Market News

  Mortgage Bonds struggled today as resistance provided by the 100-day Moving Average kept a lid on any attempted advances.

   Starting the day, Jobless Claims came in better than expected, down 565K, as opposed to the 600K estimated.  We will have to wait and see if this number gets revised.  However the number of existing claims rose by 12,000.

   The $11B 30-Year Auction showed a 2.36 bid-to-cover and indirect participation of 50.2%.

   The benchmark 4.5% Mortgage Bond closed at $100.12 but the effect of this rollover is minus 47 basis points.

   Therefore, while the bond quote for today shows minus 81bp, the minus 47bp rollover adjustment must be accounted for.  This means that pricing actually closed down 34bp on the day.

   All three major indexes traded mostly flat throughout the day, however ended in the green for the first time in more than a week.

   Crude Oil traded in the red for most of the session and even broke below the $60 threshold before closing the day positively at $60.48.

   What news will tomorrow bring with the Balance of Trade and the University of Michigan’s Consumer Sentiment Index scheduled for release.

   Bonds continue to remain in an overbought state and with more second quarter earnings to be announced, the roller coaster ride should continue

Happy 4th of July

Have a fantastic 4th of July. 

Market News

Jobless report hurts the dow, the earlier reports prove to be way off

 

 The big news today was the Labor Department’s Non-farm payrolls, which took Wall Street off guard reporting that there were 467,000 jobs lost in June versus the -365,000 that was expected as the recession continues to grip the nation.

 The Unemployment rate rose to its highest level since August of 1983 to 9.5%, slightly lower than the 9.6% that was anticipated and up from June’s reading of 9.4%.

So what exactly does “we saved or created 150,000 jobs” mean?

The weak data sent Stocks plunging and giving a lift to Bond prices.

The benchmark 4.5% coupon rose 9bp to close at $99.97.

The Treasury announced next week’s round of auctions with a size of $73B.

 The NY Fed purchased $23.1B in Mortgage backed Securities in the latest week concentrated in the 4.5% to 5.5% coupons.

Stocks plunged on Wall Street today weighed down by the lousy Jobs report.

 The Dow plummeted 223 points to end at 8,280, while the Nasdaq fell 50 points to end at 1,796.

The closely watched S&P 500 Index dropped 26 points ending at 896.

 Oil dropped on the NYMEX to $66.73/barrel down $2.58 as the poor payrolls report could keep demand at low levels.

Have a Happy 4th of July!

Fannie & Freddie Enter Into The Subprime World

   The Huntington Beach Mortgage Oracle is a blog site to keep people aware of changes in the mortgage industry.  In case you have been living in a cave there has been many changes in the finance world.  These changes have come about because of the things that the current administration has implemented.  The finance, banking bailouts & guideline changes are where the Fed’s, aka Obama Administration, and mortgage professionals square off.  So after many questions here are a few things to think about. 

   It does not matter what anyone thinks about Obama being elected president.  It is time to grow up as the election took place in November of 2008.  Today is July 2, 2009 and it is now time to look at the real issues.  So just for example, lets focus on the economy and not light bulbs.  The light bulb issue is a perfect example of not seeing the big picture.  The EPA at this point has not and will not allow any US company to manufacture these twist light bulbs on US soil.  These florescent twist light bulbs are made in China, the same China that is continuing to purchase US Treasury Bonds.  So here we go yet again killing another industry and the jobs that come with in. 

   There is a service life to these twist light bulbs and when that time comes where do we dispose of these bulbs.  Is this the new industry that Obama is talking about?  Currently it is illegal to put old florescent bulbs or lamps into the normal trash.  So where will these toxic twist light bulbs be discarded? 

   Obama is the President of the United States period.  It is not only permissible but expected of everyone to expect him act Presidential.  I have offered my companies services and I am sure we can match ability with any of the current Mortgage advisors to the President.  I say that with complete confidence because we have been at the front lines for years and ran our own companies successfully even in this down market. 

   Here is the first thing I would advise him on.  Stop telling the people of this country that he has put together this great new mortgage plan called the “H.A.R.P.” and it is going to save hundreds of thousands of homes.  This could not be farther from the truth and how in the world he can say this straight faced is unbelievable.

   The H.A.R.P. loan program is a program that will allow a home owner to refinance there current mortgage up to 105% of the current value without mortgage insurance.  This sounds great but the current mortgage can not have existing mortgage insurance and the current mortgage must be owned by Fannie Mae.  There are some Freddie Mac owned loan options but they have even more restrictions.  Here are the facts for the month of May 2009.  Roughly 400,000 foreclosures and roughly 11,000 H.A.R.P. loans done.  Clearly this program is doing little to help and the Fed’s know it.

   So yesterday the Fed’s made the announcement that they are coming out with 125% LTV Fannie and Freddie loan programs.  This will raise the H.A.R.P. program from 105% to 125% underwater.  The Treasury Secretary Tim Geithner made the announcement in Las Vegas and called the move “a crucial step in our broader efforts to get America’s housing market and economy on the path to recovery.”  I have read this quote several times and I keep coming to the same conclusion.  These guys must be smarter than me because I have trouble with a loan to value being higher than 100%.  This clearly makes the beginning on the Fed’s entering into the subprime arena. 

   The recent passing by the House of the “Cap & Trade” bill is a disaster in the making for the already weak mortgage industry.  There are provisions in the “Cap & Trade” bill that will require a home owner to bring their home up to “Green Standards” in order to sell it.  The Green Standards are upgrades to doors, windows, heating & cooling systems, kitchen appliances, lighting, water heaters, low flow faucets & toilets and insulation.  In this already weak housing market who has the equity to make these upgrades just to sell their home? 

  Just a few days ago Obama had yet another scripted town hall meeting.  I hear what the man is saying and I see what is happening.  I find myself thinking that Obama is a man much like a turtle on top of a fence post.  It is time to get your feet solidly on the ground and act like an American President.  We are American’s!   We have a capitalist lifestyle that rewards people for working hard.  It is clearly time for a flat tax.    

   The Future President of 2012 will be faced with the largest economic recovery in the Countries history.  We will have to see if the American people will vote for the next president with real economic understanding.  How about at the next town hall meeting we answer some real questions.  This is what a real President does.  We have real problems that need real answers.  Let’s stop telling stories about better times and unachievable goals and get down to business.  It was just three months ago Obama told us that unemplyment would not go over 8% if we pass his stimulus bill.  Today the jobless rate is 9.5%.  The highest in 26 years and we have a huge stimulus bill to pay for.  This is not real leadership, my kids can do this.    

   My staff has years of experience in structuring finance solutions for the private sector.  That is code for “we know how to get the job done!”  We tell our client’s not to wait until it is too late to correct a situation.  We are here and ready to go and I am sure our expenses are much less that your current staff’s.  If not my staff then find another company with the same ability but it is clearly time for some new thinking with real leadership.

   I will give you something to think about.  The Fed’s have given billions to the big banks of tax payer money to save them.  If I was the President of a smaller bank that did business the right way I would not be happy about this.  Today the Fed’s prime rate is a ridiculously low .50%.  The banks also borrower this money and then lend it back to the public in the form of mortgages, loans and Credit Cards.  Today most mortgages seem to be near 5.5% and I have heard of Credit Cards as high as 38%.  Unless you are using some unusual creative math this makes some huge profits for the banks. 

   Yesterday Citibank announced that they are raising their credit card interest rates to record levels before the new law kicks in.  Isn’t Citibank the bank that took the most bailout money?  Aren’t the tax payer’s now stock holders in Citibank?  We have a voice and should be able to address the chairman of the board.  Who is our representative for the Citibank stock and why isn’t this person speaking up?  

 Why is it whenever you follow the money it ends at a place that stinks?

Its Time To Look At The Big Picture

  I have taken a little time off due to the recent passing of my father and all of the issues of dealing with his affairs.  It has changed my prospective a bit.  Today the media seems to be more concerned about what the Obama family is doing, the John & Katie divorce and of all things Perez Hilton getting smacked.  Obama’s family should not be in the news, John & Kate have some serious personal issues that should stay personal and my god, why would anyone listen to what Mr. Hilton has to say.  Just my opinion, it is about time he got what he deserved.

  With that said it is time to look at the real issue and that it the real issue here is the economy.  Currently the Fed action is to sell treasury bonds that will put a huge burden on the next administration and every tax payer.  In a nut shell the Fed is now living off its credit cards.  This huge debt will have to be repaid and much of it within seven years.  How is that going to happen?  There are several possibilities but many of us do not understand them.  Here are a few possibilities to consider;

Taxes

  Currently we are living in the lowest tax rate in history and we pay the most taxes.  The reason is because we have lost the ability to write off everything but home mortgage.  In the current environment maybe all levels of Government should consider giving back in ways that do not burden us with huge debt.  We need to open our eyes and look at the current actions of the Fed’s and relies that we are going in a tax and spend direction. 

401K’s 

  If you think about the 401K accounts and how they will disperse it should make you upset.  Today most of us, including myself, have or currently still do put money into a 401K thinking that they are helping themselves in the future.  This could not be future from the truth.  Today you are deferring your taxes until a future date.  That date is when you start withdrawing the funds from your 401K account.  The issue here is this is when you are going to need the money the most and you will be paying what tax rate on the money withdrawn?  Today’s rate, guess again, it will be tomorrow’s rate.  Do you think taxes are going to be lower in the future?  Taxes have out paced income nearly three times in recent years.  If you think about it everyday I pay over 27 different taxes before I get out of bed.  In my state of California and I am appalled at the state leaders even considering raising taxes to cover their over spending.

Car Industry

  In times of need why are we not trying to help people to purchase cars.  If the tax deduction for car financing was restored then more car would have been purchased.  There is no way to tell if it would have saved GM and Chrysler but there would have been more money for them to work with.  It would be much easier for us the taxpayer to deal with a small tax revenue reduction that billions in bailout money. 

Banks

  Several of the big banks have received bailout money.  The media views them as bad for doing bad loans.  The media seems to forget that Fannie Mae & Freddie Mac set the guidelines for these so called bad loans.  The jig is up, the Fed’s where in on it.  Why do you think they where so willing to hand out the Bailout money? 

The H.A.R.P. loan program   

  Obama has stood before us and spoke about this HARP loan program that will help many people keep there homes.  This is a modified version of the HOPE loan program that the banks refused to do.  The month of May had roughly 400, 000 foreclosures and only roughly 11,000 HARP loan done.  This program is hardly meeting its expectations.  The reason is this Fannie Mae nor Freddie Mac have agreed to purchase these HARP loans.  The banks have no where to sell these loans so again we sit and wait.   

  It is time for the Fed’s to give something back to the people.  Bailing out these big companies Banks, Insurance Companies, Auto Companies, ECT only helps the good old boys club and not the tax payer.  If Treasury Bonds continue to sell at a record pace, mortgage rates will continue to rise.  The current economy is all Obama at this point and it will not be paid off in my lifetime.  The burden being put on our grand children is unbelievable!

The 30 Year Rate Seems To Be Easing

  The Mortgage Bond market continues to improve as accurate economic data continues to come in. 

The comments made by President Obama hurt the Bond Market and rates increased dramatically. 

Today the 4.5% Mortgage Backed Security traded in an 88bp range as the volatility continues closing at $98.91up 62bp for the session. 

The only major economic news report out today was the New York State Empire Index showing that manufacturing in that region continues to contract reported at -9.41 versus the -4.60 that was expected. 

Stocks had their worst day in a month as investors became wary of an economic recovery aided in part by the poor data from the manufacturing report and after a downgrade of Wal-Mart from Goldman Sachs.

The weak economy along with the down turn with the DOW will help rates to stay low. 

When the Stock Market begins to rise rates with most like rise with it.

Market News

Well after several days of Mortgage Bonds taking a beating we have had two days of improvement. 

Investors are finally coming back to mortgage bonds simply because where else are you going to earn 5% return on your investment. 

Banks are not offering anywhere near 5% on CD’s so what are your options? 

The 4.5% Mortgage Backed Security rose 81bp to close at $98.28 after hitting a low of $96.31 yesterday.

Investors sensed a bargain and hedge fund giant Paulson & Co. announced that it will be buying Mortgage Backed Securities.

Paulson had bet successfully that the housing market would collapse a few years ago.

This afternoon Mohamed El-Erian, chief executive of the world’s largest Bond fund PIMCO, said that the Federal Reserve will be forced by rising Bond yields to ‘engage again’ in the purchases of US Treasuries and Mortgage Backed Securities in an effort to lower home loan rates that have moved higher in the last 2 weeks.

We have shared and have expressed the same opinion of Mr. El-Erian’s for several weeks.

Again just my opinion but this seems counter productive. 

Rates in the near future, in our opinion, will soon be in the 6% range for a 30 year fixed mortgage.

Why Are Mortgage Rates Going Up

  Currently we are seeing mortgage rates rocketing up into the mid 5% range for a 30 year fixed mortgage.  Just 10 days ago rates where nearly 1% less for the same 30 year fixed mortgage.  We are now beginning to see the impact of all of the resent Government spending.

   As the Feds continue to offer Treasury Bond Auctions nearly every few weeks is now beginning to affect the supply of available bonds.  The continued pressure of available bonds for purchase will drive up rates.  This is due to more supply than demand on a daily basis and you have had a recipe for lower Mortgage Bond prices.  Keep in mind that Lower Mortgage Bond prices equal higher Interest Rates.  The high the rates will reduce the available pool of home buyers due to debt to income ratios. 

 Here is what happened in the Bond Market today; 

•  Mortgage Bonds took another beating today after the Non-Farm Payroll report was reported at minus 345,000 versus the minus 520,000 that was expected.
•  The supply of Bonds coming out of the government and more supply than demand on a daily basis and you have had a recipe for lower Mortgage Bond prices.
•  The Unemployment Rate ticked up to a 26-year high of 9.4%.
•  The benchmark 4.5% fell 81bp closing at $98.19.
•  Stocks closed near unchanged levels as the S&P 500 hasn’t been able to close above a 7 month resistance of 944 closing at 940 down 2 and fractional points.
•  The Dow managed a small gain of 12 points to end at 8,763, while the tech heavy Nasdaq was near unchanged at 1,849.
• Oil on the NYMEX fell 41 cents to $68.39/barrel in extended hours trading.

   The Federal Governments spending is now beginning to hurt the average home buyer.  There are many possible solutions available but throwing money at the credit crunch issue seems to be the answer for now.  Bush asked for and got 750 Billion and spent half of that money in the form of bailouts.  Obama came in and spent the balance along with another 800 Billion and counting. 

   I have offered my office staffs services several time and at a considerable cost saving for ideas on how to fix the Mortgage Crises.  I will offer up one idea here to think about.  The Fed’s need to stat that they will support the Dollar and continue to purchase Mortgage Backed Securities.  No one is beating this drum.  Why would another country invest in Mortgage backed Securities if we wont?  Talking the talk on a good will tour will not get it done.  We need to walk the walk.

Market News

The volatility that has gripped the Mortgage Bond market since mid May has somewhat subsided today. 

 The benchmark 4.5% MBS traded in just a 41bp range today and for most of the afternoon session traded in a tight 12bp range.

 The 4.5% closed at $100.03 up 16bp for the day.

 The volatility may come back into the Bond markets tomorrow with the Treasury announcing note auctions for next week. 

 Also the government’s Employment Report on Friday morning where it is expected that 520,000 jobs were lost.

 In today’s economic news, mortgage applications fell 16% in the week ended May 29 as home loan rates were pushed higher.

 The ISM Services Index came in near estimates.

 The ADP Employment report estimated that there were 532,000 private sector jobs lost in May, slightly worse than the -525,000 expected.

 Stocks stalled today as investors took some profits after equities moved higher in the previous four sessions but did manage a late session rally that pared some of the losses.

 Yesterday, the S&P 500 closed at resistance at 944 and were turned lower today closing down 13 points ending at 931, while the Dow lost 66 points ending at 8,675.

 The Nasdaq dropped 11 points to finish at 1,825.

 The Mortgage Bond market appears to be reacting to future inflation fears.

 We may have seen the last of 4% rates for awhile. 

 

Stay Tuned….

Is the Real Estate Market Now Stable?

  We have all seen the low asking prices for listed properties that are Short Sells or Auction homes.  Is this the best way to purchase a home?  Well, it could be.  More times than not you will over pay for properties sold in this fashion. 

   Most people looking for what is perceived as a “great deal” often over pay for it.  It is human nature to want something and to over pay for anything if we get emotion involved in our decision making.  Think about it, the home that you want is about to go on the auction block and you bid on the property only to find out that someone else wants the home too.  And the bidding run up is on.  I would have to think everyone has bought something in their lives and later found out that they over paid.  This is what happens more times than not as the auctioneer has a property on the block. 

   In regards to short sells these are proving to be silent auctions.  I have seen properties sell for as much as $90,000 over the asking price with the buyer paying all of the closing cost.  Most people that are looking for a short sell property to purchase will discover this over offer price bidding.  The average person looking to purchase a short sell property will make offers on roughly 20 properties before they actually get an accepted offer on a property.  This is because it is hard to except the fact that you have to offer more than the asking price, in most cases, in order to get a home. 

   Main Stream Media still does not report this correctly.  I often watch the morning news while getting ready for work and it is very disappointing to continually hear tabloid stuff.  

• Why have the banks not started offering HOPE loan program? 
• Why have the banks not fully integrated the HARP loan program? 
• Why did we bailout banks that did bad business? 
• Why don’t banks have to disclose problems with the short sell properties that they are selling? 
• Why is it short sell homes sell in a silent auction format? 
• Our Media seems to like to report on the Obama’s date nights.  
• Does anyone ask why the Obama’s are going on “date night” and taking the company car?   
• Why hasn’t Barney Frank and/or Nancy Pelosi been thrown out of office?
• Does any journalist have what it takes to ask Obama, Frank or Pelosi why the HARP or HOPE loan programs have not been fully interrogated? 

   We have real problems still yet to come in California in regards to real estate values.  California is still considered a declining market by the Lenders which means you get hit with an additional cost when you obtain a mortgage.  As the State Government is finally left with facing the real possibility of stopping wasted spending we are sure to have to deal with higher taxes even in this time of need.  California is dealing with a mass exit us of business and without work the people with soon follow.  Simple supply and demand along with limited finance options and lack of gainful employment will only drive down prices even more if Sacramento can not truly balance our budget.

   With of DMV fees set to double even I am considering relocating to another state to reduce my taxes.  As a native Californian it is difficult for me to say such a thing but look at what we are faced with.  Currently even before I get out of bed I pay 27 different taxes with the real possibility that the number of taxes paid will increase or go up.  Taxes are out pacing income by three times and set to even increase.  This is unbelievable!  I am neither a Democrat nor a Republican but I can surely understand why the country wide Tea Parties are on going.  I would bet that most people think as I do and I believe the song says it best, Clowns to the left of me, jokers to the right, here I am, stuck in the middle again.