Marc's Mortgage Matter's

Folks wonder where the most reliable sources of mortgage news are. Besides Us, People, and Martha Stewart's Living, this is quite amazing. Put your mouse on a city and see today's newspaper's front page: FrontPage 

But speaking of news, in a paper published by the Federal Reserve Bank of San Francisco, In the years leading up to the financial crisis of 2008-2009, a combination of factors including low interest rates, lax lending standards, the proliferation of exotic mortgage products, and the growth of a global market for securitized loans promoted increased household borrowing. Is this late-breaking news to anyone in the market, business or America?

"Homebuyers with access to easy credit helped bid up U.S. house prices to unprecedented levels relative to rents and disposable income. The rapid rise in household net worth encouraged lenders to ease credit even further based on the assumption that house price appreciation would continue indefinitely. U.S. household leverage, as measured by the ratio of debt to disposable income, reached an all-time high of 130% in 2007." The research piece goes on to say that house prices in the United States have dropped on average by about 30% from their peak in 2006, but also that the personal saving rate trended up from around 1% to about 6% in the third quarter of 2010 while the ratio of household debt to disposable income dropped from 130% to 118%. 

As has been written in the past, on the one hand "higher saving rates imply correspondingly lower rates of domestic household consumption growth so that a larger share of GDP growth would need to come from business investment, net exports, or government spending. On the other hand, an increase in domestic saving would help rebuild household nest eggs in preparation for retirement and also help correct the large imbalance that now exists in the U.S. current account."

Fraud in Michigan? No way! "The owner of a mortgage brokerage company pleaded guilty this afternoon to conspiracy to defraud the U.S. by falsifying documents to obtain loans for unqualified applicants." My advice - don't drop the soap: he faces up to five years in prison and three years on supervised release when sentenced, along with paying back the money.

I found a comment about the White House losing value. "You are absolutely correct that the White House, like the rest of American homes, has gone down in value by 24%. In fact some areas would be happy with a decline of only 24%. But, unlike the rest of America, the White House was able to increase its HELOC by about $5 trillion dollars while everyone else had their lines frozen." So wrote a principal of Two River Mortgage in New Jersey.

Some recent mortgage fraud figures have been released and the winner is.... South Florida! "South Florida's mortgage market had the nation's highest number of suspicious activity reports in the third quarter of 2010, according to the Financial Crimes Enforcement Network's third-quarter mortgage fraud report released Thursday."

After a late-year run-up at the end of 2010, mortgage rates have slid gently in the first couple of weeks of 2011, lending some cheer to those hoping to refinance or purchase a home this year. An improving economy largely fostered that rise, but year-end investor positioning likely played a role as well. Now that we've passed the holiday and vacation season, there seems to be a growing realization that a mild recovery is the most likely to occur, even if it features a slightly faster rate of growth.

Both inflation and economic growth are likely to persist on a slight firming trend as 2011 progresses. Many forecasts for growth have been bumped higher, moving from the upper two percent range for GDP to a lower three percent one. That's certainly an improvement, but not so strong that it should create much stronger price pressures or trim the ranks of the unemployed very quickly. Collectively, that's good news for mortgage shoppers; as we mentioned here over the past couple of weeks, the run-up in interest rates did seem to have overshot the mark somewhat, at least relative to the amount of economic activity and inflation in the present environment. With this week's easing of rates taking us back to early December levels, we have erased at least some of that overage.

Which brings us to next week. A Monday market holiday makes it only a four-day affair, with a light slate of significant economic news. We will get to see a few looks at how the housing market closed last year and impressions of how it is beginning this one through reports covering existing home sales, housing starts and builder sentiment. That will be joined by a couple of localized manufacturing reports, but with little else available, it seems reasonable that little change to rates should be expected, save perhaps a couple of basis point decline should the present trend hold.