San Diego, California Mortgage Market Update

HSBC has come out with their response to the changes made at FNMA and FHLMC. They’ve notified brokers that "Charges for Non-traditional or Missing FICOS scores with an LTV of <=70% or 70.01-75.00 will be increased. All other AAP overlay charges will remain unchanged at this time."

How can FNMA (and FHLMC) lose money? Over 25% of Fannie Mae's credit losses in the third quarter came from its book of guaranteed alternative-A mortgages, according to the company's president and chief executive officer, Daniel Mudd.

Should everyone be able to receive a loan from the government? Or should FHA lenders say "no" to borrowers with FICO’s less than 580? Mortgage originators who only did subprime and Alt-A are now taking the same type of subprime/Alt-A borrower and sending them to investors who allow manual underwrites (LP/DU often won't approve this type of borrower), with no minimum FICO requirements. These loans then flow up into government-guaranteed GNMA securities while the broker or agent collects their points. Some feel that this new crop of government production will not perform like traditional FHA/VA mortgage-backed securities, which may in turn impact HUD. Some investors, however, such as Citi, are setting up price adjustments (overlays) to compensate for borrowers with low credit scores.

Yesterday, rates rose and prices worsened with the news that the Fed would be sponsoring a term auction facility to ease year-end inter-bank funding pressures. This is good news for the economy, they hope, and mildly helped the stock market. The Federal Reserve, with four other central banks, will add cash to the financial system to help ease stressed conditions in credit markets, in an effort to ensure that banks have adequate access to capital through the year end, when demand is typically the greatest. They plan to hold a series of auctions, starting with $40 billion next week that would provide term funds to banks against a wide variety of collateral to secure loans at the discount window. Many predict that the Fed Funds rate may fall below 3% in order to keep the US economy from falling into recession (Merrill Lynch predicts 2% by next year), and a survey of economists finds the number forecasting a recession has doubled recently (rising to 18% of the group). About 67% of the group said the chance of recession was at least 25%.

This morning we had quite a bit of news. The Producer Price Index (+3.2%, twice expectations, +.4% core), Jobless Claims (-7k to 333k), and Retail Sales (+1.2%, ex-transportation +1.8%) were all relatively strong. As one would expect, rates have moved up (10-yr is 4.15%) and mortgage prices have worsened (currently by .125-.250). Tomorrow we will close out the week with the Consumer Price Index number, but the numbers from this morning are causing some economists to revise GDP growth higher!

Today's Market update is brought to you by:

 Todd Albrigo.

Market Happenings:

New home sales plunged -9% in November to 647K : well below expectations. The level is the lowest since April 1995 and is less than half the size of the July 2005 peak. Unsold inventories rose to 9.3 months, just below the upwardly revised 9.4 month high of August. Prices don't reflect the housing recession or the lack of demand as median prices stand just -0.4% lower than a year ago as average prices (more reflective of the high priced homes) shows a 0.5% gain from a year ago. No way to put a pretty face on the housing data with no near term improvement expected. The Chicago manufacturing index rose to 56.6 in December: rather than the expected decline from 52.9 in November. While the regional index is volatile the gain is significant given the sub 50 (contractionary) read in October as the level is the strongest in a half year. The market is focusing on the somber and bearish housing data as well as seeking a flight to quality as the Bhutto assassination continues to resonate throughout the world with implications of a nuclear state that has been thrown into chaos unsettling investors (as well as non-investors). With comparable Treasuries yielding in the low 4.0% range, investors are targeting Agency MBS as their safe haven with FNMA 5.5% coupons charging up 17 ticks (+17/32) while 6.0%’s are plus 10 (+10/32). Expect lender pricing to be 25 – 50 bps better today depending on note rate and loan program.

Industry News:

Countrywide, ACORN Mull Home Retention

Countrywide Financial Corp. and the Association of Community Organizations for Reform Now have entered into discussions to develop a "blueprint" for foreclosure prevention that they expect to release in early January. "Countrywide and ACORN anticipate final release of the groundbreaking provisions of the home retention initiative soon after the New Year," says a joint release. The discussions are mainly focused on helping subprime borrowers who have shown an ability and willingness to make their payments. But the parties are also looking at different products, including payment-option adjustable-rate mortgages. "We see actually more borrowers getting into trouble with payment-option ARMs than we are seeing with hybrid ARMs at this point," said Michael Shea, executive director for ACORN Housing Corp. He noted that Countrywide does not have a systematic approach yet for helping option ARM borrowers. "That is one of the things we are talking to them about," Mr. Shea said.

Applications Fall

The Market Composite Index, an overall measure of mortgage applications, fell from 653.8 to 603.8 on a seasonally adjusted basis during the week ended Dec. 21, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. On an unadjusted basis, applications decreased 8.2% on the week but were up 9.9% from the level recorded a year earlier. The Purchase Index fell from 422.2 to 394.5 on a seasonally adjusted basis, while the Refinance Index declined from 2093.6 to 1915.3. Refinancings represented 53.0% of total applications, down from 53.2% the previous week, while adjustable-rate mortgages accounted for 10.4%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.18% to 6.10%, and points (including the origination fee) fell from 1.12 to 1.05, for loans with 80% loan-to-value ratios, the association re

TB&W to Buy Control of Platinum Bancshares

Platinum Bancshares Inc., Rolling Meadows, Ill., has announced the signing of a common stock purchase agreement with Taylor, Bean & Whitaker Mortgage Corp. under which TB&W will acquire a controlling interest in Platinum. The terms of the deal were not disclosed. William Giambrone, chairman and chief executive officer of Platinum, said TB&W is "one of the premier national players" in the prime residential mortgage market. The transaction will allow Platinum to diversify its products and services, he said. TB&W is based in Ocala, Fla.

Misc:

-- On Today’s date in 1832, John C. Calhoun became the first vice president of the United States to resign, stepping down over differences with President Jackson.

-- On Today’s date in 1846, Iowa became the 29th state to be admitted to the Union. At some point its citizens also became the political litmus test for all of America.

-- On Today’s date in 1945, Congress officially recognized the Pledge of Allegiance.

-- Today Actor Denzel Washington is 53. He has mad squabbles.

-- Today Comedian Seth Meyers is 34.

-- Today Rhythm-and-blues singer John Legend is 29.

-- Today Actress Sienna Miller is 26.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.

Market Happenings:

Yes, Bonds and Mortgage Backed’s are Open Today : The market has reluctantly shown up for work this morning as the holiday impacted week grinds on & trade looks to do the same. Globally most markets were closed ushering in a very slow start to the session. The Housing Bear keep rolling with the release of the Case Schiller data and this shouldn’t come as a huge surprise. Little else going on today. The stock market has been in sell mode since the bell on thin volumes which likely is impacting the pickup in bonds and MBS, albeit slight. Look for lender ratesheet pricing to be about flat from Monday.

Industry News:

Home Prices Drop 6.1% - Case-Shiller Says 11 of 20 Cities Show Record Low Growth Rates

Home prices in 20 major U.S. cities were down 6.1% on average in the past year as of October, according to the Case-Shiller price index released Wednesday by Standard & Poor's. Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3% in April 1991. "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, chief economist at MacroMarkets LLC and co-developer of the index. Eleven of the 20 metro areas posted a record low annual growth rate. Also, all 20 metro areas declined from the prior month as San Diego posted the largest decline -- 2.6%. Miami sustained the largest drop over the past year, with a decline of 12.4%. Next came: Tampa, with a drop of 11.8%, Detroit with a drop of 11.2%, and San Diego with a drop of 11.1%. Home prices are going to decline "considerably further" in coming quarters, likely reaching a double-digit pace on a year-over-year basis, according to Joshua Shapiro, chief economist for MFR Inc. "Given conditions relating to mortgage financing, and the number of unsold homes that is piling up, all regions are likely to continue on a negative trend in the months ahead, and those with the greatest oversupply (at the bottom of the pack at the moment) will continue to fall by the most," wrote Shapiro in a research note.

GSE Loan Purchases Up, Portfolios Down

Loan purchases by Fannie Mae and Freddie Mac rose in November but their retained portfolios continued to shed assets. Fannie Mae purchased $63.7 billion in mortgages during the month, a 28% rise from the level recorded a year earlier. Freddie's purchases rose a more modest 8%, to $41.4 billion. At the end of November Fannie held $722 billion in mortgages, a 1.4% decline from the level on Oct. 31. Freddie's holdings fell 0.3%, to $701.3 billion. In a research note, Credit Suisse said, "Freddie disclosed that wider spreads on mortgage products adversely affected the fair value of its common equity during November." Credit Suisse has an "underperform" rating on Freddie and a price target of $22, which is $8 below its current trading value.

Fitch Downgrades Subprime Securities

Over 260 classes of mortgage-backed securities from 22 issuers were downgraded by Fitch Ratings on Dec. 21 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of approximately $27 billion. Among the securities affected by the latest downgrades were: 42 classes of Structured Asset Investment Loans mortgage pass-through certificates; 35 classes of Ameriquest, Argent, and Park Place mortgage pass-throughs; 31 classes of Soundview Home Equity Loan Trust asset-backed certificates; 15 classes from three Bear Stearns Asset-Backed Securities issues; 13 classes of Fremont Home Loan Trust mortgage pass-throughs; 13 classes of NovaStar mortgage pass-throughs; 12 classes of WaMu asset-backed certificates; 12 classes of Citigroup Mortgage Loan Trust mortgage pass-throughs; 11 classes of Option One mortgage pass-throughs; and 11 classes of People's Choice Home Loan mortgage pass-throughs. The rating actions were attributed to changes in Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness."

Misc:

-- On Today’s date in 1941, Winston Churchill became the first British prime minister to address a joint meeting of the U.S. Congress.

-- On Today’s date in 1996, 6-year-old beauty queen JonBenet Ramsey was found beaten and strangled in the basement of her family's home in Boulder, Colo. (To date, the slaying remains unsolved, despite a widely publicized "confession" by John Mark Karr.)

-- On Today’s date in 2004, more than 200,000 people, mostly in southern Asia, were killed by a tsunami triggered by the world's most powerful earthquake in 40 years beneath the Indian Ocean.

-- Today Baseball Hall of Fame catcher Carlton Fisk is 60.

-- Today Rock musician Lars Ulrich (Metallica) is 44.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.

Market Happenings:

The December consumer sentiment index was revised a point higher to 75.5 : but still shows a small -0.8% decline from November. The one-year inflation expectations were also revised down slightly to 3.4%. The index is already below the lowest level during the 2001 recession as its fallen 22% since the two year high reached in January. High energy prices, the mortgage disaster, tightened credit and a rising unemployment rate provide the fear as this morning's report on spending shows just how resilient the consumer can be. The news on spending is better than expected : The huge 1.1% nominal gain was partially offset by an 0.6% gain in the PCE price index to leave real spending (used for GDP) at a much stronger than expected 0.5%. The rise in nominal spending was the strongest in over two years and leaves an annual growth rate of a large 6.7%. Moreover, October's spending was revised higher to 0.4% -- doubling the initial read. Both provide a welcome boost to Q4 GDP estimates. Income growth was a bit below expectations at 0.4% but leaves a 6.1% yoy gain which will help support spending in the coming months/quarters. The outsized spending with the modest income growth returned the negative sign to the savings rate at -0.5%. Mortgage market appears grumpy on the whole with FNMA 5.5%’s of 9 ticks (-9/32) and 6.0%’s down 5 (-5/32). For those lenders who did not re-price yesterday, expect pricing to be off anywhere from 30 – 40 bps, and about 5 – 20 bps for those that did.

Industry News:

Bear Loses $854M in 4Q, Hikes B&C Hit

Bear Stearns & Co. posted an $854 million loss in the fourth quarter and increased its provision for subprime writedowns to $1.9 billion, a 60% hike from its previous damage estimate. Bear was a major player in the subprime asset-backed securities market, funding nondepository mortgage bankers, buying their loans, and then securitizing them. Bear Stearns currently owns a nonprime shop in Texas called EMC Mortgage. The Wall Street firm made headlines this summer when two subprime-related hedge funds it had started filed for bankruptcy protection. The London-based Barclays Bank -- which had lent $400 million to the funds -- sued Bear on Wednesday, saying the Wall Street firm misled it about the funds' performance.

Bear Sued by Barclays Over B&C Hedge Funds

Barclays Bank of London, which lent $400 million to two subprime hedge funds managed by Bear Stearns & Co., has sued the Wall Street firm, charging that Bear misled it about the performance of the funds. The funds -- High-Grade Structured Credit Strategies Fund, and High-Grade Structured Credit Strategies Enhanced Leverage Fund -- filed for bankruptcy protection in the Cayman Islands this summer. Barclays is owed money by the firms. The funds were managed by two Bear executives: Ralph Cioffi and Matthew Tannin. Mr. Cioffi recently left Bear. At deadline time, Bear Stearns had not commented on the suit. The failure of the funds is the subject of a criminal probe and an investigation by the Securities and Exchange Commission.

NAHB Sees Signs of Market Stabilization

The downturn in home values will likely persist through next year, though signs of stabilization are emerging, according to the chief economist of the National Association of Home Builders. NAHB chief economist David Seiders says home values will likely start to turn upward again early in 2009, with a 10%-15% decline in home prices from the peak of the cycle in 2005 to the trough. On the plus side, lower prices and low mortgage interest rates are reviving housing affordability, Mr. Seiders said during an annual year-end housing forecast call. Mr. Seiders, acknowledging that the housing downturn has been more severe than he predicted, said the meltdown in the housing finance market was the chief reason that home sales and prices have suffered more than expected. Still, he said improved housing affordability and low interest-rates are laying the groundwork for recovery. "Demand has weakened dramatically, but we are looking at tentative signs of stabilization," he said.

Misc:

-- On Today’s date in 1620, Pilgrims aboard the Mayflower went ashore for the first time at present-day Plymouth, Mass. They were greeted by the Golden Girls.

-- On Today’s date in 1937, the first feature-length animated cartoon in Technicolor, Walt Disney's "Snow White and the Seven Dwarfs," had its world premiere in Los Angeles.

-- On Today’s date in 1945, Gen. George S. Patton died in Heidelberg, Germany, of injuries from a car accident.

-- On Today’s date in 1988, 270 people were killed when a terrorist bomb exploded aboard a Pam Am Boeing 747 over Lockerbie, Scotland.

-- Today Talk show host Phil Donahue is 72.

-- Today Actress Jane Fonda is 70.

-- Today Actor Samuel L. Jackson is 59.

-- Today Tennis star (not the former LA Rams QB) Chris Evert is 53.

-- Today Actor-comedian Ray Romano is 50.

-- Today Actor-comedian Andy Dick is 42.

-- Today Actor Kiefer Sutherland is 41.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.

Market Happenings:

No bonuses for Bear Sterns Executives as the firm takes its first ever loss due to the credit mess (specifically their mortgage and mortgage derivatives holdings, surprise!) and it’s affect on their balance sheet. Initial claims for unemployment benefits rose 12K to 346K in the week of December 15 as the rebound back near 350K stokes recession worry. The last two recessions hit when the 4-week average rose above 362K as the new two year high of 343K rides an upward trend. The leading economic indicator fell -0.4% in November as the 6-month growth fell to -1.2% implying an on-coming recession. When 6-month growth falls below -1% or the string of declines reaches 3 months this leading indicator of recessions rings warning bells. The index misjudged the mid-90s "soft-landing" but correctly foresaw the 1990 and 2001 economic downturns. The index leads the starts of recession by about two quarters. So, with most of the data being released this morning, one could make the logical deduction that today would be a tough one for mortgages. Well blame it on holiday cheer (or a lack of volume) but FNMA MBS are actually up a couple of ticks since the bell. Expect lender ratesheet pricing to flat to better by 5 bps.

Industry News:

House Passes Mortgage Tax Relief

The House has passed a mortgage tax relief bill that encourages loan modifications and extends a deduction for mortgage insurance premiums -- clearing the way for the legislation to be sent to the president for his signature. The Senate passed the same bill (H.R. 3648) on Dec. 14. It ensures that homeowners are not penalized when a lender reduces the principal amount of their mortgage in a restructuring or foreclosure. Currently, any reduction in mortgage debt by a lender is treated as income for tax purposes. The tax relief is temporary, as requested by the Bush administration, and it applies to a discharge of debt on a principal residence before Jan. 1, 2010. Meanwhile, the bill extends the deduction on MI premiums for three years. Continuing this tax deduction is an "important step forward as Congress seeks solutions to the current housing and mortgage crisis," said Kevin Schneider, president of Genworth Financial Inc. "Many potential buyers can't make a traditional 20% down payment, and a loan with tax-deductible mortgage insurance may make the difference in their ability to become homeowners safely."

LoanPerformance: Home Prices Off in 21 States

Home prices in 21 states showed a 12-month decline in October, according to the latest LoanPerformance Home Price Index. "The overall picture continues to be mixed, however," said Damien Weldon, vice president of collateral and prepayment analytics for the San Francisco-based First American LoanPerformance. "Some states such as New York and Vermont, for example, actually show an increase in year-over-year home price appreciation compared to last month's LoanPerformance HPI release." The LoanPerformance HPI provides a comprehensive set of monthly home price indices and median sales prices covering 7,451 ZIP codes and 662 counties in all 50 states and the District of Columbia, the company said. The index incorporates more than 30 years of repeat sales transactions from the property database of its parent company, First American CoreLogic Inc.

Utah Bank Takes $94M CDO Hit

Zions Bancorp, Salt Lake City, says it will take a $94 million pretax charge in the fourth quarter because the collateral backing some of its investments in collateralized debt obligations is "impaired." According to a new filing with the Securities and Exchange Commission, Zions said the collateral backing the CDOs includes debt issued by residential mortgage real estate investment trusts, commercial mortgage-backed securities, home builder debt, and commercial income REITs. Seven REIT-related CDOs are of concern to the bank. (It has investments in 12.) Even though it expects to take a large hit, Zions said five of the seven CDOs are rated "investment grade."

Misc:

-- On Today’s date in 1803, the Louisiana Purchase was completed as ownership of the territory was formally transferred from France to the United States during ceremonies in New Orleans. Quite the deal for us, paying 4 cents/acre for a total of $15M.

-- On Today’s date in 1860, South Carolina became the first state to secede from the Union.

-- On Today’s date in 1864, Confederate forces evacuated Savannah, Ga., as Union Gen. William T. Sherman continued his "March to the Sea."

-- On Today’s date in 1989, the United States launched Operation Just Cause, sending troops into Panama to topple the government of Gen. Manuel Noriega.

-- Today Producer Dick Wolf ("Law & Order") is 61.

-- Today Chris Robinson (Black Crowes and Goldie Hawn’s Son in Law) is 41.

Today's market update brought to you by:

Todd Albrigo

Account Executive

CMG Mortgage, Inc.

Here’s Today’s Market Update
 
Arthur is 90 years old. He's played golf every day since his retirement 25 years ago.  One day he arrives home looking downcast. "That's it", he tells his wife. "I'm giving up golf. My eyesight has gotten so bad.... once I've hit the ball, I can't see where it went." His wife sympathizes, and pours him a cold drink.  As they sit down she says, "Why don't you take my brother with you, and give it one more try?"
That's no good" sighs Arthur. "Your brother's a hundred and three. He can't help."  He may be a hundred and three", says the wife, "but his eyesight is perfect."
So the next day Arthur heads off to the golf course with his brother-in-law.  He tees up, takes a mighty swing and squints down the fairway. He turns to his brother-in-law and asks, "Did you see the ball?"  "Of course I did!" 
"Where did it go?" says Arthur.
"I can't remember."
 
Treasury Secretary Henry Paulson favors temporarily allowing Freddie and Fannie to purchase jumbo loans which exceed $417,000. Currently the two own or guarantee 40% of the $11.5 trillion home loan market, and Paulson said he agreed with Fed Chairman Bernanke who suggested to lawmakers that they consider allowing Fannie Mae and Freddie Mac into the jumbo mortgage market. (It is up to Congress to determine the maximum loan amount, but Bernanke indicated in a Nov. 8 hearing that he favored letting Fannie Mae and Freddie Mac buy mortgages of up to $1 million.) OFHEO Director James Lockhart last week said they will begin considering the removal of a 30% excess reserve capital rule when the companies release 2007 results in February as a way of giving them freer rein for making loans.
 
Onto the “FHA bill”. A Senate bill, which passed last week, would expand the functions of the Federal Housing Administration (FHA) and hopes to make low-cost, fixed-rate mortgages available to more homebuyers and to homeowners seeking to refinance out of expensive adjustable rate mortgages (Arm’s). FHA-insured loans have become an important element in the proposed solutions to the subprime mortgage crisis. There is bipartisan Congressional support for the measures and from the Bush administration, and lenders like FHA’s because the government guarantee enables the lenders to easily sell off the loans.
 
The Senate FHA-modernization bill differs in some significant ways from the House bill. Both the House and the Senate versions raise cap limits, the maximum dollar amount of mortgages that are eligible for FHA insurance, but the House bill is much more aggressive in nearly every one of its provisions. The Senate’s version sets the cap at $417,000, while the House would set the cap at $729,750, which is more than twice its current amount. That will give many more home buyers, especially those in high-priced areas like California, access to FHA-insured loans. The House will also allow more people in by accepting no-money-down deals, unlike the current policy, which mandates a 3 percent down payment. The Senate bill still requires a down payment but halves it to 1.5 percent. Both bills relax the strict provisions that have kept FHA insured mortgages of limited use in buying condos and manufactured homes. The next step for the FHA modernization bill is for members of the House and Senate to work out the differences in the two versions. That may happen as early as this week.
 
A couple more things about VA loans that agents need to keep in mind. While they do not require PMI, the borrower pays a VA funding fee which is typically wrapped into the loan balance similar to the upfront MIP on FHA loans.  Also the VA guarantee to lenders is only 25% coverage. The VA guarantees the top 25% of the loan which means that, unlike FHA who guarantees 100% of the loss, the VA only covers a portion. So if a lender loses more than 25% they are on the hook for the rest and in severely declining markets, VA loans can cost a lender.
 
November Housing Starts came out as expected, -3.7%, but showed a big drop, and Building Permits were -1.5%. One thing to note – the decline in Building Permits is decreasing, which is a stretch for good news. What has that done to the market so far? The 10-yr is down to 4.18% and mortgage prices are about .125 higher (better). Goldman Sachs released their earnings, which were slightly stronger than expected, and the dollar has improved somewhat. But generally speaking, given the surprising resiliency in the economy with better than expected economic data and worse inflation indications, most do not expect much improvement in mortgage rates or in treasury yields for the rest of the year. The Fed may be done lowering rates for now and the markets are reflecting that. A catastrophic event in the financial markets such as a large bank going bust will need to happen before the next Fed meeting if we are going to see more cuts.
 
 
* Campbell, CA-based Alliance Title, with nearly 200 branch offices and more than 2,000 employees, unexpectedly shut down its operations over the weekend. Customers are advised to call the Insurance Department's hotline at 1-800-927-HELP (4357).
* On Friday CitiMortgage discontinued their FNMA EA III and EA TPR-III programs, changed their Expanded Lending Product FICO/LTV’s and Non Agency Alt-A LTV/FICO, and made other related adjustments.
 
 
Thanks for your business!

Market update brought to you by:
 
 
Todd Albrigo
Account Executive
CMG Mortgage, Inc.

Market Update
 
I had to have the garage door repaired. The Sears repairman told me that one of our problems was that we did not have a ”large” enough motor on the opener. I thought for a minute, and said that we had the largest one Sears made at that time, a 1/2 horsepower. He shook his head and said, “Buddy, you need a 1/4 horsepower.” I responded that 1/2 was larger than 1/4. He said, “No it's not. Four is larger than two.”
I haven't used Sears repair since. (Although maybe he has a career in Capital Markets.)
 
In the past a mortgage brokers definition of "no problem" meant “I'll do my best to figure what you are talking about after you say we have a deal.” Sometimes that meant pointing the borrower toward a subprime loan, sometimes toward a VA loan. But VA mortgage origination dropped during the real estate boom since many who qualified for the VA guarantee found it easier to take a subprime loan that required no down payment and little documentation of income or assets. Lenders were offering easy terms such as interest-only payments, which are not available through the VA program, and VA loans took longer to process. VA loans rules prohibit buyers from paying some closing costs, such as the home inspector's fee, and sellers can expect to pay such expenses if their buyer is using a VA loan.
 
Remember that the government does not lend the money for VA mortgages - the government provides lenders a guarantee in lieu of the veteran's cash down payment. If the veteran fails to pay back the loan, the lender can collect on that guarantee and with that government assurance, participating lenders are willing to give borrowers loans for the full price of their homes with no MI required. The absence of PMI saves borrowers hundreds of dollars each month. Qualified veterans and active-duty military personnel can buy a home for as much as $417,000 without a down payment or private mortgage insurance. Borrowers can add some down payment money to the mix and use the VA program for homes that cost more than $417,000. Larger VA loans may become more common now that GNMA (which packages VA loans for the secondary market) has changed its rules to allow larger VA loans if the borrower makes a down payment for at least a 25% of the portion of the home's price that exceeds $417,000. Some investors will actually lend up to $1 million for VA: if a veteran were to buy a $500,000 home, for example, the first $417,000 would require no down payment. For the remaining $83,000, the veteran would need to make down payment of 25%, or $20,750. All together, the veteran would be making a 4.15% down payment on a $500,000 home, without owing PMI. Agents can visit http://www.homeloans.va.gov for more information.
 
 
* Wells Fargo announced tough changes to their products. “Non-conforming: Additional LTV/CLTV changes are also effective - LTV:  LTV greater than 90 is no longer allowed. Additional requirements for LTV/CLTV above 80/80: LTV/CLTV greater than 80/80 require Full Documentation Option, Feedback Response from Direct Express (Full Doc or "none" selected for doc type) with no ineligible messages, Maximum DTI of 38%, 1-2 unit properties only, and Primary Residences only.” Wells also made changes for loans with FICO’s lower than 680, Limited Doc/VOA loans (minimum FICO of 740, maximum LTV/CLTV of 80/80, etc.), and for their “Jumbo LP and Jumbo DU Programs, a minimum Loan Score of 680 , maximum DTI of 45%.
* SunTrust announced new risk-based pricing guidelines with locks starting today for the Agency loan programs. All affected loans will be evaluated on the basis of attributes such as FICO score, loan –to-value (LTV) ratio, total loan-to-value (TLTV) ratio, interest only feature, secondary financing, etc.
 
 
Late last week Treasury and mortgage prices fell (worsened) after an unexpected spike in retail sales and a small drop in jobless claims. Retail sales surged +1.2% during November, as the PPI jumped 3.2% in November, the biggest one-month jump since August 1973. Regardless of the cut in overnight Fed Funds, the fact is that fixed mortgage rates tend to move in line with yields on long-term Treasury bonds, not short-term rates. The benchmark for a 30-year mortgage is actually the 10-year Treasury, because after 10 years, the average borrower has sold his or her house or refinanced.
 
This week we already had the Current Account Balance for the 3rd quarter (it shrank from $188 billion to $178 billion, evidence that the weak dollar has increased exports which should help to strengthen the dollar eventually) and the Empire State Manufacturing Index (a drop from 27.4 to 10.3). After that the 10-yr stands at 4.21% and mortgages are roughly unchanged. November's Housing Starts report will be released tomorrow morning, no news Wednesday, but Thursday we have the final to the 3rd Quarter GDP and the Conference Board’s Leading Economic Indicators (LEI) for the month of November. Lastly, heading into what appears to be the holiday weekend, we have November’s Personal Income and Outlays and the revised University of Michigan Index of Consumer Sentiment for December.

Today's market update is brought to you by:

Todd Albrigo
Account Executive
CMG Mortgage, Inc.

Home Equity Loans

A Home Equity Line of Credit (HELOC)A Home Equity Line of Credit is like a credit card. You can borrow money up to your credit limit, and you only get charged interest on the portion that you borrow. You can pay down the balance, then reuse the credit. Most have a draw term, usually 5 to 10 years, where you can draw money out, then the loan is paid back over a 10 to 15 year period. You may also elect to refinance the Equity Line and get another 5 to 10 years to use the line of credit.

You choose what you want to do with your home equity line of credit:
Remodel your home Take a vacation Consolidate bills Buy a car, boat or RV Finance tuition or other expense Use it as an emergency fund

There are many features of HELOC loan programs. Ask your Loan Officer to help you decide which is best for you.

Great Rates: rates can be below the prime rate on some programs. No Loan Fees: No appraisal fee or closing costs. Convenient Closings: Some programs allow doc signing in your home. Credit lines or maximum loan limits vary with each program. Pricing varies with the LTV. Accessing the cash in your credit line can be done by writing a check, charging on a credit card or making a withdrawal at a financial center. Many of these programs have an early termination fee. Some programs may offer a fixed rate loan option feature, where you can lock in a fixed rate on all or a portion of your outstanding balance. Pricing is based on your Credit Score. These cutoff limits are fairly strict, so if your score is just below the next higher range, you may want to discuss how to improve your score with your loan officer. A HELOC is usually 100% tax-deductible*, and a smart way to consolidate debt, pay for home improvements, new automobiles, student loans or even vacations or weddings.

Home Equity Fixed Rate Loan You may prefer a home equity fixed rate loan compared to a HELOC. Home equity fixed rate loans offer a wide variety of amortization periods (length of time to pay it back), more choices for people with less-than-perfect credit, fixed rates so your rate can never go up and the interest paid may also be tax-deductible*!

Owning your own home provides several benefits. In addition
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say "good bye" to your landlord and take control of your living environment.

Whether you are a first-time home buyer, renter, or
are purchasing a new or second home, we have an assortment of tools and loan programs
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