The Weekly Rap! Friday Jan 11, 2013

The Dow is currently trading at 13,476 higher by 64 pts compared with last Friday.  The S&P 500 is also trading lower at 1,469.  Gold is trading at $1,656 an ounce, while oil futures at $93.28 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.35/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, are trading at 1.90%.  30-year Treasury Bond yields are trading at 3.08%.  The MBS (Mortgage Backed Security) FNMA 30-year fixed 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days, is about 75% of the over-all production.  This security is currently at 104.06 flirting with the bottom of the current range.

Since October 4 We’ve been trading in a range of 104.13 to 105.53 hitting the low twice and the top twice.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  Think of anything above 100 as a credit.  The higher the number (price), the better the rate.

In economic news this week; Mortgage rates ended the week near their highest level in eight months (although still very low by historical standards) as long-term worries about steps Washington still needs to take, and confidence in the Fed’s buying is at the moment preventing a continuation of last week’s selloff.  The markets (especially bonds) trade mostly on rumors, and the rumor floating among traders is the Fed may slow or stop buying treasuries and Mortgages by the end of the year.

Consumers took on plenty of debt in November for auto purchases and student loans, but they didn’t use their credit cards very much in the first month of the holiday season.  Consumer credit rose by $16.1 billion in November, marking the second straight sizable gain, according to the Fed.  Consumers usually add debt when they feel more confident about the health of the economy and their ability to pay off their loans.

New applications for unemployment benefits rose slightly in the first week of the new year, but the level of claims is basically unchanged over the past few months and is consistent with a modestly improving labor market.  Job openings were about the same at  3.68 million in November as in October. Compared with the prior year, job openings rose 12% with private openings increasing 14% to 3.32 million, and government openings increasing by 2% to 355,000. There were more than 4 million jobs open when the recession began in December 2007. With about 12.04 million unemployed people in November, there were about 3.3 potential job seekers for each opening.  Not exactly something to shout about.

The cobbled-up Fiscal Cliff deal that Congress passed a week ago extends the ability to deduct the cost of mortgage insurance on a qualified personal residence. The deduction is phased-out ratably by 10% for each $1,000 by which the taxpayer’s AGI exceeds $100,000. Thus, the deduction is unavailable for a taxpayer with an AGI in excess of $110,000. The bill extends this provision for two additional years, through 2013.

In many cases a conventional loan with mortgage insurance is a better choice over an FHA loan (if the borrowers have a high enough credit score) as the insurance rate is much lower and can be more easily removed.  The conventional loan also doesn’t have a 1.75% upfront insurance premium.  The fact that the insurance is deductable is just another positive.

The Consumer Financial Protection Bureau or CFPB  issued new mortgage rules yesterday designed to prevent a return to lending practices that cratered the housing market and brought the financial system to its knees during the past decade.  The rules, which go into effect next January, were designed to enhance consumer safety without tightening credit standards beyond current levels.

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Bill Bartok

Mortgage Advisor

NMLS 445991

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