Happy Friday all,

The National Debt is currently: $17,252,311,452,573.00  higher by about 26 BILLION.  I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,276 higher by about 500 points from last week.  The S&P 500 is trading at 1,822.  Gold is trading at $1,201 an ounce, while oil futures at $98.63 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.25/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.89%.  30-year Treasury Bond yields last traded at 3.83%.  Rates on 30-year fixed-rate mortgages are about 4.625% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 99.78 right about where we were last Friday at this time.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.

Product Corner:  The HELOC is back!  The Home Equity Line of Credit virtually vanished back in 2008 when the mortgage/housing meltdown began.  Well it is back and many do not know about it.  It is a 30 year loan with the first 10 years being interest only.  You can pay it down and use it again.  Max loan amount is $350,000 and we can go behind a Conventional or FHA first (417,000) up to 90% CLTV to $833,000 purchase price.  Rate is 1.99% plus Prime (currently 3.25) for fully indexed rate of 5.24%.  This is great for many of the properties listed in the El Dorado Hills area.

I just approved an FHA first (buyer had Short sale almost 3 years ago) at 4.25% with enough lender credit to cover closing costs and impound reserves, and the second of $332,000 on a purchase of $833,000.  That’s 90% on  purchase of $833,000.

In economic news this week; the reader’s digest version is the economy continues to grow at a snail’s pace but at least it’s a positive direction.  Inflation is in check.  New home sales are up while existing home sales are down.  The biggest news of the week was that the Fed will begin “tapering” its bond purchases.

The Federal Reserve reported that Industrial production in November saw the biggest one-month percentage gain in a year, 1.1% in November, to reach a record high, though the monthly advance was led by utilities output after an unusually cold month. This was the biggest percentage rise since Nov. 2012, as utilities output jumped 3.9%.

We spent less on gasoline in November, but the rising cost of housing and pricier airfare largely offset the savings on fuel.  Wholesale inflation was reported last week as basically unchanged and the consumer price index reported this week was unchanged in November as well.  Over the past 12 months consumer prices have risen by a meager 1.2%.

The U.S. appears poised for faster growth in early 2014, according to an index measuring the nation’s economic health.  The leading economic index increased by 0.8% last month, the fifth-straight gain, spearheaded by improvements in hiring and manufacturing. The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.

On the Real Estate front: A gauge of home-builder confidence rose in December to the highest level in four months, led by views on current sales of single-family homes. The National Association of Home Builders/Wells Fargo housing-market index reached 58 this month, matching an eight-year high hit in August, up from 54 in November.  Results above 50 signals that builders, generally, are optimistic about sales trends. Still, the housing-finance system is in somewhat of a state of flux with new mortgage rules taking effect in January, and plans to lower limits for government-backed mortgages. Plus, U.S. lawmakers are working on housing-finance reform, adding one more element of uncertainty.

Construction on new homes soared 22.7% in November, the highest rate since February 2008, with surges for single-family homes and apartments.  The monthly home-construction data is fairly volatile, and could see revisions. Still, overall starts in November were up 29.6% from the same period in the prior year, pointing to the housing market’s continuing recovery.

Sales of existing homes in November fell to the slowest pace in almost a year, hit by higher mortgage rates and low inventory, according to the National Association of Realtors which reported that sales of existing homes slumped 4.3% in November, a third month of declines.  The sales pace in November was down 1.2% from the year-earlier period, the first annual drop in more than two years.

In our local area (El Dorado Hills to Shingle springs) new listings were down 40% from October to November and down 52% from the high point this year in June.  Sales are down 20% from October to November.  We should have December data next week.

On the Employment front:  last week saw the most applications processed for unemployment benefits since late March, but the spike probably reflects typical holiday-season ups and downs instead of any abrupt change in a labor market that’s shown clear improvement lately.  Initial claims climbed by 10,000 to 379,000 last week.  The claims report is a good barometer of how many layoffs are occurring in the economy but it reveals little about hiring patterns.  Other labor-market indicators, particularly the critical monthly employment report, show that hiring has accelerated, albeit very slowly, over the past few months. The weekly number is typically volatile until mid-to-late January.

The Fed Gods on Wednesday took the first step to exiting from their controversial bond-buying program, showing greater confidence that the economy will grow faster and hiring will pick up over the next year.  Starting in January, the Fed will reduce the pace of asset purchases to $75 billion from $85 billion a month. And if the economy improves at the pace the Fed expects, outgoing Chairman Ben Bernanke said in a press conference that he could foresee the bond-purchase program coming to an end by late next year.

“We are hopeful the economy will continue to show progress,” Bernanke said, and return to a “more normal” path of growth.  Hopeful?  Really?  They’re now basing their policy on hope.  Not that this surprises me, it’s basically what they’ve been doing for years.  It just hasn’t been in print.  The Fed could taper at each meeting if the economy continues to improve.  He didn’t rule out pausing if the economy stumbles or tapering more quickly if growth surprises to the upside. the central bank also tried to cushion the effects of a reduction in bond purchases on U.S. markets by indicating that short-term interest rates could remain near zero for even longer than the Fed had previously suggested, perhaps for several years.  Read full text of Fed statement.

What worries me is that stocks have risen from roughly 8,000 to 16,000 in the last few years on 2.00% growth in the economy that has been predicated of stimulus from the Fed to the tune of 85 BILLION dollars per month.  This is like an athlete on steroids.  But what happens when the athlete stops taking the juice???  We will have to see if the markets can sustain their levels as the Fed cuts off its “juice”.

I have been working with a great credit repair specialist for some time and she shares a “tip or the week” that I thought I would also share.  Please let me know what you think.  Her name is Pamela Standlee, Owner of CreditComeBack and can be reached at (916) 357-6700, Pam@CreditComeBack.org in Folsom Ca.

True or False: Paying Off a Collection will Improve a Credit Score?

False!!!  This is the #1 mistake that I see made in the mortgage credit industry. 

There is a huge myth that paying off a collection will boost a credit score. This is simply not true!  It is the event of having a collection that is damaging to a credit score, not whether or not the collection has a balance owed.

Credit scoring models look at the account’s date of last activity as one of the factors to determine the impact a derogatory item will have on the credit score (how recent is it)? The longer a collection has aged on the report, the less impact it has on the credit score. When a payment is made on an aged collection account (ie; six months or older), the collection agency will send an update to the credit bureaus to reflect the account status as “Paid”. When this happens, the date of last activity is updated to the current date (the day the word “Unpaid” was changed to reflect “Paid”). I’ve seen credit scores drop by as much as 120 points, depending on how old the collection was and the overall credit profile.  The only good collection is a DELETED collection.  Please feel free to contact me for more information on the best way to do this… it can be very tricky and the collection agencies can be deceptive!

You can visit my corporate website at: http://bill.bartok.stanfordloans.com


Bill Bartok

Mortgage AdvisorMLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!

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