Marc's Mortgage Matter's

I was reading in the paper today about a dwarf that got pick-pocketed. How could anyone stoop so low? ("Bah da bum") Speaking of stooping low, the ringleader of a mortgage fraud scheme involving dozens of homes in northern Virginia and losses of at least $9 million has been sentenced to five years in prison. Among 20 other arrests, real estate agent Ruben Rojas led a scheme whereby two real estate agents and a loan officer recruited "straw buyers" with incomes of less than $25,000 and then were approved for loans of $800,000 or more with little or no down payments. America is a great country! 

Why should what happens in Greece impact the mortgage rate that Joe Thompson pays in Missoula? US mortgage markets have been helped in two ways: the uncertainty in Europe has led to a flight to quality in safer investments, including US Treasuries and mortgage-backed securities (MBS), and also investors expect that continued economic turmoil in Europe will reduce US exports to the region, slowing US economic growth and reducing inflationary pressures. The United States does not have extensive trade and financial ties with Greece, and banks in this country own few Greek bonds. But other countries do, and the U.S. financial system could be adversely affected indirectly by the heavy exposure of other European countries to Greece.

Although recent indicators suggest that the Euro-zone economy (16 countries) is slowly and weekly expanding, a default by Greece or anyone else (PIGS: Portugal, Ireland, Greece, Spain) would slam the European banking system, and in turn ours. As it turns out, the European Union (EU) and the International Monetary Fund (IMF - almost 20% funded by the US) joined forces early last week to create a loan package/bond purchase plan for $962 billion (759 billion euros). Of course, Greece has yet to succeed with its austerity measures - retiring at age 55 with full pay sounds pretty good

Mortgage and other interest rates are of course influenced by other factors, too, with economic growth or decline and inflation concerns chief among them. As we drift away from the recent recession, growth appears to be solidifying gradually, hopefully building enough momentum to overcome the drag of a still-soft labor market and the wreckage of a once-robust housing market.

It's worth noting that the price of oil has fallen sharply since the Euro-zone crisis began. After flirting with the $85/bbl range just a few weeks ago, we are now seeing prices in the low $70 range. Should the lower-price trend hold, this could provide millions of additional consumer spending dollars to help perk up economic growth in the weeks ahead, and perhaps even offset the annual increase in gasoline costs attributed to the "summer driving season," coming soon to a gas station near you.

In short then following Greek market mess and another rough-and-tumble week for US equity markets saw investors again run to the safe haven of US Treasury issues. As a result, the influential 10-year Treasury yield was driven down to 3.45% at Friday's market close, a value comparable to the lows of last week when those issues were compounded by a 10% drop in the Dow Jones Industrial Average. Such turmoil has a silver lining for mortgage rates, since declining yields drag mortgage rates down along with them. 

Kate Berry with American Banker put out an interesting article on a credit-related trend. It used to be common for children to piggyback on their parents' credit to buy a car. Now the opposite is happening with increasing frequency: in some areas where unemployment and foreclosure rates are among the highest, parents are increasingly using their grown children's higher credit scores to lease cars! According to one person in that industry, many of these adult borrowers can afford to take over a lease payment "but have issues qualifying for credit," and are turning to their children for help. 

There are lots of poll taken to gauge public opinion. The latest telephone poll directed by Rick Perry, the Texas Governor, asked whether people who live in Texas think illegal immigration is a serious problem:
29% responded, "Yes, it is a serious problem."
71% responded, "No es una problema seriosa."