Colorado Mortgage Broker

Home builder confidence in the newly-built, single-family housing market is down for the third straight month this month.

After reaching a 3-year high just 90 days ago, the National Association of Homebuilders' Housing Market Index is now at a multi-year low. It's since dropped by almost half.

As an economic indicator, the HMI's goal is to "take the pulse of the single-family housing market". It surveys home builders across the country and asks them to report on 3 facets of their business:

1. How are market conditions today?
2. How do market conditions look 6 months from now?
3. How is the prospective traffic of new buyers for new homes?

Responses are then collated, weighted, and presented as the Housing Market Index.

The August HMI reading of 13 is the lowest since March 2009.

Not surprisingly, the main reasons why HMI is down echo the main reasons why consumer confidence is down. Jobs growth continues to be weak; credit guidelines remain restrictive; and, home values are recovering slowly, pressured by distressed properties.

Builders report watching foot traffic stagnate and most likely won't want to be stuck with excess inventory into the fall and winter months.  For home buyers in Denver , drops in builder confidence like this can be an excellent negotiation tool.

Builders may be more likely to offer incentives and/or price reductions into an uncertain economy, as compared to a strong one. Furthermore, weakness in home building indirectly drags mortgage rates lower. 

This one-two combination can make for cheaper homes with cheaper monthly payments.

For the second time this year, FHA mortgage insurance will be modified.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:

• Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
• Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners in Colorado and everywhere else , this switch in MIP decreases the upfront cost of an FHA mortgage, but increases the loan's long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be "perilously low".  The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad -- the borrowing landscape will just looks a bit different.  Yes, loans will cost more to carry each month, but also they'll be less expensive to procure. It's a trade-off and you can apply math formulas to solve for the best time to apply FHA. 

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.

If you're unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email your loan officer for help.

NOTE : The FHA originally announced an implementation date of September 7 as I previouly wrote about (FHA Mortgage Insurance Premiums to Change). It was subsequently amended to October 4, 2010.

Today, in its first meeting in 6 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since June, the pace of economic recovery "has slowed". Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.

Today's statement shows less economic optimism as compared to the prior year's worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be "more modest in the near-term" than its previous expectations.

Weaknesses aside, the Fed highlighted strengths in the economy, too:

1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period".

There were no surprises in the Fed's statement so, as a result, the mortgage market's reaction to the release has been neutral. Mortgage rates in Colorado are unchanged this afternoon.

The FOMC's next meeting is scheduled for September 21, 2010.

It looks like FHA Mortgage Insurance premiums will be changing once again, starting in September.  The proposed changes will be voted on this month and will bring about an change in both up-front and monthly MIP.

Here is an excerpt from mortgage industry advocacy group IMMAAG:

"Almost two weeks before the closing of the public comment period on proposed FHA changes, Commissioner Stevens announced yesterday, August 5, 2010 the Congressional passage of HR5981 which allows FHA to increase the monthly insurance premiums on standard FHA programs up to 1.5%.

In applauding the congressional action, Mr. Stevens announced that effective with case numbers assigned beginning September 7, 2010 the front end MIP will be reduced 1.0% (100 basis points) which will reduce it 25 bps below last year's rate when it was increased from 1.50% to 2.25% while the monthly premiums will increase to 0.85% for borrowers with LTV's <=95% and to 0.90% for borrowers with loan amounts >95%.

As pointed out in a Loan Tool Box post yesterday by one of IMMAAG's subscribers (thank you Jason Klaskin - an MLO in PA) it is interesting that in the face of the Commissioner's cry to take steps necessary to as quickly as possible return the somewhat depleted Mutual Mortgage Insurance Fund (MMIF) to its statutory minimum level of 2.0% that the premium source generating the most immediate impact is reduced.

In what IMMAAGbelieves to be a further contradiction, we also wonder why, since the proposed rule goes to great lengths to establish the link between LTV and risk, that when FHA is proposing increasing down payment requirements for lower FICO borrowers that it would at the same time allow those who are "forced" to the lower LTV because of their risk profile to pay less on-going MI than those who by definition must have higher FICO's to qualify for the 95% LTV will pay a higher monthly premium. We continue to challenge the agency to explain some of the their responses to the analytical results they claim to have achieved.

Also, in the same vein, as we commented on with respect to the proposed Seller Contribution and Down Payment rule (Comments due 8/16/10) it seems contra-indicated, given the FHA "mission"  to force those with the least amount of liquidity to further deplete the liquidity by putting more down in the purchase. It also follows that if they have less liquidity, they have a higher risk of failure when a negative life cycle event occurs, yet on an on-going basis beginning September 7, 2010 they will contribute less to the reserve pool than less risky, higher FICO borrowers. It is somewhat counter-intuitive to reduce the front end premium which can now be financed at extremely favorable rates in favor of higher monthly premiums which, by definition will increase debt service costs and will result in risk profiles that are worse than in today's environment.

Lastly, the bill itself requires the Commissioner to appear before both the Senate Banking Committee and the House Financial Services Committee within 270 days to "discuss the finances, including premiums, of the Federal Housing Administration." IMMAAG has to wonder, since Mr. Steven's testified on the overall FHA position as recently as October 2009 and since then he has announced several fundamental changes and proposed changes, how any discussion can provide useful empirical data about the effects of these continual modifications. Seems that in this short of a period, all the variables being changed by the FHA create a "moving target" that can't be hit, at least analytically.

IMMAAG solicits user comments on this and suggests that everyone consider including comments about this issue in responding to the open proposed changes. While this change does not directly address the proposed changes, it does have an impact on the overall objectives stated in FR-5404-N-01 (the docket number for the Seller Contribution proposal).

Copies of the announcement and the one page bull (HR5981) are posted on www.immaag.com"

Colorado Mortgage Rates have been falling since April but that momentum could reverse tomorrow.

The Bureau of Labor Statistics releases the July jobs report at 8:30 A.M. ET Friday. With a stronger-than-expected reading, colorado mortgage rates should rise, harming home affordability in Colorado. Jobs are a keystone in economic growth and growth is tied to rates.

Earlier this year, job growth went positive and reached as far north as 431,000 jobs created in May. That figure slipped negative last month, however, as the temporary, decennial census workers left the workforce.

Jobs matter to the U.S. economy. Among other concerns, unemployed Americans spend less on everyday goods and services, and are more likely to stop payments on a mortgage. These effects retard the economy, spur foreclosures, and harm home values.

The reverse is also true. More workers means more disposable dollars and, in theory, a stronger economy.

Analysts expect that a net 65,000 jobs were lost in July. Wall Street -- and Main Street -- have a big interest in those results.

Poor jobs data would likely result in a stock market sell-off which would, in turn, boost the value of government-backed mortgage bonds. This is because bonds tend to perform well when the economy is sagging and higher bond prices mean lower colorado mortgage rates.

Strong jobs data, however, would likely push stock markets up and bond markets down. This would cause mortgage rates to rise. The stronger the employment figures, the higher colorado mortgage rates should go.

So, if you're happy with where colorado mortgage rates are today and you're concerned about what the jobs report may do to them tomorrow, consider talking to your loan officer about locking your rate as soon as possible.

Once the jobs report is released, it may be too late.  With the report due out tomorrow morning by the time you are pouring your second cup of coffee, it would be wise to secure your rate today if you are happy with what you can obtain.

The Pending Home Sales Index failed to rebound from a cliff-dive in May, falling by another 3 percent more in June.  The index remains at record-low levels.

A "pending home sale" is a home under contract to sell, but not yet closed. The data is culled from local real estate associations and large brokers and accounts for 20 percent of all purchase transactions in a given month nationwide.

The Pending Home Sales Index is a future indicator for the housing market; there is a high correlation between the PHSI and the monthly Existing Home Sales report.  This is because of the relatively large sample set used for the PHSI, and because 80 percent of homes under contract close within 60 days, according to the National Association of Realtors.

June's Pending Home Sales Index is weak by most measures, but if you're a home buyer in Denver , the headlines aren't so bad. Fewer home sales can push negotiation leverage to the buy-side of a transaction.

Plus, there's other positives in the market for today's buyers:

• Home supplies are up, which creates competition among sellers
• Builder confidence is down, which leads to "free" upgrades and incentives
• Mortgage rates are low, which increases cash flow and disposable income

All things equal, the current home buying conditions haven't been this favorable in years.

The falling figures in June's Pending Home Sales Index hint that home sales will be down through the rest of the summer and into early-Fall. However, colorado mortgage rates may not and higher mortgage rates can do more to change a monthly payment that a small reduction in home price.

If you're planning to buy a home later this year, consider moving up your time frame. 

It's an excellent time to be a buyer.

Mortgage markets improved last week, pushing Colorado Mortgage Rates lower for the 6th time in seven weeks. 

Since April, Colorado Mortgage Rates have been on a downward path, spurring refinances in most markets and sparking the start of a Refi Boom.

Last week, 3 key stories played a role in falling rates:

1. Demand was strong for U.S. government debt
2. Emerging concerns of a Japan-style deflation in the U.S.
3. Personal Spending since late-2007 was shown to be less than previously thought

Of the three, it's the measured drop in Personal Spending for which rate shoppers and Colorado Home Buyers should watch. Drops in spending slow down the economy which, in turn, tends to pull Colorado Mortgage Rates lower.

Long-term, deflation could be a drag on rates, too. For now, though, it's just a conversation among academics and economists.

This week, Colorado Mortgage Rates could move up or down -- a lot hinges on the results on July's Non-Farm Payrolls report. 

More commonly called "the jobs report", Non-Farm Payrolls hits the wires Friday at 8:30 AM ET. Markets are expecting a 75,000 net loss of jobs last month. If the actual number is higher, mortgage rates should rise. If the actual number is lower, mortgage rates should fall.

With the jobs numbers not due until Friday morning, expect choppy trading through Thursday's market close. There's a handful of economic date releases including Personal Consumption Expenditures (Tuesday), Pending Home Sales (Tuesday) and Jobless Claims (Thursday). Each has the potential to move Colorado Mortgage Rates.  As usual, economic data drives the markets with positive data tending to push rates up, and negative reports driving rates down.

The Refi Boom is ongoing but when it ends, it will end in a hurry. If you've been thinking about a Colorado Refinance, contact your loan officer about your options sooner rather than later.

The theme lately seems to have been LOW Colorado Mortgage Rates with rates dropping even further last week to the lowest levels ever seen.  By far this is the lowest I have seen mortgage rates in my 10 year career.  Locking clients in at 4.5% on a 30 year fixed rate with no points previously seem inconceivable, but now is a reality.

Why is this happening?  The bottom line is that the economy continues to stink and people are not convinced that there is an end in sight.

The chart on the left shows the incredible run-up we have seen on bond prices.  This is a 3-month history, and the trend generally has continued up.  Bonds hit a ceiling of resistance a couple weeks ago and rates bounced temporarily higher, but have since continued on their trend higher.

Both retail sales and consumer confidence came in last week very low, leading to an improvement in Colorado Mortgage Rates compared to the previous Friday.  In addition, manufacturing data remained sluggish suggesting companies are still reluctant to increase production and hiring.

Although not a heavy news week this week, some important housing data will be released.  On Tuesday, housing starts and building permits data will hit the wires, an indication of home builder sentiment.  Thursday brings the existing home sales numbers which will be interesting with the home buyer tax credit drawing to a close.

Despite the record low mortgage rates we have seen, home owners and prospective home buyers have shrugged off the news and applications for Colorado Home Loans are generally down.  However, savvy home owner's are grabbing the low Colorado Mortgage Rates that are available to lock in long-term interest savings on their mortgages.

How to File A Tax Extension Denver Colorado

Running out of time?  Midnight tonight, and you are officially late on filing your taxes and you may be subject to penalties and interest. 

First of all it's FREE to File a Tax Extension and it's very easy.  All you have to do it fill out the IRS Form 4868, "Application for Automatic Extension of Time To File U.S. Individual Income Tax Return," and you are good to go. 

The bad thing is that if you are reading this article today, you have less than 24 hours to File A Tax Extension.  The form must be submitted by April 15th, and will get you an additional 6 months to file.

One more important thing to note is that when you File A Tax Extension, you must send in your estimated tax payment if you anticipate owing taxes! 

Longer extensions are available for those living overseas or active military. 

Here are a few links to the different methods you can use to File a Tax Extension:

IRS Free Online Fillable Forms

IRS Form 4868

TurboTax

TaxACT

TaxCut

What is a Bond Coupon Rollover?

The Bond Coupon Rollover is an event that happens every month at which time the current month's coupon is closed out and any new loans are placed with next month's coupon. 

On Friday, the monthly Bond Coupon Rollover happened, and we saw the price of bonds drop by almost 40 bps.  However, despite this, there was no effect on mortgage rates because this was a paper drop in bond prices. 

One way to help understand this is to think of each month's issuance in terms of the time they mature.  A 30 year bond will mature in 360 months.  These loans for the current previous month are packaged and sold to investors.  Because new investors who are jumping into the market with new loans today effectively have 30 days from now to write loans on this months coupon, they have a 30 day extension relative to Friday's coupon.  The new issuance will mature 360 months from now, one month longer than last month's issuance.

The charts show a sharp decline in bond prices from Friday, but again, this was due to the Bond Coupon Rollover, which has little or no effect on mortgage rates.

Read today's Market Update.