Internet Lender Hit with $20 Million Plus in Penalties

WHY MORTGAGE INTEREST RATES ARE RISING

The bond and mortgage markets started this morning where they left off yesterday, interest rates are increasing and mortgage rates going higher. Yesterday’s surprise 4.0% Q2 GDP, Q1 revised from -2.9% to -2.1% and the Q2 deflator at 2.0% took all of the bullishness out of the rate markets. Geopolitical situations are also being pushed back as increasing belief that Ukraine/Russia and Israel/Hamas are more regional and won’t escalate to wider perspectives. The US stock market, the European stock markets are under pressure and likely will sell off more as economic reports increase the outlook that the Fed will increase interest rates sooner than expected. In the policy statement yesterday the Fed said it will keep the FF rate at current levels for an extended period. The Fed concerns that the employment gains show significant under utilization in the labor markets (low paying and part time jobs) went nowhere in the minds of traders in stocks and bonds. Under the headlines there is more dissension within the FOMC on when to increase the FF rate; we get the sense that more members are leaning toward an earlier increase than what was stated in the policy statement. That is what markets are also thinking. 

Latest Numbers on Health of Existing Home Sales

For news yesterday, Existing Home Sales rose to 4.89 million in May from an upward-revised 4.66 million in April, up 5% on a sequential basis but down 5% on an annual basis. Total inventory rose 2.2% to 2.28 million homes which represents a 5.6 month inventory (6 months is considered a "balanced" level). The median home price rose to 213,400 which is up 5.1% on an annual basis. Distressed sales were 11%, down from 18% a year ago. The first time homebuyer continues to be MIA, with only 27% of sales going to first-time buyers. All cash sales were 33%, and median time on market was 47 days. On a regional basis, the West continues to be soft, with sales only up 0.9% m-o-m and still down 11.4% y-o-y. This likely reflects the diminished inventory of distressed properties in the region and stretched affordability given the sharp gain in prices in much of the U.S.

Sluggish Housing Market A Product Of Millions Of 'Missing Households'

There are 2 million "missing households" in the US - which represents pent up demand for new residences in the US. These are Millennials who are living with their parents or rooming together in an apartment. That represents 2 years of housing starts at the current pace. Rents are increasing, jobs are tough to get, and student debt is high. Fun fact - we haven't been building this few homes since World War II, according to the NAHB.

Read or Listen to this story

Interest Rates Fractionally Lower this Week

Data Provided by Freddie Mac's Primary Mortgage Market Survey® Rates listed are for conforming mortgages up to $417,000  Week ending on 05/15/14 Interest Rate Fees & Points Margin  30 Year Fixed Rate 4.20% 0.6 N/A  15 Year Fixed Rate 3.29% 0.6 N/A  5/1-Year Adjustable Rate 3.01% 0.4 2.72  1 Year Adjustable Rate 2.43% 0.5 2.72 For up-to-the-minute local mortgage interest rate information, contact:  Tom Drasler at Direct (714) 478-3153  Week ending on 05/08/14 Interest Rate Fees & Points Margin  30 Year Fixed Rate 4.21% 0.6 N/A  15 Year Fixed Rate 3.32% 0.6 N/A  5/1-Year Adjustable Rate 3.05% 0.5 2.74  1 Year Adjustable Rate 2.43% 0.4 2.71

This is not intended as an advertisement of interest rates as defined by Regulation Z, Section 226.24. Data is provided by Freddie Mac's Primary Mortgage Market Survey (PMMS) and is provided for informational purposes only. The financial and other information contained herein speaks only as of the date posted herein. Freddie Mac, and/or the sender of this information, is not responsible for business decisions made based on the reported results of the PMMS. In general, the data presented were calculated from information collected Monday through Wednesday of the same week that the PMMS is released and may not reflect mortgage rates, fees or points currently available. Average fees and points are provided to reflect the total upfront cost of obtaining a mortgage. Borrowers may still pay closing costs which are not included in the survey.

Weekly Commentary

by Frank Nothaft, vice president and chief economist, Freddie Mac

"Mortgage rates were little changed amid a week of light economic reports. These lower than expected rates are welcome news with the spring home buying season underway and may even provide those who haven't already refinanced possibly a reason to take another look. Of the few releases, advanced retail sales rose 0.1 percent in April, but below the market forecast consensus of a 0.4 percent increase. Also, the Producer Price Index for final demand rose 0.6 percent in April which followed a 0.5 percent boost from the prior month."

Mortgage Rates Fell Back to 2014 Lowest Levels

Mortgage rates fell back to their lowest levels of 2014, with most lenders in similar territory to last Friday.  Market movement was moderate, but grew increasingly positive for MBS (the mortgage-backed-securities that dictate lenders' rates) as the day progressed.  As such, some lenders released positive mid-day reprices.  Before those, rates were just slightly higher on average.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.25%, and is currently closer to 4.125% than the previous rate of 4.375%. Today's improvement was seen in the form of slightly lower closing costs.  That change in costs equates to an effective rate change of 0.02%.

Where Will Mortgage Interest Rates be in 2015?

Many people ask me where I believe mortgage interest rates will be in the next year or so. Unfortunately, there is no way of knowing, other than we know as the economy improves, and the Fed’s stop manipulating the monetary system, mortgage interest rates will continue to  rise. The folks at the Mortgage Bankers Association, just published a forecast on April 8^th, 2014. Here is the link to our mortgage market forecast and historical quarterly origination's, posted on the MBA website.The forecast provides quarterly data on historical and forecast ed housing starts, interest rates for 30 and 10 year fixed mortgages, and loan origination's.

Clearly, mortgage origination's have significantly dropped, primarily due to interest rates rising 1% in the last year. For example loan origination's for Q1 of 2013 was $524 billion versus Q1 of 2014 at $226 billion. However, both purchase of new and existing home sales has dropped, likely due to investors leaving the market and the recent run up in home valuations.

For people who are looking to purchase or refinance residential real estate, evaluate the cost of waiting, as interest rates WILL rise over the next year.

If you or someone you know, is looking to purchase or refinance residential property, send them my way for a complimentary analysis.