Congress and the President have declared war on the weak economy and especially on the housing market. That makes sense because it is the housing market that caused the economy to collapse and we will not have a recovery without a healthy or at least stable housing sector. Immediately after signing the $780 billion Stimulus Bill and putting into law a stronger tax credit and higher allowable loan limits for Fannie Mae, Freddie Mac and FHA, the President wasted no time delivering the second of two strong punches. His housing rescue plan contained several elements that should help the housing market, though it remains to be seen how many will be helped and who will be left out. The goal of the housing plan is to help nine million homeowners. That is a very ambitious number, especially considering the fact that there are less than 100 million homeowners in the United States. If 10% to 20% of the homeowners are assisted, certainly it will help bring about economic recovery more quickly. The number is not too ambitious considering the fact that millions of homes have already gone into foreclosure and millions more are waiting in the wings. Our news this week will contain a description of the elements of the stimulus package and next week we will cover the President’s housing plan. But we caution that since the final regulations are not published, these details may change in the coming weeks and months.
Current Indices For Adjustable Rate Mortgages
Last week, President Obama signed into law the American Recovery and Reinvestment Act of 2009, which contains nearly $800 million in economic stimulus spending and tax relief designed to help individuals and businesses in the current economic climate. The following is a list of some of the major provisions of the new law without significant details which will follow as rules are issued. Note that many of the benefits are temporary and/or are phased out for higher income individuals. Higher Loan Limits. Conforming and FHA mortgage limits in high-cost areas were temporarily raised back to the limits which expired at the end of 2008. This will mean an increase from $625,000 to just under $730,000 in higher cost of living areas such as Northern California and New York City. The bottom line will be lower rates in these areas because "jumbo" loans carry a higher rate. "Making Work Pay" Tax Credit. For 2009 and 2010, the Act creates a refundable tax credit of up to $400 for working individuals or $800 for couples with modified adjusted gross income (MAGI) that does not exceed $75,000 or $150,000 respectively. An additional credit was passed for those who do not work, such as the retired and the disabled. AMT Exemption Raised. The Act raises AMT exemption amounts above 2008 levels to $70,950 for joint filers and surviving spouses (up from $69,950 in 2008); and $46,700 for single filers and heads of households (up from $46,200). First-Time Homebuyer Tax Credit. The Act expands the low-to-moderate income first-time homebuyer tax credit, originally enacted under the Housing Assistance Tax Act of 2008. The maximum amount of the credit is increased to $8,000 and the Act eliminates the repayment obligation for qualified principal residences purchased from January 1, 2009 through November 30, 2009. To be exempt from repayment, the homebuyer must stay in the home for three years. New Car Deduction. Effective for new vehicle purchases on or after February 17, 2009, the Act allows qualified taxpayers an above-the-line deduction for all state, local sales and excise taxes paid relating to the first $49,500 of the purchase price of a new car, light truck or other vehicle through the end of the year. Education Tax Credit. For 2009 and 2010, the Act expands and renames the existing HOPE education credit, increasing the credit amount (subject to income limits) from $1,800 to $2,500 a year and applying the credit to all four years of college. The Act also makes 40% of the credit refundable and adds course materials as qualifying expenses. Bonus Depreciation. The Act extends the first-year 50% bonus depreciation enacted under the 2008 Economic Stimulus Act for new business equipment purchases through December 31, 2009. The Act also extends through 2010 bonus depreciation for other qualified property. Net Operating Loss Carryback. The Act enables qualified small businesses with average gross receipts of $15 million or less to carry net operating losses back for up to five years. The carryback provision applies to any NOL for tax years beginning or ending in 2008 
War is Declared
Rates fell again in the past week. Freddie Mac announced that for the week ending February 19, 30-year fixed rates averaged 5.04%, down from 5.16% the week before. The average for 15-year fixed fell to 4.68%. Adjustables also fell with the average for one-year adjustables decreasing to 4.80% and five-year adjustables falling to 5.04%. A year ago 30-year fixed rates were at 6.04%. "Rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation," said Frank Nothaft, Freddie Mac vice president and chief economist. "And consumer sentiment fell in February for the first time in three months to near its lowest level since May 1980, while industrial production slowed in January by more than the market consensus. Meanwhile, the housing market is not doing any better. New housing construction slowed to an all-time record low of 466,000 homes (annualized) in January since records began in January 1959." Note: average rates do not include fees and points. Information is provided for indicating trends only and should not be used for comparison purposes.
Updated February 20, 2008
Daily Value
Monthly Value
Feb. 19
January
6-month Treasury Security
0.51%
0.30%
1-year Treasury Security
0.67%
0.44%
3-year Treasury Security
1.38%
1.13%
5-year Treasury Security
1.89%
1.60%
10-year Treasury Security
2.85%
2.52%
12-month LIBOR–WSJ
1.904% (Jan)
12-month MTA
1.633% (Jan)
11th District Cost of Funds
2.757% (Dec)
Prime Rate
3.25% (Dec)
Concerns raised by about bill to let bankruptcy judges alter mortgages
By Ronald D. Orol, MarketWatch
Last update: 6:14 p.m. EST Feb. 24, 2009
WASHINGTON (MarketWatch) - Citing recent statistics about high re-default rates on reworked home loans, Republican lawmakers expressed concerns Tuesday about the viability of a new Obama administration plan to modify mortgages for troubled homeowners.
"It is important that we have statistics and knowledge that there are high re-defaults on modified mortgages, but in fact these reports actually reinforce a lender's resolve not to modify," said Rep. Kenny Marchant, R-Texas, in a House Financial Services subcommittee hearing.
"What mortgage shareholder would urge its institution to modify or extend or renew a loan that has a 1-in-3 chances in default?" asked Marchant.
Marchant cited statistics released earlier in the day by the Office of Thrift Supervision showing that more than half of all modified mortgages defaulted again within six months.
Read the rest of the story below:
GOP lawmakers take issue with loan modification plan - MarketWatch
Ed Bisquera Mortgage Consultant Portland Oregon Vancouver Washington
Most rates improved today as mortgage bonds regain some of the losses from Thursday following the direction of Treasuries, which are busy gaining back yesterday’s losses. Up and down…up and down. The good news is mortgages, while trending in the same direction as Treasuries, have not seen the massive swings in price, thanks in part to the Fed’s intervention. Let’s hope this trend continues as massive swings in rates coupled with longer turn times due to volume creates all kinds of problems for both brokers and lenders alike. The Dow has sunk below its November lows in search of a bottom, down over 100-points at the moment at 7355. Blame the banks: fears of nationalization, under capitalization and, of course, the whole Swiss tax evasion issue isn’t helping either. Happy Friday…
In the News:
Jumbo Defaults Up While Getting Jumbo Loans Proves More Difficult
Jumbo Loan Defaults Rise at Fast Pace as Rich Sufferr
Feb. 20 (Bloomberg) -- Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis that began with the poorest Americans has reached the wealthiest.
About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent, a percentage reached within 10 months and the fastest since at least 1992, according to LPS Applied Analytics, a mortgage data service in Jacksonville, Florida. That’s almost twice as quickly as 2007 borrowers fell behind and a level 2006 owners haven’t attained after almost three years.
The jump in late payments on jumbo loans, while still lower than the 20 percent delinquencies in subprime mortgages, signals that the borrowers with the most money and the best credit are hurting as the U.S. recession deepens in its second year. It also means these loans will be even more difficult to obtain and more expensive to pay off.
== READ THE REST HERE: Jumbo Defaults Up While Getting Jumbo Loans Proves More Difficult
Today’s Lock Rate (Feb 20, 2009)
30 YR Fixed 4.875% (4.99%APR)
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Interest Rates AND Demand for purchase and refinance funds will likely increase now that the $787 Billion Dollar Stimulus Package has passed.
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Volatility
If we could sum up the markets in one word right now, the word would be "volatility." The past several days we were volatile on the downside for stocks and bonds. And up for oil. It is interesting because at least one pattern was broken. In the past few months rates and oil prices would go lower as the stock market went down. But in the past two weeks the stock market has fallen while rates and oil prices have increased. Is this a new pattern? Such a pattern would be disturbing because lower rates and oil prices are good news for the economy and thus stocks. The question is–why do we have rates going up if the economy is so bad?
One explanation is a "bounce." Rates and oil prices have moved so far so fast that a few bounces upward are likely. Or, it could be that the markets are worried about the government borrowing several trillion dollars for economic stimulus which is rekindling long-term inflation fears. How we go from deflation fears one week to inflation fears the next week is hard to imagine–but that is what breeds volatility. If inflation is the real concern, we may have seen the lows for rates and oil. If it is a technical bounce, we could always bounce back. We won’t try to predict the future here. Excepting to predict more volatility because of such conflicting forces.
The Markets. The streak was broken after 11 straight weeks of lower rates. Freddie Mac announced that for the week ending January 22, 30-year fixed rates averaged 5.12%, up from 4.96% the week before. The average for 15-year fixed rose to 4.80%. Adjustables were mixed with the average for one-year adjustables increasing to 4.92% and five-year adjustables falling slightly to 5.24%. A year ago 30-year fixed rates were at 5.48%. "Fixed mortgages followed bond yields and edged up this holiday week," said Frank Nothaft, Freddie Mac vice president and chief economist. "However, over the first three weeks of 2009, 30-year fixed mortgages averaged 0.25 percentage points below its monthly average for December 2008. As a result, the number of mortgage applications for refis was roughly about 86 percent of all conventional loans over the same time period."
Note: If you are interested in receiving an article designed to help you make the right refinance decision, please contact me.
Current Indices For Adjustable Rate Mortgages
Updated January 23, 2009
| Daily Value | Monthly Value | |
| Jan 22 | December | |
| 6-month Treasury Security | 0.29% | 0.26% |
| 1-year Treasury Security | 0.42% | 0.49% |
| 3-year Treasury Security | 1.11% | 1.07% |
| 5-year Treasury Security | 1.61% | 1.52% |
| 10-year Treasury Security | 2.62% | 2.42% |
| 12-month LIBOR–WSJ | 2.406% (Dec) | |
| 12-month MTA | 1.826% (Dec) | |
| 11th District Cost of Funds | 3.155% (Nov) | |
| Prime Rate | 3.25% (Dec) |
Mini Sales Booms Reported In Hardest Hit Areas of Depreciation
Some cities that were hardest hit by the real downturn are experiencing mini sales booms. Las Vegas real estate properties are down 28 percent in price, but sales of homes are up 15 percent. Motivated buyers accounted for 64 percent of Las Vegas sales in October, says Radar Logic, a derivatives firm. That’s the highest rate in the country. "There’s a pretty active housing market, it’s simply at a lower-priced inventory," says Michael Feder, chief executive of Radar Logic. "And there are now bidding wars taking place over homes in foreclosure." Phoenix and San Diego are reporting similar experiences. "We’re clearing out the bad news," says Kiva Patten, a director at Merrill Lynch specializing in housing derivatives. "By the end of 2010 – that’s where we’re calling the bottom in the forward market. You’re going to get a small price appreciation in 2011," says Patten. "It’s not like the turn is 10 percent per year, it’ll be something like 3 percent or 4 percent." Source: Forbes
Size Of Homes Drops Over Last Year's Average
The National Association of Home Builders (NAHB) reports a drop in home size to an average 2,438 square feet in last year’s third quarter from 2,629 square feet in the second quarter. NAHB research director Gopal Ahluwalia expects shrinking residence size to be a lasting trend, noting that consumers are more concerned about affordability and recognize that smaller households do not need large dwellings. According to a January NAHB survey of builders, 89 percent have downsized their offerings. American Institute of Architects chief economist Kermit Baker attributes the trend to the weak economy, residential price declines and rising energy costs. Source: USA Today
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Here's a re-posting of President Obama's first weekly address as President of the United States. And below is a transcript of his address in its' entirety:
Remarks of President Barack Obama (original blog post here)
Weekly Address Saturday, January 24th, 2009
We begin this year and this Administration in the midst of an unprecedented crisis that calls for unprecedented action. Just this week, we saw more people file for unemployment than at any time in the last twenty-six years, and experts agree that if nothing is done, the unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four. And we could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future.
In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse.
That is why I have proposed an American Recovery and Reinvestment Plan to immediately jumpstart job creation as well as long-term economic growth. I am pleased to say that both parties in Congress are already hard at work on this plan, and I hope to sign it into law in less than a month.
It’s a plan that will save or create three to four million jobs over the next few years, and one that recognizes both the paradox and the promise of this moment - the fact that there are millions of Americans trying to find work even as, all around the country, there’s so much work to be done. That’s why this is not just a short-term program to boost employment. It’s one that will invest in our most important priorities like energy and education; health care and a new infrastructure that are necessary to keep us strong and competitive in the 21st century.
Today I’d like to talk specifically about the progress we expect to make in each of these areas.
To accelerate the creation of a clean energy economy, we will double our capacity to generate alternative sources of energy like wind, solar, and biofuels over the next three years. We’ll begin to build a new electricity grid that lay down more than 3,000 miles of transmission lines to convey this new energy from coast to coast. We’ll save taxpayers $2 billion a year by making 75% of federal buildings more energy efficient, and save the average working family $350 on their energy bills by weatherizing 2.5 million homes.
To lower health care cost, cut medical errors, and improve care, we’ll computerize the nation’s health record in five years, saving billions of dollars in health care costs and countless lives. And we’ll protect health insurance for more than 8 million Americans who are in danger of losing their coverage during this economic downturn.
To ensure our children can compete and succeed in this new economy, we’ll renovate and modernize 10,000 schools, building state-of-the-art classrooms, libraries, and labs to improve learning for over five million students. We’ll invest more in Pell Grants to make college affordable for seven million more students, provide a $2,500 college tax credit to four million students, and triple the number of fellowships in science to help spur the next generation of innovation.
Finally, we will rebuild and retrofit America to meet the demands of the 21st century. That means repairing and modernizing thousands of miles of America’s roadways and providing new mass transit options for millions of Americans. It means protecting America by securing 90 major ports and creating a better communications network for local law enforcement and public safety officials in the event of an emergency. And it means expanding broadband access to millions of Americans, so business can compete on a level-playing field, wherever they’re located.
I know that some are skeptical about the size and scale of this recovery plan. I understand that skepticism, which is why this recovery plan must and will include unprecedented measures that will allow the American people to hold my Administration accountable for these results. We won’t just throw money at our problems - we’ll invest in what works. Instead of politicians doling out money behind a veil of secrecy, decisions about where we invest will be made public, and informed by independent experts whenever possible. We’ll launch an unprecedented effort to root out waste, inefficiency, and unnecessary spending in our government, and every American will be able to see how and where we spend taxpayer dollars by going to a new website called Recovery.gov.
No one policy or program will solve the challenges we face right now, nor will this crisis recede in a short period of time. But if we act now and act boldly; if we start rewarding hard work and responsibility once more; if we act as citizens and not partisans and begin again the work of remaking America, then I have faith that we will emerge from this trying time even stronger and more prosperous than we were before. Thanks for listening.
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