“Bond Market News and Perspective for Mortgage Professionals”

Friday, March 27, 2009

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Michigan Consumer Sentiment Index Rose to 57.3 in March from 56.3 in February. The gauge, which has averaged 112 over the last three decades, reached a 28-year low of 55.3 in November.

.Savings Rate Continues to Be High , Spending Rises a Bit, as Incomes Fall:   Personal Income Decreased -.2% in February, Consumption Expenditures +.2%   Personal saving as a percentage of disposable personal income was 4.2% in February after 4.4% in January. The last time the saving rate exceeded 4.0% two straight months was August and September 1998,  Saving money is healthy for households and the economy over time, a path to prosperity. But today’s newfound thrift, born of fear, brings pain to the economy in the short-term because a dollar saved is not a dollar spent. Consumer spending makes up 70% of gross domestic product, the broad measure of the economy.

Treasuries Rise Before Fed’s Second Buyback as Stocks Fall. Three-year notes led the gains before the central bank’s scheduled purchase of notes maturing from March 2011 to April 2012. The Fed on March 25 bought $7.5 billion of U.S. debt as it began its first targeted purchases of Treasuries since the 1960s. The Treasury this week auctioned a record $98 billion of coupon securities. The yield on the benchmark 10-year note fell two basis points to 2.72 percent. Yields have now gained 19 basis points in the seven days since the Fed’s purchasing announcement sent them down 47 basis points, the most since 1964. The yield declined to a record low of 2.04 percent on Dec. 18 and averaged 4.26 percent for the past five years.

 Fifteen-year fixed-rate mortgages and five-year adjustable-rate mortgages also hit record lows. The 15-year fixed-rate mortgage averaged 4.58% and hasn’t been lower since 1991, when the survey began tracking the mortgage. The 15-year mortgage averaged 4.61% last week and 5.34% a year ago.  Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.96%, the lowest since the survey began tracking the ARM in 2005. The ARM averaged 4.98% last week and 5.67% a year ago. One-year Treasury-indexed ARMs averaged 4.85%, down from 4.91% last week and 5.24% a year ago.Freddie Mac:  Thirty-Year Mortgage Hits a Low of 4.85%, the lowest point since Freddie Mac’s weekly survey began in 1971. Repayment Risk Shifts Back to Mortgage Lenders Under House Bill. legislationfixed-rate loans

 The proposed would prohibit lenders from “directly or indirectly” hedging or transferring a minimum retained credit risk on most nontraditional mortgages, including some loans that have adjustable interest rates or require little documentation of a borrower’s income. The legislation introduced today is designed to curb “predatory” lending and encourage the use of traditional 30-year, .  “The growth of exotic, non-traditional mortgages was a major factor in the current housing and foreclosure crisis,”

.Broker Offers Unemployment Insurance Plan for Home Buyers People who list their homes for sale through the firm can participate in this program by agreeing to pay $329 at the closing to pay for the insurance. The policy gives the buyer $1,500 a month for up to six months if he or she loses a job within the first year of purchasing the home.

 

 

Economic Calendar for upcoming releases:

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By Robert Schmidt and Scott Lanman

 

     March 25 (Bloomberg) — The Obama administration is preparing an overhaul of U.S. banking rules that would force financial companies to keep more cash on hand in case their trading bets go wrong.

     Treasury Secretary Timothy Geithner told lawmakers yesterday that changes will include “strong oversight, including appropriate constraints on risk-taking.” Federal Reserve Chairman Ben S. Bernanke said the case of American International Group Inc. showed the “intense problem” of trading with insufficient capital to guard against losses.

     “You’ll see less risk assumed, and that might lead to lower profits on average,” said Robert Parry, who was president of the Federal Reserve Bank of San Francisco from 1986 to 2004.

“There’s no doubt that the administration and regulators are going” to get banks to treat risk differently.

     The comments foreshadowed what may become the biggest revamp to U.S. banking rules since the 1930s. To prevent the nation from losing its share of the global financial industry, the administration will also need to ensure that regulators abroad take similar measures, Geithner said.

     “Without that, there is a risk that capital will move, business will shift from the United States, and we’ll end up with a weaker system overall,” the Treasury chief said at a House Financial Services Committee hearing yesterday.

To contact the reporters on this story:

Robert Schmidt in Washington at +1-202-624-1853 or rschmidt5@bloomberg.net

Scott Lanman in Washington at +1-202-624-1934 or slanman@bloomberg.net

To contact the editor responsible for this story:

Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net

 

  U.S. MBA’s Mortgage Applications Index Jumped 32% Last Week

2009-03-25 11:00:00.10 GMT

By Shobhana Chandra

 

     March 25 (Bloomberg) — Mortgage applications in the U.S. rose for a third consecutive week as a drop in borrowing costs helped spur a wave of refinancing and encouraged purchases.

     The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan soared 32 percent to 1,159.4 in the week ended March 20 from 876.9 the prior week. The group’s refinancing gauge surged 42 percent and its purchase index gained 4.2 percent.

     The interest rate on a 30-year fixed loan plunged to a record low last week, the group said, prompting homeowners to refinance mortgages to trim monthly payments. Still, the housing slump may persist as foreclosures depress property values and widespread job cuts limit demand, worsening the real-estate glut.

     “Lower mortgage rates will stimulate demand, but will not be enough to keep sales from sliding further over the next few months,” said Patrick Newport, an economist at IHS Global Insight Inc. in Lexington, Massachusetts.

     The mortgage bankers’ purchase index increased to 267.8 last week, from 257.1 the previous week, today’s report showed.

The refinancing gauge jumped to 6,363.2 from 4,497.6.

     The share of applicants seeking to refinance loans rose to 78.5 percent of total applications last week, from 72.9 percent.

     The average rate on a 30-year fixed-rate loan fell to 4.63 percent, the lowest level since the Mortgage Bankers group began records in 1990, from 4.89 percent the prior week.

     At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be about $514, or $69 less than the same week a year earlier, when the rate was 5.74 percent.

To contact the reporter on this story:

Shobhana Chandra in Washington at +1-202-624-1888 or schandra1@bloomberg.net

To contact the editor responsible for this story:

Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net

 

  U.S. Durable Goods Orders Unexpectedly Rose 3.4% in February

2009-03-25 12:30:00.184 GMT

By Courtney Schlisserman

 

     March 25 (Bloomberg) — Orders for U.S. durable goods unexpectedly rose in February on a rebound in demand for machinery, computers and defense equipment.

     The 3.4 percent increase was the biggest in more than a year and followed a 7.3 percent decrease in January that was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders gained 3.9 percent, the most since August 2005.

     Combined with reports showing improvements in retail sales, residential construction and home resales, the figures indicate the economy is stabilizing after shrinking last quarter at the fastest pace in a quarter century. Stepped up efforts by the Obama administration and Federal Reserve to ease the credit crunch may help revive growth later this year.

     “We are still seeing contraction, but there’s been a slowing in the pace of contraction,” Julia Coronado, senior U.S.

economist at Barclays Capital Inc. in New York, said before the report. “We have seen consumer spending stabilize and that means manufacturers will work off the inventories and slow down the pace of contraction in production.”

     Economists forecast total durable goods orders would fall

2.5 percent, according to the median of 69 projections in a Bloomberg News survey. Estimates ranged from a drop of 4.1 percent to a 0.7 percent gain.

     Excluding transportation, orders were expected to decline 2 percent, according to the Bloomberg survey.

To contact the report on this story:

Courtney Schlisserman in Washington +1-202-624-1943 or Cschlisserma@bloomberg.net

To contact the editor responsible for this story;

Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net

 

  U.S. New-Home Sales Rose 4.7% to a 337,000 Pace in February

2009-03-25 14:00:00.251 GMT

By Shobhana Chandra

 

     March 25 (Bloomberg) — Purchases of new homes in the U.S. unexpectedly rose in February from a record low as plummeting prices and cheaper mortgage rates lured some buyers.

     Sales increased 4.7 percent to an annual pace of 337,000 after a 322,000 rate in January, the Commerce Department said today in Washington. The median sales price fell 18 percent, and unsold homes at the current sales pace were the fewest since June 2002.

     Demand for new homes has been limited by the highest jobless rate in a quarter century and shrinking household wealth, a sign housing may stay in recession until steps to cut borrowing costs and reduce mortgage defaults take hold. Sales of previously owned homes unexpectedly rose last month as buyers snatched up foreclosed properties at bargain rates.

     “The housing slump may be nearing a bottom,” David Resler, chief economist at Nomura Securities International Inc. in New York, said before the report. “However, we would expect sales and other metrics of housing activity to recover only gradually.”

     Economists forecast new home sales would drop to a 300,000 annual pace from an originally reported 309,000 rate in January, according to the median estimate in a Bloomberg survey of 65 economists. Forecasts ranged from 280,000 to 340,000.

     The median price of a new home decreased from a year earlier to $200,900, the lowest since December 2003.

     Sales of new homes fell 41 percent from February 2008.

     Inventories decreased. The number of homes for sale dropped to a seasonally adjusted 330,000, and the supply of homes at the current sales rate fell to 12.2 months’ worth from 12.9 months.

     Sales in February were led by a 9.7 percent gain in the South and a 6.6 percent increase in the West.

To contact the reporter on this story:

Shobhana Chandra in Washington +1-202-624-1888 or schandra1@bloomberg.net

To contact the editor responsible for this story:

Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net

Posted in MORTGAGE NEWS, THE FED | No Comments »

Posted in MORTGAGE NEWS | No Comments »