A Mortgage Update from Jay Skwierawski for the week of February 10
Hello Everybody!
Interest rate rose slightly last week from where they started the week. There were only two bits of information out on the economy, and both should have been mortgage rate friendly. The ISM Services index, which is a measure of the service side of the economy came in much lower than expected, and at a number that is considered recessionary. The first time claims for unemployment number came in higher than expected, and the continuing claims for unemployment number came in at it's highest level in years.
So, why did rates go up? More bad news in the mortgage industry and some unfavorable words by a couple members of the Federal Reserve. One of the members - Dallas Fed President Richard Fisher (Loose Lips, as he is known in economic circles), who was the only Fed member to vote against decreasing rates at the last Fed meeting, said in a speech in Mexico City that he thought that what the Fed had done so far in lowering rates should be given some time to work before lowering rates anymore, especially before inflation doesn't give more signs of letting up. So, the markets took this to mean that the Fed is done lowering rates. Even though the bet is now for the Fed to lower rates, again, when they meet in March. This coming week, we have Ben Bernanke, the Chairman of the Fed speaking before Congress. The markets will be listening closely for any signs from him that the Fed is or isn't done lowering rates.
In addition to the Fed Chairman speaking next week, the following news is set to be released (including its potential impact on mortgage rates):
Wednesday - Retail Sales (HIGH Impact)
Thursday - Balance of Trade (Moderate Impact)
Thursday - First time Unemployment Claims (Moderate)
Friday - Empire State Index (Moderate)
Friday - Industrial Production and Capacity Utilization (Moderate)
Friday - Consumer Sentiment (Moderate)
The mortgage rate markets will be watching these economic releases for signs of a recession. They will be listening to Chairman Bernanke's speech for any signal of what the Fed's next move might be. Finally, the mortgage rate market may take its cue from the stock market - a huge jump in stock prices usually means an increase in mortgage rates, as investors pull their money out of mortgage back bonds and go into the stock market. On the other hand, a large dip in the stock market usually signals lower mortgage rates, as investors pull their money out of stocks and put it into the safe haven of U.S. Treasury and mortgage backed bonds. I read somewhere this weekend, that it is unusual for the stock market to move more than 2% in any direction on any given day. In the past three years, it has happened only once. So far this year, it has happened six times! When this does happen, it sometimes signals a "bottoming" out of stock prices. That could bode well for our stock investments and 401-k's, but maybe not so much for mortgage rates.
CONGRESS SENDS ECONOMIC STIMULUS BILL TO PRESIDENT BUSH - As expected, Congress passed the economic stimulus bill, H.R. 5140 (read more about it at this link: http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.05140: ). Part of the bill allows for taxpayers (and some non-taxpayers) to receive a "tax rebate" from the U.S. Treasury. Another part of the bill calls for an increase in the maximum loan amounts that FNMA and FHLMC can purchase from the current maximum level of $417,000. Unfortunately, from what I have been able to gather so far, it doesn't appear that Chicago is one of the markets that is going to be affected by this change. So far, it looks like most of the areas affected by the change are on the east and west coasts. I hope that the information that I have seen so far is wrong, and I will keep you posted on the correct information AS SOON AS I RECEIVE IT. It's like being a kid in school, and everybody has been talking about the "big party on Friday night", and everybody, including you, is talking about it and getting excited about it, and then, and then, and then (repeated for dramatic effect!) you find out you're not invited to the party! The reason that the answer is not yet known is that Congress pegged the new limits to an index that doesn't readily exist - the HUD Median Sales Price for counties and MSMA's around the country. It DOES appear that we will see an increase in the maximum FHA loan amount but, again - the amount is pending.
Interest Rates -
I have been asked to include the current rate in my updates. Unfortunately, this is not easily done, especially given the new FICO pricing increases mandated by FNMA. A borrower's interest rate will vary, greatly, depending on loan program, loan amount, loan to value, FICO score, term of lock period, and other risk factors. It would be impossible for me to list all of the different variations of the current rates. So, what I am going to do is list one interest rate that you can watch to at least get an idea of the trend in interest rates. I would urge you to check with your loan officer to get an exact quote for your borrower rather than quote this interest rate.
30 year conventional fixed rate mortgage (assuming 680+ credit/30 day lock/95% ltv or lower): 5.875%
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
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