.35 percent. A year ago, the 5-year ARM averaged 6.14 percent. One-year Treasury-indexed ARMs averaged 5.74 percent this week with an average 0.6 point, down from last week when it averaged 5.84 percent. At this time last year, the 1-year ARM averaged 5.63 percent. “Over the past week, long-term mortgage rates were largely unchanged as the most recent economic news showed smaller increases than had been expected,” said Frank Nothaft, Freddie Mac vice president and chief economist. “For instance, core personal consumption expenditure price index rose at an annualized rate of only 1.3 percent in the second quarter and July’s consumer spending data showed a 1.9 percent gain in the core price index for the twelve months ending in July. “In other news, the most recent Conventional Mortgage Home Price Index (CMHPI) release issued by Freddie Mac reported that on average, national house prices grew by 0.1 percent in the second quarter, the slowest quarterly house price growth since the fourth quarter of 1994. For the past 12 months, house prices appreciated 3.3 percent, the slowest rate in 10 years.”

The Mortgage Market This Week

The Mortgage Market This Week
Monday, September 10, 2007 - The Bond Rate Monitor

Last week, when all the smoke cleared rates were pushed .125% to .25% lower as we predicted. This week's economic calendar is much lighter than last week, so will rates continue to drift lower or will they stall?

Last week, rates were pushed lower by the weak Jobs Report. The loss of 4,000 jobs was in sharp contrast to the anticipated creation of 110,000 jobs. This negative news almost ensured the Fed will drop rates at their next meeting on September 18th. The only question remains - Will the Fed cut rates by 25 or 50 bps?

The week ahead is shaping up much like last week, rates are likely to move sideways until Friday's Retail Sales Report. A number significantly below the expected would likely push rates down further.

The bottom line: Expect rates to move sideways in anticipation of Friday's Retail Sales report

Home Prices Post Record Annual Decline

NEW YORK, NY - Data through June released by Standard & Poor’s for its S&P/Case-Shiller^® Home Price Indices, a leading measure of U.S. home prices, shows continued negative annual returns in the U.S. National Home Price Index, the 10-City Composite and the 20-City Composite, as well as 15 of the 20 metro area indices.

“The pullback in the U.S. residential real estate market is showing no signs of slowing down,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”

During this cycle, Boston was the first metro area to report negative year-over-year returns, back in April 2006. In June 2007, Boston showed an improvement in its annual rate of decline from the value reported in May, –3.9% versus –4.3% reported in May. Boston has shown improvement since the beginning of the year, where its annual growth rate measured –5.5%. More data however, is needed to determine whether Boston, whose growth rate turned negative before other metro areas, is truly the first metro area to turn around.

The table below summarizes the results for June 2007. Click image to enlarge.

Pending Home Sales Index Falls Largely on Mortgage Tightening

WASHINGTON, D.C.- Pending home sales, a forward-looking indicator, shows existing-home sales are likely to decline in coming months as mortgage disruptions work their way through the housing market, according to the National Association of Realtors®. The Pending Home Sales Index, based on contracts signed in July, fell 12.2 percent to a reading of 89.9 in July from the June index of 102.4, and was 16.1 percent lower than July 2006 when it stood at 107.1. Lawrence Yun, NAR senior economist, said abnormal factors are clouding the horizon. “It’s difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment,” he said. “These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat. “If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,” Yun said. The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Annual changes in the index are more closely related to actual market performance than are month-to-month comparisons. As the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales. The PHSI in the South declined 6.6 percent in July to 104.0 and was 15.2 percent below a year ago. In the Northeast, the index fell 12.2 percent from June to 84.3 and is 10.0 percent lower than July 2006. The index in the Midwest dropped 13.1 percent in July to 80.4 and was 15.8 percent below a year ago. In the West, the index fell 20.8 percent in July to 82.3 and was 21.8 percent below July 2006.

Liquidity Crisis Increases Demand for Credit Repair

LOS ANGELES, CA - As the nation experiences the effects of the recent mortgage liquidity crisis and lenders raise their minimum required credit scores, many borrowers are scrambling to qualify for any mortgage loan—when in weeks past a wide variety of loan programs would have been available to them. As a result, demand for credit restoration services are on the rise.

“Just in the past 60 days, public interest in credit repair has risen 33 percent,” says Edward Jamison, founder of Jamison Law Group and CreditCRM.com. “That’s because credit restoration is the fastest way to increase the chances of getting a higher quality mortgage loan, and for some, it’s the fastest way to qualify for a loan at all.”

Of the factors impacting the mortgage underwriting decision, the credit score is the only variable that can be adjusted in time to impact the final determination. Unlike the property’s value and the borrower’s income and employment status, credit scores can be increased with a few simple steps and in as little as 60 to 90 days.

“Many borrowers erroneously believe that there’s nothing they can do to affect an underwriting decision in a timely manner,” explains Jamison. “This assumption is simply not true. Borrowers have much more control over the approval process than they may believe. There are several very quick action steps borrowers may take that can positively impact their credit scores. However, these actions are often overlooked because most borrowers don’t understand how the credit scoring process works. These steps may be as simple as asking for higher credit limits on credit cards, and making sure that maximum credit limits on each credit line are reported. Simple actions, much like these, have the ability to make a huge difference in the final score.”

According to Jamison, credit restoration is the legal and legitimate process of eliminating derogatory credit information from an individual’s credit report, and can result in an increased credit score in a matter of weeks. Borrowers of all levels can utilize credit restoration to increase their credit scores and impact the underwriting decision to better their chances of not only getting a loan approval, but also securing higher quality loans.

“In today’s volatile market, it makes sense for borrowers to ensure that they have obtained the highest possible credit scores available to them,” adds Jamison.

Survey Finds 1/3 of Broker Loans Failed to Close Last Month

WASHINGTON, DC – One-third of broker-originated purchase money closings were canceled last month, as lenders shied away from riskier borrowers, a new survey says.

The survey of 1,700 mortgage brokers conducted by Campbell Communications comes as numerous lenders that catered to subprime and Alt-A borrowers shuttered up operations.

Thomas Popik, who designed the survey, said three years ago a survey of real estate agents found that only 4 percent of transactions failed to close on average, according to published reports from the Associated Press.

Additionally, the survey found 57 percent of adjustable-rate borrowers with resetting interest rates that were working with a mortgage broker were unable to refinance. Brokers also reported that one-in-five subprime funding commitments were not met by wholesalers.

Countrywide to Cut Up to 12,000 Jobs

CALABASAS, CA - Countrywide Financial Corp., the largest U.S. mortgage lender, said on Friday it would cut up to 12,000 jobs, the biggest job reduction by a single company to date that stems from the deepening U.S. housing crisis.

According to the company, it expects to eliminate up to 20 percent of its work force over the next three months, for a loss of 10,000 to 12,000 jobs. It said the cuts were needed because mortgage volume may decline 25 percent in 2008 from this year's level.

"We are taking decisive action to ensure that Countrywide continues to be well-positioned for further success," said Angelo Mozilo, Chairman and Chief Executive Officer. "As we carry out our plan, the Company's overarching focus is exactly where it has always been: to remain an industry leader in the U.S. residential lending business, to deliver value and world-class service to our customers and business partners, to enhance shareholder value, and to provide career opportunities for our people."

The company’s decision to make the current job cuts were announced less than 20 days after it announced that it would cut an undisclosed amount of employees from its Full Spectrum unit.

"Each employee at Countrywide is considered an important member of the Countrywide family," said David Sambol, President and Chief Operating Officer. "While workforce reductions are therefore always very difficult, these decisions are being made with the utmost attention and sensitivity to the impact they will have on our Company and our people."

However, on a positive note the company said, it would continue its profitable market share growth in areas of opportunity as they presented