The Million Dollar Question: Have Home Prices Bottomed?

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Jun 30, 2011 9:18AM

Risk Retention–Back to the Drawing Board

Originally published in the July 2011 issue of Asset Securitization Report The regulatory agencies charged with implementing the risk-retention provision of the Dodd-Frank Act (DFA) recently announced that the comment period for their initial proposal will be extended to Aug. 1. As reported in the press, the delay resulted from widespread opposition to the definition of qualified residential mortgages (QRMs) as outlined in the March proposal. More fundamentally, it reflects the difficult tradeoffs…

Jun 29, 2011 2:44PM

FEEDBACK NEEDED: Simplifying Mortgage Disclosures

Transparency is critical and today much of the paperwork associated with a mortgage is far too confusing. Recent government regulations have made credit products, especially mortgages, even more opaque with mandated disclosures in obscure legal language produced in small type. As a result, an extra burden has been imposed on lenders while providing no additional benefit to consumers. Elizabeth Warren, Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau, told…

Micro News

5:06 PM:

The Day Ahead: ISM, Consumer Sentiment, Auto Sales

4:12 PM:

Geithner to Consider Leaving Treasury After Debt Debate

4:00 PM:

BestEx Teetering Again. Path of Least Resistance

3:04 PM:

Ex-TBW Chief Sentenced to 30 Years for $3BN Fraud

2:56 PM:

US Caught China Buying More Treasuries Than Disclosed

2:33 PM:

INFOGRAPHIC: QE2 in Pictures

10:38 AM:

Greek Austerity Plan Clears Final Vote. Default Avoided for Now

9:28 AM:

JPMorgan Strikes Deal on Mortgage CDO Case

Around the Web

Video News

Post QE2 Strategy

Debt Deal Grounds Senate Vacation Plans

The Job Creation Challenge

Today’s Comments

Larry Gray

“Always a little disconcerting to go into a holiday weekend with wondering if there is anything one should lock. I always operated on the idea if a client…”

Michael Molina

“In a time when we are supposedly reforming the GFE/TIL to make it easier to understand, I fail to see how Option #2 – which provides the least amount of…”

Donald Banka

“Option #1 the best, and easiest for the consumer to understand. Option #2 more closely resembles the HUD, but the HUD format always takes a lot of explanation…”

Today’s Q&A

Anonymous

“Is real estate tax Paid “in advance” or for the past…”

Anonymous

“I have excellent credit rating/score/history but low income,…”

Anonymous

“I stopped paying my mortgage for 9 months but it has been a year…”

Today’s Forum Discussions

Brent Harless

“We are about to buy a freddie mac foreclosure property and have to go FHA for our loan because of DTI issues (must use only wifes income, I and self employed…”

dnatheman

“Hello. I am trying to refinance my home with an adjustable rate mortgage and take some cash out. Some lenders tell me this loan is illegal by Texas State…”

[MBS Commentary] – MBS RECAP: 6/30/2011

Secondary Marketing Managers:
If you are interested in gaining access to the most accurate real-time back-month TBA indications from Thomson Reuters and Tradeweb.  LEARN MORE

MBS RECAP: 6/30/2011

Posted to: MBS Commentary
Thursday, June 30, 2011 4:15 PM

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MBSonMND: MBS RECAP
Open MBSonMND Dashboard
FNMA 3.5
95-18 : -0-13
FNMA 4.0
99-29 : -0-10
FNMA 4.5
103-13 : -0-04
FNMA 5.0
106-06 : -0-02
GNMA 3.5
96-28 : -0-14
GNMA 4.0
101-26 : -0-06
GNMA 4.5
105-16 : -0-02
GNMA 5.0
108-12 : +0-05
FHLMC 3.5
95-13 : -0-12
FHLMC 4.0
99-27 : -0-09
FHLMC 4.5
103-08 : -0-05
FHLMC 5.0
106-01 : -0-02
Pricing as of 4:00 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard.
3:54PM  :  ALERT: Stocks up. MBS Down. Negative Reprices Not Impossible.

MBS prices have technically moved enough to alert you to the possibility of reprices for the worse. Volume and selling pressure for bonds picked up a bit heading into the official 3pm close–not alarming here at month end. But after the volume died down, sellers were left in control and 10 year yields added a few more bps while Fannie Mae 4.0 MBS fell 7/32nds. We should qualify, it REALLY depends on whether a lender already repriced, by how much, and from how conservative of an initial sheet (among other factors), but 7/32nds is technically enough of a movement to justify an alert. Whether that turns out to be the case here and now may be largely dependent on the particular lender. Overall, we’re not seeing current movements important to the big picture, but they could be important enough for a few scattered reprices.
3:34PM  :  New Mortgage Rate Watch Post

3:04PM  :  Ex-TBW Chief Sentenced to 30 Years for $3BN Fraud

(Bloomberg) – Lee Farkas, the ex-chairman of Taylor, Bean & Whitaker Mortgage Corp., was sentenced to 30 years in prison for leading a $3 billion fraud involving fake mortgage assets. Farkas, who has been in custody since his conviction in April of 14 counts of conspiracy and bank, wire and securities fraud, was also ordered by U.S. District Judge Leonie Brinkema in Alexandria, Virginia, to forfeit more than $38 million. “I actually don’t believe you accept responsibility for these criminal acts,” Brinkema said today as she handed down the sentence. “This was a very serious series of crimes.” Prosecutors said Farkas, 58, orchestrated one of the largest and longest-running bank frauds in the U.S., which duped some of the country’s largest financial institutions, targeted the federal bank bailout program and contributed to the failures of Taylor Bean and Montgomery, Alabama-based Colonial Bank. Farkas, who was wearing a green jumpsuit with the word “prisoner” stenciled on the back, appeared thinner and his hair darker than during his two-week trial. He read from a statement saying he had to “take risks” because he couldn’t accept the failure of the company. “I believe that everyone at TBW and Colonial Bank were acting together in good faith to help each other,” Farkas said.
2:56PM  :  US Caught China Buying More Treasuries Than Disclosed

The rules of U.S. Treasury auctionsmay not sound like the stuff of highstakesdiplomacy. But a little-noticed2009 change in how Washington sells itsdebt sheds new light on America’s delicatebalancing act with its biggest creditor,China.When the U.S. Treasury Departmentrevamped its rules for participating ingovernment bond auctions two years ago,officials said they were simply modernizingoutdated procedures.The real reason for the change, a Reutersinvestigation has found, was more serious:The Treasury had concluded that Chinawas buying much more in U.S. governmentdebt than was being disclosed, potentiallyin violation of auction rules, and it wantedto bring those purchases into the open – allwithout ruffling feathers in Beijing.Treasury officials then worked to keepthe reason for the auction-rule changequiet, with the acting assistant Treasurysecretary for financial markets instructingsubordinates to not mention any specificcreditor’s role in the matter, according toan email seen by Reuters. Inquiries madeat the time by the main trade organizationfor Treasury dealers elicited the explanationthat the change was a “technicalmodernization,” according to a documentseen by Reuters. There was no mention ofChina.
2:33PM  :  INFOGRAPHIC: QE2 in Pictures

(WSJ REAL TIME ECONOMICS) – Matt Phillips and Stephen Grocer put together this graphical look back at what the Federal Reserve’s bond-buying program did and didn’t accomplish. The Federal Reserve’s second round of so-called quantitative easing comes to an end today, after $600 billion in Treasury-bond purchases over the past eight months. Chairman Ben Bernanke’s stated goals: lower mortgage rates to boost housing, reduce corporate bond rates to encourage investment and raise stock prices to increase confidence and spending. Markets responded soon after the program was first hinted at by Mr. Bernanke in an Aug. 27 speech in Jackson Hole, Wyo. But the end goals proved more elusive. CHECK OUT THE INFOGRAPHIC: http://blogs.wsj.com/economics/2011/06/30/a-qe2-retrospective-in-pictures/
12:45PM  :  ALERT: MBS Significantly Improved From Lows. Positive Reprices?

While it might not be good for the level of "alert nausea," MBS have improved enough that we could be entering the first stages a time frame where lenders are considering repricing for the better. The actual price improvements in MBS are already a sufficient distance from the lows of the day to justify a reprice for the better, but the questions is more appropriately how much stability will be required and for what length of time before lender’s comfort levels allow it. To reiterate, in the best cases, it could be soon. In the the worst cases, not at all. Either way, lender pricing is widely stratified at the moment, leaving room for anything between small "token" reprices and something more in line with the actual MBS gains. To quantify those gains, we’re essentially looking at previous lows around 99-24 versus current prices very near par–an 8/32nds gain, or a quarter of a point in terms of analogous rebate (of course lenders don’t simply adjust rebate according to MBS Prices. We’d expect defensive, conservative stances to be in effect after the "spooky" morning.).
11:28AM  :  ALERT: Technical Breakdown Prompts Rapid Sell-Off

If you’re watching charts, this is old news to you. We’re just talking about the technical breakdown in 10yr Treasuries right now, not because they dictate mortgage rates, but because the overall “bond market” has been volatile and operating near longer term inflection points that speak to potential “shifts.” In times like these, the value of analyzing MBS charts greatly decreases and underlying benchmarks become much more important. What we’re seeing happen this morning is a bond market that came into the day as close to “on the edge” of the recent range as it could be. That was marked by 3.10 in 10yr notes, which was actually broken yesterday, but would need trading action today to actually confirm or reject the breakout. Long story short, the breakout has now been confirmed after looking indecisive leading up to 9:45am Chicago PMI data. After that, the snowball began. Volume ramped up, and yields moved sharply 10bps higher to 3.20. That was the next major technical level for 10yr yields, and in terms of “history repeating itself” is an analogous level to how things happened in 2010. If history continues repeating, more volatility is in store–BIG swings. But even before assessing that possibility, we can at least observe today that 3.20 has held as a supportive ceiling for 10yr yields, effectively stopping the bleeding. It could break again in coming hours or days, but for now, insane volume and a healthy bounce back down to 3.17 suggest that the bond market has pulled into the “pit lane” between sub-3.10 trading and greater-than-3.20% trading. Tomorrow’s economic data may help inform a break away from this middle ground, either helping bonds get “back in the race,” or retire and head to higher yields. The translation to MBS hasn’t been unusually awful so far with 4.0’s down just under three eighths (11/32nds) to 99-27. If you had rates well before 9:45am Eastern, reprices remain a risk. If you don’t have them yet, expect a big cut to rebate.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard.
Adam Quinones  :  “RTRS – OBAMA, SENATE DEMOCRATS WEIGH 7-MONTH U.S. DEBT LIMIT INCREASE AS ONE OPTION-SENATE SOURCE”
Matt Hodges  :  “WF rp”
Matthew Graham  :  “The live update at 2:56pm provides the original story on China’s double dipping and here’s that supplemental link again that talks about “the rules of the game in a US Treasury auction” http://www.reuters.com/article/2011/06/30/usa-china-treasuries-idUSN1E75T0ZJ20110630″
Matt Hodges  :  “GMAC finally RP”
Christopher Stevens  :  “seeing my first reprices for the better”
Adam Quinones  :  “Good Perspective Comment from Larry Gray on the blog: Always a little disconcerting to go into a holiday weekend with wondering if there is anything one should lock. I always operated on the idea if a client wants to lock you lock. However, since we have alot of power over their decision making process sometimes I have been re-thinking that. Not that I do not have loyal clients but I also get so many new purchase loan clients that are shopping rate and it is not always easy to get them to commit”
Adam Quinones  :  “10yrIRS well off recent wides. tighter spreads means more investors are receiving a rate lock = being paid a fixed rate while paying counterparty a floating rate = = locking in to receive recent highs = adding duration = encouraging for our cause. “
Oliver S. Orlicki  :  “pfg +125 total .25% on the day”
Adam Quinones  :  “nice move tighter in swap spreads (tech bounce at +15/).not much duration dumping into higher rates yet. both positive signs of containment”
Matthew Graham  :  “make sure you catch the initial story pdf they link to. http://graphics.thomsonreuters.com/11/06/ChinaandUStreasuries1.pdf”
Matthew Graham  :  “nice article just hit reuters.com for anyone interested in more particulars on tsy auction process. dig it: http://www.reuters.com/article/2011/06/30/usa-china-treasuries-idUSN1E75T0ZJ20110630”
Tom Bartlett  :  “and pf improved almost simultaneously.”
Tom Bartlett  :  “saw that BB. Strange timing.”
Brent Borcherding  :  “Freedom Mortgage just repriced worse…”
Bill Clark  :  “pf gave said token of .125 better “
Christopher Stevens  :  “Thanks AQ…good advice!”
Adam Quinones  :  “i would take down MBS marks at 930 every morning and then compare to raw pricing. Keep track of spreads and outright levels. This will help you see reprice potential much easier.”
Adam Quinones  :  “as a secondary manager it would give you a better sense of awareness if you were keeping track of your lender’s pricing strategies vs. MBS indications.”
Adam Quinones  :  “you getting those rates in XLS format Chris?”
Christopher Stevens  :  “I can see that in my pricing today AQ. I lock with 6 investors and pricing is all over the place”
Adam Quinones  :  “margin was all over the place”
Adam Quinones  :  “talked to 10 lock desks yesterday”
Matthew Graham  :  “more of a question of how stable for how long vs lender comfort level”
Matthew Graham  :  “you’ll see improvements even on stability at current levels”
Christopher Stevens  :  “where would I need to see FNMA 4 in order to see pricing improvement…100.05?”
Matthew Graham  :  “CLOSE/MERGE PUBLIC ENTITIES AND SUBSIDIES: 540 million in 2011, with further 700 million euros in savings in 2012-2015. FIGHTING TAX EVASION: 878 million euros in 2013, 975 million in 2014 and 1.15 billion in 2015. CUTS IN PUBLIC INVESTMENT SPENDING: 950 million euros this year. DEFENCE CUTS: 200 million euros in 2012, and 333 million euros each year in 2013-2015. CUTS IN HEALTHCARE SPENDING: 310 million euros this year and a further 1.81 billion euros in 2012-2015, mainly by lowering regulated “
Matthew Graham  :  “INCREASE SOCIAL CONTRIBUTION RECEIPTS: 629 million euros this year, 259 million in 2012, 714 million in 2013, 1.14 billion in 2014 and 504 million in 2015. To be achieved through an increase in social security contributions and by cracking down on contribution evasion and undeclared labour. “
Matthew Graham  :  “CUTTING THE PUBLIC SECTOR WAGE BILL: 770 million euros in 2011 and 600 million in 2012, 448 million in 2013, 306 million in 2014 and 71 million in 2015. The reduction will come from a curb on hirings and allowance cuts, as well as by shedding all public sector workers employed under temporary contracts. The government will replace only 1-in-10 civil servants who retire this year and 1-in-5 in coming years. “
Matthew Graham  :  “TAX INCREASES: taxes will increase by 2.02 billion euros this year, with additional taxes of 3.68 billion euros in 2012, 156 million euros in 2013 and 685 million in 2014. This includes a 1.37-billion-euro “solidarity levy” charged this year on households, ranging between 1 and 5 percent of income. Other measures include the lowering of the tax-free threshold to 8,000 euros from 12,000 euros, higher property taxes, legalisation of unauthorised buildings, a VAT rate hike on restaurants and ba”
Brent Borcherding  :  “Someone have a link to the austerity measures that were passed?”
Adam Quinones  :  “RTRS – EX-TAYLOR, BEAN & WHITAKER CHAIRMAN FARKAS SENTENCED TO 30 YEARS IN PRISON FOR MASTERMINDING $2.9 BLN FRAUD SCHEME “

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[Mortgage Rate Watch] – Mortgage Rates: Risking Another Move Higher

Secondary Marketing Managers:
If you are interested in gaining access to the most accurate real-time back-month TBA indications from Thomson Reuters and Tradeweb.  LEARN MORE

Mortgage Rates: Risking Another Move Higher

Posted to: Mortgage Rate Watch
Thursday, June 30, 2011 3:34 PM

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Volatility attacked on Tuesday and attacked again today.

For the second time this week, home loanborrowing costs have risen about as much as they can without negativelyimpacting the CURRENT MARKET Best Execution Mortgage Rates. 

The abrupt jump in cost is again due to bond market volatility following a”technical breakdown.” Read More from MBSonMND.

CURRENT MARKET*: The “Best Execution” conventional 30-yearfixed mortgage rate has risen to 4.625%. Some lenders may already be quoting 4.75% though.  On FHA/VA 30 yearfixed “Best Execution”  is 4.375% andpotentially even 4.50% at some lenders (GNI pricing = better).   15 yearfixed conventional loans are now best priced at 3.875%. Five year ARMs are still bestpriced at 3.25% but the ARM market is more stratified and there is morevariation in what will be “Best-Execution” depending on yourindividual scenario. 

PREVIOUS GUIDANCE:   After failing on repeated occasions toextend the two-month rally, mortgage rates are acting exhausted. That means thepath of least resistance is up for interest rates, at least in the short-term.That puts us in a defensive posture for the next 10 to 20 days. We are notready to change our outlook for lower rates by the end of the summer though.This corrective behavior happened last year too, which supports our longstanding view that “history is repeating itself” in the bondmarket. 

CURRENT GUIDANCE:   Previous guidance nailed it: The pathof least resistance is up for interest rates, at least in the short-term. Thatputs us in a defensive posture for the next 10 to 20 days.  And markets demonstrated that again todaywith sharp increases in costs.  You havetwo choices: 1) lock up and get out now, avoiding any ongoing volatility or 2)try to capitalize on a brief correction. The former is the safe advice. With respect to the latter, there will be ups and downs no matter whichdirection rates are moving.  And in thecurrent environment, those swings can be BIG. You’re almost looking at the next level higher in terms ofBest-Execution rates, so PROTECT THAT, especially if you can’t afford to loseit.  For the thrill-seekers out there, orthe longer-term, more flexible scenarios, we haven’t seen anything yet thatkills chances of lower rates by the end of the summer.  Bumpy ride in assessing that possibilitythough….  Making the following “rules ofthe game” doubly important.

What MUST be considered BEFORE one thinks about capitalizing on a ratesrally?

   1. WHAT DO YOU NEED? Rates might not rally as much as youwant/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as youwant/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make toughdecisions?

SEE A CHART OF NEW YTD RATE LOWS

—————————-

“Best Execution” is the most cost efficient combination ofnote rate offered and points paid at closing. This note rate is determinedbased on the time it takes to recover the points you paid at closing (discount)vs. the monthly savings of permanently buying down your mortgage rate by0.125%.  When deciding on whether or not to pay points, the borrower musthave an idea of how long they intend to keep their mortgage. For more info, askyou originator to explain the findings of their “breakeven analysis”on your permanent rate buy down costs.

*Important Mortgage Rate Disclaimer: The “Best Execution”loan pricing quotes shared above are generally seen as the more aggressive sideof the primary mortgage market. Loan originators will only be able to offerthese rates on conforming loan amounts to very well-qualified borrowers whohave a middle FICO score over 740 and enough equity in their home to qualifyfor a refinance or a large enough savings to cover their down payment andclosing costs. If the terms of your loan trigger any risk-based loan levelpricing adjustments (LLPAs), your rate quote will be higher. If you do not fallinto the “perfect borrower” category, make sure you ask your loanoriginator for an explanation of the characteristics that make your loan moreexpensive. “No point” loan doesn’t mean “no cost” loan. Thebest 30 year fixed conventional/FHA/VA mortgage rates still include closingcosts such as: third party fees + title charges + transfer and recording. Don’tforget the fiscal frisking that comes along with the underwriting process.

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Your Wells Fargo Mortgage Rate Monitor(SM) Alert

Wells Fargo Mortgage Rate Monitor(SM) Alerts

Today's Rates: June 30, 2011

—————————————————————–
30 YEAR FIXED (CONFORMING(1) LOAN RATE)
INTEREST RATE: 4.625%
ANNUAL PERCENTAGE RATE (APR): 4.812%
MONTHLY PAYMENT: $899.75
PAYMENT TERM: 30 YEARS
LOAN AMOUNT: $175,000
EST. PREPAID FINANCE CHARGES: $3,750
DOWN PAYMENT: 25%
—————————————————————–
15 YEAR FIXED (CONFORMING(1) LOAN RATE)
INTEREST RATE: 3.75%
ANNUAL PERCENTAGE RATE (APR): 4.069%
MONTHLY PAYMENT: $1,272.64
PAYMENT TERM: 15 YEARS
LOAN AMOUNT: $175,000
EST. PREPAID FINANCE CHARGES: $3,750
DOWN PAYMENT: 25%
—————————————————————–
30 YEAR FIXED (FHA)
INTEREST RATE: 4.625%
ANNUAL PERCENTAGE RATE (APR): 5.657%
MONTHLY PAYMENT: $1,075.25
PAYMENT TERM: 30 YEARS
LOAN AMOUNT: $175,000
EST. PREPAID FINANCE CHARGES: $3,750
DOWN PAYMENT: 3.5%
—————————————————————–
Be aware that mortgage rates can change without notice and apply
only in certain conditions. The APR for the loan products shown
reflects the interest rates and estimated prepaid finance charges
which include 1% of your loan amount to be paid toward the loan
origination charge, but does not include all closing costs or
discount points. The displayed rates assume that you're
purchasing a single-family primary residence with a 60-day-lock.

These mortgage rates are based upon a variety of assumptions and conditions which include a consumer credit score which may be higher or lower than your individual credit score. Your loan's interest rate will depend upon the specific characteristics of your loan transaction and your credit profile up to the time of closing.

The monthly payment amount displayed includes principal and interest only. The payment amount does not include homeowner's insurance or property taxes which must be paid in addition to your loan payment.

Conventional loans with a down payment less than 20% require mortgage insurance which could increase the monthly payment and APR.

FHA loans require both an upfront and an annual mortgage insurance premium. The upfront fee is $1,750.00. The annual premium varies based on individual credit scores, your loan-to-value ratio and the loan term. For the FHA loan, a mortgage insurance payment has been added to the monthly principal and interest payment displayed above.

(1) Conforming loan amounts for certain loan products have increased in federally designated metropolitan areas. Larger limits available in the state of Hawaii. To find out if these new loan limits can help meet your needs, contact us.
https://mortgage.rsys1.net/servlet/cc6?OMouJQCDQYCRVLjpJskljhILtQthHgjHlLxIthnnLjQJhuV2VYV8wv268231Xzgw0fVollik%3A%2F%2FOOOQILgLMplkquhjlnHnLQJhu%2FHMMpgplP%2FJhglHJl3kQOMu%3FkmMMpzf%3DthNLtHgKJh%25TAKu%3DV9fXv3f7G0V9fb062GyEVXLX

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Close on Time or We Pay You!

When you're relocating or buying a home, you want to reduce uncertainties. That's why Wells Fargo Home Mortgage provides our exclusive Wells Fargo Closing Guarantee(SM):

We will close your loan on or before the closing date stated in your original purchase contract or we'll write you a check equal to your first month's principal-and-interest payment(1).

Our Wells Fargo Closing Guarantee reflects our commitment to excellence and to you. As one of the nation's leading residential mortgage lenders, we have on-time closing down to a science. On the rare occasion when our timing is off, we'll make up for small delays in a big way.

> Get a Preapproval or a Free Prequalification
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(1) Other terms and conditions apply. Ask a home mortgage consultant for details.
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Invest In Your Future
Whether you plan to buy your first home, second home or an investment property, understand the fundamentals of mortgage financing. Register to attend a free Homebuyer Workshop, and get face-to-face advice from specialists in your area.
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Get Preapproved
Shop for a home with confidence. Getting preapproved can be a good move because it shows sellers you are a serious homebuyer. Get started today or call 970-613-9779.
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Loveland CO
Office: 970-613-9779
Fax: 866-694-3871
Contact Us: https://www.benefits-mortgage.com/affinity/contactUs.wfm?suffix=lovelandco&dm=

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Loveland, CO 80538

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[MND NewsWire] – Foreclosure Sales Lag as Banks Walk Tightrope

Secondary Marketing Managers:
If you are interested in gaining access to the most accurate real-time back-month TBA indications from Thomson Reuters and Tradeweb.  LEARN MORE

Foreclosure Sales Lag as Banks Walk Tightrope

Posted to: MND NewsWire
Wednesday, June 29, 2011 12:20 PM

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Foreclosuresales have not regained the momentum they had before numerous lender moratoriabrought the process to a virtual halt last Fall. 

According to the May Mortgage Monitor Report released by Lender Processing Services, Inc. (LPS), the number ofserious delinquencies (90 days delinquent) and foreclosures (loans referred toan attorney for foreclosures but not yet sold) outnumber the actualforeclosure sales by a factor of 50 to 1.

During the month of May there were a total of 4,084,557 loans that wereseriously delinquent or in foreclosure while only 78,676 foreclosure sales tookplace in the month.

 

Thedelinquency rate was essentially unchanged from April at 7.97 percent but wasdown from a rate of 9.74 in May 2010. The foreclosure rate declined slightly to 4.11 percent from 4.14 but wasup substantially from the 3.66 percent rate a year earlier.   Therewere 197,007 foreclosure starts in May, nearly 10 thousand more than in Aprilbut down from 237,198 one year earlier. 

Newproblem loans, defined as those that were 60 days or more delinquent during themonth but had been current six months earlier, were at 1.27 percent, down fromapproximately 1.80 percent a year earlier and less than one-half the peak levelseen in 2009.

Foreclosuresales peaked almost exactly three years ago at around 130,000 per month and,after a number of sharp monthly variations, were at almost that level lastSeptember when deficiencies in the foreclosure process were uncovered and foreclosuresales plummeted to about 60,000 in October. Sales have not recovered.  The78,000+ sales in May represented less than 6 percent of the loans in theforeclosure inventory.

TheMay data shows that the biggest drop in foreclosure sales since the September2010 peak has been seen in East Coast states, with a decline of 96% in DC, 80%in Maryland, 79% in New York, and 75% in New Jersey. Additionally, inventoriesof foreclosures in judicial states have increased twice as much as inventoriesin non-judicial states over the last year.

Theaverage time a loan spends in foreclosure continues to increase.   In May 40 percent of delinquent borrowers hadnot made a payment in over a year and one third of those in foreclosure had notmade a one in over two years.

Negativeequity continues to be a problem.  LPSreports that nearly 30 percent of performing loans are in a negative equity position.  This is ominous as other LPS data shows thatunderwater loans default with 10 times the frequency of those where theborrowers have equity. Of the 70 percent of current foreclosures with negativeequity, over 35 percent have combined loan to value ratios of over 150 percent.

The Million Dollar Question: Have Home Prices Bottomed?

“Nationally, housing faces a long road to recovery, but not all markets are equal”, says MND’s Managing Editor Adam Quinones. “While areas with a high concentration of distressed properties are clearly stuck in a deflating environment, some communities will see price stability.  It’s all based on local and regional economies. Where are jobs being created? Where are the best schools? Where is value being created by the community? Where do buyers want to live? This is where the housing recovery can build momentum. Of course you need to be in the right financial situation to even be asking these questions. That’s another problem all together. Tight credit demands from lenders combined with damaged borrower credit profiles (and a lack of reserves) implies buyer demand will lag the broader economic recovery, which is lagging itself.  Finding a bottom in the hardest hit areas is another story. Here, the GSEs, FHA, and major banks must manage their REO inventory carefully. In these areas, home prices remain highly-sensitive to even the smallest of shocks in buyer sentiment, such as the premature release of shadow inventory. It’s gonna be a tight-rope walk. Step 1 is stopping the negative feedback loop.”

Foreclosure Filings in Downtrend. Masked Reality?

Housing Scorecard: Delinquencies Down. Foreclosures Delayed

Foreclosure Filings Drop. Prevention Policies Distorting Supply and Demand

LPS Data Shows Long Delays in Foreclosure Process

CoreLogic Estimates Shadow Inventory at 1.8 Million Homes

Foreclosure Filings Fall. Robogate Fallout Skews Report

ABOUT: LPSdata is based on mortgage data and performance information on nearly 40 millionfirst mortgages across all types of credit products.

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[MBS Commentary] – MBS MID-DAY: 6/30/2011

Secondary Marketing Managers:
If you are interested in gaining access to the most accurate real-time back-month TBA indications from Thomson Reuters and Tradeweb.  LEARN MORE

MBS MID-DAY: 6/30/2011

Posted to: MBS Commentary
Thursday, June 30, 2011 4:16 PM

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MBSonMND: MBS MID-DAY
Open MBSonMND Dashboard
FNMA 3.5
95-16 : -0-15
FNMA 4.0
99-27 : -0-11
FNMA 4.5
103-10 : -0-07
FNMA 5.0
106-03 : -0-05
GNMA 3.5
96-27 : -0-15
GNMA 4.0
101-22 : -0-09
GNMA 4.5
105-11 : -0-07
GNMA 5.0
108-05 : -0-02
FHLMC 3.5
95-10 : -0-16
FHLMC 4.0
99-24 : -0-12
FHLMC 4.5
103-05 : -0-08
FHLMC 5.0
105-30 : -0-04
Pricing as of 11:00 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard.
10:38AM  :  Greek Austerity Plan Clears Final Vote. Default Avoided for Now

(Reuters) – The Greek parliament approved detailed austerity and privatization bills on Thursday in a crucial vote to secure emergency funds and avert imminent bankruptcy, but longer-term dangers still lurk. Prime Minister George Papandreou secured a majority for the legislation after lawmakers backed a 28 billion five-year euro austerity plan on Wednesday, clearing the last obstacle to the next slice of aid from the European Union and the International Monetary Fund. Belgian Finance Minister Didier Reynders said euro zone finance ministers were likely to agree as a result to release a next tranche of loans to Greece at a meeting on Sunday. The IMF is set to follow suit on July 5. That 12 billion euro loan will prevent Greece defaulting in mid-July or at the latest on August 20, when it must honor a big bond redemption, and shift the focus to a second assistance package likely to be about the same size as last year’s 110 billion euro bailout. But credit insurance markets are still pricing in an 80 percent chance of Greece defaulting on its 340 billion euro debt mountain — 150 percent of annual economic output — within five years, and a likely 40 percent write-down for bondholders on three-year debt. Prime Minister George Papandreou’s socialist government may find it hard to enforce tax increases and state asset sales against massive public resistance, while a violent fringe always present in Greek politics has burst to the fore. Vasso Papandreou, a former European Commissioner and rebel member of the prime minister’s PASOK party who is not related to him, told parliament she would vote for the laws as a patriotic duty even though she believed the economy would deteriorate as a result.
9:52AM  :  ALERT: Reaction To Econ Data Bad for Bonds and Rate Sheets

Following the better-than-expected results on the Chicago Purchasing Manager’s Index, 10yr benchmarks have risen to their highest yields in over a month, and Fannie Mae 4.0 MBS have fallen an immediate 6/32nds, bringing them into negative territory for the day. If you already had rate sheets this morning, this may mean a reprice for the worse is on the way shortly. Otherwise, it changes the likelihood of slightly improved initial rate sheets to slightly worse.
9:48AM  :  ECON: Chicago PMI Beats Consensus

(Reuters) – Business activity in the U.S. Midwest grew more than expected this month, helped by a jump new orders, a report showed on Thursday. The Institute for Supply Management-Chicago business barometer rose to 61.1 in June, The reading was 56.6 in May and economists had forecast a June reading of 54. The employment component of the index slipped to 58.7, from 60.8 in May, but new orders surged, to 61.2, from 53.5. A reading above 50 indicates expansion in the regional economy. (Reporting by Ann Saphir; Editing by James Dalgleish)
9:28AM  :  JPMorgan Strikes Deal on Mortgage CDO Case

(Reuters) – A federal judge on Wednesday approved a $153.6 million settlement between JPMorgan Chase & Co and the top U.S. market regulator over allegations a mortgage CDO product defrauded the bank’s investors at the time of the housing market collapse. The U.S. Securities and Exchange Commission and the second-largest U.S. bank announced the settlement on June 21 of civil charges over JPMorgan’s collateralized debt obligation (CDO) marketed as Squared CDO 2007-1. The settlement was approved at a hearing in New York by U.S. District Judge Richard Berman, who described it as “another important step for the financial industry and the SEC in righting the wrongs of the recent financial crisis.” The settlement echoes on a smaller scale the $550 million accord that Goldman Sachs Group Inc reached last July over its Abacus collateralized debt obligation. Both cases involved charges that banks let hedge fund clients structure complex securities — and then bet against them — without disclosing their involvement to investors. John Savarese, a lawyer for JPMorgan Chase & Co said the matter had been “thoroughly investigated” and the parties had reached “a fair and reasonable agreement.” JPMorgan sold $150 million of Squared CDO notes to pension funds and investors worldwide that lost most of their value in just 10 months, the SEC said.
8:57AM  :  MBS Fall After Jobless Claims, Now Holding Ground

Fannie Mae 4.0 MBS are up 4/32nds at 100-10. They briefly traded as high as 100-15+ this morning, but that proved fleeting. 10yr notes are also improved on the day. Yields are down .0259 to 3.095. This is an important level as it lies within the boundaries of their recent range, and holding here would effectively be a rejection of the breakout suggested with yesterday’s sell-off. But even if 10’s are able to hold under 3.10 today, that would do little to change the near-term likelihood of volatility. Based on the morning’s MBS improvements, lenders should generally be coming out with improved rate sheet offerings, but expect more defensiveness than generosity in the volatile environment.
8:44AM  :  Fannie’s Monthly Summary Shows Falling Delinquencies

In the latest monthly summary released by Fannie Mae, the single-family serious delinquency rate fell 5bps to 4.14 pct, after having fallen 8bps in the April report. The report, covering May, showed a similar 5bps fall in multi-family delinquencies to 0.52 pct. Fannie also reported the completion of 16,419 loan modifications in May bringing the 2011 total to 84,133.
8:35AM  :  ECON: Jobless Claims Barely Move. Higher than Forecast

(Reuters) – New U.S. claims for unemployment benefits fell less than expected last week, a government report showed on Thursday, suggesting the labor market was struggling to regain momentum. Initial claims for state unemployment benefits edged down 1,000 to a seasonally adjusted 428,000, the Labor Department said. Economists polled by Reuters had forecast claims dropping to 420,000. The prior week’s figure was unrevised at 429,000. It was the 12th straight week that claims have been above 400,000, a level that is usually associated with a stable labor market. Employment stumbled badly in May, with employers adding just 54,000 jobs — the fewest in eight months. Nonfarm payrolls are expected to have increased 90,000 this month, according to a Reuters survey, with the unemployment rate edging down to 9.0 percent. The employment report for June will be released on July 8. (Reporting by Lucia Mutikani; Editing by Neil Stempleman)
8:05AM  :  New MBS Commentary Post

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard.
Matthew Graham  :  “yeah, rate sheets are another story… “
Adam Quinones  :  “(id be concerned if convexity sellers surface)”
Matthew Graham  :  “10’s could easily get there without altering the bigger picture”
Matthew Graham  :  “Might seem overly bearish or scary, but I’d only be really concerned with a break above 3.20”
Adam Quinones  :  “rates are overbought, path of least resistance = higher.”
Adam Quinones  :  “right now I think we need to focus on techs.”
Matthew Graham  :  “however, if they don’t, the choppiness is in line with historical precedent.”
Andrew Horowitz  :  “it appears they are just looking at the headline and not digging into the report”
Matthew Graham  :  “yeah….”
Adam Quinones  :  “hopefully others see those comments soon…”
Matthew Graham  :  “Joseph, specifically, note AQ’s highlight of one of the report’s respondents below: “Producing ahead to avoid know future contract price increases. Chemicals market still shows volatility with no end in sight.””
Matthew Graham  :  “AQ, so far, the stuff you pointed out is the best “find” in the internals, and the best example of an analyst looking past the headline. I was kinda dismayed reading bandwagony comments on Breakingviews just now…”
Joseph Watts  :  “Why make it if no one is buying it?”
Andrew Horowitz  :  “Make it now and store it on shelves”
Matthew Graham  :  “RTRS- BULLARD – EFFECTS OF FED ASSET PURCHASES ON REAL ECONOMY HARDER TO ASSESS BECAUSE OF SHOCKS TO ECONOMY IN EARLY 2011 “
Matthew Graham  :  “RTRS- BULLARD – FINANCIAL MARKET EFFECTS OF FED’S QE2 WERE SAME AS IF FED HAD REDUCED POLICY RATE SUBSTANTIALLY “
Matthew Graham  :  “RTRS- BULLARD – FED ASSET BUYING AT LONGER MATURITIES CAN SUBSTITUTE FOR ORDINARY MONETARY POLICY WHEN INTEREST RATES ARE NEAR ZERO “
Andrew Horowitz  :  “from the quotes you just posted they are MFG goods in hopes that the orders will come in”
Matthew Graham  :  “RTRS – FED’S BULLARD – EFFECTS OF QUANTITATIVE EASING ON ECONOMY WILL LAG BY SIX TO 12 MONTHS “
Scott Valins  :  “based on the rip up in yields its clear that the path of least resistance is higher”
Adam Quinones  :  “”Suppliers continue to have trouble finding skilled workers. The recession, the “recovery,” and the disappearance of industrial arts in our schools seem to have diminished a formerly strong labor pool””
Matthew Graham  :  “to quantify the volume comment, we’ve seen the strongest 10-minute chunks of time with between 90k and 100k contracts in the past 2 weeks. the 10 minutes following PMI was just over 90k, basically on par with other fast-paced post-econ-data 10 min blocks”
Adam Quinones  :  “”There may be a little softening coming but its too early to tell.””
Adam Quinones  :  “”Producing ahead to avoid know future contract price increases. Chemicals market still shows volatility with no end in sight.””
Adam Quinones  :  “”Incoming orders have definitely slowed down. Several orders we expected to see are currently on hold. Hopefully something will break or the 4th quarter is going to look sad.””
Adam Quinones  :  “”Material inflation, Steel and Aluminum, still impacting cost. Weak housing and commercial construction hurting overall business””
Adam Quinones  :  “General Comments from Members of the Survey Panel…”
Andrew Horowitz  :  “the “hope” is that it implies a second half pickup”
Andrew Horowitz  :  “SV it stopped the downward trend in all of the MFG numbers”
Scott Valins  :  “ok so just clarifying that this beat estimates but why would this imply a 2nd half pickup? it’s still worse than most first half #s”
Adam Quinones  :  “rates traders wont like this report. It bucks the trend on manufacturing weakness and implies the Fed was right when they said to expect a 2nd half pickup.”
Matthew Graham  :  “RTRS- CHICAGO PURCHASING MANAGEMENT PRICES PAID INDEX AT LOWEST SINCE NOVEMBER 2010 “
Matthew Graham  :  “RTRS – CHICAGO PURCHASING MANAGEMENT PRODUCTION INDEX 66.9 IN JUNE VS 56.0 IN MAY “
Matthew Graham  :  “RTRS – CHICAGO PMI EMPLOYMENT INDEX 58.7 IN JUNE VS 60.8 IN MAY “
John Rodgers  :  “that is a hot number”
Matthew Graham  :  “RTRS- CHICAGO PURCHASING MANAGEMENT PRICES PAID INDEX 70.5 IN JUNE VS 78.6 IN MAY “
Matthew Graham  :  “RTRS- CHICAGO PURCHASING MGMT NEW ORDERS INDEX 61.2 IN JUNE VS 53.5 IN MAY “
Matthew Graham  :  “RTRS – CHICAGO PURCHASING MANAGEMENT INDEX 61.1 IN JUNE (CONSENSUS 54.0) VS 56.6 IN MAY “
Adam Quinones  :  “Chicago PMI reports on June data…this is a chance for econ developments to move the market…”
Matthew Graham  :  “waiting to see how domestic stock open goes”
Matthew Graham  :  “4th time at 3.088 so far this am. seems like they want to try to break lower”
Adam Quinones  :  “10s are crossing back and forth over 3.10% since Japan opened at 8pm last night.”
John Rodgers  :  “from GMAC (Ally) I will send another email with several general correspondent updates under separate cover; however, please find the pricing changes effective yesterday 6/29 for your information.•Conv 30Y – 5-10 bps (no change to 20Y)•Conv 15Y – 15-30 bps (no change to 10Y)•Govt 30Y – 5-55 bps (there will also be a price improvement on FICO >=700 of 25 bps implemented 6/30)”
Matthew Graham  :  “I’m not sure they could express any more indecision”
Matthew Graham  :  “but at least supported by yesterday’s closing levels.”
Matthew Graham  :  “10’s blocked by opening levels so far'”
Adam Quinones  :  “Open interest has fallen in both the 10yr futures contract and S&P futures this week.Lower open interest in TY tells us there’s been liquidative position squaring of longs, but limited new position adding. A similar story can be told in stocks. Falling open interest into higher prices implies short covering has led the rally, not new position adding. This makes sense as stocks have trended lower since April and bonds have rallied for 2 of 3 months in the quarter. This week’s price action stinks “
Matthew Graham  :  “RTRS- US INSURED UNEMPLOYMENT RATE FELL TO 2.9 PCT JUNE 18 WEEK FROM 3.0 PCT PRIOR WEEK (PREV 2.9 PCT) “
Matthew Graham  :  “RTRS- US CONTINUED CLAIMS FELL TO 3.702 MLN (CON. 3.690 MLN) JUNE 18 WEEK FROM 3.714 MLN PRIOR WEEK (PREV 3.697 MLN) “
Matthew Graham  :  “RTRS- US JOBLESS CLAIMS 4-WK AVG ROSE TO 426,750 JUNE 25 WEEK FROM 426,250 PRIOR WEEK (PREVIOUS 426,250) “

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