The Labor Department has reported that 639,000 new unemployment claims were filed for the week ending 2/27. This was the fifth week in a row that initial claims were over 600,000. However, the number of initial claims fell 31,000 from the week before.

Stocks took a nose dive Monday to a 12-year low following insurance company AIG’s announcement that it has suffered a huge quarterly loss and GM’s possible bankruptcy filing, and continued to fall through the week. Dow Jones lost nearly 300 points, bringing it to levels last seen in 1997, while the S&P 500 lost 55 points, taking it back to 1996 levels.

Foreclosure statistics for 2008 show that nearly one in eight homes in the U.S. is behind on mortgage payments or currently under foreclosure proceedings, the Mortgage Bankers Association said on 3/5. A record 11.18 percent of loans on one-to four-unit residences were at least one payment past due or in the foreclosure process in 2008. The MBA predicted that moving forward, foreclosures will be less a result of poor or subprime loans and more as a result of unemployment and the resulting income loss.

Rates on the 30-year fixed-rate mortgages rose .08 percent in the last week, according to Freddie Mac. Rates averaged 5.15 percent for the week ending 3/5, up from the previous weeks’ 5.07 percent.

Same-store sales for retail discount stores rose slightly for the first time in five months, according to Thomas Reuters and Retail Metrics. Target and Walgreen’s February same-store sales declined, while Wal-Mart far exceeded analyst’s estimates, reporting a 5.1 percent increase in sales for February. Department-store chains continued to face declines in sales.

Consumer confidence reached an all-time low in February, standing at 25, down from January’s 37.4. The GDP for the fourth quarter of 2008 was -6.2 percent, its worst quarterly reading in 26 years.

So what’s happening in the markets? It’s essentially a battle of two “frames of mind.”

On the one hand, we have the belief (hope?) that the worst is over and the markets and the economy are starting the long arduous road to recovery. This belief is evidenced by the headline numbers from Wells Fargo, GE, Citibank and Fed Chairman Bernanke’s statement that the rate of decline is slowing. As that belief continues to grow, it’s putting upward pressure on mortgage rates.

On the other hand, we have the fear that the worst isn’t over and this is, shall we say, a “dead cat bounce.” What’s a dead cat bounce? It’s a false bounce in the markets that makes it appear that a recovery is happening but it soon reverts to the downward trend from before. This belief/frame of mind is evidenced by the “rest of the story” about Wells earnings, the signs that foreclosures are picking up, the all time high number of unemployment claims, the continuing pressure on Citibank’s credit card portfolio, negative housing starts numbers and a poor Philly Fed Index.

So which way is the economy going? Are we starting the journey back or is this a temporary blip? I’d love to believe that this is the start of the journey back and I sincerely hope I’m wrong but I’m afraid it’s not.

What difference does that make? Frankly, it’s a tug of war (or a game of teeter totter)
between these two frames of mind. As we see more evidence of a turnaround, we’re going to see more upward pressure on mortgage rates. As we see more evidence of a downturn/ongoing problems in the economy/markets, we’ll see downward pressure on mortgage rates.

This might seem a bit contradictory but while I believe that we haven’t seen the bottom in the markets and the economy, I believe that the upward pressure is going to win out and we’re going to see rates drifting higher rather than dropping lower.

What are rates at today? We’re at
5.0% for 30 year refi with 0 pts.
4.75% for a 30 year purchase with 0 pts
(both are for loans of $417,000 or less with credit scores over 720)

Mortgage Rates - Insider Explanation

Mortgage Bonds are traded much like stocks in the Mortgage Bond Market. These bonds are generated by compiling sales of Mortgage backed securities which sets the going price, just like a stock share price is based on other stock share prices.. As demand increases for a particular stock the price per share goes up.

For Mortgage Bonds, the price is set exactly the same way. And currently, the Fed is inreasing demand with a Mortgage Bond Purchasing Program, where they are buying over $600 BILLION dollars worth of Mortgage Bonds. This is creating a spike in demand, which is increasing the price that investors, including the Fed, are willing to pay per dollar (similar to per share on stocks) for these mortgage bonds.

When the price that the bonds get on the Bond Market is higher, then the mortgage rate is lower, when demand falls and the mortgage bonds have to be sold at a discount, the mortgage rate gets higher.. both to entice the investors with higher rate of return, AND to make up for the discounted price at which the bonds have to sell for during a pitfall in demand.

This is exactly what happened during the mortgage collapse in 2007 and 2008. Mortgage Bonds were riskier by nature becuase underwriting guidelines and policies were very relaxed, and the demand fell becuase the mortgage bonds weren't performing at the levels that they were supposed to.. so rates went up for about 18 months, WAY up, about 2%-3% higher than they are today.

Thanks to VERY tight guidelines over the last 16 months, AND the Fed Mortgage bond purchase program, the demand has increased and rates have fallen to the point they are today, a 40 year low for fixed 30yr mortgages!

But, it is imperative people don't wait. The rate isn't low becuase the economy is bad, and it isn't going to get lower if the economy worsens. Its low becuase demand has been increased. And it is VERY unlikely that the Fed purchase program of $600 BILLION in mortgage bonds will be replaced with purchasing from investors. The point: Mortgage rates WILL increase, and quite possibly very dramatically when the Fed Mortgage Bond Purchase Program is over.

So if you have a rate above 5.625% and/or are thinking of buying a new home, you need to hurry. The Fed Purchase Program funds will likely be exhausted by June.. and you do not want to lose the benifits of the lowest rates in the histroy of mortgages by hoping with mislead information for lower rates.

Call me today for a no obligation analysis of refinance or purcahse financing for your profile and circumstance.

Please share this information with ANYONE you know, so that your friends and family do not get burned by the false hopes that rates will get better, and miss the opportunity that is at hand!

512-644-1587 cell
512-502-1705 office

Will Staney

HOME AFFORDABLE REFINANCE PROGRAM (HARP)

On March 4, 2009, the US Treasury announced the Making Home Affordable Program, which includes its Home Affordable Refinance Program, commonly known as HARP. W.J. Bradley is now the first in Austin, TX to offer this new program to our clients.

HARP is designed to help borrowers whose loans are held by Fannie Mae or Freddie Mac refinance into a more affordable mortgage. You may be eligible if:

• You are the owner-occupant of a one-to-four unit home, Second Home or Investment property
• 30 year fixed terms and 40 year fixed terms at very low rates
• Streamline rate/term refinance program for Freddie Mac to Freddie Mac transactions.
• Streamline rate/term refinance program for Fannie Mae to Fannie Mae transactions
• Fannie Mae DU Refi Plus .
• NO MORTAGE INSURANCE & LOAN TO VALUE UP TO 105%
• Appraisal may or may not be required
• You are current on your mortgage payments (if you are not current you may be eligible for the Home Affordable Modification program)
• The amount you owe on your first mortgage is about the same or slightly less or more than the current value of your house, Loan To Value to 105% NO CLTV LIMIT
• You have income sufficient to support the new mortgage payments
• The refinance improves the long term affordability or stability of your loan.

If you fit in to this scenario and would like to see if you are eligible for this program and lower your mortgage payment, contact me.

Will Staney
W.J. Bradly Company
512-644-1587 cell
512-502-1705 office
will.staney@wjbradley.com