Marc's Mortgage Matter's

Sometimes the best intentions go awry. For example, it is a well-known fact that storing food in the refrigerator usually helps preserve them - except bread. Someone's intention may be to keep bread around longer. Refrigerator temperatures inhibit mold growth in bread, but the refrigerator air draws the moisture out of bread and it actually becomes stale faster. (Sealing it in plastic in the refrigerator only seals moisture in, which helps mold growth.) Many years ago it was the government's intention to promote home ownership by asking the agencies to move down the credit curve, making home financing available to "harder-to-finance" groups of borrowers. How did that work out?

This week the Financial Times tells us that the FBI has told them (you following this) that we can expect to see a sweep of mortgage fraud perpetrators this week. Charges are expected to be leveled over offenses ranging from pushing borrowers to lie about their income on mortgage applications to providing homeowners with false information about foreclosure rescue programs, the newspaper said.

What is going on out there? Not much. Monday the yield on the 10-yr note went from 3.23% up to 3.26%. In Washington, the effort to iron out the differences between the Senate and House financial reform bills continues. (Have you told your representative how you feel?) The Fed meets next week, and no matter what folks on TV or newspapers tell you, overnight rates (which don't have a huge impact on 30-yr mortgage rates) are going to stay the same. Yesterday prices started off a little worse, and then improved back to Friday afternoon's levels. So the mortgage-backed security market ended the day roughly unchanged, but we still had price improvements from investors. (Kind of like Nordstrom's increasing the mark-up on socks, and then having a sale taking the price back down to normal levels.)

Fortunately US recessionary "double-dips" are exceptionally rare. There have been only three episodes in US business cycle history when the economy lapsed back into recession within a year of the previous recession ending: 1913, 1920, and 1981. (Since 1854 there have been 33 recessions and only three instances when the economy lapsed back into recession within 12 months of exiting the previous downturn.) So this, combined with the fact that US exports to the Euro Zone only account for about 1% of our GDP, lead smarter minds than mine to believe that any chance of a double dip are minimal.

Pensacola, FL "We have good news and bad news. The bad news is that your bike rental business here in Pensacola is going to have no revenue for the foreseeable future. The good news is that Fannie, Freddie, and servicers such as CitiGroup aren't going to require you to pay your mortgage for a while." CitiMortgage will suspend all foreclosure sales and filings for 90 days on its 1st mortgages within 25 miles of the coast. Fannie Mae said that servicers of Fannie-backed loans may immediately suspend or lower payments on mortgages for borrowers whose income or property were affected by the spill. Under the Fannie Mae program, servicers can offer to postpone or lower payments for up to 90 days, during which the servicer is expected to verify the borrower's income loss or the damage the oil spill may have done to their property. Freddie Mac will grant up to six months forbearance to victims of the oil spill.

Here in Alaska, it is illegal to whisper in someone's ear when they are moose hunting. (Don't ask me why - probably the result of some senator's hunting accident years ago.) The laws dealing with mortgage fraud are much more serious, however, and the FBI's announced mortgage fraud operations this week have certainly created some headlines. The number of FBI investigations into alleged mortgage frauds more than doubled, to more than 3,000 this year from around 1,200 in fiscal year 2007.

The advent of Summer is nearly upon us, with warm days and what are likely to be languid times for real estate and housing markets. As we look across the economic landscape into the season ahead, it is clear that the frenetic pace of Spring is falling behind us, with a spike in activity replaced with a slow slog toward recovery.

Last week, we had occasion to consider the dynamics of housing demand, the factors that influence them and the prospects for activity in the months ahead. This week, we thought we'd consider the distorting effects of government policy on that demand, and wonder how markets would have fared without those intrusions into their more natural functions. For their part, low mortgage rates are both a surprise and a key support for potential homebuyers, but re-filling the pool of demand is going to occur slowly at best.

Mortgage rates have no real place to go at the moment. There isn't enough domestic economic strength or demand for credit to propel them higher, and while the the influx of cash from the euro-zone mess has pressured them down, the panic rush to safety does seem to have subsided. The Federal Reserve Open Market Committee will meet next week to consider these and many other things, but will report no change to policy, a moderate assessment of the present economic climate and a measured concern for the overseas problems and proposed solutions.

As far as significant economic data, we'll get new and existing home sales, both for May; can't imagine that they'll go anywhere but down. We'll get a final look at Q1 GDP, a durable goods report and a sentiment reading. In this context, rates should probably hold pretty flat, typical loans closing now are in the 4.75 to 5.125 range for a 30yr fixed loan.


GEOGRAPHY OF A WOMAN
Between 18 and 22, a woman is like Africa - half discovered, half wild, fertile and naturally beautiful!
Between 23 and 30, a woman is like Europe - well-developed and open to trade, especially for something of real value.
Between 31 and 35, a woman is like Spain - very hot, relaxed, and convinced of her own beauty.
Between 36 and 40, a woman is like Greece - gently aging, but still a warm and desirable place to visit.
Between 41 and 50, a woman is like Great Britain - with a glorious and all-conquering past.
Between 51 and 60, a woman is like Israel - has been through war, doesn't make the same mistakes twice, and takes care of business.
Between 61 and 70, a woman is like Canada - cool, self-preserving, but open to meeting new people.
After 70, she becomes Tibet - wildly beautiful, with a mysterious past and the wisdom of the ages.... an adventurous spirit and a thirst for spiritual knowledge.

THE GEOGRAPHY OF A MAN
Between 1 and 80, a man is like a third world country - ruled by a couple of nuts.