Tag Archives: Mortgages

mtg apps dip

Posted on by

How does that go again about low rates helping housing?

Mortgage Applications Dipped Last Week

June 29 (Reuters) — Applications for U.S. home mortgages slipped last week as demand waned, even as mortgage rates dropped, an industry group said Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 2.7 percent in the week ended June 24.

The MBA’s seasonally adjusted index of refinancing applications fell 2.6 percent, while the gauge of loan requests for home purchases lost 3.0 percent.

The refinance share of mortgage activity increased to 69.5 percent of total applications from 69.2 percent the week before.

Fixed 30-year mortgage rates averaged 4.46 percent in the week, down from 4.57 percent.

Share

Mosler proposal for the housing agencies

Posted on by

Have the Fed Financing Bank fund the agencies with fixed rate amortizing term funding.

Have the FFB eat the convexity and allow prepayments of advances at par as mtgs pay down.

Have Congress set the FFB’s advance rate for the mtgs for public purpose.

Have fed member banks originate agency mtgs on
Congressionally dictated terms as agents for the agencies on a fee basis.

Have the agencies hold all these newly issues loans in portfolio.

Have the banks do the servicing for a fee.

This would lower mtg rates maybe 1%.

Have the agencies offer refi’s for existing agency loans at current rates without new appraisals or income statements.

Am i missing anything?

Feel free to distribute!

Share

mtg apps for new purchases fall again

Posted on by

Seems the fall off after the tax credit ended April 30th has yet to fully run its course:

US Mortgage Applications Soar on Refinance Demand

July 7th (Reuters) —Refinancing drove total U.S. mortgage applications to a nine-month high last week, while demand for loans to purchase homes sunk to a near 13-year low as buyers remained sidelined after the expiration of federal tax credits.

Mortgage rates stuck around record lows, the Mortgage Bankers Association said on Wednesday, giving homeowners another chance to cut monthly payments by refinancing.

Refinancing requests jumped 9.2 percent in the week ended July 2 to the highest level since May 2009, lifting total applications by 6.7 percent, seasonally adjusted, to the highest level since early October 2009.

Demand for mortgages to buy homes slipped 2 percent. It was the eighth weekly drop in the nine weeks since the federal tax credits for homebuyers expired on April 30.

“For the month of June, purchase applications declined almost 15 percent relative to the prior month and were down more than 30 percent compared to April, the last month in which buyers were eligible for the tax credit,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement.

The average 30-year mortgage rate was little changed in the week ended July 2, climbing 0.01 percentage point to 4.68 percent.

The borrowing rate lingered just above the record low of 4.61 percent set in March 2009, according to the MBA’s records that date back to 1990.

Fifteen-year mortgage rates rose to 4.11 percent last week from the record low 4.06 percent set the prior week.

Refinancings accounted for 78.7 percent of all applications last week, the highest share since April 2009, the industry group said.

Tepid employment growth and a surprisingly steep slump in pending home sales kept interest rates low.

Home purchases will stay weak over the next few months as the housing market adjusts to the end of government incentives, and prices should bottom around the third quarter, said Robert Andrews, senior research analyst at IBISWorld in Santa Monica, California.

Fallout from record defaults and foreclosures are also likely to sway many younger buyers from making such a big commitment in the near term, he said.

“People in my generation, people 20 to 30 years old, saw the downside risk associated with housing, so I think there’s going to be a bit weaker demand over the next few years,” said Andrews.

Refinancing, likewise, is unlikely to approach the levels seen last year when mortgage rates were near current levels.

Borrowers who could qualify for refinancing have in most cases already refinanced, most analysts agree.

Share

Re: Alt A downgrades

Posted on by


[Skip to the end]

(An email exchange)

On Wed, Jun 4, 2008 at 12:57 AM, Eric wrote:
>     I guess you have seen this article.
>
>      Primes going down too.
>
>
>      More generally look at the attached graphs, they suggest that IOs and other
>      exotic mortgage are clearly a major cause of the problems, independently of
>      the quality of the loans. I think there is here a pretty good argument to make
>      that non-fixed mortgages, and more especially exotic mortgage have structural
>      characteristics that make them prone to speculative and ponzi structure. The
>      borrowers expect to be able to refinance at one point once interest rate reset or
>      the principal become due. Warren you were saying that proof of ability to pay
>     “libor plus 3 or whatever” was necessary to qualify. This margin of safety
>      (expected ability to pay libor +3 even though now borrower pay only teaser rate)
>      may have been destroyed in several ways.
>
>      – the interest rate may have reset at a higher rate than libor + 3, so that people
>      cannot afford the mortgage anymore.
>
>      – ARMs reinforce the probability of the previous effect, especially when libor when
>      up sky high after the crisis
>
>     – Income of borrowers felt short of expectations, expecially with the economic
>     slowdown (here fiscal policy is clearly a big player)
>
>     – The margin of safety thinned. Maybe previously they had to prove libor + 5 but
>     progressively borrower only had to prove libor + 4 then libor + 3. This would qualify
>      more borrowers and make the deal more sensitive to shock in product and financial
>      markets
>
>      In all this case the affordability of the mortgage is questioned Þ need to refinance Þ
>      if not available then sell the house (short sale or foreclosure). Fixed-rate mortgage
>      eliminate three of the previous reason (only income expectations is a problem).
>
>      Éric

agreed with all.

add to that food and energy prices taking income from home mtg payments, which could be the larger short term effect.

the fed has been taking some heat for this under the theory that the low rates have hurt the $ and thereby hurt the financial sector via the above channel, rather than helped the financial sector via lower rates ‘easing’ conditions via the lower payments channel.

the fed has argued this isn’t the case, insisting the lower rates have helped more than hurt.

also, the fiscal package could soften some of the delinquency increases for a few months.


[top]

Share

U.K. mortgage approvals drop to least since 1999

Posted on by

U.K. Mortgage Approvals Drop to Least Since 1999

By Jennifer Ryan

(Bloomberg) U.K. mortgage approvals dropped in December to the lowest in at least nine years, and consumer credit fell, threatening the outlook for economic growth.

Lenders granted 73,000 loans for house purchase, down from 81,000 in November and the least since records began in January 1999, the Bank of England said in London today. The median forecast in a Bloomberg News survey of 24 economists was 79,000. Lending on personal loans and overdrafts fell to 265 million pounds ($530 million), the least in 15 years.

Banks are tightening credit standards after contagion from the U.S. subprime mortgage market collapse, the Financial Services Authority said yesterday. Less access to credit for Britons with record debt may further slow consumer spending and a weakening housing market, adding to the case for an interest rate reduction by the Bank of England as soon as next week.

“The household sector was clearly under some kind of pressure at the end of 2007,” James Shugg, an economist at Westpac Banking Corp. in London, said in an interview on Bloomberg Television. “The U.K. housing market is embarking on a much slower growth period.” He predicted further interest rate reductions after a quarter-point cut last month.

In a separate statement, Prime Minister Gordon Brown reappointed central bank Governor Mervyn King to serve another five-year term. King accepted the position, saying in a statement that he looks “forward to working hard with my bank and MPC colleagues on the economic and financial challenges that face us all.”

Consumer Credit
The central bank’s report today showed consumers borrowed less on unsecured credit as they faced repaying a record 1.4 trillion pounds in debt and banks curbed lending to them. Net consumer credit fell to 557 million pounds in December, less than half the previous month’s total.

“A significant minority of consumers could experience financial problems because of their high levels of borrowing,” the FSA, the U.K.’s financial regulator, said in its risk outlook report yesterday. “A growing number of consumers are likely to experience debt repayment problems in 2008.”

The average cost for a fixed-rate mortgage maturing in the next 12 months and switching to a variable rate will rise by about 210 pounds per month, creating a “serious impact on the affordability of the loan,” the FSA said. The increase will affect about 1.4 million home loans.

Subprime Losses
Britons face higher home loan costs after banks around the world posted at least $133 billion in losses from the collapse of the U.S. subprime mortgage market.

The average rate offered by lenders on a mortgage for 95 percent of the price of a property, fixed for 24 months, rose to 6.53 percent in December from 6.44 percent, the central bank said Jan. 10. The central bank’s credit conditions survey showed banks plan to limit access to all debt in the first quarter.

“There is a risk that some consumers could find it difficult to meet their credit commitments due to tighter lending standards for both secured and unsecured credit,” the FSA said.

All 30 economists in a Bloomberg News survey forecast the Bank of England will cut interest rates a quarter point to 5.25 percent on Feb. 7 as growth slows and the housing market stalls.

U.K. retail sales rose at the slowest pace in 14 months in January, the Confederation of British Industry said yesterday.

House prices fell for a fourth month in January, Hometrack Ltd. said Jan. 28. U.K. real estate professionals said December was the worst month for the housing market since the aftermath of Britain’s last recession in 1992, according to a Jan. 16. report by the Royal Institution of Chartered Surveyors.

♥

Share

Re: meltdown?

Posted on by

(an interoffice email)

> … He’s here w/me now & also is very concerned over the entire
> spectrum, especially all the 5/1 ARM’s & 2nd mgtg paper most
> refinancing this year. Ie: orginally good credits, now not. A ton of
> 5/1 Arm paper was done w/ escalations up 40/50% payment wise.

Presumably the borrowers qualified at the time based on the higher payments?

And I see refi’s ratcheting up nicely. Unemployment is about the same, incomes are up, so most borrowers should qualify for refis,
apart from the ones that slipped by with substandard credit in the first place?

> Guess w/these Insurance Cos being downgraded tomorrow will be BLACK Tuesday.
> So, how do we fix a crisis of CONFIDENCE? BB isn’t too convincing these days.

The risk is mark to market risk if there is forced selling by investors that must have rated credits and were relying on the insurance to comply with their ratings criteria.

Forced selling is disruptive for sure- sellers lose, buyers gain as prices go lower than economic and/or recovery value.

Not much the Fed or Congress can do apart from bailing out the bond holders by taking over some piece of the insurance, and operationally it’s hard to see them doing that on a timely basis. But it would ‘cost’ the govt. a relatively small amount of $ to do that, as first loss would still be the shareholders of the ins. companies, and the govt could insure maybe only 95% of the rest, limiting default losses for bond holders to 5 pts max, for example.

As before, none of this directly alters the real economy, apart from psychological effects that might slow demand for a while. This much like the crash of 87- large financial losses but the real economy muddled through until the Bush tax hikes…

All the best!

warren

Share