5/1

Jumbo Arm

3.22% APR

It’s much better to be locked at a great rate and wish you were floating, than to be floating and wish you’d locked in that great rate.”

Bonds Prices are up, Mortgage Rates are Down but off their lows as volatility
Continues.   The trend is our friend. The Rising Trend line, and Moving Averages are a clear intermediate trend higher for Bond Prices. Remember that the last time Bonds traded at these levels, prices fell sharp and quick.  Bond prices rose in 3 of the last 4 trading days.  Lower than expected GDP and the continuing concerns over Euro Debt in Europe accelerated the Bonds gains.  The 3.5% coupon rose 19bp to end the session at 103.69.

Remember Mortgage Rates move lower as Bond Prices move higher.  We are looking at the deal of a century with respect to mortgage rates.  Float, but get ready to lock in that Rate.

The Fed Speaks

The Federal Reserve’s Policy Statement released Wednesday was similar to recent
Statements, including stable long-term inflation expectations, a tepid economic
recovery and fragile job market…with one big exception to their norm. The
Policy Statement said there will be “exceptionally low levels for the
Federal Funds Rate at least through late 2014.” This is a big change from
the previous statements of “low rates until mid-2013.”

The Fed thinks the economy is just be slogging along, and there is a need to
continue with an accommodative monetary policy in order to keep the economy
growing at least at a modest pace. The Fed has spoken, and as the old adage
goes…”Don’t fight the Fed.”

The other big news came at 2pm ET on Wednesday when the Fed released their
forecasts, and included for the first time in history a specific long range
target for inflation of 2%, as measured by the Core Personal Consumption
Expenditure Index (PCE) currently at 1.7%.

This is a clear signal that the Fed has laid the groundwork for QE3.

And this is why Mortgage Bonds have gone crazy since Wednesday.

Technically, the intermediate trend for Mortgage Rates remains lower. This means that Bonds
might just bust above the nearby ceiling of resistance, and make all-time price
highs in Bonds, which translates into all-time low home loan rates.

Get Ready to take advantage of this great interest rate story.

This may be a short window of opportunity, as historically, Mortgage Rates move
lower in anticipation of Quantitative Easing (QE), but then reverse once the
official announcement is made.

If the Fed wants to create inflation and boost Stock prices, it will likely come
at the expense of Bonds and Mortgage Rates at some point.  Now is the time to make your move, as things can change qucikly.

Housing May Turn the Corner in 2012: CoreLogic

Core Logics chief economist Mark Fleming says housing statistics and
the duration of the downturn to date suggest 2012 may be the year the housing
market begins to turn the corner.

He points out that the housing market has long business cycles. Regional housing recessions have typically taken anywhere from three to five years to find their bottom, and Fleming says the
national housing recession has performed similarly in that it has skipped along
the bottom for the past two years. Fleming notes that housing affordability
is rising dramatically due to a combination of home price deflation and
historically low mortgage rates.  Additionally,  he says, after adjusting for inflation, this
has been a “lost decade” for housing as prices are the same as at the beginning
of the millennium.  “The time is right in 2012 for prices to begin growing again,” Fleming said, “and housing affordability will put a floor under any further significant declines.”  Fleming says he will be watching the spring and summer market closely for positive signs of demand.  He points out that households are paying off their debts and at the same time accessing credit, such as equity loans more easily.  Fleming refers to a quarterly survey by the New York Federal Reserve Bank, which shows total household debt continues to decline. At the same time, consumer sentiment rebounded strongly in the latter part of 2011, posting a six-month high in December – an indication that consumers’ confidence in the strength of the economy is growing, according to Fleming.

Although market indicators are coming off their lows, he notes that both existing-home sales and single-family housing starts have begun to increase, homebuilder confidence is improving, and
affordability is at an all-time high.  All the data suggests that the housing market is likely to sustain these upward movements in 2012, according
to Fleming. “While we cannot say with a high degree of certainty what 2012 has in store for us, indications based on the latter part of 2011 are that both the broad economy and the housing market are moving toward positive growth in 2012,” Fleming said. He admits that some road blocks do exist, including weaker global economic growth, problems in Europe, and fiscal and political uncertainty in the United States.

But Fleming says when you look at the big picture, “we are bullish on the prospect of improving economic performance in 2012 from 2011.” Source; DS News

Economic News

The Commerce Department estimated the gross domestic product growth rate at 2.8% for the final three months of 2011-a bit below expectations
of 3.2%.  Third-quarter GDP growth was 1.8% and the economy rose at a rate of 1.3% in the second quarter.

Jobless Claims
Rise Less Than Expected, Up 21,000 to 377,000.

Durable Goods Orders Rise More Than Expected, Up 3%.

Existing Home Sales
for December 2011 increased 5% from November. This is the third consecutive month of increases and the second highest reading of 2011. The December level
was also 3.6% above December 2010, and as a whole, existing-home sales were up 1.7% from 2010. Total housing inventory dropped 9.2% for December, representing
a 6.2-month supply, down from a 7.2-month supply in November.

Housing Starts Fall More than Expected, Down 4.1% Vs. 0.6% Estimates.

Housing Market Index
(HMI) rises in January to a reading of 25 according to the National Association
of Home Builders (HAHB). This is up 4 points from the previous December reading
of 21 and marks the 4th consecutive month of increases.

Jobless Claims Fall More than Expected, Down 50,000 to 325,000.

Consumer Price Index Up 0.1%; Core Up 0.1%

5/1 Jumbo Arm

2.689% APR

Mortgage Rates continued their sideways to slightly lower pattern being supported by the Federal Reserve’s daily buying of Mortgage Bonds. Also helping Mortgage Rates is the weakness in Stocks.  For now, Mortgage Rates are in a longer-term sideways trend as well as an intermediate trend lower.

However, this can change quickly as there is speculation that the Fed will do another round of Quantitative Easing (QE3), possibly as soon as the spring. The after effects of QE1 & QE 2 actually increased Mortgage Rates due to concerns of inflation, and the fueling of Equities and Commodities. Therefore, it may be prudent to lock into rates before any formal announcement from the Fed.

On Tuesday afternoon MetLife — the folks who market their business using Snoopy, Linus and Charlie Brown – handed out pink slips to 4,300 mortgage workers.  The very next morning Met Life published a statement saying the company bought a luxury rental apartment building (29 stories and 249 units) in Chicago’s North River neighborhood. Clearly, met Life has more confidence in the rental market than the home buying market. Maybe MetLife’s laid off mortgage workers can move into a rental once they lose their homes.

Housing
Incremental Improvement for the housing sector is likely in 2012 according to economists at Fannie Mae. The second half of the year should outpace the first six months in terms of growth, though fiscal policy and political uncertainty in Washington will likely drive consumer and business activity, the mortgage giant said. Chief Economist Doug Duncan said positive consumer activity and challenges in housing and the global economy will equate to moderate growth for the year. “We’re entering 2012 with decent momentum, especially on the employment side, which is fostering positive household and consumer behavior,” Duncan said in a release. “Unfortunately, we expect this momentum to slow as we move through the first half of the year.” Pending Home Sales continued to gain in November and reached the highest level in 19 months, according to the National Association of Realtors®.

Economic News

Initial Jobless Claims rose by 24,000 in the latest week to 399,000, the highest level since November.

Consumer Sentiment for January increased to a reading of 74.0, up for 69.9 in December. This marks the 5th consecutive month of gains since the 2011 low of 55.7.

Banks Filed Foreclosures on roughly 205,000 homes in December, the lowest monthly total since November 2007, according to RealtyTrac, which said the 1.8 million

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Mortgage Rates moved sideways this week as Mortgage Bond Prices continued their volitility.

Mortgage Bonds are now below support at the 35-Day Mobving Average.  Mostly due to empty trading desks and low volume.

The outlook is for rates to continue in this sideways pattern in the short term.

With the end of the year upon us, many have taken advantage of the very low rates. Those who haven’t still can do the same, as rates remain low.  From all of us at North Atlantic Mortgage during this holiday season- we appreciate your business.

We wish you a Happiness, Health and Prosperity throughout the year.

Economic News

Core Personal Consumption (PCE) Index came in ay 0.1%, which met expectations, which shows that inflation will continue to remain tame.

Consumer Sentiment Improves More than Expected, Index at 69.9 in December

Jobless Claims Fall More than Expected, Down 4,000 to
364,000; Economy Grew Less than Expected in Third-Quarter, Up 1.8%

Homebuilders See Surge in Potential Buyers, With Home
Builders Index Rising for Third Straight Month to 21

Bonds and Mortgage Rates ended the week pretty much where they started. Mortgage Bonds remain above support levels and therefore I recommend floating, not locking into mortgage rates at this time. With little economic data and news out of Europe, the focus is now on next weeks Bond Auction, with $99 billion in added supply of 2, 5 and 7 Year T-Notes.  The 3.50% coupon fell 22 basis points to $101.62.

Remember, Mortgage Rates move in the opposite direction of Mortgage Bond Prices.

Economic News

Weekly Initial Jobless Claims remained below the psychological  400,000 level for the third week in a row at 388,000. While the recent data is encouraging, the unemployment rate remains at concerning levels.

Housing Starts and Building Permits showed signs of improvement.

Consumer Price Index (CPI) fell by -0.1%, versus the 0.1% expected.

Producer Price Index (PPI) was better than expected in October falling -0.3% .

Index of Leading Indicators Rise 0.9% in October signaling stronger growth.

 Retail Sales Rise more than expected, up 0.5% in October.

Mortgage rates were under pressure this week as the 3.50% Coupon Bond closed just beneath support at the 50-Day Moving Average. The Treasury auctioned $16B in 30-Year Bonds on Thursday and the results were miserable. Gyrations in the stock market due to Eurozone concerns made for no shortage of volatility in the Bond Market.   The 3.50% Coupon hit a weekly high of 102.56 and a low of 101.31 and settled at 101.59 down 16 basis points.

All things considered the Bond Market held up relatively well and headed into the weekend on a positive note.  Hence, my recommendation to float, not lock rates at this time, but be prepared to move quickly.

“When The Moon Hits Your Eye Like A Big Pizza Pie That’s A Bailout”

Italy’s problems are not as dire as Greece, but they are a larger country and the seventh largest economy in the world.  Their debt crisis will be much harder to contain.  Italy’s 2, 5 and 10-year Notes were Yielding 7% at their peak this week.  A dangerous record high.  Yields have risen because the concern is Italy won’t get out of this mess without international assistance.  Slimy Silvio Berlusconi looks to be stepping down and the country is looking to form a new government around Mario Monti the  European Unio Competition Commissioner.  This is a positive as it demonstrates Italy’s understanding that they must move quickly to save their economy.

Hopefully, our elected officials and the Fed are learning something from this. Like, STOP SPENDING MONEY WE DON”T HAVE! 

Economic News

Initial Jobless Claims were reported at 390,000, better than expectations and below the important psycological 400,000 number.

Consumer Sentiment Better than expected in September, Reuters/U of Michigan index at 64.2.

After rallying multiple days, locking into rates prior to Fridays Jobs Report was a wise choice, as there was more risk of rates moving higher heading into the numbers.  Economic weakness here in the States and Abroad provide long term support for Mortgage Bonds and Mortgage Rates.  However that is not to suggest that Mortgage Rates will move much lower than their previous bottom.

Technically speaking, we are closely watching the 50-Day Moving average, which was a tough level of resistance a few weeks ago and is now our floor of support.  A drop beneath this level could reverse the direction of Mortgage Rates and Bond Prices.  Bonds could easily loose 170 basis points and that could push Mortgage Rates considerably higher.  Volatility is still the key word and we think Mortgage Rates will trade in a wide range by as much as .50%.  The 30 Year Fixed Rate is currently at 3.884% APR. Our bias is towards locking into rates, not floating.

Economic News

Fed Chairman Ben Bernanke stated at last weeks Fed Meeting, that the Fed may look to reinvest in Mortgage Backed Securities to provide additional support to the weak housing market.

The Bureau of Labor Statistics reported 80,000 jobs were created in October, less than expectations.

Jobless Claims Fell by 9,000 to 397,000

The European Central Bank (ECB) cut interest rates by .25%

 Broker or Bank?

It’s quite astonishing how little the general public knows about what has
been happening in the lending markets.  Every now and then I have a
conversation with someone seeking home financing and they believe that the
banks will give them the best terms for financing.  It’s really naive when
you consider the bad publicity the big banks have had over the past three
years.

First – let’s remember that the big banks and Wall Street were responsible
for the shape the economy is in.

Second – they robbed you and I, the “Taxpayer’ of $700 Billion dollars (the
“Stimulus Package”), of which they never made loans with, as was the
governments intended use.

Third – the Banks are not required to educate, license or test their
loan originator employees as Brokers and small Lenders are.

Fourth – Banks do not disclose all their fees and revenues as Brokers &
small Lenders always have.

Fifth – Recent laws and rules make it impossible for Brokers and Small
Lenders to take advantage of the consumer.  However, Banks are exempt and
are taking advantage of the consumer.

Sixth – The Banks are not Banks; rather they are Brokers, as they don’t lend
their own money. They sell the loans to Fannie Mae, Freddie Mac and FHA.

Seventh – Therefore, doesn’t it make sense that since the bank is really a
broker; why not use a broker that has many more options than those of one bank.

I strongly recommend watching the recently released HBO Movie “Too Big To
Fail”.

I was a Contributing Editor for CNBC, Bloomberg and Fox TV during the credit
meltdown and will say that the movie is pretty accurate and does a good job of
explaining who was responsible for the credit crisis and how it all unfolded,
in a way that the average person can understand.

The point is; there are better options available for home financing than
using the very banks that are responsible for the Credit Mess, Hi Unemployment,
Falling Real Estate Values, and Wiping Out a chunk of your 401k.

Copywrite John Sauro 2011 All Rights Reserved

Reproduction of this report without written permission is strictly prohibitted.

Another week of  volatility for Mortgage Bonds ends with rates a little higher than where they started.  The 30 Year Fixed Rate ended the week at 4.255% APR.  Much of the volatility was due to the Eurozone debt crisis. On Thursday Bonds were down on news that Europe had a solution  to their debt crisis, but on Friday a poor Italian Bond Auction reminded the markets that the European debt crisis is far from over, and investors fled to the safety of  U.S. Bonds which was good for Mortgage Rates.

The focus next week will be on Wednesday’s Federal Reserve Board’s meeting and the important Jobs Report.  Both will have an impact on the markets.

Bond prices remain above an important level of support and therefore I recommend not locking into a mortgage rate at this time, but rather floating into next week for the possibility that rates may improve.

The Federal Housing Finance Administration announced plans to help struggling homeowners refinance.   The program is intended to help homeowners under water refinance.  It is not intended to move mortgage rates lower. Contact our office to find out if you are eligible.

The S&P Case Shiller Index showed 10 of 20 cities saw home price increases.

New Home Sales up 5.7% in September.

Personal Spending rises 0.6% in September.  Income rises 0.1%.

Consumer Confidence for September was a miserable 39.8.

 There was little change for Mortgage Rates this week as Mortgage Bonds recovered a bit of the losses from the prior week.   The stock market surged on news of strong earnings reports and while this typically is not good for Bonds and  Mortgage Rates, they held up relatively well. 

The 3.50% Bond coupon was down 3 basis points at 100.94, up 28 basis points for the week.  While there is a strong level of support for Bonds, the technicals will have to take a back seat to the Euro news coming out over the weekend.  The average 30 Year Fixed Rate finished the week at 4.125%.  Mortgage Bonds and Treasuries moved in opposite directions, proving once again that Mortgage Rates are not tied to the 10 year Bond as many inexperienced Mortgage Brokers and Bankers would lead you to believe.

The recommendation is to float Mortgage Rates, but be prepared to lock in at a moments notice.

Beware of Bank’s Fees

Be careful when shopping for a Mortgage.  Many of the big banks are charging excessive up front fees to Mortgage Applicants.  Unlike professional Mortgage Brokers, banks are charging  Application, Processing, Lock in, and commitment fees.  Some banks are also charging a non refundable .50% up front fee.  The reason is simple and you know the answer if you’re keeping up with the financial news.  Banks are still hurting.

Don’t believe for a minute that you will get better terms from the bank you have your checking and savings account with, that’s a myth.  The fact is the banks are brokering their loans to the government agencies Fannie Mae and Freddie Mac.  So they are beholding to the same rates and fees Fannie and Freddie set.  And, unlike professional brokers, banks are not required to be transparent with all their costs and revenues.  Additionally, banks mortgage employees are not required to be educated, tested or licensed as professional brokers.   So you might as well ask the counter person at McDonalds to help you with your application for a mortgage.  Surprising?  You bet.  Big banks lobbyists made sure that the banks were exempt from many of the consumer protection regulations.  So choose wisely when searching for one of your biggest financial decisions.

Economic News

Fed Governor Daniel Tarullo made headlines when he called for more Mortgage Bond purchases, more Quantitative Easing (QE3).
 
Housing starts rose to a seasonally adjusted rate of 658,000 units, nearly 11% higher than September of 2010.  However, the surge was led by multi-dwelling units as rental demand soars.  Building Permits, a sign of future construction, fell 5% to 594,000.

Consumer Price Index (CPI) for September rose by 0.3%, inline with estimates on higher gasoline and food prices, making the year-over-year number to 3.9%, up slightly from last month’s reading of 3.8%.  Longer term inflation is on the rise, the year-over-year figure was just 1.6% in January.

The Producer Price Index rose by a staggering 0.8% in the month of September, increasing year over year wholesale prices by steaming 6.9%.

Existing Home Sales Fall 3.0% in September

Jobless Claims Fall More than Expected, Down 6,000 to 403,000; Estimates Called for Drop of 4,000