Mortgage Rates Continue to Hold Under 5%
Posted 09-16-2009 at 09:01 AM by VictorBurek
Mortgage backed securities open to the downside yesterday following much better than expected economic data. Retail sales posted large gains which would typically lead to a rally in stocks and a selloff of fixed income investments. Well, as the day progressed MBS managed to move off the lows of the morning and ended up closing where they opened. A few lenders did reprice for the better as the improvement in price of MBS held through close.
This morning the Mortgage Bankers’ Association released their weekly applications index which tracks the monthly change in home loan applications at major lenders. Recent housing reports have shown a increase in mortgage activity but today’s report from the MBA shows a large decrease in both purchase and refinance activity. This is somewhat troubling as mortgage rates held at historic low levels last week and the government stimulus for first time home buyers is still in effect; however, last week was a shortened week due to the Labor Day holiday which will explain part of the decline.
The U.S. Department of Labor released the monthly Consumer Price index which measures inflation at the consumer level. Yesterday’s producer price index did show a much higher increase in producer prices but quite often those higher prices are not passed on to the consumer. This held true today with the CPI report coming in right on expectations and further validating that inflation is not a concern today or for the foreseeable future. The year over year core CPI, which strips out food and energy due to their volatility, posted a 1.5% increase which is well within the Feds comfort zone for price increases. With inflation of no concern, this will allow the Fed to maintain the current accommodative stance of keeping the Fed fund rate low for quite some time.
The final report on the day comes from the Federal Reserve Board of Governors with the release of Industrial Production. This monthly report shows us how much factories, mines and utilities are producing. An increasing trend suggests that consumer spending will be increasing in order to buy the goods produced which is good for the overall economy. The report indicates that production has increased for the second month in a row just beating economists’ expectations and adding fuel to the fire that the recession is over.
At the open of trading today, MBS moved considerably higher but following the release of the Industrial Production report they have come under some selling pressure. They are still holding above closing levels yesterday which is allowing most lenders to offer better pricing this morning.
Early reports from fellow mortgage professionals are indicating that the par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for the best qualified consumers. In order to secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% and pay all closing costs including one point loan origination/discount/broker fee. If you are seeking to access any equity in your home, you should expect to pay higher closing costs or an increase to your mortgage rate.
A major issue that I have run into with clients looking to secure a conventional(not a FHA or VA loan) loan is disputes on credit reports. Many consumers file a dispute with the credit agencies when they feel that the information being reported is inaccurate. In past times this did not create a problem as all that would be required would be a letter of explanation regarding the dispute. Today, lenders will no longer accept a letter of explanation, they are requiring that the dispute be removed. Removing disputes does take some time, so if you are considering buying or refinancing in the near future, make sure you review your credit report in detail. If any line item says account in dispute, contact the credit agencies and have them remove the dispute. One current client has two disputes on items that have been paid off for over 2 years showing a $0 balance with $0 payment, yet the lender is still requiring that the consumer have the disputes removed. I would like to hear from any other mortgage professional or consumers on this topic, are you running into this situation?
This morning the Mortgage Bankers’ Association released their weekly applications index which tracks the monthly change in home loan applications at major lenders. Recent housing reports have shown a increase in mortgage activity but today’s report from the MBA shows a large decrease in both purchase and refinance activity. This is somewhat troubling as mortgage rates held at historic low levels last week and the government stimulus for first time home buyers is still in effect; however, last week was a shortened week due to the Labor Day holiday which will explain part of the decline.
The U.S. Department of Labor released the monthly Consumer Price index which measures inflation at the consumer level. Yesterday’s producer price index did show a much higher increase in producer prices but quite often those higher prices are not passed on to the consumer. This held true today with the CPI report coming in right on expectations and further validating that inflation is not a concern today or for the foreseeable future. The year over year core CPI, which strips out food and energy due to their volatility, posted a 1.5% increase which is well within the Feds comfort zone for price increases. With inflation of no concern, this will allow the Fed to maintain the current accommodative stance of keeping the Fed fund rate low for quite some time.
The final report on the day comes from the Federal Reserve Board of Governors with the release of Industrial Production. This monthly report shows us how much factories, mines and utilities are producing. An increasing trend suggests that consumer spending will be increasing in order to buy the goods produced which is good for the overall economy. The report indicates that production has increased for the second month in a row just beating economists’ expectations and adding fuel to the fire that the recession is over.
At the open of trading today, MBS moved considerably higher but following the release of the Industrial Production report they have come under some selling pressure. They are still holding above closing levels yesterday which is allowing most lenders to offer better pricing this morning.
Early reports from fellow mortgage professionals are indicating that the par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for the best qualified consumers. In order to secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% and pay all closing costs including one point loan origination/discount/broker fee. If you are seeking to access any equity in your home, you should expect to pay higher closing costs or an increase to your mortgage rate.
A major issue that I have run into with clients looking to secure a conventional(not a FHA or VA loan) loan is disputes on credit reports. Many consumers file a dispute with the credit agencies when they feel that the information being reported is inaccurate. In past times this did not create a problem as all that would be required would be a letter of explanation regarding the dispute. Today, lenders will no longer accept a letter of explanation, they are requiring that the dispute be removed. Removing disputes does take some time, so if you are considering buying or refinancing in the near future, make sure you review your credit report in detail. If any line item says account in dispute, contact the credit agencies and have them remove the dispute. One current client has two disputes on items that have been paid off for over 2 years showing a $0 balance with $0 payment, yet the lender is still requiring that the consumer have the disputes removed. I would like to hear from any other mortgage professional or consumers on this topic, are you running into this situation?
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