Refinance Free Credit

Tuesday's bond market has opened in negative territory after this morning's economic news renewed inflation related concerns. The stock markets are also reacting negatively with the Dow down 15 points and the Nasdaq down 5 points. The bond market is currently down 8/32, which with yesterday's late weakness will likely push this morning's mortgage rates higher by approximately .250 - 375 of a discount point.

The Labor Department posted March's Producer Price Index (PPI) this morning, showing a surprising 1.1% jump in the overall reading. This was much higher than the 0.6% increase that was expected. Fortunately, the more important core data reading that excludes more volatile food and energy prices met forecasts with a 0.2% increase. This data gives us an important measurement of inflationary pressures at the producer level of the economy. The core data reading is somewhat good news, but the jump in the overall reading is a concern to traders.

Th ere are four pieces of news scheduled for release tomorrow. The first is the sister report of the PPI with the release of March's Consumer Price Index (CPI). This index is very similar to today's PPI, but tracks prices at the more important consumer level of the economy. This is one of the most important pieces of data we see each month, so stronger than expected readings will undoubtedly lead to higher mortgage rates. Current forecasts are calling for an increase of 0.3% in the overall index and 0.2% in the core data.

March's Housing Starts report is the second report to be posted, but it will most likely be a non-factor in the market. It gives us a measurement of housing sector strength and mortgage credit demand, however, usually doesn't cause much movement in mortgage pricing unless it varies greatly from forecasts. It is this week's least important report.

The third is March's Industrial Production report at 9:15 AM ET. It gives us a measurement o f output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for a decline in production of 0.1%. Since signs of a weakening economy are considered favorable to bonds and therefore mortgage rates, a larger decline would be good news for mortgage pricing. However, the CPI is by far the most important data of the day.

The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET tomorrow. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float i f my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Southern California’s housing market, stuck in the deep freeze most of winter, has yet to thaw out as spring arrives. According to data released Tuesday by real estate data firm DataQuick Information Systems, the seasonal boost in sales between February and March was less than half its normal level — and a record low to boot. The median sales price in SoCal also took another record nose dive during March, as well.

A total of 12,808 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March, DataQuick said. That was up 18.8 percent from 10,777 the previous month — a bit of good news — but down a dramatic 41.4 percent from 21,856 in March 2007.

Over the past 20 years, sale volume in Southern California has risen by an average of 38 percent between February and March, according to DataQuick’s statistics. Last month’s 18.1 percent increase from February was the lowest on record, signaling that sellers anxiously waiting for a spring season selling bounce may have wait longer than they’d hoped.

March was the seventh consecutive month in which sales have fallen to the lowest level on record for a given month, DataQuick said — on average, March sales have been about twice as high as the level recorded for this year.

Foreclosures, foreclosures, everywhere
Foreclosure auctions dot much of the Southern California landscape these days — and it’s not surprising, really, given that more than one of three homes resold last month were subject to a foreclosure action at some point in the past twelve months. To put that number into historical perspective, consider that foreclosures represented less than 8 percent or resales just one year ago.

Hard-hit Riverside County actually saw more than its fair share of foreclosure sales, according to the DataQuick report — more than half of all resales were foreclosures during March.

“We continue to believe a lot of people who could be buying or selling right now are opting to sit tight until they sense we’ve hit bottom,” said Marshall Prentice, DataQuick president. “Often what we’re left with, especially in inland areas, are sales driven by foreclosure, or the threat of it.”

The median price paid for a SoCal home was $385,000 last month, the lowest since $380,000 in April 2004. In Orange County, median prices fell nearly 20 percent on an yearly comparison basis, settling at $506,000 during March; annual declines were steepest in San Bernardino County, however, which has seen prices fall more than 28 percent to a median of $265,000.

For more information, visit http://www.dataquick.com.

On the heels of a Standard & Poor’s report that managed to suggest that both Fannie Mae and Freddie Mac could endanger the rating agency’s view of U.S. sovereign debt, the Office of Federal Housing Enterprise Oversight on Tuesday issued a report to Congress that characterized the GSEs as “a significant supervisory concern.”

“Fannie Mae and Freddie Mac should be commended for the timely filing of their 2007 annual statements,” said Lockhart. “While they have made progress in fixing many of their systems, internal controls and risk management problems, they still have much work to do, especially with the continuing challenges of today’s mortgage market.”

As Congress and housing officials look to both GSEs to “do even more,” Lockhart argued that the need to put a stronger regulatory structure in place has become critical.

“As I noted in my transmittal letter, last month both GSEs agreed that a ‘world-class regulatory structure’ is needed and they renewed a shared commitment to work for comprehensive GSE reform legislation,” he said. “The time to act on the legislation is now.”

The House Financial Services Committee originally passed H.R. 1427, the Federal Housing Finance Reform Act of 2007, in March of last year, after its introduction by Congressman Barney Frank, along with Reps. Richard Baker (R-LA), Mel Watt (D-NC) and Gary Miller (R-CA). Industry pundits and pols alike have been calling for its approval by Congress ever since, to no avail.

The OFHEO Congressional report highlights the many risks both Fannie and Freddie face as the mortgage market continues to roil: deterioration in the market value of RMBS held in each GSE’s portfolio and increasing counterparty risk as seller-servicers, deritivative issuers, and mortgage insurers have seen their core ratings taking a hit.

It also warns on the uncharted territory both GSEs are now in, especially as it relates to model risk.

“[R]apidly changing market conditions significantly increased model risk, particularly for credit and
prepayment models,” the report warned. “Given the lack of historical precedent for current conditions and the fact that models are estimated based on historical experience, Enterprise models have become less reliable and require greater management judgment, increasing the potential for error in pricing and other metrics.”

Reuters reported late last week that Treasury Secretary Henry Paulson has scheduled a meeting with the heads of both Fannie Mae and Freddie Mac for this week, to discuss the proposed legislation.

Richard Syron and Daniel Mudd, the chiefs of Freddie Mac and Fannie Mae, respectively, will meet Paulson along with Sen. Christopher Dodd (D-CT) Sen. Richard Shelby (R-AL), according to the news agency.

While a number of hedge funds are looking to jump into non-performing residential mortgages, others are looking for opportunities of a different kind within the larger mortgage market. One case in point is Stamford, Conn.-based Structured Portfolio Management, which manages roughly $1.2 billion in investor assets; the firm is betting that slowing prepayment speeds represent at least an intermediate-term trend, and has launched a new hedge fund designed to profit from it.

FINalternatives reported on the move by SPM earlier on Tuesday morning:

“We believe that as a knock-on consequence of housing prices dropping and the imposition of extra fees and more constrained underwritings of mortgages in the prime mortgage sector, that the response on average of mortgagors to a rate incentive for refinancing is going to be substantially lower than it has been in the past,” Don Brownstein, SPM’s CEO and chief investment officer, told FINalternatives.

“So we think there is money to be made by effectively taking positions which reflect that view about prepayments.”

Executives at the firm did not immediately respond to a request for comment, but sources have suggested to Housing Wire that the hedge fund is likely looking to invest in so-called interest-only strips — known more commonly as IO strips — in the mortgage-backed securities market.

IO strips can be among the riskiest MBS investments due to an extreme sensitivity to prepayments; nonetheless, slowing prepayment speeds sustained over a period of time would make such investments extremely profitable, HW’s sources explained.

Hopes for a rebound in U.S. housing during March may have been premature, given new data released Tuesday morning which found that foreclosure filings — including default notices, auction sale notices and bank repossessions — were recorded on 234,685 properties nationwide during March. The total for the month was a five percent rise from February levels, and a 57 percent jump compared to one year earlier, according to RealtyTrac’s U.S. Foreclosure Market Report.

“The March numbers show that overall foreclosure activity so far this year continues to run nearly 60 percent above the levels we saw last year,” said James J. Saccacio, chief executive officer of RealtyTrac.

Saccacio said that he believed the data suggested that borrowers were simply walking away from their mortgages.

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“On a year-over-year basis, default notices were up nearly 57 percent and bank repossessions were up nearly 129 percent, but auction notices were up only 32 percent, indicating that more defaulting homeowners are simply walking away and deeding their properties back to the foreclosing lender,” Saccacio said.

“This deed-in-lieu-of-foreclosure process allows the lender to take possession of a property without putting it up for public foreclosure auction.”

The nation’s highest foreclosure rates for the month — as measured against statewide population levels — were recorded in Nevada, California and Florida. Nevada’s rate of foreclosure, one in every 139 households, ranked as the nation’s highest for the 15th consecutive month, underscoring just how bad things have gotten for one former epicenter of the housing boom. Foreclosure filings were reported on a total of 7,659 properties in Nevada during the month, RealtyTrac said, up 24 percent from the previous month and up nearly 62 percent from March 2007.

One in every 204 California households received a foreclosure filing in March, according to RealtyTrac data — 2.6 times the national average — and one in every 282 Florida households received a foreclosure filing during the month — 1.9 times the national average.

Foreclosures soar in California, Florida, Ohio
Foreclosure filings were reported on 64,711 California properties in March, the most of any state for the 15th consecutive month, RealtyTrac reported. Foreclosure activity in the Golden State increased nearly 21 percent from the previous month, and has more than doubled the volume recorded in March 2007.

Florida posted the nation’s second highest total, with foreclosure filings reported on 30,254 properties in March — down 7 percent from the previous month, but still more than double last year’s numbers.

Texas, usually among the nation’s leaders in foreclosures each month, saw a welcome respite of sorts during March. Foreclosure filings were reported on a total of 10,700 properties in the Lone Star state for the month, a nearly 13 percent decrease from February and a 16 percent decrease from year-ago numbers.

For more information, visit http://www.realtytrac.com.

Dealing with difficult situations is what Cheryl Lang does for a living, but some things always tend to hit closer to home than others. For Lang, president of Integrated Mortgage Solutions, a Houston-based national property preservation and field services company, her largest sense of dread is reserved for a “Paw Alert.”

Another dog left inside a foreclosed property with nothing but a large bowl of dry dog food. Or a pair of cats, left to roam a house that has been vacant for weeks on end.

“It just breaks my heart whenever I see an animal left behind,” she said. Personal property laws, which can complicate matters in a foreclosure — pets are considered personal property in most states, and are therefore subject to some stiff regulations — often make the situation even more gut-wrenching for pet lovers like Lang.

Determined to do something about it, Lang recently created a national non-profit organization dedicated to caring for a growing number of animals that have all of a sudden found themselves out of house and family amid the worst foreclosure crisis in recent memory. The nonprofit, called No Paws Left Behind, is her way of tackling a problem that many industry participants say has reached epidemic proportions.

“There’s no real data out there on how prevalent this is, but it’s a real issue,” she said. She estimates that her company alone deals with at least one Paw Alert each day.

According to the 2007-2008 National Pet Owners Survey, 63 percent of U.S. households own a pet, which equates to 71.1 million homes. Lang estimates that the volume of foreclosure activity already being seen, as well as the foreclosures that are yet to occur, will put more than one million animals at risk of abandonment over the course of the next twelve months or so.

“We’ll feed the animal, care for the animal, and take it to a pet shelter if need be,” Lang said. “We work with local animal control as well as helping locate no-kill shelters the animals can be taken to.”

Reaching for an industry-wide solution
While the motivation for No Paws left Behind may be rooted in what she calls her “other job” at IMS, Lang’s passion for making the non-profit an industry-wide initiative usually becomes crystal clear within the first minute of speaking with her.

“We’ll work with anyone that has an affected pet, no matter who is managing the property,” said Lang. “It doesn’t need to be [IMS] at all. The goal here is to work to find the right solution for the pets.”

Fannie Mae has expressed an interest in supporting the program. So, too, have industry conferences — one has already offered No Paws Left Behind a free booth to promote what it does, and to raise industry awareness and funds for ongoing operation, Lang said. She’s also in early discussions with HOPE NOW officials to drive local awareness for the program among troubled borrowers attending sponsored homeownership clinics in key housing markets.

So far, lenders haven’t yet supported the program with donations. “Thank you is pretty much it,” she said, although she expects lenders will support the cause more formally in the months ahead.

No Paws Left Behind plans to update its Web site at the end of this month, making it possible for borrowers and industry professionals alike to locate local help for pets caught in the foreclosure mess by using the same technology that IMS uses to manage local properties and contractors.

“These are mostly good people, going through tough times,” Lang said. “Many move in with a friend, or into an apartment complex, and can’t take the pet with them. They just don’t know what to do.”

“I just want to be able to help.”

Seeing fewer Paw Alerts cross her desk in the months ahead would be a welcome change, too.

Editor’s note: To learn more about No Paws Left Behind, including information on how you can support the non-profit agency’s efforts to help pets abandoned in foreclosure, email Cheryl Lang directly at cheryl@nopawsleftbehind.org.

How to Save Thousands on Your Mortgage and Have the Seller Pay for it

Although the seller concession/credit as part of a real estate transaction is not new, today they are becoming more commonplace due to a buyer’s market. If you do not know what I am referring to, a seller concession is simply a credit provided by the seller to the buyer at the closing. The dollar amount for this concession should be negotiated as part of the original offer and acceptance of the purchase contract. Once a contract is out of attorney review you cannot add this language.

The important thing is to make sure the language is written correctly during the offer phase so as to not raise an objectionable issue with your mortgage lender. In order to ensure that your mortgage company will allow the concession be sure it is worded something to the effect: “the seller shall provide the buyer with a seller concession/credit of X dollars to be used towards closing costs and/or pre-paid items”. The amount of the concession can usually be up to 3% of the purchase price and some programs will permit up to 6%. The seller concession can be a nice feature to negotiate as part of your purchase price to save you money.

You can use this concession to pay for your closing costs or even for a loan discount point. If you make the amount equal to the cost of a mortgage discount point you will get a lower interest rate and monthly payment. This will in turn save many times the amount of the concession over the years. Make life happen, negotiate a seller concession for a discount point on your mortgage and Take Control of Your Financial Future!

A market bombshell released yesterday by Standard & Poor’s left many industry participants unsure of just what to think next, as the rating agency surprisingly suggested that the credit risks now being taken on by both Fannie Mae (FNM: 25.52, +0.71%) and Freddie Mac (FRE: 23.52, +1.82%) — as well as the Federal Home Loan Banking system — may be sufficient enough to threaten the U.S. government’s ‘AAA’ sovereign credit rating.

“We believe [the GSEs] pose large contingent fiscal risks that recent policy decisions aimed at supporting the U.S. mortgage market have made even larger,” wrote S&P’s John Chambers and Nikola Swann, who co-authored the report released on Monday.

“If these risks were to translate into increased government debt, they could even hurt the U.S.’s credit standing.”

The GSEs are certainly being asked to take on more risk. The U.S. Treasury and the Office of Federal Housing Enterprise Oversight relaxed the GSEs’ capital surplus position in March to 20 percent from 30 percent, while also loosening previous restrictions on portfolio growth. Both Fannie and Freddie are also now authorized — albeit temporarily — to purchase so-called “jumbo conforming” mortgages with a lending limit up to $729,750, as part of the Economic Stimulus Act of 2008.

While S&P characterized any potential credit damage to the U.S. itself as “unlikely,” the rating agency said that the fiscal risks of supporting the GSEs far outweighed any risks associated with propping up the broker-dealer segment of the U.S. financial system — a la Bear Stearns.

In a deep and prolonged recession, S&P estimated that the maximum potential cost of assisting the broker-dealer sector remains small compared with the size of the economy, at just below 3 percent of GDP. However, an equivalent measure for GSEs, together with loans and guarantees extended by explicitly-guaranteed U.S. government agencies, yielded a potential fiscal cost to the government of up to 10 percent of GDP, S&P said.

“Standard & Poor’s does not predict a deep recession,” said John Chambers, chairman of Standard & Poor’s sovereign rating committee.

“Even under a severe stress scenario, the contingent fiscal risks of broker dealers will not threaten the ‘AAA’ rating on the U.S. government. However, under such a scenario, the size of GSEs, coupled with their current level of common equity, could create a material fiscal burden to the government that would lead to downward pressure on its rating.”

It’s a finding that would seem, on its face, to fly against the theory that says Bear Stearns needed to be bailed out in order to prevent an unraveling of the U.S. and global financial system.

“We expect the mortgage GSEs to raise substantial amounts of equity to meet their capital adequacy needs,” said S&P credit analyst Victoria Wagner. “We will be looking closely at their forthcoming plans to shore up their common equity base as they attempt to preserve the ‘AA-’ rating and limit the risk they present to the ‘AAA’ rating on the U.S. government.”

For more information, visit http://www.standardandpoors.com.

The deepening slump in the nation’s housing markets has seriously eroded consumer sentiment and pushed the economy into a mild recession, according to the chief economist for the National Association of Home Builders.

“The worse-than-anticipated housing downturn, combined with systematic weakening of the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers,” said NAHB’s David Seiders, in a press statement released Tuesday morning. “It’s now clear that we have entered what we anticipate will be a mild recession, running through the first half of this year, and there are substantial downside risks to this economic scenario.”

The NAHB economist argued — as he has for well over two months — that Congress needs to take “immediate steps” to guard against a more severe downturn. In particular, Seiders said, modernization of the Federal Housing Administration and reform of Fannie and Freddie should be front and center for policymakers.

“Stopping the downward trend in housing prices is key to bolstering consumer confidence as well as mortgage credit quality, and a temporary home buyer tax credit is the best way to do that,” he said.

That may be easiers said than done, according to industry sources that spoke with Housing Wire, many of whom think that prices in many key markets yet have further to fall — and, indeed, some say that prices must continue to fall.

“Prices need to keep dropping,” said one source at a major mortgage insurer, who asked not to be named. “We’ll never right this ship we call housing if we waste our time and tax dollars trying to keep housing prices out of whack relative to income.”

Given the ongoing erosion in housing finance markets and buyer demand, Seiders said he had adjusted the NAHB’s official housing forecast to indicate continuing downward movement in housing starts through the end of 2008, bringing the decline for the year to 30 percent. A month ago, Seiders expected housing starts to bottom out in the third quarter, with a 27 percent decline for 2008.

“This change in our forecast indicates that, barring immediate action by Congress to stimulate housing and the economy, the housing sector will continue to be a serious drag on economic growth until the beginning of 2009,” he said.

For more information, visit http://www.nahb.com.