Posts Tagged ‘Lehi mortgage’

Markets: Flat.  No change.  Rates hover at 5% and a bit below.  15-year loans are at 4.25% and thereabouts, 5/1 ARMS are 4% or a shade lower.

Analysis: A piac nem tud melyik iranyba menni, ugyhogy semmisem tortenik.  If I write the same thing I’ve been writing for the past month, it gets old, even for me, so I wrote it in Hungarian this time.  Prizes for the first person to email me the sentence above in English.

There’s nothing going on, people.  Or, at least, nothing that is big enough to make the markets move.  Breathlessly we wait for the Fed to stop buying mortgage-backed securities, and loud are the forecasts of rate-based doom, and yet…nothing.  Still, nothing.

Clarification: There is a lot of confusion about the homebuyer tax credits, so let me herewith set the record straight.  YOU DO NOT HAVE TO CLOSE ON YOUR PURCHASE BY APRIL 30.  The house merely has to be under contract by April 30.  It can then close any time before JUNE 30.  “Under contract” means there is an agreement, signed by both the seller and the buyer, outlining the sale price and the terms of the sale.  As long as you have that in place by April 30, you still qualify for the tax credit, and that is either the first-time homebuyer credit or the long-time homeowner credit, either one.

Cj

Markets: We’re off 12bps, which is a bit less than what we gained yesterday.  Rates hang out right at 5% (fractionally more on some programs, fractionally less on others).  SOmething interesting to note: the 15-year loans are operating at their biggest spread in a decade – the 15 year fixed loan is currently selling at 4.25% and better, depending on your credit and equity position.

Analysis: We talked about this last time (and here as well, in greater depth), there just isn’t any good reason to believe that much is going to change here.  I got some push-back on my contention that politics is driving the market at the moment, but I’m sticking to my guns here.  Even if Obama is indifferent to a second term (and I’m not convinced that he is, all protestations to the contrary), the driver on this stuff is Congress, more than the President.  The retirement of Evan Bayh of Indiana is a black, black sail for the Democrats.  Having spent 25 years in the political arena, I’m quite sure that most of the sitting Congressmen want to keep their jobs, and that usually means tossing bread to the plebs as they go to the polls.  That argues against fiscal restraint and higher interest rates.  I’m just saying.

NEXT year, well, that’s a different story.  And please let me emphasize, I’m no prophet.  I’m just telling you what I think, and freely acknowledge that I’m often wrong.  But I’m never slow on the trigger, so right or wrong, you’ll have the benefit of someone watching what’s happening in the markets while you do the real work out there.

Action: The tax credit expires on April 30 if you do not have a home under contract.  Call your Realtor and get cracking.  The FOMC stops buying mortgage-backed securities in 42 days.  That’s going to have SOME impact on rates, and it isn’t likely to be good (although, as argued, I don’t think it will be very big).  Move expeditiously.  That is all.

Cj

Markets: We’re trading in a very narrow channel this week, and no news is good enough or bad enough to get us out of it.  Our benchmark 4.5% FNMA 30-year bond is off 3bps, meaning it’s flat for all intents and purposes, exactly as it has been for the past week.  We successfully weathered another $12 billion in bond auctions this week without a blip.  This is remarkable, and ought to be telling smart people something.  More on that below.

Analysis: I want to point everyone at a really interesting article from the Wall Street Journal about what’s coming in interest rates on mortgages when the Fed stops buying mortgage-backed securities.  For a long time now, conventional wisdom has held that the only think keeping interest rates this low (5% as of this writing, and a fraction lower in some instances) is the presence of the Fed, doling out huge chunks of money to keep the mortgage market stable.

But look, people, this can’t be right.  Market players aren’t stupid.  They can see the same things everyone else can, and if they really thought that the true market level – minus the Fed – was 6%, we’d be seeing a move in that direction right now.  Instead, what we see is…nothing.  And that’s not because the Fed is buying everything in sight, either.  The markets just don’t believe that there’s going to be a big rate move on April 1.  I don’t believe it, either.

Action: That means that the true market mover right now is the new home purchase market, because the $8000 tax credit for first-time homebuyers and the $6500 credit for long-time owners will expire on schedule.  Houses must be under contract by April 30, and the close deadline is June 30.  If you’re in this market, now is the time to move.  Short sales take an average of 40 days to get completed, which leaves us about a month of extra window in case something goes kablooie.  Which in this market, folks, it does with regularity.

Been saying it for a while.  Do not wait.

Markets: A slow burn downward has reversed itself, and the market has now gained ground four of the past five days.  This keeps rates firmly at 5%, and even lower than that on some programs for those with great credit.

Analysis: It just doesn’t appear that there is any steam in the bond selloff.  The latest rounds of 3-, 5-, and 10-year bonds were met with extremely hot demand, especially from foreign buyers.  China may be scaling back its purchases, but other nations are picking up the slack.  Bonds are still hot.  Nobody is sold on the recovery yet.  Even the looming threat of the cessation of Fed purchases is not having any impact on bond prices.

Action: the phrase “smoke ‘em if you got ‘em” comes to mind.  Everyone knows that with the historical average for interest rates at almost 3 points above our current levels, this can’t last.  There’s no way that 5% can be the new normal, and rates are going to rise.  When, nobody knows (we’re already a year and a half past my prediction, in the interest of full disclosure).  But the incentives to purchase will not be extended again, and rates simply can’t get better than this – we’ve had this range now since Thanksgiving of ’08.  You wait, you’ll regret it.

Thanks to so many of you that supported our seventh annual Twelfth Night Charity Ball last week.  It was a great event, and we think we’ll be supporting both Heart-2-Home and Noah’s for the forseeable future.  Look for us next year a bit later in the year.  We’re looking at March instead of January, but more details on that forthcoming.

I don’t vent.  I don’t blow up.  I think that kind of negative emotion is counterproductive and I fight it.  Still, I’m mortal.  Sue me.

The enemy of growth is uncertainty.

I am a gardener some of the year, in my spare time, and I have about a hundred houseplants, and I’ve learned a few things from this activity that bear directly on the current economy.

Plants grow well in certain conditions. They like there to be a certain amount of light, a certain amount of heat, and a certain amount of water. Not an average over a week, mind you, but a definite amount every day. No water for six days, then 3 gallons all at once will kill most plants. Light uninterrupted for four days, then three days of darkness is not really conducive to good growth. An average temperature of 65 is great, as long at it doesn’t consist of half the time at 30 and the other half at 100. Plants like it predictable. A little water today, a little more tomorrow. 14 hours of light today, 14 hours tomorrow. Temperatures in the 60-70 range all the time.

Oh, they’ll still grow if things are a little sketchy. They can take a few days of rain, then a few days of bright sunshine and heat. If the soil’s not right, or the water is the wrong ph, or there are rocks to negotiate, they can handle that, but they won’t grow as well as they might otherwise have, and if two or three of those things combine, the failure rate goes up pretty fast. Bugs, incidentally, love to attack weak plants. They tend to leave stronger ones alone. What that means is that once you start down the path to weakening your plants, you can expect other things to start going wrong and make things worse.

Let’s apply this to the current economy, shall we?

Corporations like things predictable. If they know what tax policy is going to be, they can concentrate reserves and personnel on development and growth. If tax policy is changing every ten minutes, a lot of those resources are channeled into figuring out whether today’s successful business model is going to be illegal in a year, or perhaps next week. It’s distracting and it’s destructive.

In the mortgage industry, which is my industry, we’ve spent the last year trying to figure out what all the new rules and regulations mean for us, how much extra time we will have to devote to managing the increased paperwork, and whether whole lines of business are even viable. Some of us – the best of us – will survive this, too, as we’ve survived everything else so far. But NONE of us will do better work for the client or ourselves than we would have if we’d been left alone. ALL of us, and this goes for the Top 100 all the way down to the green kid that just got his license, are spending huge amounts of time learning to navigate government regulations instead of trying to do a good job for the borrower.

The argument is fairly made that if we had spent our time doing a good job for the consumer in the first place, we wouldn’t have all this government regulation, so it’s our own fault. But this argument is stupid.

First off, it’s not the broker on the street that created the 100% no-down 520 FICO no-doc loan. All the brokers did was sell the product. Was it a mistake to sell it? I guess. But you know the part of page 3 of the 1003 that asks all the invasive questions about race and sex and national origin? That’s not there because brokers needed more boxes to check. It’s there because the government will sue you and put you in jail if you don’t make loans to people, especially low-income people and MOST especially people that routinely fall into the category of higher-risk borrower. A broker could decide not to sell any of those products at all, but this is sort of like deciding not to sell iPhones because you think that it’s a fad and people will eventually figure out that you can’t replace the battery. It’s stupid to do this. Businesses exist to make money, and failing to sell what people are buying, just because you don’t like it yourself, is a great way to end up working at WalMart. No offense, Mr. Walton. This is even more especially true when the Department of Housing and Urban Development can put you in federal prison for not doing so.

Second, the vast majority of the problem in the real-estate industry has been caused not by bad loans, but by bad houses. Not that they’re poorly constructed, but that they were overpriced. Some of that is the fault of the lending institutions, which created loans that roughly doubled the available pool of buyers, naturally (and somewhat artificially) boosting home values. At least as much of it is the fault of the government, pushing said lenders to create loans for people that traditionally default in huge numbers. And a lot of the fault has to be carried by the Fed, leaving interest rates at ridiculously low levels for a long time, again reducing the cost of buying and ramping up demand. None of that stuff has anything to do with the loan officer on the street.

And lastly, there’s the elephant in the room, which is that none of the government regulations will do one blessed thing to make any of the above less likely in the future. None. Not HVCC, a lawsuit about a lender-owned AMC that specifically permits lender owned AMCs to continue. Not HERA, a gigantic waste of time and money that pushed closings back a week or more on most loans. Not RESPA, The Sequel, which hilariously creates a new, “simpler”, 3-page Good Faith Estimate that is so iron-bound that no lender with any reputation will issue one until the borrower signs a notarized contract to do business with that lender and nobody else. Not one of these byzantine regulations – oh, and let’s include the national database of loan originators, which now requires a fingerprint card, as if there were any evidence whatever that such provisions have reduced any kind of fraud in any industry – will do anything whatever to reduce the incidence of evil people duping stupid ones.

But it will make it so that the good loan officers are unable to distinguish themselves from the rest of the herd. It will make it more expensive, more complicated, and more difficult to continue to work in this industry, which will chop down the number of players and – consult any economics textbook – raise the prices for the borrowers.

Our plant will continue to grow. We will make it through the drought, through the hail, and force our roots through the rocky ground. We will survive. But we will never produce the fruit that we could have, and no one else will, either. And tens of thousands of our compatriots will be out there competing for the six available jobs, having been killed off not by incompetence or laziness, but by the twin terrors of the Great Recession and Uncle Sam.  Worst of all, we can’t even plan for what we’re going to do next year, because we never know from one minute to the next what new dragon will rear its head.  Not a market dragon, hard as those are to deal with, but the mighty dragon of government, trying to “help”, and changing the temperature and the landscape because it makes re-election a better bet.

Happy New Year.