Volatile Week in the Mortgage Markets
Strap yourself in. The wild roller coaster ride continues for the financial and mortgage markets.
The week ended close to where it started for the major market indices, but the 10 Year Treasury yield had a nice little decline and clipped an eighth point off mortgage rates overall.
Financials continue to take a hit, increasing the mortgage-spread premium across the board. Risk is the key here, and the economy is still not showing any clear signs of a recovery trend. This week, the FDIC seized two regional banks and Merrill Lynch announced on Tuesday that it is selling $30.6 billion worth of U.S. ABS CDOs for only $0.22 on the dollar, in an effort to reduce its risk exposure and shore up its balance sheet.
Of course, this week, President Bush signed the housing bill into law, which includes support for Fannie Mae and Freddie Mac. The new law will be a benefit to mortgage lenders as it restores investor faith in Fannie and Freddie issued mortgage securities. We’ll have to wait and see what it’s impact will be on the mortgage spread. Without any other economic stimuli, this backing of the twin tower mortgage giants should reduce the spread and lower mortgage rates.
The remaining portion of the housing bill is mainly political fluff designed to make the Fannie and Freddie bailout more palatable for the masses. Although I would like to mention one important add-on to the bill that actually has some teeth and positive news for Jumbo mortgage shoppers.
There are maximum amounts for loans that the FHA will insure, and that Fannie and Freddie will guarantee. Those loan limits were raised temporarily this year. The new law now raises limits permanently. For FHA-insured mortgages, the new limit will be 115 percent of the median home price in that area, up to $625,000.
For conforming mortgages, those eligible to be bought by Fannie Mae and Freddie Mac, the conforming limit will remain at $417,000 for a single family home. Starting next year, the new limit is either $417,000 or 115 percent of the area’s median home price, whichever is higher. This new provision should help Jumbo mortgage shoppers to shave a significant amount from their interest rate when refinancing or purchasing a new home.
Expect continued volatility for mortgage rates. For every positive sign, we get a negative report in return. Inflation, oil prices, financial liquidity, and housing numbers are the big areas to keep an eye on relating to their impact on mortgage rates. Mortgage rates, although off their yearly lows, continue in good shape.
May the Mortgage Rates be with You!
Refinance Tool Box
The week ended close to where it started for the major market indices, but the 10 Year Treasury yield had a nice little decline and clipped an eighth point off mortgage rates overall.
Financials continue to take a hit, increasing the mortgage-spread premium across the board. Risk is the key here, and the economy is still not showing any clear signs of a recovery trend. This week, the FDIC seized two regional banks and Merrill Lynch announced on Tuesday that it is selling $30.6 billion worth of U.S. ABS CDOs for only $0.22 on the dollar, in an effort to reduce its risk exposure and shore up its balance sheet.
Of course, this week, President Bush signed the housing bill into law, which includes support for Fannie Mae and Freddie Mac. The new law will be a benefit to mortgage lenders as it restores investor faith in Fannie and Freddie issued mortgage securities. We’ll have to wait and see what it’s impact will be on the mortgage spread. Without any other economic stimuli, this backing of the twin tower mortgage giants should reduce the spread and lower mortgage rates.
The remaining portion of the housing bill is mainly political fluff designed to make the Fannie and Freddie bailout more palatable for the masses. Although I would like to mention one important add-on to the bill that actually has some teeth and positive news for Jumbo mortgage shoppers.
There are maximum amounts for loans that the FHA will insure, and that Fannie and Freddie will guarantee. Those loan limits were raised temporarily this year. The new law now raises limits permanently. For FHA-insured mortgages, the new limit will be 115 percent of the median home price in that area, up to $625,000.
For conforming mortgages, those eligible to be bought by Fannie Mae and Freddie Mac, the conforming limit will remain at $417,000 for a single family home. Starting next year, the new limit is either $417,000 or 115 percent of the area’s median home price, whichever is higher. This new provision should help Jumbo mortgage shoppers to shave a significant amount from their interest rate when refinancing or purchasing a new home.
Expect continued volatility for mortgage rates. For every positive sign, we get a negative report in return. Inflation, oil prices, financial liquidity, and housing numbers are the big areas to keep an eye on relating to their impact on mortgage rates. Mortgage rates, although off their yearly lows, continue in good shape.
May the Mortgage Rates be with You!
Refinance Tool Box
Labels: business, finance, money, mortgage rates, refinance
posted by Jim Bisnett at
7:50 AM
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