Friday, February 29, 2008
Rate Update Feb 29, 2008
Weakness in the stock market is helping the bond market right now. This may help 30 year rates dip by .125% this afternoon.
Watch today’s you tube video to find out what is influencing the markets.
We’ll need to be cautious. Technical signals suggest that mortgage bonds are trading against stiff resistance. We could see prices reverse and erode quickly against these levels.
Current Outlook: cautiously floating
Thursday, February 28, 2008
Rate Update Feb 28, 2008
You Tube link to see rate update video:
Mortgage-backed bonds are continuing to rally this morning. After touching the 200-day moving average on Tuesday mortgage-backed bonds have reversed higher by 170 basis points. This is an indication of how strong that level of support is.
We have to look ahead to tomorrow as the Fed’s favorite gauge of inflation is scheduled for release. The Personal Consumption Expenditure (PCE) is deemed to be the most current read on inflation. Watch today’s you tube video to find out what this report will mean for mortgage rates…….
Current Outlook: neutral ahead of tomorrow’s PCE report
Personal Consumption Expenditures and Core PCE
The Core PCE excludes the volatile food and energy components from a measure of price changes in consumer goods and services. It consists of the actual and imputed expenditures of households and includes data pertaining to durables, non-durables, and services. It is essentially a measure of goods and services targeted towards individuals and consumed by individuals. This report is the Fed's favorite gauge on inflation.
Mortgage-backed bonds are continuing to rally this morning. After touching the 200-day moving average on Tuesday mortgage-backed bonds have reversed higher by 170 basis points. This is an indication of how strong that level of support is.
We have to look ahead to tomorrow as the Fed’s favorite gauge of inflation is scheduled for release. The Personal Consumption Expenditure (PCE) is deemed to be the most current read on inflation. Watch today’s you tube video to find out what this report will mean for mortgage rates…….
Current Outlook: neutral ahead of tomorrow’s PCE report
Personal Consumption Expenditures and Core PCE
The Core PCE excludes the volatile food and energy components from a measure of price changes in consumer goods and services. It consists of the actual and imputed expenditures of households and includes data pertaining to durables, non-durables, and services. It is essentially a measure of goods and services targeted towards individuals and consumed by individuals. This report is the Fed's favorite gauge on inflation.
Wednesday, February 27, 2008
Rate Update Feb 27, 2008
You Tube link to see rate update video: http://www.youtube.com/watch?v=uhh_BCCeazg
After moving higher yesterday morning mortgage rates appear to have reversed course on technical trading patterns and testimony from Ben Bernanke.
Mortgage-backed bond prices touched the 200-day moving average yesterday morning and despite worse than expected inflation data that would ordinarily weigh on bond prices were able to reverse higher (see chart above).
Today, Fed Chairman Ben Bernanke is testifying in front of Congress on the outlook of the economy. Watch today’s you tube video to hear which comment is helping mortgage rates move lower.
Current Outlook: floating
Tuesday, February 26, 2008
Why Fed Rate Cuts do not lower mortgage rates by Evan Swanson, CMPS
The Fed is at it once again slashing short-term interest rates with the hopes of helping the economy avoid a steep recession. Many people, including so-called “experts” in the media, believe the recent Fed cuts are the reason why mortgage rates touched 4-year lows on January 22nd. However, if you look at history the results may surprise you.
Let’s first remember that the Federal Reserve can only control the Discount Rate and Fed Funds Rate. These are short-term rates used for overnight lending between banks and can change from day to day. This is very different than 30 year mortgage rates which remain fixed for a much longer period.
The last time the Fed went on a lengthy rate cutting cycle was back in 2001. In the span of 12 months (January- December) the Fed cut the Fed Funds Rate from 6.00% to 1.75%. To an uninformed consumer one would think that mortgage rates would have also decreased significantly over that timeframe. In fact, 30 year fixed rate mortgages actually increased from 6.95% in March to 7.07% in December (source: www.freddiemac.com).
In the most recent cycle, the Fed began cutting short-term interest rates on September 18th, 2007. From then until now the Fed has slashed short term interest rates from 8.25% down to 6.00%. Over that timeframe mortgage rates have come full circle starting at around 6.25%, falling as low as 5.00% in late January, and now back up to the 6.25% range in late February.
The truth is that fixed mortgage rates are wholly determined by the direction that mortgage-backed bonds trade. Mortgage-backed bonds are bonds which are sold to investors that are backed by the mortgages that you and I pay interest on. When the demand for these assets increase it drives up the price and lowers the yield. This is what causes mortgage rates to decrease and vice versa.
So, what is it that causes the prices of these assets to fluctuate? Like other asset classes such as stocks, there are many factors that we can identify. However, the primary factor is inflation expectations. If you think about it this makes sense. If you’re going to lend another person some money today and you expect the purchasing power of that money to be significantly less in the future, due to inflation, then you will charge them a higher rate of interest in order to borrow your money.
This is exactly the case for mortgage rates. When inflation expectations increase so do mortgage rates and vice versa. So when do inflation expectations rise or fall? Again, there are a myriad of factors that can influence inflation expectations including commodity prices, the economic outlook, and inflation data.
However, I would argue that mortgage rates recently touched 4-year lows not because of the Fed’s rate cut but because of the fear and concern that the Fed raised when they made their surprise .75% on the morning of January 22nd.
For now investors are beginning to realize that the implication of the “easy-money” monetary policy combined with the generous fiscal stimulus package is likely to be increased inflation.
Let’s first remember that the Federal Reserve can only control the Discount Rate and Fed Funds Rate. These are short-term rates used for overnight lending between banks and can change from day to day. This is very different than 30 year mortgage rates which remain fixed for a much longer period.
The last time the Fed went on a lengthy rate cutting cycle was back in 2001. In the span of 12 months (January- December) the Fed cut the Fed Funds Rate from 6.00% to 1.75%. To an uninformed consumer one would think that mortgage rates would have also decreased significantly over that timeframe. In fact, 30 year fixed rate mortgages actually increased from 6.95% in March to 7.07% in December (source: www.freddiemac.com).
In the most recent cycle, the Fed began cutting short-term interest rates on September 18th, 2007. From then until now the Fed has slashed short term interest rates from 8.25% down to 6.00%. Over that timeframe mortgage rates have come full circle starting at around 6.25%, falling as low as 5.00% in late January, and now back up to the 6.25% range in late February.
The truth is that fixed mortgage rates are wholly determined by the direction that mortgage-backed bonds trade. Mortgage-backed bonds are bonds which are sold to investors that are backed by the mortgages that you and I pay interest on. When the demand for these assets increase it drives up the price and lowers the yield. This is what causes mortgage rates to decrease and vice versa.
So, what is it that causes the prices of these assets to fluctuate? Like other asset classes such as stocks, there are many factors that we can identify. However, the primary factor is inflation expectations. If you think about it this makes sense. If you’re going to lend another person some money today and you expect the purchasing power of that money to be significantly less in the future, due to inflation, then you will charge them a higher rate of interest in order to borrow your money.
This is exactly the case for mortgage rates. When inflation expectations increase so do mortgage rates and vice versa. So when do inflation expectations rise or fall? Again, there are a myriad of factors that can influence inflation expectations including commodity prices, the economic outlook, and inflation data.
However, I would argue that mortgage rates recently touched 4-year lows not because of the Fed’s rate cut but because of the fear and concern that the Fed raised when they made their surprise .75% on the morning of January 22nd.
For now investors are beginning to realize that the implication of the “easy-money” monetary policy combined with the generous fiscal stimulus package is likely to be increased inflation.
Rate Update Feb 26, 2008
You Tube link to see rate update video: http://www.youtube.com/watch?v=rPx8IDngbYw
There’s a lot to cover today. First off, The Producer Price Index (PPI) which was reported this morning came in much hotter than expected. Both the Core and headline readings on inflation at the wholesale level of the economy came in double expectations.
The S & P Case Shiller home price index was released today. Although much of the data was bleak for the 20 markets covered in the index Portland, Seattle, & Charlotte were the only three that DID NOT show losses. This is great news and one that should be shared with clients in these markets.
Lastly, consumer confidence came in well below expectations. This shouldn’t be a huge surprise given the amount of negative press on the economy and housing markets. Watch today’s you tube video to understand what all this information means for mortgage rates.
Current Outlook: cautiously floating
Producer Price Index (PPI)
The Producer Price Index (PPI) is a measure of price changes in the manufacturing sector of the average price level for a fixed basket of capital and consumer goods paid by producers. It measures average changes in selling prices received by domestic producers in the manufacturing, mining, agriculture, and electric utility industries for their output.
Core CPI takes out food and energy as a factor.
There’s a lot to cover today. First off, The Producer Price Index (PPI) which was reported this morning came in much hotter than expected. Both the Core and headline readings on inflation at the wholesale level of the economy came in double expectations.
The S & P Case Shiller home price index was released today. Although much of the data was bleak for the 20 markets covered in the index Portland, Seattle, & Charlotte were the only three that DID NOT show losses. This is great news and one that should be shared with clients in these markets.
Lastly, consumer confidence came in well below expectations. This shouldn’t be a huge surprise given the amount of negative press on the economy and housing markets. Watch today’s you tube video to understand what all this information means for mortgage rates.
Current Outlook: cautiously floating
Producer Price Index (PPI)
The Producer Price Index (PPI) is a measure of price changes in the manufacturing sector of the average price level for a fixed basket of capital and consumer goods paid by producers. It measures average changes in selling prices received by domestic producers in the manufacturing, mining, agriculture, and electric utility industries for their output.
Core CPI takes out food and energy as a factor.
Northwest Real Estate Markets buck national trend!
The S & P/ Case-Shiller Home Price Index is a monthly survey of home prices in 20 of the top metropolitan areas in the United States. Earlier today they released their data for the 2007 calendar year. Despite record losses for home prices in most of the areas the report follows Portland, Seattle, & Charlotte, NC were able to buck the national trend by showing modest year over year appreciation.
These were the only 3 markets of the 20 that the index follows which did not record losses to home prices in 2007. Here is a link to the press release for the report:
Year End Numbers Mark Widespread Declines According to the S&P/Case-Shiller® Home Price Indices
The S & P/ Case-Shiller Home Price Index Report is viewed by many to be the best gauge of home prices for major metropolitan markets because the methodology for calculating home prices changes includes the broadest range of data.
These were the only 3 markets of the 20 that the index follows which did not record losses to home prices in 2007. Here is a link to the press release for the report:
Year End Numbers Mark Widespread Declines According to the S&P/Case-Shiller® Home Price Indices
The S & P/ Case-Shiller Home Price Index Report is viewed by many to be the best gauge of home prices for major metropolitan markets because the methodology for calculating home prices changes includes the broadest range of data.
Monday, February 25, 2008
Rate Update Feb 25, 2008
Mortgage rates ticked up this morning as the mortgage-backed bond market followed through on Friday’s trading pattern with lower prices.
The National Association of Realtor reported better than expected existing home sales for the month of January. December’s figures were also revised higher.
We’ll be watching for tomorrow’s Producer Price Index (PPI) report for clues on inflation pressures.
Current Outlook: neutral
Producer Price Index (PPI)
The Producer Price Index (PPI) is a measure of price changes in the manufacturing sector of the average price level for a fixed basket of capital and consumer goods paid by producers. It measures average changes in selling prices received by domestic producers in the manufacturing, mining, agriculture, and electric utility industries for their output. Core CPI takes out food and energy as a factor.
The National Association of Realtor reported better than expected existing home sales for the month of January. December’s figures were also revised higher.
We’ll be watching for tomorrow’s Producer Price Index (PPI) report for clues on inflation pressures.
Current Outlook: neutral
Producer Price Index (PPI)
The Producer Price Index (PPI) is a measure of price changes in the manufacturing sector of the average price level for a fixed basket of capital and consumer goods paid by producers. It measures average changes in selling prices received by domestic producers in the manufacturing, mining, agriculture, and electric utility industries for their output. Core CPI takes out food and energy as a factor.
Friday, February 22, 2008
Rate Update Feb 22, 2008
You Tube link to see rate update video: http://www.youtube.com/watch?v=8e4chKAMLqA
The volatility ion the bond market has been unprecedented over the past few days. From Jan 22nd to today rates have increased from 5.00% up to 6.25% and now back down to 6.00% for 30 year fixed rates.
Watch today’s you tube video to see what is on tap to impact mortgage rates over the next week…..
Current Outlook: neutral
The volatility ion the bond market has been unprecedented over the past few days. From Jan 22nd to today rates have increased from 5.00% up to 6.25% and now back down to 6.00% for 30 year fixed rates.
Watch today’s you tube video to see what is on tap to impact mortgage rates over the next week…..
Current Outlook: neutral
Thursday, February 21, 2008
Rate Update Feb 21, 2008
You Tube link to see rate update video: no video today
Technical trading patterns dominated the interest rate picture yesterday. After hitting the 200-day moving average yesterday morning mortgage-backed bonds have rebounded nicely recovering 100 basis points.
There were a couple economic reports out this morning showing weak economic activity. For now we are going to recommend a floating stance with the hopes that the momentum carries rates lower.
Current Outlook: floating
Technical trading patterns dominated the interest rate picture yesterday. After hitting the 200-day moving average yesterday morning mortgage-backed bonds have rebounded nicely recovering 100 basis points.
There were a couple economic reports out this morning showing weak economic activity. For now we are going to recommend a floating stance with the hopes that the momentum carries rates lower.
Current Outlook: floating
Wednesday, February 20, 2008
Rate Update Feb 20, 2008
You Tube link to see rate update video: http://www.youtube.com/watch?v=h1_qEX3Ye34
Yesterday marked the single highest increase in mortgage rates in a single day in over two years. I have posted the bond chart from yesterday showing the huge dip in prices we experienced (135 basis points).
So what is the cause of this increase to mortgage rates?
Watch today’s you tube video to find out…..
Current Outlook: neutral
Yesterday marked the single highest increase in mortgage rates in a single day in over two years. I have posted the bond chart from yesterday showing the huge dip in prices we experienced (135 basis points).
So what is the cause of this increase to mortgage rates?
Watch today’s you tube video to find out…..
Current Outlook: neutral
Tuesday, February 19, 2008
Rate Update Feb 19, 2008
Mortgage rates are higher this morning in response to selling pressure in the bond market. The stock market rallied at the open this morning which pulled capital out of the bond market.
Here are a couple headlines which are likely helping to boost stocks this AM:
*Retail bellwether Wal-Mart posted better than expect quarterly earnings- this is a sign that the US Consumer may not be in as bad shape as analysts thought.
*Cuba’s President Fidel Castro announced that he would step down and hand power over to his brother- it has long been rumored that once Castro stepped down tensions between the US and Cuba could thaw opening up potential trade opportunities which would be good fro business.
What to watch next?
Technically mortgage-backed bonds are trading right along the 100-day moving average. Should bonds dip below this support line then we’d expect rates to increase .125%-.375% over the next couple days. Hopefully they can hold this line.
Tomorrow the Labor Department will release the monthly Consumer Price Index (CPI) report. Should the inflation readings come in hotter than expectations we’d expect rates to rise and vice versa.
Current Outlook: locking
Here are a couple headlines which are likely helping to boost stocks this AM:
*Retail bellwether Wal-Mart posted better than expect quarterly earnings- this is a sign that the US Consumer may not be in as bad shape as analysts thought.
*Cuba’s President Fidel Castro announced that he would step down and hand power over to his brother- it has long been rumored that once Castro stepped down tensions between the US and Cuba could thaw opening up potential trade opportunities which would be good fro business.
What to watch next?
Technically mortgage-backed bonds are trading right along the 100-day moving average. Should bonds dip below this support line then we’d expect rates to increase .125%-.375% over the next couple days. Hopefully they can hold this line.
Tomorrow the Labor Department will release the monthly Consumer Price Index (CPI) report. Should the inflation readings come in hotter than expectations we’d expect rates to rise and vice versa.
Current Outlook: locking
Monday, February 18, 2008
Rate Update Feb 18, 2008
The financial markets are closed today in recognition of President's day. No rate update will be posted today.
Friday, February 15, 2008
Rate Update Feb 15, 2008
You Tube link to see rate update video: http://www.youtube.com/watch?v=ahSQXn-MvNo
The blood bath continued yesterday in the mortgage-backed bond market as prices slipped another 65 basis points pushing fixed rates higher by .125%. 30 year fixed rates have now increased by almost 1.00% since January 22nd.
Watch today’s you tube video to find out why and what to expect moving forward.
Current Outlook: locking
Thursday, February 14, 2008
Mortgage Rates will continue to move higher in near future
The mortgage-backed bond market is continuing to tank this afternoon. This is the 3rd straight day where mortgage backed-bonds have sold off. The cause for the sell-off is likely to be inflation concerns because the equity markets are also trading lower. Here is the bond chart as of 12:15 PM PST. The large red candlestick on the end indicates bonds are off BIG!
Mortgage rates work inversley with the price of these bonds so when bond prices move lower mortgage rates move higher.
Mortgage rates work inversley with the price of these bonds so when bond prices move lower mortgage rates move higher.
Prepay your mortgage versus invest the difference?
There was a great article in Consumer Reports that was sent to me recently by a colleague. Consumer reports ran some hypothetical scenarios where a person had the option of either investing or prepaying their mortgage by $100 per month. The results? You're better off investing the money in the long-run. Check out their article here:
http://www.consumerreports.org/cro/money/credit-loan/prepaying-your-mortgage-3-08/overview/prepay-mortgage-ov.htm?resultPageIndex=1&resultIndex=1&searchTerm=your%20mortgage
http://www.consumerreports.org/cro/money/credit-loan/prepaying-your-mortgage-3-08/overview/prepay-mortgage-ov.htm?resultPageIndex=1&resultIndex=1&searchTerm=your%20mortgage
Rate Update Feb 14, 2008
The stock market rallied again yesterday pulling capital out of the bond market and driving mortgage rates higher. Mortgage backed bonds have now lost 175 basis points since January 22nd.
In his testimony to Congress this morning Fed Chairman Ben Bernanke indicated that significant downside risks remain in our economy including the housing & labor markets. His damper comments are weighing on stocks which should help the bond market to stabilize.
The technical trading picture for bonds is bleak but we think the market may have overreacted. We're changing our stance to neutral in the hopes that the market will reverse for the better in the next couple days.
Wednesday, February 13, 2008
Consumption in the US by income level
I guess I'm blog happy today.....my wife emailed me this graph from the NY Times. It shows average consumption by various categories by household income level. What's interesting is the wealthiest of household spend signifcnatly more money on their clothes, cars, taxes, and are able to save a heck of a lot more money than less well-off households.Is there a link between terrorism & the housing bubble?
Interesting article on msnmoney.com about the link between the 9/11 attacks and the housing bubble:
http://articles.moneycentral.msn.com/Banking/HomeFinancing/DidTerroristsCauseTheHousingMess.aspx
http://articles.moneycentral.msn.com/Banking/HomeFinancing/DidTerroristsCauseTheHousingMess.aspx
Increase to conforming loan limits?
As a part of the fiscal stimulus package which the President is expected to sign into law today there is a provision designed to offer relief to homeowner's with loan amounts above the current conforming loan limit ($417,000). However, the law is unlikely to impact most of the country.
The reasoning behind the provision is to help homeowner's who are having trouble procuring mortgage financing because their loan amount exceeds the current conforming loan limit. The credit tightening that has taken place over the past 6 months has increased the cost of non-conforming loans and made it more restrictive in terms of qualifying.
However, the final version of the law states that conforming loan limits will remain $417,000 in all areas of the country EXCEPT those areas where 125% of that areas median home price exceeds $417,000 (not to exceed $729,750). The timeline for the temporary extends through December 2008.
For example, if an area had a median home price of $400,000 then the temporary increase of the conforming loan limit would be $500,000 (125% of $400,000). It has yet to be published what the official "median home price" is for the different parts of the country but initially it looks like the Portland- Metro AREA will not benefit from the provision.
Our initial research suggests that our median home price will be published in the range of $300,000-$330,000.
In the Pacific Northwest it looks like the only areas which will see increases are the following (Remember these are estimates for now):
Bend- $447,500
Medford- $422,500
Seattle/ Tacoma- $493,375
San Juan County- $477,355
Once the official figures are issued we'll plan to give you a follow up report.
The reasoning behind the provision is to help homeowner's who are having trouble procuring mortgage financing because their loan amount exceeds the current conforming loan limit. The credit tightening that has taken place over the past 6 months has increased the cost of non-conforming loans and made it more restrictive in terms of qualifying.
However, the final version of the law states that conforming loan limits will remain $417,000 in all areas of the country EXCEPT those areas where 125% of that areas median home price exceeds $417,000 (not to exceed $729,750). The timeline for the temporary extends through December 2008.
For example, if an area had a median home price of $400,000 then the temporary increase of the conforming loan limit would be $500,000 (125% of $400,000). It has yet to be published what the official "median home price" is for the different parts of the country but initially it looks like the Portland- Metro AREA will not benefit from the provision.
Our initial research suggests that our median home price will be published in the range of $300,000-$330,000.
In the Pacific Northwest it looks like the only areas which will see increases are the following (Remember these are estimates for now):
Bend- $447,500
Medford- $422,500
Seattle/ Tacoma- $493,375
San Juan County- $477,355
Once the official figures are issued we'll plan to give you a follow up report.
Rate Update Feb 13, 2008
You Tube link to see rate update video: http://www.youtube.com/watch?v=5Bzw02hk71Y
Yesterday it was Warren Buffet’s offer to bail out the bond insurers and today it’s stronger than expected retail sales numbers. Either way the good news for the economy is supporting the stock market which is sucking capital out of the bond market.
Mortgage-backed bonds are now trading about 75 basis points lower than their prices on February 8th. In that time we’ve seen 30-year fixed rates increase .25%.
We feel that mortgage rates may have further to go since there is no significant economic data scheduled to be released the rest of this week.
Watch today’s you tube video to learn what other notable news is taking place today.
Current Outlook: locking
Yesterday it was Warren Buffet’s offer to bail out the bond insurers and today it’s stronger than expected retail sales numbers. Either way the good news for the economy is supporting the stock market which is sucking capital out of the bond market.
Mortgage-backed bonds are now trading about 75 basis points lower than their prices on February 8th. In that time we’ve seen 30-year fixed rates increase .25%.
We feel that mortgage rates may have further to go since there is no significant economic data scheduled to be released the rest of this week.
Watch today’s you tube video to learn what other notable news is taking place today.
Current Outlook: locking
Tuesday, February 12, 2008
Rate Update Feb 12, 2008
Mortgage rates look poised to increase modestly in the coming hours in response to a stock market in rally. All the major indexes are currently up over 1.0% in trading today thanks to Warren Buffet’s offer to help out troubled bond insurers. We talked about it before but when stocks rally it usually means money is coming out of the bond market which pushes yields higher.
Current Outlook: locking
Current Outlook: locking
Monday, February 11, 2008
Rate Update Feb 11, 2008
You Tube link to see rate update video:
http://www.youtube.com/watch?v=kgqCxEf77fU
Mortgage-backed bonds are currently trading sideways on the day. It is another relatively light week in terms of economic data. The only notable release this week will be the retail sales report which is due out Wednesday.
President Bush is expected to sign the Economic Stimulus package into law on Wednesday, watch today’s you tube video to find out what we know and don’t know in terms of how it will impact “conforming loan limits”.
Also, I’d direct your attention to the new blog I’ve started @ http://mortgagerateupdate.blogspot.com. I would encourage you to check in periodically to read up on the latest and greatest happenings in the mortgage industry.
Current Outlook: neutral
http://www.youtube.com/watch?v=kgqCxEf77fU
Mortgage-backed bonds are currently trading sideways on the day. It is another relatively light week in terms of economic data. The only notable release this week will be the retail sales report which is due out Wednesday.
President Bush is expected to sign the Economic Stimulus package into law on Wednesday, watch today’s you tube video to find out what we know and don’t know in terms of how it will impact “conforming loan limits”.
Also, I’d direct your attention to the new blog I’ve started @ http://mortgagerateupdate.blogspot.com. I would encourage you to check in periodically to read up on the latest and greatest happenings in the mortgage industry.
Current Outlook: neutral
Sunday, February 10, 2008
More tightening to come?
One of the most difficult questions to answer is WHEN our lenders' credit standards will stabilize and maybe even ease. Of course, in the long run, tighter credit standards will help all participants in the real estate industry (be it mortgage originators, lenders, investors, homeowners, realtors, title companies, etc.) because it will promote more prudent and responsible lending. However, in the immediate term tighter credit standards is not welcome news to an already weary housing market.
There were two articles in this weekend's Wall Street Journal which are conerning.
The first, "Markets at Risk for Additional Shocks" was a summary of a report issued by a forum of gloabal banking authorities who met in Tokyo over the weekend. The forum urged banks to be more "forthcoming about underwriting standards used." Translation: Keep tightening....
The second article, "New Hitches In Markets May Widen Credit Woes" reported that the value of bonds backed by loans made to firms for leveraged buyouts have been dropping substantially (some as low as $.90 on the dollar). When the value of these bonds fall it negatively impacts the balance sheets of lenders who also make mortgage loans.
The impact on the mortgage industry?
This may spur another round of credit tightening. I would expect "stated income" & loans made to borrowers with lower credit scores to be the victims.
There were two articles in this weekend's Wall Street Journal which are conerning.
The first, "Markets at Risk for Additional Shocks" was a summary of a report issued by a forum of gloabal banking authorities who met in Tokyo over the weekend. The forum urged banks to be more "forthcoming about underwriting standards used." Translation: Keep tightening....
The second article, "New Hitches In Markets May Widen Credit Woes" reported that the value of bonds backed by loans made to firms for leveraged buyouts have been dropping substantially (some as low as $.90 on the dollar). When the value of these bonds fall it negatively impacts the balance sheets of lenders who also make mortgage loans.
The impact on the mortgage industry?
This may spur another round of credit tightening. I would expect "stated income" & loans made to borrowers with lower credit scores to be the victims.
Saturday, February 9, 2008
Stimulus plan- Tax "rebates"
According to a couple articles I've reviewed online it appears that the so-called "tax rebate" which is at the focal point of the governments plan is not a reabte at all. In fact, most taxpayers will see their 2009 tax refund reduced by the amount of their rebate. This is certainly not the way that the government is presenting it.
Sources:
*http://articles.moneycentral.msn.com/Taxes/Advice/TheDetailsOnTaxRebates.aspx
*http://newsbusters.org/blogs/noel-sheppard/2008/02/08/cnn-deletes-line-about-tax-rebates-being-advance
Sources:
*http://articles.moneycentral.msn.com/Taxes/Advice/TheDetailsOnTaxRebates.aspx
*http://newsbusters.org/blogs/noel-sheppard/2008/02/08/cnn-deletes-line-about-tax-rebates-being-advance
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