As you may have guessed, there
is no logical correlation between whether there is snow in Boston on Christmas
and the performance of the stock market. Any incidence of a white Christmas in
Boston and bullish market performance in the following year are purely
coincidental. This may be why this indicator is also referred to as the
"BS indicator". See? Who says you never learn anything from this
commentary?
At the other end of the scale, Newton-based
residential mortgage company 1st New England Mortgage Corp. has filed for
Chapter 7 bankruptcy. 1st New England Mortgage Corp. does business as Aberdeen
Mortgage, FNE Mortgage and First New England Mortgage, according to the
bankruptcy filing. The mortgage company had $1.2 million in liabilities,
including $124,456.28 to Company President and CEO David W. Black and
$944,375.47 to Lehman Brothers Holdings Inc. care of Dallas-based Locke Lord
LLP, according to the bankruptcy papers.
As a reminder since there still
seems to be a little confusion about this, Congress unanimously voted to
extend a provision of the Servicemembers Civil Relief Act (SCRA) until January
2016, which prohibits foreclosing on a Servicemembers house for one year
after returning from active duty. Congress had previously extended the
protection period from 3 to 9 months in 2008 and then to one year in 2012. If
Congress did not pass the provision, the protection period would have reverted
back to three months. Last May, Senator Sheldon Whitehouse proposed the
Foreclosure Relief and Extension for Servicemembers Act of 2014 and stated that
troops returning from fighting overseas should not have to fight to keep a roof
over their heads when they return home, as they often need to time to regain
their financial footing.
According
to the latest Ellie Mae Origination Insight
Report, the refinance market is picking up steam due to
the low interest rates, as lenders' refinance share rose for the fourth
straight month in November. Since July, lenders' overall volume of refinances
climbed thirteen percent and the total closing rates on purchase loans
increased to 66.5 percent, the highest level since Ellie Mae began tracking
this number in August 2011. The increase in refinance volume has been a cushion
for lenders who normally face a slow winter market. As the end of 2014
approaches, The New Year looks promising for most lenders with continued low
rates and the re-emergence of the GSE's three-percent down payment loan
programs. Other findings from the report include the average time to close a
purchase loan was 41 days, up one day from October, whereas the average time to
close a refinance loan decreased to 37 days, despite the increase in refinance
activity. Credit requirements have also remained the same from a year
earlier, with 31% of borrowers having an average FICO score of under 700.
The
level of FHA's insurance premiums continues to come under fire. As Millennials begin to
invest in homeownership, changes need to be made to allow these young adults to
qualify and finance a loan.
The Community Home Lenders Association
(CHLA) has called for the FHA to lower annual premiums in
order to make FHA loans more affordable for lower and middle income homebuyers,
an income bracket most millennials fall into. CHLA has proposed the change
after the FHA's annual Actuarial Reported was published, which indicated the
FHA is making a steady progress towards strengthening their finances. Since
FHA's mission is to provide financing for first time and minority borrowers,
the only way it can fulfill this undertaking is by reducing premiums. Last
February, CHLA asked the FHA to reduce its annual premium level from 1.3% to
0.75%. In this report, CHLA pointed out that about 125,000 to 375,000 borrowers
would have purchased a home in 2013 with an FHA loan if premiums weren't so
high. FHA home purchase volume has also decreased by more than 40% since 2010
and has experienced comparable declines in loans to African-Americans and
Hispanic homebuyers.
Ocwen
Financial Corporation, in the news lately and the nation's largest independent mortgage
servicer, announced the re-launch of a free database of loan-level data for
mortgages serviced by Ocwen in private label mortgage-backed securities (MBS),
powered by the REALPortal platform. The re-launch addresses a variety of
requests from mortgage loan investors to enhance functionality, access to data
and bandwidth. Additional functionality is being planned for near-term
implementation. Access to Ocwen's REALPortal service is free, and interested
parties can register a login and password, click here.
Last
month Stearns Wholesale began offering LPMI pricing improvements and
improvements to its government pricing. LPMI pricing features improvements on
FICO scores 700+. For more details, click here. Government pricing
also features improvements on FICO scores 660+ for both purchase and refinance
transactions. Stearns has also announced mid-November that it migrated to a
standardized Administrative Fee of $995 for all mortgage transactions in the state
of California ($795 for Streamline transactions).
What did all that news
yesterday mean for mortgage rates? Gross Domestic Product was
much stronger than expected (pushing rates up), but Durable Goods were less
than expected, pushing rates lower. Personal income was +0.4% to $54.4 billion
in November. Disposable personal income (DPI) increased +0.3% to $42.4
billion. Personal consumption expenditures (PCE) increased +0.6% to $67.9
billion. The FHFA House Price Index was +0.6% in October. From October
2013 to October 2014, house prices were up 4.5 percent - no impact on rates.
The University of Michigan Consumer Sentiment hit a seven-year high, pushing
rates up. New Home Sales were +1.6% in November - not a big impact on rates.
The median sales price of new houses sold in November 2014 was $280,900; the
average sales price was $321,800. The seasonally adjusted estimate of new
houses for sale at the end of November was 213,000. This represents a supply of
5.8 months at the current sales rate.
So after all that rates moved
higher primarily due to the GDP number - it is hard to argue with the strength
of the 3rd quarter and this momentum is expected to help things in
the 4th. The 10-year note sold off .875 in price, closing at a yield
of 2.27%, while current coupon MBS prices only worsened .5.
This morning we had the MBA's
apps data for last week (falling further by 1% from the week before) and will
have Initial Jobless Claims at 8:30AM EST - a day early (expected unchanged
from last week's 289k) and a $29 billion 7-year note auction at 11:30AM EST. In
the early going rates are virtually unchanged from Tuesday's closing levels.
Merry Christmas!!!
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