Mortgage Rates worsen this morning

Stock market is in pause mode, but gold continues its upward March, now $1,220 and climbing.  The ADP National Employment Report says 169,000 jobs were lost last month, down from 195,000 jobs in October. The ADP report, while it doesn’t represent the entire economy, is often seen as a good indicator of what will emerge in the government’s closely-watched monthly employment report, which is due on Friday. Economists are expecting the unemployment rate remained flat at 10.2 percent last month.  SI thinks it will still continue to increase.

 

The long slow slide to  lower mortgage rates is over for now as the market worsened throughout the day yesterday to over .75% worse.  Rate sheets from investors were will be worse at least that amount this AM.  Be very careful when planning your locks due to the closing of the month and the Holidays that get in the way.  I strongly suggest taking a 40 day lock rather than a 25 if it falls on a Monday, as your lock period rolls back to the previous Friday.  And with the Holidays, your ship time is compressed as well.   Check when your lock expires and make a good decision accordingly.

 

Right now, the futures market is pricing in an 83% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.28% (3.22% yesterday).  Mortgage rates are worse by about .125% but is trending to flat, but not enough for investors to produce a new rate sheet as of yet. 

 

Market News:   Fannie Mae is raising its minimum credit score to 620 from 580 and lowering its maximum debt-to-income ratio to 45% to reduce future defaults. The underwriting changes go into effect the weekend of Dec. 12 as part of an update to Desktop Underwriter, the GSE’s automated underwriting system. “The adjustments reflect careful analysis of a borrower’s ability to repay their mortgage obligation over the life of the loan,” said Fannie spokesman Brian Faith. Fannie claims that borrowers with credit scores below 620 are generally nine times more likely to become seriously delinquent than other borrowers. In modifying loans, “we have seen too many borrowers where their other consumer debt has jeopardized their success at homeownership,” Mr. Faith said. He noted that none of these changes apply to Fannie’s Refi Plus program, which provides a streamlined refinancing option for existing Fannie borrowers that have loan-to-value ratios greater than 80% and up to 125%.

 

SI commented about FHA and their low reserves. Article this AM talks about several upcoming changes to try and ensure they do not become the next Fannie and Freddie.   In Dec. 2 testimony before the House Financial Services Committee, HUD Secretary Shaun Donovan is expected to announce changes to the FHA mortgage insurance program to curtail defaults. They likely will include an increase in the minimum credit score for FHA loans from 500, a boost in the minimum down payment from 3.5 percent and a reduction in the maximum amount of seller concessions from 6 percent of the home’s value to 3 percent. Experts say monthly insurance premiums charged to borrowers and the current upfront premium — currently 1.75 percent of the loan value — also could be hiked.

 

Product News: Reminder about the change with streamline refinances placed through BofA. Effective with case numbers on or after November 18, 2009 a minimum credit score of 640 will be required with BofA.  Loans with scores less than this amount must be closed by the end of December and be purchased by January 31, 2010.    Secondary has a list and will be contacting the branch to ensure you are aware of the deadline. on files that might be affected.