Ryan Frost

Looks like a bill will be voted on to Nullify the Home Valuation Code of Conduct (HVCC). Stay tuned in the next few weeks. To see if it passes the house. The senate will then have to vote on it and it is expected to be presented by the end of the year. I can tell you from the front line of assisting borrowers, that this will greatly assist buyers and current homeowners to get a less expensive, faster, better estimation of their home's value.

Rates do not look good and have already opened worse than what we have seen the last week.

Just a quick note to agents who have clients shopping ahead of the $8,000 tax credit deadline- Remind clients that if they wait and haggle over $5,000 dollars on an offer, they may end up getting a better deal on the home only to see the savings eaten up by higher interest rates.

Example- on a $200,000 mortgage, difference in rate of 5.5% versus 5% is $1,000 a year. Use this example to explain to your clients the importance of the rate of interest over the long haul. If you have buyers in Utah who need a customized idea of how rates would affect their personal situation have them call me at 801-676-4400 or email me today.

Sorry for such a brief and simple blog, but I have to go lock some loans. Apply now at http://www.compasslendingsolutions.com/applyNow.html if you would like me to look after you loan.

Have a great weekend!!! Last weekend of Oktoberfest at Snowbird. PROST!

Good luck Utes against the CSU Rams tomorrow. Game time is 4:00 PM and is televised on the Mtn.

Utah versus USA current unemployment data

The unemployment rate in Utah is currently 6.1% versus the US rate that is nearing 10%. I wonder how much under employment we are currently experiencing? I have read that in order for the US to keep up with population growth we must create at least 125,000 jobs a month. The forcast for Friday's jobs report is for a 180,000 job loss. When you factor in the necessary increase just to keep up with population growth, the trend looks increasingly dismal.

In order to get back to the 15 year unemployment rate average of 6%, our nation would have to create 225,000 jobs a month for the next 5 years. With zero signs of a rapidly recovering economy and with our government already spending trumendous amounts of public funds to try and turn our situation around, I think we have to get used to under utilization of our nation's working class. This is depressing.

Its the middle of a Wednesday and the rain keeps falling here in Sandy, Utah. I should probably have looked at interest rates instead of unemployment rates. At least they are still awesome.

Interest rates are have been amazing in 2009. Especially for home buyers and the few current homeowners who can still qualify for a mortgage after all of the tightening of lending guidelines and decreasing property values that we have seen. Why is it that we have had such a good streak of great rates for the last 9 months?

Usually when the stock market rises, bond prices fall. When bond prices fall, rates go up. Thus, while stocks and bonds have an inverse relationship, stocks and interest rates generally move in the same direction. The S&P 500 is up over 13% YTD, and up over 35% since the lows experienced in March. This is been quite a rally and normally would result in higher interest rates.

The main reason why rates have remained low during 2009 is that the Federal Reserve has committed to buying mortgage backed securities (MBS) in an effort to keep rates low to stimulate borrowing, which helps keep the economy going. If people have access to money, they will have access to spend it which is vital to our capitalist and consumer driven economy. So how much are they going to buy?

The Fed has committed to buying $1.25T in MBS. Of that committment (which is not a guarantee), they have executed the purchase of $870B or approximately 70%. This tells us that rates will likely remain lower in the coming months. However, they must begin to ratchet back their purchases of MBS. If they don't and they turn off the spiggot of buying activity all at once, there will be a massive increase in rates as supply and demand dictates that with the largest active buyer leaving the marketplace, sellers will have to lower their prices of bonds in order attract buyers. Lower prices = higher rates.

Watch closely the FOMC meetings the next few days and listen to the way they word their guidance and outlook. It will be critical to understanding when rates will raise and by how much.

This could be terrible news to homeowers already feeling the backlash of so many years of loose lending practices.

FHA today announced that they are going to be reviewing careful their credit risk and have decided to hire a Chief Risk Officer for the first time in the history of FHA. This comes on the heels of their annual audit completion which is due to be delivered to Congress for review by November.

This is scary stuff for many reasons. First, if FHA makes drastic changes they often do it without a lot of notice. This could leave some correspondent type lenders in a serious pinch holding onto undeliverable loans or having to back out of pricing and delivery contracts. Second, for homebuyers it means guidelines will almost surely tighten again.

This could be disasterous to the housing recovery, but unfortunately seems extremely necessary in order to avoid future losses which could result in a taxpayer funded bailout.

From the front lines I can tell you that FHA is a vital program that we use with approximately half of our borrowers. Tightening of credit guidelines will mean fewer buyers. I think the changes that have already occurred (lowering of LTVs, increasing of credit score minimums, larger down payment requirements) are needed and valid and over time will assist in shoring up FHA's losses. Addition tightening may be going overboard.

If you have clients in the process of buying a home get them in touch with a trusted FHA approved lender right away. Get them pre-qualified and get them looking. Guidelines WILL change and it could affect you or your clients.

Please post a comment with you opinions and concerns.