Dave Woodland - Your Bend, OR Friendly, Knowledgable Mortgage Professional

BELOW IS THE DATA SHEET RIGHT FROM THE WHITE HOUSE:

KEY POINT: APPLIES TO REFINANCES OF LOANS ORIGINATED BEFORE 6/1/2009.

KEY FHA NUMBERS TO REMEMBER: (assuming 96.5% loan)

Upfront MI: Was: 1.0% Will be 1.75%, but STREAMLINED ONLY 0.1% !!!
Annual MI: Was: 1.15% Will be 1.25%, but STEAMLINED ONLY 0.55% !!!

Now from the White House:

Reducing Fees for FHA Borrowers Seeking to Refinance – Saving Homeowners Hundreds of Dollars A Year

The FHA offers a streamlined refinancing program to allow borrowers with FHA-backed mortgages to refinance their loans at lower cost and with fewer burdens. This program has helped hundreds of thousands of families refinance, but lender reticence and fees have kept many families from participating. Today, the President is announcing new steps to increase the reach and effectiveness of the program, reducing the fees that participants will pay on these loans.

• Cutting its Fees Substantially: The FHA currently charges an up-front mortgage insurance premium of 1% of the borrower’s loan balance and an additional 1.15% of the balance per year. FHA is reducing the up-front premium to .01% for streamlined refinancings of loans originated prior to June 1, 2009 and cutting the annual fee for these refinancings in half, to .55%. Together these reductions could save the typical FHA borrower about a thousand dollars a year.

• An Estimated 2-3 Million FHA Borrowers Will Be Eligible to Benefit: We estimate that approximately 2-3 million FHA borrowers are eligible to benefit from the program with these changes. While it is always difficult to estimate participation in these programs, this will result in significant monthly savings for hundreds of thousands of families.

Reduction in Fees Could Save the Typical Borrower About a Thousand Dollars a Year – On Top of Savings from Refinancing

• Consider a typical FHA borrower with $175,000 outstanding on the

The single-largest drag on our economy is housing. The biggest kitchen-table concern is underemployment and unemployment. The two are connected as homeowners’ ability to buy homes is out of reach with the worst-in-our-lifetime employment picture. So the news from the Bureau of Labor Statistics (BLS) on Friday was more than welcome. A quarter million net private sector jobs created in the month was fantastic.

Improvement of unemployment to 8.3% is also good. Or is it? The out-of-work number is 12.7 million people. That is as large as the population of Pennsylvania, every man, woman and child in Pittsburgh and Philadelphia and everywhere in between. There was much celebrating going on Friday as the unemployment figure was announced. I saw claims of a 40-48 state sweep by President Obama in 2012 based on the improved number.

What? Yes, 8.3% is good compared to 9.1% where we were. Yes, 8.3% is good compared to the 8.5% economists predicted. But how does it feel to you? Do you see marked improvement in your neighborhood? Does it feel like we are moving out of the Great Recession? Let’s look at some numbers and what you will be hearing about for the next month until the BLS provides more numbers.

Let’s detail some percentages: 8.3%, 15.1%, 11.0%, 8.0%. Some numbers 1,177,000; 1,685,000; and another percentage 63.7%. These are numbers you will need to know to make heads or tails of the spins you will hear for the next number of weeks.

8.3%: January Unemployment published by the BLS after their monthly phone survey. One of the questions they ask is “Did you apply for a job during the time period between x and y?” If the answer is “No.” and you aren’t currently employed, you are considered not looking and not part of the employment work force. Remember that 8.3% is 12.7M people out of the153M who are either working or still looking/applying for work.

15.1%: This is the “Underemployed” or “U-6” number and takes into account those who are working part-time (PT) but want to be working full-time (FT). It also estimates those who are “marginally attached to the Labor Force”, i.e. would start looking again as soon as they can.

This 15.1% has improved from 17.3% a year ago and is still very high. The implication is that as the economy improves there are that many million more jobs needed to absorb the people looking. Remember that the net working population growth each month is approx 140,000. If only 127,000 jobs are created in a month, the Unemployment stays flat. The 8.8M jobs lost between January 2008 and February 2010 has been devastating.

To get back to healthy, we not only need to get a significant number of the Unemployed back to work, but also many of the ~3M PT employed who are wanting FT employment, plus many of the millions who have given up looking and are not part of the 8.3% and for some not even part of the 15.1%. Watch for OFA to use the chart up on the left with the down bars in red, blamed on Bush and the up bars in green attributed to the policies of this administration.

11.0%: today’s number of January Unemployed if the number of 2008 employees were all still in the game, at least looking for employment. Don't confuse this. Today's 8.3% is lower because so many are no longer looking. If you add those dropouts back in, as if they were still looking, the number would be 11% today.

8.0%: You will hear republican candidates calling out Pres. Obama for the 8.0% bright line he drew in the sand, an unemployment number he claimed when he touted the stimulus projects. You will hear Pres. Obama and Whitehouse Press Sec’y Jay Carney rebutting that his policies have led to the recovery from the worst part of the downturn (a downturn caused by the failed policies of his predecessor, btw.) You decide. Is it feeling like a recovery? Some will say yes and others will say no.

1,177,000 is the adjustment in January to the Labor Force. An adjustment was made to accommodate the 2010 census numbers and in the process it was determined that this many additional people are not in the workforce and not looking for work.

1,685,000 is the number added to the entire population of working age based on the 2010 census. Of this number 508,000 have found work or are looking and 1.2M are not in the Labor Force. Note that this number of people did not drop out in the month of January as some have reported, but are part to a catch up adjustment. There is some debate around the 1.2M number, but the truth still is that these need to be included in the millions who will need work if we are to bring the unemployment rate back to a healthy figure (closer to 5%).

63.7% is the participation percentage, meaning what percentage of the working-age* population is participating in the work force, either FT or PT employed. This number at 63.7% is down from a year ago at 64.2% and dropped 0.3 pts in January because of the adjustments just mentioned. The number has not been this low since 1984 and to some, this is the most concerning statistic. Will those long-term out of work be able to reengage in the workforce? BTW, *the working population is considered all 16 and up who are not on active duty or in an elderly, mental, or penal institution. That civilian worker number in January is 242M.

Another bright point from the BLS Jobs Report is that the unemployment rate amongst Iraq and Afghanistan Vets fell from 13.1 to 9.3%, still not low enough, but a nice movement in the right direction.

The impact on mortgage rates Friday was about an 1/8th of a percent. The market during the day today has already recovered more than half of that decrease. The very small net reaction in the market is an indicator that the bond buyers are not seeing this Unemployment “improvement” in the same light as the Whitehouse. The Fed is sticking by thei predictions last week that Unemployment will be between 8.2 and 8.5% on the year.

These days, more than ever, experience counts. We at Signet have spent our careers providing the best programs and the best customer service. You, your friends and clients deserve the best. We enjoy making exceptional real estate deals happen. Please let us call your friends and clients who could use expert advice. We are grateful to work with you.

The FOMC released its announcement this morning at 9:30 eastern. Two very important indications of what the FOMC will do are found in the statement released to the press.

1. They anticipate keeping the “exceptionally low fed funds rate at least through late 2014″. (Had previously been “into late 2013″, so this is favorable to interest rates.)

2. They have announced extending their program to bolster long-term security holdings.

The impact to the rates was precipitous. Check out this chart to see how the bellwether 10-yr Treasury dropped 14 bps immediately after the announcement.

Mortgage rates continue to improve.

Big news in the Interest Rates market! The mortgage backed securities that enable banks to package loans into the secondary market are at an all-time high which means rates are great and getting better.

Only once ever has the 3.50% coupon MBS from Fannie Mae closed this high and it was in the excitement of the “Operation Twist” announcement and introduction about 100 days ago. At that time interest rates plummeted.

Today we are experiencing the same thing with interest rates in a place that allow for cost-free, 30-year fixed loans on purchases and refis with a 3 in front. That’s right APRs sub 4.0%.

See your friendly neighborhood mortgage broker on Monday for the best available rates!

...Jobs and it Begins with Housing! But wait...

Unemployment dropped sharply last week to 8.6%! Watch this number. The biggest component of the drop is the 100s of thousands who gave up their search, either for the holidays or until the economy makes job search a bit better. I haven't heard any Administration officials touting this number yet and I hope I don't. People have been scared away and discouraged.

The jobs created at 120,000 reported last week is still not enough to even break even with the number of workers coming of age outpacing those turning standard retirement age. And that doesn't take into account that so many are now working much later in life than they used to.

So Unemployment improved but jobs are still not keeping up. We need
1- More-reasonable credit standards in home lending;
2- Significantly lower Federal deficits (currently >$120 B per month!); and
3- Less fear of tax hikes and regulatory crush on the businesses that create jobs.