Showing posts with label Mortgage news. Show all posts
Showing posts with label Mortgage news. Show all posts
Tuesday, November 27, 2012
Lending Gets Even Tighter for Borrowers
The average FICO score for first-lien loans reached 750 in October, a rise from 741 in August, according to Ellie Mae, an analysis that encompasses about 20 percent of all loan applications in the U.S.
Meanwhile, the average FICO score on applications that were denied by lenders was 706. That is up from 700 compared to year ago levels and 697 in September 2011.
Last week, Federal Reserve Chairman Ben Bernanke said that tighter lending conditions are contributing to a housing slowdown. He said that some tightening in mortgage lending was necessary following the housing crisis. But, he added, “it seems at this point the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes."
Source: “Average FICO Score Getting higher for Approved Mortgages,” HousingWire (Nov. 19. 2012)
Wednesday, February 17, 2010
Selling Short? Keep Track of Everything
Selling Short? Keep Track of Everything
By Gino Blefari
President and CEO
Intero Real Estate Services, Inc.
It’s that time of year again. The Winter Holidays are behind us, we’ve cheered a new Super Bowl champion and exchanged boxes of chocolates for Valentine’s Day. That can only mean one thing: Tax Season is upon us.
When it comes to your home, there is plenty of documentation of which you need to keep track when it comes time to file your annual return. For those of you filing “standard” income tax returns, this is all fairly clear and straightforward.
With the current real estate climate, however, there are scores situations, like having lost a home to foreclosure, or staring personal bankruptcy in the face, in which many never thought they’d find themselves. Situations like these can make filing taxes a bit trickier.
There’s one circumstance in particular on which I’d like to focus today:
Short sales.
If you’ve gone through the short sale process (where you can no longer afford the payments on your home, but your lender allows you to sell the home at loss, rather than go through with foreclosure), then you know it’s long, it’s arduous, and it’s one in which things have the potential to be very murky.
When completing the reams and reams of paperwork required by your lender to complete the short sale process, it’s likely that you signed a promissory note, or other like document, granting the lender the right to take action against you to collect the deficient amount. This is pretty standard. It’s possible, though, that you also got a copy of a document with the heading 1099-C, which the lender has filed with the IRS, indicating that the unpaid portion of the loan has been canceled. This is a trigger for the IRS to assess taxes against the forgiven debt.
Wait. What?
“How is that possible?” you might ask. Good question. It doesn’t stand to reason that a lender can pursue you for unpaid debt and that the IRS can assess taxes, as well. Logic would dictate that one or the other is reasonable, but not both.
Keep copies of everything having to do with anything related to the transaction.
If you signed paperwork indicating that the lender can take collection action against you, but you’ve also received a 1099-C for the uncollected debt, you’ll have plenty of documented proof to show the IRS that you don’t owe taxes on that amount. Similarly, if there is nothing in your sale paperwork that gives the bank the right to collect the debt, nor is there any other reference to it, the 1099-C will serve as evidence should the bank, at some point, decide to take action against you.
They can’t have it both ways.
I’m not a tax professional. I’m not certified to give that sort of advice. But I can advise you to seek the counsel of a tax professional, so that negotiating the maze of tax ramifications that come with a short sale is made somewhat easier
By Gino Blefari
President and CEO
Intero Real Estate Services, Inc.
It’s that time of year again. The Winter Holidays are behind us, we’ve cheered a new Super Bowl champion and exchanged boxes of chocolates for Valentine’s Day. That can only mean one thing: Tax Season is upon us.
When it comes to your home, there is plenty of documentation of which you need to keep track when it comes time to file your annual return. For those of you filing “standard” income tax returns, this is all fairly clear and straightforward.
With the current real estate climate, however, there are scores situations, like having lost a home to foreclosure, or staring personal bankruptcy in the face, in which many never thought they’d find themselves. Situations like these can make filing taxes a bit trickier.
There’s one circumstance in particular on which I’d like to focus today:
Short sales.
If you’ve gone through the short sale process (where you can no longer afford the payments on your home, but your lender allows you to sell the home at loss, rather than go through with foreclosure), then you know it’s long, it’s arduous, and it’s one in which things have the potential to be very murky.
When completing the reams and reams of paperwork required by your lender to complete the short sale process, it’s likely that you signed a promissory note, or other like document, granting the lender the right to take action against you to collect the deficient amount. This is pretty standard. It’s possible, though, that you also got a copy of a document with the heading 1099-C, which the lender has filed with the IRS, indicating that the unpaid portion of the loan has been canceled. This is a trigger for the IRS to assess taxes against the forgiven debt.
Wait. What?
“How is that possible?” you might ask. Good question. It doesn’t stand to reason that a lender can pursue you for unpaid debt and that the IRS can assess taxes, as well. Logic would dictate that one or the other is reasonable, but not both.
Keep copies of everything having to do with anything related to the transaction.
If you signed paperwork indicating that the lender can take collection action against you, but you’ve also received a 1099-C for the uncollected debt, you’ll have plenty of documented proof to show the IRS that you don’t owe taxes on that amount. Similarly, if there is nothing in your sale paperwork that gives the bank the right to collect the debt, nor is there any other reference to it, the 1099-C will serve as evidence should the bank, at some point, decide to take action against you.
They can’t have it both ways.
I’m not a tax professional. I’m not certified to give that sort of advice. But I can advise you to seek the counsel of a tax professional, so that negotiating the maze of tax ramifications that come with a short sale is made somewhat easier
By Gino Blefari
President and CEO
Intero Real Estate Services, Inc.
It’s that time of year again. The Winter Holidays are behind us, we’ve cheered a new Super Bowl champion and exchanged boxes of chocolates for Valentine’s Day. That can only mean one thing: Tax Season is upon us.
When it comes to your home, there is plenty of documentation of which you need to keep track when it comes time to file your annual return. For those of you filing “standard” income tax returns, this is all fairly clear and straightforward.
With the current real estate climate, however, there are scores situations, like having lost a home to foreclosure, or staring personal bankruptcy in the face, in which many never thought they’d find themselves. Situations like these can make filing taxes a bit trickier.
There’s one circumstance in particular on which I’d like to focus today:
Short sales.
If you’ve gone through the short sale process (where you can no longer afford the payments on your home, but your lender allows you to sell the home at loss, rather than go through with foreclosure), then you know it’s long, it’s arduous, and it’s one in which things have the potential to be very murky.
When completing the reams and reams of paperwork required by your lender to complete the short sale process, it’s likely that you signed a promissory note, or other like document, granting the lender the right to take action against you to collect the deficient amount. This is pretty standard. It’s possible, though, that you also got a copy of a document with the heading 1099-C, which the lender has filed with the IRS, indicating that the unpaid portion of the loan has been canceled. This is a trigger for the IRS to assess taxes against the forgiven debt.
Wait. What?
“How is that possible?” you might ask. Good question. It doesn’t stand to reason that a lender can pursue you for unpaid debt and that the IRS can assess taxes, as well. Logic would dictate that one or the other is reasonable, but not both.
Keep copies of everything having to do with anything related to the transaction.
If you signed paperwork indicating that the lender can take collection action against you, but you’ve also received a 1099-C for the uncollected debt, you’ll have plenty of documented proof to show the IRS that you don’t owe taxes on that amount. Similarly, if there is nothing in your sale paperwork that gives the bank the right to collect the debt, nor is there any other reference to it, the 1099-C will serve as evidence should the bank, at some point, decide to take action against you.
They can’t have it both ways.
I’m not a tax professional. I’m not certified to give that sort of advice. But I can advise you to seek the counsel of a tax professional, so that negotiating the maze of tax ramifications that come with a short sale is made somewhat easier
By Gino Blefari
President and CEO
Intero Real Estate Services, Inc.
It’s that time of year again. The Winter Holidays are behind us, we’ve cheered a new Super Bowl champion and exchanged boxes of chocolates for Valentine’s Day. That can only mean one thing: Tax Season is upon us.
When it comes to your home, there is plenty of documentation of which you need to keep track when it comes time to file your annual return. For those of you filing “standard” income tax returns, this is all fairly clear and straightforward.
With the current real estate climate, however, there are scores situations, like having lost a home to foreclosure, or staring personal bankruptcy in the face, in which many never thought they’d find themselves. Situations like these can make filing taxes a bit trickier.
There’s one circumstance in particular on which I’d like to focus today:
Short sales.
If you’ve gone through the short sale process (where you can no longer afford the payments on your home, but your lender allows you to sell the home at loss, rather than go through with foreclosure), then you know it’s long, it’s arduous, and it’s one in which things have the potential to be very murky.
When completing the reams and reams of paperwork required by your lender to complete the short sale process, it’s likely that you signed a promissory note, or other like document, granting the lender the right to take action against you to collect the deficient amount. This is pretty standard. It’s possible, though, that you also got a copy of a document with the heading 1099-C, which the lender has filed with the IRS, indicating that the unpaid portion of the loan has been canceled. This is a trigger for the IRS to assess taxes against the forgiven debt.
Wait. What?
“How is that possible?” you might ask. Good question. It doesn’t stand to reason that a lender can pursue you for unpaid debt and that the IRS can assess taxes, as well. Logic would dictate that one or the other is reasonable, but not both.
Keep copies of everything having to do with anything related to the transaction.
If you signed paperwork indicating that the lender can take collection action against you, but you’ve also received a 1099-C for the uncollected debt, you’ll have plenty of documented proof to show the IRS that you don’t owe taxes on that amount. Similarly, if there is nothing in your sale paperwork that gives the bank the right to collect the debt, nor is there any other reference to it, the 1099-C will serve as evidence should the bank, at some point, decide to take action against you.
They can’t have it both ways.
I’m not a tax professional. I’m not certified to give that sort of advice. But I can advise you to seek the counsel of a tax professional, so that negotiating the maze of tax ramifications that come with a short sale is made somewhat easier
Friday, November 6, 2009
CONGRESS PASSES HOMEBUYER TAX CREDIT
Here's the latest intelligence from Real Estate Economy Watch.
Special Report
CONGRESS PASSES HOMEBUYER TAX CREDIT
--------------------------------------------------------------------------------
The House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.
The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.
For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
Read the full story at http://www.realestateeconomywatch.com/
Special Report
CONGRESS PASSES HOMEBUYER TAX CREDIT
--------------------------------------------------------------------------------
The House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.
The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.
For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
Read the full story at http://www.realestateeconomywatch.com/
Wednesday, September 2, 2009
Mortgage Market Commentary
Rates were GREAT yesterday and yet have IMPROVED today!!
If you’re an honest, law-biding citizen, should you care if the IRS starts comparing mortgage payments and income? What about if you’re a roofer who makes half his income in cash? If Jane Doe claims she makes $2,000 per month on her taxes, yet her mortgage payment is $3,500, should that be a reason for Ms. Doe to be investigated? In yet another story yesterday, it appears that the IRS “will study whether it should make greater use of data on mortgage-interest payments provided to it by banks.” The IRS currently uses such data to send notices to non-filers who it believes should have filed a return. The data could also be used to target for audits individuals who don't file tax returns, or who report less income than they paid in mortgage interest. Of course, if you’re a struggling borrower that is using money out of your savings account, or from Mom & Dad, to make the mortgage payment, you don’t need two guys with badges showing up at your office….
Wells Fargo was in the rumor mill yesterday, not for anything mortgage-related but rather on if and when it is going to pay back the government TARP money. The rumors prompted its CEO to make a statement that Wells will not be selling more stock to pay back its TARP monies but rather use its earnings. Wells, in addition to Citi and Bank of America, have not paid back any TARP money yet. Although $25 or $26 billion is a big chunk of change, Wells has been having its best results in its history and has had made money by cutting its dividend. Let’s hope that they keep buying mortgages!
Yesterday was one of those days when it was better to own fixed-income securities than to own stocks. As it turned out, there were rumors swirling about Wells Fargo (see above), and this caused the herd to shuffle into the proverbial “flight to quality”. Besides, many think that the stock market has gotten a little ahead of itself in recent weeks, and took some profits by selling. Regardless, bonds did well, and rates came down. But as I have said, few are complaining about rates – they are too busy wondering if guidelines will ever loosen up.
What moved rates yesterday? Construction Spending was -0.2% in July, and year-over-year spending is down 10.5%. The Institute for Supply Management’s Factory Index increased to 52.9 in August, better than expected. We also had the National Association of Realtors report that Pending Home Sales were up 3.2%, more than forecast, and once again attributed to lower rates, less expensive houses, and the tax credit (which expires around Thanksgiving). So go figure: better news across the board should have moved the stock market higher and bonds lower, but the reverse happened.
Today we have Factory Orders and the FOMC Minutes, although we have already seen mortgage applications. U.S. mortgage applications were down last week a little over 2%, with purchase apps declining for the first time since early July. Purchase loan applications dipped 1%, and applications to refinance fell about 3%. We also had the ADP employment numbers, which don’t include government jobs, which showed that job losses in the U.S. private sector fell to their lowest monthly level in nearly a year. “Only” 298,000 jobs were cut in August. After this tidbit we find the 10-yr at 3.36% and mortgage securities about unchanged.
Make it a great day!!!
If you’re an honest, law-biding citizen, should you care if the IRS starts comparing mortgage payments and income? What about if you’re a roofer who makes half his income in cash? If Jane Doe claims she makes $2,000 per month on her taxes, yet her mortgage payment is $3,500, should that be a reason for Ms. Doe to be investigated? In yet another story yesterday, it appears that the IRS “will study whether it should make greater use of data on mortgage-interest payments provided to it by banks.” The IRS currently uses such data to send notices to non-filers who it believes should have filed a return. The data could also be used to target for audits individuals who don't file tax returns, or who report less income than they paid in mortgage interest. Of course, if you’re a struggling borrower that is using money out of your savings account, or from Mom & Dad, to make the mortgage payment, you don’t need two guys with badges showing up at your office….
Wells Fargo was in the rumor mill yesterday, not for anything mortgage-related but rather on if and when it is going to pay back the government TARP money. The rumors prompted its CEO to make a statement that Wells will not be selling more stock to pay back its TARP monies but rather use its earnings. Wells, in addition to Citi and Bank of America, have not paid back any TARP money yet. Although $25 or $26 billion is a big chunk of change, Wells has been having its best results in its history and has had made money by cutting its dividend. Let’s hope that they keep buying mortgages!
Yesterday was one of those days when it was better to own fixed-income securities than to own stocks. As it turned out, there were rumors swirling about Wells Fargo (see above), and this caused the herd to shuffle into the proverbial “flight to quality”. Besides, many think that the stock market has gotten a little ahead of itself in recent weeks, and took some profits by selling. Regardless, bonds did well, and rates came down. But as I have said, few are complaining about rates – they are too busy wondering if guidelines will ever loosen up.
What moved rates yesterday? Construction Spending was -0.2% in July, and year-over-year spending is down 10.5%. The Institute for Supply Management’s Factory Index increased to 52.9 in August, better than expected. We also had the National Association of Realtors report that Pending Home Sales were up 3.2%, more than forecast, and once again attributed to lower rates, less expensive houses, and the tax credit (which expires around Thanksgiving). So go figure: better news across the board should have moved the stock market higher and bonds lower, but the reverse happened.
Today we have Factory Orders and the FOMC Minutes, although we have already seen mortgage applications. U.S. mortgage applications were down last week a little over 2%, with purchase apps declining for the first time since early July. Purchase loan applications dipped 1%, and applications to refinance fell about 3%. We also had the ADP employment numbers, which don’t include government jobs, which showed that job losses in the U.S. private sector fell to their lowest monthly level in nearly a year. “Only” 298,000 jobs were cut in August. After this tidbit we find the 10-yr at 3.36% and mortgage securities about unchanged.
Make it a great day!!!
Tuesday, September 1, 2009
Would you want your child to go into real estate?
By:Rick Soukoulis
Chairman and CEO
Intero Mortgage
Kind of an interesting question, isn’t it?
It reminds me of that Willie Nelson song, “Mothers, don’t let your babies grow up to be cowboys…”
So what is it? Do you or don’t you want your kids to follow your foot paths into real estate?
First, let’s look at the choices. Your child could be a Realtor, a mortgage broker, a bank lending officer , an appraiser, or a title or escrow officer.
The first thing is that yes, it can be a very lucrative field. This is especially true for Realtors and mortgage brokers.
It’s not unusual, at least in a good year, for a Realtor or mortgage loan officer to make $100,000-200,000 in a year.
The obvious downside is volatility. I know one person who was an account executive for the sub-prime mortgage arm of Lehman Brothers. She was making about $300,000 a year during the good times, but she’s now working as a bookkeeper at a plumbing supply company.
If your kids do go into real estate, teach them early to set aside money during the good times to help them ride out the bad times.
Along with the lack of predictability of income, there is one huge positive: It’s the ability to help people. This is especially true for Realtors who work so hard to help people find their piece of the American Dream.
Being a Realtor was once considered almost a hobby. The cliché was that bored housewives did it to have something to do. I don’t know if that was really the case, but today’s Realtor is highly trained and extremely professional.
A final benefit to being a Realtor or being in the mortgage business is that these careers present all sorts of interesting investment opportunities. If your son or daughter goes into these or related fields, they will learn about good buildings for sale way before an ad shows up in the Sunday paper.
So along with the potential for good compensation, there is the chance to make good money through smart investing.
All in all, would I want my kids to go into real estate?
The answer is, quite simply, yes. And I’d be proud of them for doing so.
Chairman and CEO
Intero Mortgage
Kind of an interesting question, isn’t it?
It reminds me of that Willie Nelson song, “Mothers, don’t let your babies grow up to be cowboys…”
So what is it? Do you or don’t you want your kids to follow your foot paths into real estate?
First, let’s look at the choices. Your child could be a Realtor, a mortgage broker, a bank lending officer , an appraiser, or a title or escrow officer.
The first thing is that yes, it can be a very lucrative field. This is especially true for Realtors and mortgage brokers.
It’s not unusual, at least in a good year, for a Realtor or mortgage loan officer to make $100,000-200,000 in a year.
The obvious downside is volatility. I know one person who was an account executive for the sub-prime mortgage arm of Lehman Brothers. She was making about $300,000 a year during the good times, but she’s now working as a bookkeeper at a plumbing supply company.
If your kids do go into real estate, teach them early to set aside money during the good times to help them ride out the bad times.
Along with the lack of predictability of income, there is one huge positive: It’s the ability to help people. This is especially true for Realtors who work so hard to help people find their piece of the American Dream.
Being a Realtor was once considered almost a hobby. The cliché was that bored housewives did it to have something to do. I don’t know if that was really the case, but today’s Realtor is highly trained and extremely professional.
A final benefit to being a Realtor or being in the mortgage business is that these careers present all sorts of interesting investment opportunities. If your son or daughter goes into these or related fields, they will learn about good buildings for sale way before an ad shows up in the Sunday paper.
So along with the potential for good compensation, there is the chance to make good money through smart investing.
All in all, would I want my kids to go into real estate?
The answer is, quite simply, yes. And I’d be proud of them for doing so.
Thursday, August 27, 2009
Mortgage fraud bill proposed by Santa Clara County prosecutors close to becoming law
By Mark Gomez
mgomez@mercurynews.com
Posted: 08/26/2009 04:55:52 PM PDT
Updated: 08/27/2009 03:13:47 AM PDT
Santa Clara County prosecutors are hoping they will soon have a new tool that allows them to put crooked mortgage brokers out of business more efficiently.
Prosecutors are awaiting a signature from Gov. Arnold Schwarzenegger on a bill that will make it easier to obtain financial documents of mortgage brokers and lenders to determine if fraud has been committed. The legislation, SB 239, sailed through the Legislature with unanimous votes in both houses and could be approved by the governor in the next few weeks.
The legislation was originally drafted earlier this year by a Santa Clara County prosecutor as a way to better handle the growing number of complaints about mortgage fraud.
"We found it increasingly difficult to handle all of the complaints," prosecutor Mike Fitzsimmons said. "We were barely keeping our head above water. Not only us, but prosecutors all across the state."
Under current law, prosecutors must obtain search warrants to get financial records from brokers and lenders, a process that can be "time-consuming and expensive," according to Fitzsimmons.
Under the proposed law, prosecutors will need only a court order to obtain those records, Fitzsimmons said.
"This will be a much more efficient way for us to evaluate cases," he said
The Santa Clara County District Attorney's real estate fraud unit began receiving more and more complaints about crooked mortgage brokers about three years ago. In doing research
Advertisement
for the legislation, Fitzsimmons found a report that indicated reports of mortgage fraud rose more than 1,400 percent from 2000 to 2008.
SB239, authored by Sen. Fran Pavley, D-Santa Monica, and sponsored by the California District Attorneys Association, will create a provision to existing mortgage fraud law that will classify the crime as a felony or misdemeanor. Currently, mortgage fraud has only misdemeanor status in California, and prosecutors are forced to pursue serious cases under other statutes, such as grand theft.
To get the measure through the Senate and Assembly, prosecutors had to assure legislators that the law would not send more people to prison, Fitzsimmons said. The legislation is intended to help prosecutors obtain financial documents from lenders and brokers
"We're not going to be putting a demand on prison beds," Fitzsimmons said. "Defendants usually don't get prison. They get county jail time unless there are multiple counts or they are a repeat offender."
If the bill reaches the governor's desk by Friday as expected, he will have 12 days to make a decision.
Other states that have recently adopted dedicated felony mortgage fraud statutes with similar wording include Georgia, Arizona, Nevada, North Carolina and Florida.
In one of the larger mortgage broker scams prosecuted by the Santa Clara County District Attorney's Office, a San Jose couple received hefty prison sentences in May for running a scheme that involved lying to five banks about borrowers' ability to repay $8 million in subprime loans and lying to borrowers about the terms of the loans.
Prosecutors accused Esperanza Valverde and Herman Covarrubias, who operated Summit Mortgage One of Milpitas, of obtaining loans for 22 clients by supplying lenders with false tax returns, W-2 statements, pay stubs and employment verification letters. They both received prison sentences of about 20 years.
"Mortgage fraud is one of the linchpins in the demise of the California real estate market and the related crises in the financial sectors," Santa Clara County District Attorney Dolores Carr said in a statement. "It is critical that something is done to assist law enforcement in handling the flood of mortgage fraud offenses that we continue to receive."
In typical cases of mortgage fraud, crooked brokers falsify loan documents by inflating a client's income by as much as 250 percent, manufacture bogus bank statements that show tens of thousands of dollars for deposits, and falsify employer information, Fitzsimmons said.
"Frequently we come across cases in which mortgage brokers have borrowers sign blank applications and fill them in later as they see fit in order to grease the skids and facilitate getting their commissions and fees," Fitzsimmons said. "It's only a year or two when mortgages adjust and everything hits the fan when a borrower comes to us."
Contact Mark Gomez at 408-920-5869.
mgomez@mercurynews.com
Posted: 08/26/2009 04:55:52 PM PDT
Updated: 08/27/2009 03:13:47 AM PDT
Santa Clara County prosecutors are hoping they will soon have a new tool that allows them to put crooked mortgage brokers out of business more efficiently.
Prosecutors are awaiting a signature from Gov. Arnold Schwarzenegger on a bill that will make it easier to obtain financial documents of mortgage brokers and lenders to determine if fraud has been committed. The legislation, SB 239, sailed through the Legislature with unanimous votes in both houses and could be approved by the governor in the next few weeks.
The legislation was originally drafted earlier this year by a Santa Clara County prosecutor as a way to better handle the growing number of complaints about mortgage fraud.
"We found it increasingly difficult to handle all of the complaints," prosecutor Mike Fitzsimmons said. "We were barely keeping our head above water. Not only us, but prosecutors all across the state."
Under current law, prosecutors must obtain search warrants to get financial records from brokers and lenders, a process that can be "time-consuming and expensive," according to Fitzsimmons.
Under the proposed law, prosecutors will need only a court order to obtain those records, Fitzsimmons said.
"This will be a much more efficient way for us to evaluate cases," he said
The Santa Clara County District Attorney's real estate fraud unit began receiving more and more complaints about crooked mortgage brokers about three years ago. In doing research
Advertisement
for the legislation, Fitzsimmons found a report that indicated reports of mortgage fraud rose more than 1,400 percent from 2000 to 2008.
SB239, authored by Sen. Fran Pavley, D-Santa Monica, and sponsored by the California District Attorneys Association, will create a provision to existing mortgage fraud law that will classify the crime as a felony or misdemeanor. Currently, mortgage fraud has only misdemeanor status in California, and prosecutors are forced to pursue serious cases under other statutes, such as grand theft.
To get the measure through the Senate and Assembly, prosecutors had to assure legislators that the law would not send more people to prison, Fitzsimmons said. The legislation is intended to help prosecutors obtain financial documents from lenders and brokers
"We're not going to be putting a demand on prison beds," Fitzsimmons said. "Defendants usually don't get prison. They get county jail time unless there are multiple counts or they are a repeat offender."
If the bill reaches the governor's desk by Friday as expected, he will have 12 days to make a decision.
Other states that have recently adopted dedicated felony mortgage fraud statutes with similar wording include Georgia, Arizona, Nevada, North Carolina and Florida.
In one of the larger mortgage broker scams prosecuted by the Santa Clara County District Attorney's Office, a San Jose couple received hefty prison sentences in May for running a scheme that involved lying to five banks about borrowers' ability to repay $8 million in subprime loans and lying to borrowers about the terms of the loans.
Prosecutors accused Esperanza Valverde and Herman Covarrubias, who operated Summit Mortgage One of Milpitas, of obtaining loans for 22 clients by supplying lenders with false tax returns, W-2 statements, pay stubs and employment verification letters. They both received prison sentences of about 20 years.
"Mortgage fraud is one of the linchpins in the demise of the California real estate market and the related crises in the financial sectors," Santa Clara County District Attorney Dolores Carr said in a statement. "It is critical that something is done to assist law enforcement in handling the flood of mortgage fraud offenses that we continue to receive."
In typical cases of mortgage fraud, crooked brokers falsify loan documents by inflating a client's income by as much as 250 percent, manufacture bogus bank statements that show tens of thousands of dollars for deposits, and falsify employer information, Fitzsimmons said.
"Frequently we come across cases in which mortgage brokers have borrowers sign blank applications and fill them in later as they see fit in order to grease the skids and facilitate getting their commissions and fees," Fitzsimmons said. "It's only a year or two when mortgages adjust and everything hits the fan when a borrower comes to us."
Contact Mark Gomez at 408-920-5869.
Wednesday, August 12, 2009
Mortgage news
Bonds have not been able to hold on to their gain this morning. There are two big events coming up this afternoon. At 1 o'clock Eastern Time, the results of the $23 Billion auction of 10-year Notes will be released. Then at 2:15, the Fed will issue its Policy Statement after its two-day Fed Meeting.
The news from the Fed will be both multi-faceted and potentially market moving. Any hints of inflation and hikes could cause the market to swing in one direction. However, news of Bond purchases could cause an opposite reaction.
The news from the Fed will be both multi-faceted and potentially market moving. Any hints of inflation and hikes could cause the market to swing in one direction. However, news of Bond purchases could cause an opposite reaction.
Monday, August 3, 2009
Finding – or imagining – a market bottom
The Intero Insider: Finding – or imagining – a market bottom
By Gino Blefari
President and CEO, Intero Real Estate Services
There’s an increasing amount of talk – both locally and in the national media – that we may have reached the bottom of the real estate market’s downturn.
Stories about properties selling quickly are becoming more common, as are instances of bank-owned properties selling with dozens of offers.
Moreover, in the past week, the National Association of Realtors reported that existing home sales saw an increase of 3.6% in June. Also, the Commerce Department reported that sales rose 11% in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000. The last time sales rose so significantly was in December 2000.
The average person may take all of this to mean that we have indeed reached the bottom – or even that it has already passed.
But if you follow the market as closely as we do here at Intero, you come to a different, and less clear-cut, conclusion.
As I reported a few weeks ago, there are promising signs at the market’s lower end. But to get a better sense for whether or not the market as a whole will see an upward trend soon, one needs to look at the foreclosure pipeline - the number of properties making their way through the lengthy foreclosure process.
According to ForeclosureRadar, a company that tracks California foreclosure data, Notices of Default – the first step in the foreclosure process – increased 11.8% in June to 45,691, the second highest monthly total on record and a 10% year-over-year increase from June 2008. Perhaps because of recent government restrictions on foreclosures, these properties are clogged in the pipeline. Yet it seems like there are more to come – to put NAR’s optimistic existing home sales report for June (as mentioned earlier) into perspective, last month we saw an increase in home sales nationwide, yet in California in June alone the total number of new home sales was less than 80% of the total Notices of Default issued. So this tells us to expect a flood of new foreclosures hitting the market as bank-owned for sale listings several months from now and ongoing.
To compound matters, Notices of Trustee Sale – the second step in the foreclosure process, when the property owner is notified that the lender, or trustee, will attempt to sell the property at auction – decreased by a surprising 28.9% in June. Which tells us that this drop in the available supply of homes has created what seems to be a false sense of market recovery.
A third factor, from an article in the Wall Street Journal in May of 2009 - Mortgage Modifying Fails to Halt Defaults cited the Fitch Ratings Report which stated, that although thousands of home owners have been saved from foreclosure through loan modifications, anywhere from 25%-60% of these homeowners, have or will re-default and re-enter the foreclosure process in the coming months.
These three statistics tell a deeper market story: Yes, things may be improving, but it is also clear that there is a way to go before foreclosures stop flooding the market and placing downward pressure on prices.
So, like me, keep an eye on what’s happening now in the market – but also on what’s to come.
By Gino Blefari
President and CEO, Intero Real Estate Services
There’s an increasing amount of talk – both locally and in the national media – that we may have reached the bottom of the real estate market’s downturn.
Stories about properties selling quickly are becoming more common, as are instances of bank-owned properties selling with dozens of offers.
Moreover, in the past week, the National Association of Realtors reported that existing home sales saw an increase of 3.6% in June. Also, the Commerce Department reported that sales rose 11% in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000. The last time sales rose so significantly was in December 2000.
The average person may take all of this to mean that we have indeed reached the bottom – or even that it has already passed.
But if you follow the market as closely as we do here at Intero, you come to a different, and less clear-cut, conclusion.
As I reported a few weeks ago, there are promising signs at the market’s lower end. But to get a better sense for whether or not the market as a whole will see an upward trend soon, one needs to look at the foreclosure pipeline - the number of properties making their way through the lengthy foreclosure process.
According to ForeclosureRadar, a company that tracks California foreclosure data, Notices of Default – the first step in the foreclosure process – increased 11.8% in June to 45,691, the second highest monthly total on record and a 10% year-over-year increase from June 2008. Perhaps because of recent government restrictions on foreclosures, these properties are clogged in the pipeline. Yet it seems like there are more to come – to put NAR’s optimistic existing home sales report for June (as mentioned earlier) into perspective, last month we saw an increase in home sales nationwide, yet in California in June alone the total number of new home sales was less than 80% of the total Notices of Default issued. So this tells us to expect a flood of new foreclosures hitting the market as bank-owned for sale listings several months from now and ongoing.
To compound matters, Notices of Trustee Sale – the second step in the foreclosure process, when the property owner is notified that the lender, or trustee, will attempt to sell the property at auction – decreased by a surprising 28.9% in June. Which tells us that this drop in the available supply of homes has created what seems to be a false sense of market recovery.
A third factor, from an article in the Wall Street Journal in May of 2009 - Mortgage Modifying Fails to Halt Defaults cited the Fitch Ratings Report which stated, that although thousands of home owners have been saved from foreclosure through loan modifications, anywhere from 25%-60% of these homeowners, have or will re-default and re-enter the foreclosure process in the coming months.
These three statistics tell a deeper market story: Yes, things may be improving, but it is also clear that there is a way to go before foreclosures stop flooding the market and placing downward pressure on prices.
So, like me, keep an eye on what’s happening now in the market – but also on what’s to come.
Thursday, July 30, 2009
Mortgage That Matters
Toxic Assets and Real Estate
BY: Rick Soukoulis
Chairman and CEO
Intero Mortgage
President Obama has proposed a bold plan to form private-public partnerships to buy the toxic assets off the books of the nations’ books.
This could be a huge boon for the real estate lending industry.
Let me explain.
First, what are these so-called toxic assets. They are obscure financial instruments the common man has only herd of. Derivatives, CMO’s Credit Default Swaps, sub-prime mortgaged backed securities, and on and on and on. A derivative, at its heart, is simply a mirror image of a security, kind of like the real thing but not quite the real thing.
In any case, most of these assets have dropped enormously in value. The banks are afraid to mark them down to their fire-sale value, as that big a hit to capital could leave them in a severely impaired situation.
So they keep them on the books, and as long as they’re there, they’re afraid to really start lending again.
Through a variety of accounting games, they can avoid taking the real mark down, so while they avoid taking a huge loss, they’re also uncertain enough about just how toxic these are that they don't want to go too far out on the lending limb.
The great thing about the Obama plan is that it gets private institutional money involved, an the assumption is that there will be a true market in these assets, and not just prices based on s fire-sale.
As these assets are moved off the balance sheets of our banks and into the hands of private investors, the banks will start lending again, and that will play a very big role in the economic recovery.
While it’s much harder these days to get a mortgage loan, it’s still very possible.
But if you apply for s loan to buy an apartment building or build an office building, it will be almost impossible. Construction loans are almost impossible to get, and subdivision builders, especially the smaller ones, just can't find financing.
I could go on end on about the areas that have been impacted by banks with toxic assets. All of these areas will again feel the free flow of cash and new loans.
It will be a part of regaining our economic health and getting people back to work.
But as Jay Leno said, if you’re going to be selling these things, don’t you think you could call them something other than toxic assets?
Rick Soukoulis
Chairman and CEO
Intero Mortgage
408.578.8700
BY: Rick Soukoulis
Chairman and CEO
Intero Mortgage
President Obama has proposed a bold plan to form private-public partnerships to buy the toxic assets off the books of the nations’ books.
This could be a huge boon for the real estate lending industry.
Let me explain.
First, what are these so-called toxic assets. They are obscure financial instruments the common man has only herd of. Derivatives, CMO’s Credit Default Swaps, sub-prime mortgaged backed securities, and on and on and on. A derivative, at its heart, is simply a mirror image of a security, kind of like the real thing but not quite the real thing.
In any case, most of these assets have dropped enormously in value. The banks are afraid to mark them down to their fire-sale value, as that big a hit to capital could leave them in a severely impaired situation.
So they keep them on the books, and as long as they’re there, they’re afraid to really start lending again.
Through a variety of accounting games, they can avoid taking the real mark down, so while they avoid taking a huge loss, they’re also uncertain enough about just how toxic these are that they don't want to go too far out on the lending limb.
The great thing about the Obama plan is that it gets private institutional money involved, an the assumption is that there will be a true market in these assets, and not just prices based on s fire-sale.
As these assets are moved off the balance sheets of our banks and into the hands of private investors, the banks will start lending again, and that will play a very big role in the economic recovery.
While it’s much harder these days to get a mortgage loan, it’s still very possible.
But if you apply for s loan to buy an apartment building or build an office building, it will be almost impossible. Construction loans are almost impossible to get, and subdivision builders, especially the smaller ones, just can't find financing.
I could go on end on about the areas that have been impacted by banks with toxic assets. All of these areas will again feel the free flow of cash and new loans.
It will be a part of regaining our economic health and getting people back to work.
But as Jay Leno said, if you’re going to be selling these things, don’t you think you could call them something other than toxic assets?
Rick Soukoulis
Chairman and CEO
Intero Mortgage
408.578.8700
Tuesday, July 28, 2009
Tuesday Market Update
Today's Commentary
Updated on Jul 28 2009 11:34AM EST
Tuesday’s bond market has opened in positive ground following early stock weakness and a weaker than expected consumer confidence reading. The stock markets are showing losses with the Dow down 34 points and the Nasdaq down 6 points. The bond market is currently up 14/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.
The Conference Board gave us today’s important data with the release of their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment about their personal financial situations, giving us an idea of consumer willingness to spend. It showed a reading of 46.6 that fell short of forecasts by a couple of points. This is good news for bonds and mortgage rates because a less optimistic consumer is less likely to make a large purchase in the near future, limiting economic growth.
Tomorrow brings us two reports that may influence mortgage rates. The first will come from the Commerce Department when they post June’s Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.
The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke’s testimony to Congress last week gave us a recent update, I don’t think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates tomorrow afternoon as a result of this report, but the possibly does exist.
Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are tomorrow’s 5-year and Thursday’s 7-year Note sales. The last auctions of the 5-year and 7-year securities were met with very good demand from investors, leading to bond strength following the sales. But there is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wednesday and Thursday’s sales, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.
Updated on Jul 28 2009 11:34AM EST
Tuesday’s bond market has opened in positive ground following early stock weakness and a weaker than expected consumer confidence reading. The stock markets are showing losses with the Dow down 34 points and the Nasdaq down 6 points. The bond market is currently up 14/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.
The Conference Board gave us today’s important data with the release of their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment about their personal financial situations, giving us an idea of consumer willingness to spend. It showed a reading of 46.6 that fell short of forecasts by a couple of points. This is good news for bonds and mortgage rates because a less optimistic consumer is less likely to make a large purchase in the near future, limiting economic growth.
Tomorrow brings us two reports that may influence mortgage rates. The first will come from the Commerce Department when they post June’s Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.
The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke’s testimony to Congress last week gave us a recent update, I don’t think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates tomorrow afternoon as a result of this report, but the possibly does exist.
Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are tomorrow’s 5-year and Thursday’s 7-year Note sales. The last auctions of the 5-year and 7-year securities were met with very good demand from investors, leading to bond strength following the sales. But there is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wednesday and Thursday’s sales, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.
Tuesday, July 14, 2009
Tuesday Mortgage Update
Mortgage Bonds are down this morning, due largely to a hotter than expected wholesale inflation reading in the Producer Price Index (or PPI). Even excluding volatile food and fuel prices, Core PPI rose quite a bit more than anticipated. Tomorrow's Consumer Price Index will give us a better idea of the threat of inflation.
In other news, Goldman Sachs reported blowout earnings as expected. Retail Sales were also released today, rising slightly higher than expectations. Overall, department stores and restaurants still showed weak results, signaling that consumers remain hesitant to spend discretionary dollars.
Currently, Bonds are up from their worst levels earlier this morning and are clinging to support at the 50-Day Moving Average. There is no urgency for locking rates for now, but be prepared to lock as the market is very dicey right now and can change quickly.
Have a great day!
In other news, Goldman Sachs reported blowout earnings as expected. Retail Sales were also released today, rising slightly higher than expectations. Overall, department stores and restaurants still showed weak results, signaling that consumers remain hesitant to spend discretionary dollars.
Currently, Bonds are up from their worst levels earlier this morning and are clinging to support at the 50-Day Moving Average. There is no urgency for locking rates for now, but be prepared to lock as the market is very dicey right now and can change quickly.
Have a great day!
Monday, July 6, 2009
Market Monday
The financial markets are back in full swing today after the long holiday weekend. Bonds continue to remain just beneath a tough resistance level, while Stocks are getting off to a sluggish start due to concerns for the overall global economic recovery.
In other news, the ISM Services Index, which gauges the health of the non-manufacturing or service industry, came in better than expectations. Overall, the report indicates continued contraction, but at a slower pace.
Many traders and investors may be taking the next few days off as an extension of the holiday weekend, which can increase volatility. There is no urgency to lock in rates. We will watch how Bonds and Stocks continue to react to important technical factors and the news of the day. The direction could change quickly. ~ as usual~
Enjoy your day!
In other news, the ISM Services Index, which gauges the health of the non-manufacturing or service industry, came in better than expectations. Overall, the report indicates continued contraction, but at a slower pace.
Many traders and investors may be taking the next few days off as an extension of the holiday weekend, which can increase volatility. There is no urgency to lock in rates. We will watch how Bonds and Stocks continue to react to important technical factors and the news of the day. The direction could change quickly. ~ as usual~
Enjoy your day!
Tuesday, June 23, 2009
Econimic news
From the WSJ By Frederic Miskin
When the Federal Open Market Committee meets this Tuesday and Wednesday, the Federal Reserve will face a serious dilemma. Since the last committee meeting six weeks ago, the 10-year U.S. Treasury yield has risen by around 70 basis points (0.70%), with the result that the interest rate on 30-year mortgages has risen by a similar amount. The rise in long-term interest rates is particularly worrisome, because it has the potential to choke off economic recovery and lead to further deterioration in the housing market. That would put an already weakened financial system under stress.
Does the situation call for the Fed to expand its purchases of Treasury bonds to lower long-term interest rates? To answer this question, we need to look at why long-term interest rates have risen. Here, there is good news and bad news. One cause of the rise in long-term rates is the more positive economic news of the past couple of months, particularly in financial markets. The bad news is that long-term interest rates are higher because of concerns about the deteriorating fiscal situation, with massive budget deficits expected for the indefinite future. To fund these budget deficits, the Treasury has to sell large quantities of bonds both now and in the future, causing bond prices to fall and interest rates to rise.
The increased supply of Treasury debt puts pressure on the Fed to buy it up. Although an expansion of Treasury bond purchases by the Fed would have the benefit of lowering long-term interest rates temporarily to stimulate the economy, in the current environment it could be dangerous for two reasons. First, it might suggest that the Fed is willing to monetize Treasury debt. The Fed does not, and should not, want to make it easy for the Treasury to sell its debt and thereby be an enabler of fiscal irresponsibility. Second, if the Fed loses its credibility to resist pressures to monetize the debt it could cause inflation expectations to shift upward, thereby leading to a serious problem down the road. The Fed is boxed in. The slack in the economy that is likely to persist for a very long time suggests the need for stimulative monetary policy to lower long-term interest rates through the purchase of Treasuries. The fiscal situation argues against this policy action, because it would weaken the Fed's inflation-fighting credibility. How can the Fed get out of the box and pursue the expansionary monetary policy that is needed right now? The answer is that the Obama administration and Congress have to get serious about long-run fiscal sustainability. Large budget deficits naturally occur during severe recessions when tax revenue undergoes a substantial decline. In addition, fiscal stimulus to promote economic recovery when the economy is in a severe recession is a sensible prescription. However, the failure to take steps to get future budgets under control is a recipe for disaster. Not only does it make it difficult for the Fed to take the actions needed to promote economic recovery, but it may even make the fiscal stimulus package less effective. After all, if you know that the government is issuing a lot of debt that has to be paid back someday you can expect to pay much higher taxes in the future. With the prospect of higher taxes, you will be less likely to spend today. How can the Obama administration and Congress help the Fed do its job and help the fiscal stimulus package work? It needs to address exploding spending on entitlements -- Social Security and particularly Medicare -- which are causing future deficit projections to be so bleak. One possibility is to establish a nonpartisan commission on entitlement reform, along the lines of the National Commission on Social Security in the early 1980s. It produced recommendations that for a time helped put Social Security on a more solid footing. Another is taxing health-care benefits as part of any package to reform health care. Taxing health-care benefits would not only generate large amounts of revenue. It would also increase the incentive for people to lower the costs of their health care. There are surely many other ways to promote more fiscal responsibility. The Fed can assist this process. It could indicate that implementing measures that would promote fiscal sustainability will be rewarded with Federal Reserve actions to bring long-term Treasury rates down. Deals like this have been successfully made in the past. In the current extremely difficult economic environment, we surely need such a deal now.
Wall Street is concerned that the Federal Reserve's plan to jump-start growth by buying assets and keeping interest rates low could lead to an inflationary bubble. Treasury bond yields are increasing, which has fostered a rise in long-term interest rates; and the jump could make borrowing costs more expensive for both homeowners and buyers and hurt the economic recovery. When central bank officials convene this week for their policy making session, they may use their post-meeting statement to squash speculation that they're gearing up to raise interest rates this year. In light of that, investors and analysts say it is critical for the Fed to spell out how it will cut its balance sheet and keep inflation from ballooning.
When the Federal Open Market Committee meets this Tuesday and Wednesday, the Federal Reserve will face a serious dilemma. Since the last committee meeting six weeks ago, the 10-year U.S. Treasury yield has risen by around 70 basis points (0.70%), with the result that the interest rate on 30-year mortgages has risen by a similar amount. The rise in long-term interest rates is particularly worrisome, because it has the potential to choke off economic recovery and lead to further deterioration in the housing market. That would put an already weakened financial system under stress.
Does the situation call for the Fed to expand its purchases of Treasury bonds to lower long-term interest rates? To answer this question, we need to look at why long-term interest rates have risen. Here, there is good news and bad news. One cause of the rise in long-term rates is the more positive economic news of the past couple of months, particularly in financial markets. The bad news is that long-term interest rates are higher because of concerns about the deteriorating fiscal situation, with massive budget deficits expected for the indefinite future. To fund these budget deficits, the Treasury has to sell large quantities of bonds both now and in the future, causing bond prices to fall and interest rates to rise.
The increased supply of Treasury debt puts pressure on the Fed to buy it up. Although an expansion of Treasury bond purchases by the Fed would have the benefit of lowering long-term interest rates temporarily to stimulate the economy, in the current environment it could be dangerous for two reasons. First, it might suggest that the Fed is willing to monetize Treasury debt. The Fed does not, and should not, want to make it easy for the Treasury to sell its debt and thereby be an enabler of fiscal irresponsibility. Second, if the Fed loses its credibility to resist pressures to monetize the debt it could cause inflation expectations to shift upward, thereby leading to a serious problem down the road. The Fed is boxed in. The slack in the economy that is likely to persist for a very long time suggests the need for stimulative monetary policy to lower long-term interest rates through the purchase of Treasuries. The fiscal situation argues against this policy action, because it would weaken the Fed's inflation-fighting credibility. How can the Fed get out of the box and pursue the expansionary monetary policy that is needed right now? The answer is that the Obama administration and Congress have to get serious about long-run fiscal sustainability. Large budget deficits naturally occur during severe recessions when tax revenue undergoes a substantial decline. In addition, fiscal stimulus to promote economic recovery when the economy is in a severe recession is a sensible prescription. However, the failure to take steps to get future budgets under control is a recipe for disaster. Not only does it make it difficult for the Fed to take the actions needed to promote economic recovery, but it may even make the fiscal stimulus package less effective. After all, if you know that the government is issuing a lot of debt that has to be paid back someday you can expect to pay much higher taxes in the future. With the prospect of higher taxes, you will be less likely to spend today. How can the Obama administration and Congress help the Fed do its job and help the fiscal stimulus package work? It needs to address exploding spending on entitlements -- Social Security and particularly Medicare -- which are causing future deficit projections to be so bleak. One possibility is to establish a nonpartisan commission on entitlement reform, along the lines of the National Commission on Social Security in the early 1980s. It produced recommendations that for a time helped put Social Security on a more solid footing. Another is taxing health-care benefits as part of any package to reform health care. Taxing health-care benefits would not only generate large amounts of revenue. It would also increase the incentive for people to lower the costs of their health care. There are surely many other ways to promote more fiscal responsibility. The Fed can assist this process. It could indicate that implementing measures that would promote fiscal sustainability will be rewarded with Federal Reserve actions to bring long-term Treasury rates down. Deals like this have been successfully made in the past. In the current extremely difficult economic environment, we surely need such a deal now.
Wall Street is concerned that the Federal Reserve's plan to jump-start growth by buying assets and keeping interest rates low could lead to an inflationary bubble. Treasury bond yields are increasing, which has fostered a rise in long-term interest rates; and the jump could make borrowing costs more expensive for both homeowners and buyers and hurt the economic recovery. When central bank officials convene this week for their policy making session, they may use their post-meeting statement to squash speculation that they're gearing up to raise interest rates this year. In light of that, investors and analysts say it is critical for the Fed to spell out how it will cut its balance sheet and keep inflation from ballooning.
Thursday, June 11, 2009
Mortgage Update
The volatility continues as Mortgage Bonds opened lower this morning, but then erased their losses. Since May 21, the 4.5% coupon has shed 556 basis points, pushing home loan rates to the highest level since the Federal Reserve announced its Mortgage Backed Security purchase plan back in November.
Fears of future inflation and added supply have been the culprits behind the recent sell-off.
In other news, Retail Sales were inline with estimates and marked the biggest rebound for Retail Sales in 4 months. Also, while Initial Jobless Claims were below estimates, continuing claims rose to 6.82 million, which is another new record.
A day that we are not getting an "alert to lock."
Bonds look to be trying to improve this morning. I will let you know if this changes.
Fears of future inflation and added supply have been the culprits behind the recent sell-off.
In other news, Retail Sales were inline with estimates and marked the biggest rebound for Retail Sales in 4 months. Also, while Initial Jobless Claims were below estimates, continuing claims rose to 6.82 million, which is another new record.
A day that we are not getting an "alert to lock."
Bonds look to be trying to improve this morning. I will let you know if this changes.
Wednesday, June 10, 2009
Mortgage News
Mortgage Bonds finally mustered up some nice gains yesterday, but those gains were erased in early trading this morning.
In the news, US exports fell to the lowest level in almost 3 years, as the US Balance of Trade widened in April for the second month. However, US exports should improve a bit in May after the US Dollar recently sank against foreign currencies, which makes US goods cheaper and more attractive to buy.
Currently, Mortgage Bonds are trading in a very wide range. Bonds just took a dropped 31 bps. We have an alert to lock rates this AM.
If anything changes, I will let you know.
Have a great day!
In the news, US exports fell to the lowest level in almost 3 years, as the US Balance of Trade widened in April for the second month. However, US exports should improve a bit in May after the US Dollar recently sank against foreign currencies, which makes US goods cheaper and more attractive to buy.
Currently, Mortgage Bonds are trading in a very wide range. Bonds just took a dropped 31 bps. We have an alert to lock rates this AM.
If anything changes, I will let you know.
Have a great day!
Subscribe to:
Posts (Atom)