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Long Beach, Ca. Housing starts shrank to the lowest levels on record due to lack of credit and declining prices. Today, President Obama announced a plan to stem foreclosures by subsidizing mortgage payments for millions of homeowners. The plan will cost $50B. GM is seeking another $16.6B in new US aid. One trader from Cantor Fitz mentioned that, "GM seems like a pension plan that occasionally makes a car somebody occasionally buys." Currently, the Ten Year yield is at 2.66% (2.73% yesterday). 30 year mortgage backed bonds are down slightly. We had some late price changes from a few investors yesterday, even though the MBS market opened up nearly .50% better. Many of you wondered why did we not see improved pricing. There a number of answers, but bottom line, MBS pricing is determined by when the treasury and FED buy
Big news today is the announcements by the White House for a foreclosure prevention and major housing plan. CNBC headline and the article attached states 275 billion to help 9 million families. The plan and the official name of Homeowners Affordability and Stability Plan is supposed to include rescuing families who played by the rules and acted responsibly. I also establishes a 75 billion fund to reduce monthly payments for another 3 to 4 million people in sub prime mortgages due to skyrocketing interest rates or personal misfortune. A quote from the President. Hey, I did not write the speech. The Treasury Department will double its financial support for housing finance giants Fannie Mae and Freddie Mac to allow them to play a bigger role supporting housing. Meaning the government plans on keeping them around. The Treasury said it was increasing its preferred stock purchase agreements with the two government-controlled companies to $200 billion each from $100 billion. Here is the link: http://www.cnbc.com/id/29256424
The second part of this program is supposed to allow for a refinance as long as the borrowers mortgage is owned by Freddie or Fannie and their mortgage is not more than 105%. The homeowner can then apply for a refinance and lock in a lower rate. We just are unsure how this will be implemented. When we have more details, we will see how this can benefit our originations. http://www.cnbc.com/id/29257409
Coupled with this information, the President will support revamping U.S. bankruptcy rules to let judges reduce mortgages on primary residences to fair- market value as long as borrowers pay their debts under a court- ordered plan. The Obama plan will use $75 billion from the $700 billion financial bailout fund to match reductions lenders make in interest payments that lower borrowers' payments to 31 percent of their monthly income. Under the program, a lender would be responsible for reducing monthly payments to no more than 38 percent of a borrower's income, with government sharing the cost to further cut the rate to 31 percent. Treasury will share the cost when lenders reduce monthly payments by forgiving a portion of the borrower's mortgage balance, the government said. The program may help as many as 4 million borrowers, the administration said. The average borrower's home value could be stabilized against a price decline by up to $6,000, the White House fact sheet said.
Kirk Mulhearn, a Long Beach Real Estate Broker and Professional Mortgage Planner can be reached at 562-989-4608 ext. 110
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