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Market Update

10/23/2015

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Early trade this morning stock markets globally rallying on news that China is lowering rates again, the sixth time in less than a year to prop up its economy. The benchmark lending rate cut by 0.25%, the one year rate now 4.35% frm 4.60%; the one year deposit rate to 1.50% frm 1.75%. The central bank also lowered the reserve requirements for banks by 0.5% to 17.5%. Yesterday in the EU the ECB’s Mario Draghi hinted more QE may be coming in December to fend off deflation kin the Zone.

 The reaction yesterday to the ECB comment sent US stocks on a buying binge; the DJIA up 321, this morning on the China news early morning trading had the DJIA up another 150 points prior to the 9:30 open. The bellwether 10 yr note yield in early trading up to 2.09%, MBS prices down -17 bps at 9:00.
 
 Tech stocks yesterday blew the doors off with stronger than expected earnings adding to the momentary run-up in equity markets. So far earnings reports have been generally better than thought overall, though companies that are multi-national earners like Caterpillar have experienced declines. It can’t be much better than it is now in the stock world, here and in Europe as well as Asia. Markets in Asia soared to their highest levels in two months on bets of easy-money policies from global central banks. The ECB yesterday, China today and next week the FOMC will likely make another attempt to paint the US economy in bright colors. A momentary perfect storm.

 The global equity market improvement has pushed US interest rates slightly higher; the 10 yr note this morning at 2.09% +7 bps and above its 20 day and testing its 40 day average. Not too bad given the way markets are trading the last two sessions. Still the lack of inflation and concerns that the current mania will ebb soon are keeping rates well-contained. We have been concerned for two weeks that the 10 yr note was running into strong resistance at 2.00%, the inability to break the technical and psychological has lessened traders’ appetite for treasuries for the time being, but the backup in rates has been minor. 

 At 9:30 the DJIA opened +125, NASDAQ +92, S&P +19. The 10 yr note 2.08% +6 bps and MBS price on FNMA 3.5 coupon -16 bps frm yesterday’s close but unchanged frm 9:30 yesterday. It is encouraging that rates are holding well in the current mania driven by global central banks. Still have the FOMC meeting next week, the strong opening today in stocks may be the highs of the session going into the weekend but the fever is running high presently. 

 No data today. We appreciate how the bond and mortgage markets are acting this morning in the face of the global central banks on slot of easing the last 48 hours. As long as the 10 yr note yield holds below 2.15% the broader outlook remains bullish. No matter how central banks are acting now, no matter the stronger earnings in tech stocks, neither of them have any direct influence on consumers and consumer spending. Wages stagnant and low will keep growth mediocre at best; retail recently weak, most surveys on consumers report declining optimism; the idea that low gasoline prices will stoke consumer spending has yet to materialize. Standing in the wings, the coming debt ceiling concerns. 


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Deceptive Mortgage Ads

10/22/2015

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If you’re looking for a mortgage to buy a home or refinance an existing loan, you may see or hear ads with offers of low rates or payments. Whether you see them on the Internet, on television or in the paper, or whether they come by fax or mail, some of these ads look like they’re from your mortgage company or a government agency. Regardless of where you see the ads, remember that while the offers are tempting, some are terribly flawed: they don’t disclose the true terms of the deal as the law requires.

The Federal Trade Commission, the nation’s consumer protection agency, says that when you’re shopping for a home loan, it’s important to understand all the terms and conditions of a proposed loan. Start with what is in the ad itself. Read what’s between the lines as well as what’s in front of your eyes.

What The Ads SayTo help you recognize an offer that may be less than complete, the FTC wants you to know the buzz words that should trigger follow-up questions, as well as information to insist on after you’ve read an ad.
A Low “Fixed” RateAds that tout a “fixed” rate may not tell you how long it will be “fixed.” The rate may be fixed for an introductory period only, and that can be as short as 30 days. When you shop for a mortgage, you need to know when and how your rate, and payments, can change.

Very Low RatesAre the ads talking about a “payment” rate or the interest rate? This important detail may be buried in the fine print, if it’s there at all. The interest rate is the rate used to calculate the amount of interest you will owe the lender each month. The payment rate is the rate used to calculate the amount of the payment you are obligated to make each month. Some offers advertise a low payment rate without telling you that it applies only during an introductory period. What’s more, if the payment rate is less than the interest rate, you won’t be covering the interest due. This is called “negative amortization.” It means that your loan balance is actually increasing because you’re not paying all the interest that comes due, and the lender is adding the unpaid interest to the balance you owe.

Very Low Payment AmountsAds quoting a very low payment amount probably aren’t telling the whole story. For example, the offer might be for an Interest Only (I/O) loan, where you pay only the amount of interest accrued each month. While the low payment amount may be tempting, eventually, you will have to pay off the principal. Your payment may go up after an introductory period, so that you would be paying down some of the principal – or you may end up owing a “balloon” payment, a lump sum usually due at the end of a loan. You must come up with the money when a balloon payment is due. If you can’t, you may need another loan, which, in turn, means new closing costs, and potentially points and fees. And if housing prices are falling, you might not be able to refinance to lower your payments.

Teaser Rates
Mortgage rates near 30-year lows!

Rates as low as 1%!
You are paying too much!
Who doesn’t want to reduce their mortgage payments?
Loan amount $300,000 - pay only $900 per month!

Ads with “teaser” short term rates or payments like these don’t often disclose that a rate or payment is for a very short introductory period. If you don’t nail down the details in advance about your rates and payments for every month of the life of your loan, expect payment shock when the rate and payment increase dramatically.

Official Lookalikes
Important Notice From Your Mortgage Company.
Open Immediately — Important Financial Information Enclosed.
Please do not discard — account information enclosed.


Appearances can be deceiving. Mailers that have information about your mortgage and your lender may not be from your lender at all, but rather from another company that wants your business. Companies can legally get your information from public records. Before you respond to any offer, review it carefully to make sure you know who you’re dealing with.

You are eligible to take part in an exclusive government loan program. We can negotiate your existing adjustable rate mortgage to a new low fixed rate mortgage. You must contact us immediately regarding this notice.

Some businesses use pictures of the Statue of Liberty or other government symbols or names to make you think their offer is from a government agency or program. If you’re concerned about a mailing you’ve received, contact the government agency mentioned in the letter. If it’s a legitimate agency — and not one that just sounds like a government agency — you’ll find the phone number in the Blue Pages of your telephone directory.

What the Ads Don’t SayThe APRThe Annual Percentage Rate is a critical factor in comparing mortgage offers from different lenders. It is the total cost of the credit expressed as a yearly interest rate. This rate is different than the simple interest rate on your loan note, because the APR includes all costs of the credit such as points and processing fees. Knowing the APR makes it easier to compare “apples to apples” when considering mortgage offers. Look for the APR for your loan. The amount may not be in the ad at all; it may be hidden in the fine print, or it may be available deep within a website after multiple clicks.

Important Payment InformationIt’s hard to know what you don’t know, and often, some of the most important information you need isn’t in the ad, is hidden in the fine print, or is available only at a website after many clicks. To make an informed judgment about any mortgage offer, you need to know — or ask:
  • What will the monthly payment be for every month of the loan, and could it increase? When could it increase? What would your new payment be? Could your monthly payment increase more than once?
  • Does the monthly payment include an escrow amount to pay for your property taxes and homeowners insurance? Or must you pay these costs on your own? If you have to pay on your own, ask your lender for an estimate so you can budget accordingly.
  • What is the term of the loan (for example, 15 years? 30 years?)? How many payments will you have to make? Would the loan be paid off at the end or would you still owe a “balloon” payment?
  • Will you have to pay penalties to refinance or pay off the loan early? If so, how much, and when would they apply? If the loan has an introductory or teaser rate, can you refinance, without penalties, before the rate resets and your payment increases?

For More InformationThe Consumer Financial Protection Bureau has information about mortgages. The Federal Reserve Board also has several helpful mortgage resources.

Article was found on
http://www.consumer.ftc.gov/articles/0087-deceptive-mortgage-ads.


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Market Update

10/22/2015

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Weekly jobless claims was the first report this morning. Claims were expected to have increased 10K to265K, as reported claims increased 3K to 259K. The smoother 4 week average continues to decline; 263.25K frm 265K last week. Claims are hanging near 42 year lows.
 News frm the ECB meeting trickling out early today; Draghi saying the bank will continue to assess its policies to counter the effects of slowing emerging markets that are dragging the EU down. He suggested the EU likely will need increased monetary stimulus; markets taking that as a move in Dec. “Concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in commodity markets signal downside risks to the outlook for growth and inflation,” Draghi said. The bank let interest rates unchanged at the meeting, at 0.05% and the deposit rate at -0.2%. The ECB is currently buying €60B a month ($67B). Rates declined on Draghi’s comments; the German 2 yr note yield down three basis points to 0.03% to a minus 0.29%. 

 At 9:00 the August FHFA home price index, expected to have increased 0.5%, increased just 0.3%. Yr/yr the index is up 5.5%, down frm July’s yr/yr at 5.8%. More confusion; other recent indications and reports on the housing sector have implied increasing prices, the exception has been Case/Shiller; this data lines up with recent data frm Case/Shiller’s reports. Not a market mover. 

 Even before the stock market opened this morning the MBS market was volatile, very early prices opened down as much as 20 bps, then in a very thinly traded market the prices jumped back to unchanged by 9:00 am. The 10 yr note, on comments frm Mario Draghi, edged closer to 2.00%, at 2.02% at 9:00. The DJIA opened +129, NASDAQ +35, S&P +14. The 10 slipped back to unchanged at 2.03%; 30 yr FNMA 3.5 coupon -2 bps frm yesterday’s close and unchanged frm 9:30 yesterday. 

 Two key reports at 10:00 am; Sept existing home sales up 4.7%, better than +1.0% expected. Annual sales up 8.8% yr/yr. Inventories -3.0% yr/yr, the median sales price $221,900 +6.1% yr/yr. August sales were revised slightly lower by 100K. Sept leading economic indicators were expected 0.0% as reported declined 0.2%, August indicators revised from +0.1% to 0.0%, the decline was the second this year, the other hit in Feb. LEI is a composite index of ten economic indicators that should lead overall economic activity, but recently traders have put less emphasis on it. 

Stocks rallying the bond and mortgage markets flat-lining recently. Same story, we do not want to float, taking long position in the bond or mortgage markets until the 10 can break below 2.00%. We continue to believe rates will decline more but until the market actually meets our expectations we think the best approach now is to keep locked. There is little reward here but increased risk that prices could decline at these levels; we will float to begin though. 


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Market Update

10/21/2015

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Early activity prior to the actual open at 9:30 had stock indexes better along with markets in Europe; the 10 yr note yield also better as were mortgage prices. It is earnings season, overall investors and traders are liking what they see, however that is because the estimates had been ratcheted lower after strong Q2 earnings. Corporate earnings and profits expected to decline in Q3  and Q4; in the world of investments at times it appears investors and traders don’t care the economic outlook is slowing as long as data beats the weaker estimates.
 
At 9:30 the DJIA opened +56, NASDAQ +21, S&P +7. The 10 yr note yield at 2.05% -2 bps; 30 yr FNMA 3.5 coupon +11 bps frm yesterday’s close and +8 bps frm 9:30 yesterday.
 
Should be another quiet day today; so far this week not much movement in the bond and mortgage markets. Not much data, the ECB tomorrow and the FOMC next week keeping markets stable.
 
This morning the only news today; weekly mortgage applications from the MBA; apps increased 11.8% overall, purchase apps +16%, re-finance apps +9%. Mortgage applications swinging wildly the last three weeks on new disclosure rules. The week before this apps declined 27.6%, purchases -34%, re-finances -23%. The week prior to that; apps +25.5%, purchases +27%, re-finance apps +24%. Hard to draw any conclusions frm mortgage applications over the past three weeks.
 
MBA reported yesterday that the association expects $905B in purchase applications next year; up 10% frm this year. Re-finances according to MBA down by 30% frm this year to $415B. On net, mortgage originations will decrease to $1.32 trillion in 2016 from $1.45 trillion in 2015. For 2017, MBA is forecasting purchase originations of $978 billion and refinance originations of $331 billion for a total of $1.31 trillion.


















The Atlanta Fed GDPNow out yesterday; GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 0.9% on October 20, unchanged from October 14. 


Yesterday the 10 yr note yield rose to test its 20 day average and it held; this morning a little better at 2.04% -3 bps. 2.00% remains a rock solid resistance while the upside should not move above 2.15%. Still holding minor bullish bias but unlikely to move much until next week’s FOMC meeting; even then to drive rates lower for mortgages and treasuries it will take additional weakness in Europe, in Asia and emerging markets. Zero interest rates frm the Fed continue to drive investors to equities even as Q3 growth is expected to decline to less than 1.0% growth.


 


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Reverse Mortgage Can Be A Retiree's Saving Grace

10/20/2015

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Social Security is the largest retirement income asset of the average American. The other two major sources of wealth for the average American are retirement savings and home equity. Home equity is often largely ignored as a possible income source. Click here to learn more.


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Market Update

10/20/2015

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Sept housing starts and permits, the only data today. Prior to the 8:30 release the 10 yr note rate traded at 2.05% +2 bps and 30 yr FNMA Nov coupon down 9 bps frm yesterday’s close. Sept starts were thought to be up about 2.0%, as reported up 6.5% to 1206K units. Building permits expected unchanged frm August declined 5.0% to 1106K units. August starts were revised better, frm 1126K to 1132K. Permits for August revised lower to 1161K frm 1170K. Sept starts were all in multi-family, +18.3% while single family starts soft at +0.3%. Sept multi-family permits declined 12.1%, single family permits -0.3%. Not sure how to take this; year-on-year, starts are up a very striking 17.5%, permits, however, up only 4.7%.
 
Yesterday the NAHB housing market index increased 3 points to 64. Sales expectations jumped to 75 in October from 68. Current conditions rose to 70 from 67.Apparently the NAHB was all juiced up over multi-family improvements, but the report this morning doesn’t confirm the enthusiastic NAHB. Building permits are suggesting the enthusiasm may be overdone somewhat. The drop in permits is puzzling and a concern. How can the NAHB be so optimistic when building permits declined 5.0% with multi-family down 12.1% and single family down 0.3%? It is about starts, the future isn’t that optimistic.
 
At 9:30 the DJIA opened down 42, NASDAQ -6, S&P -3. The 10 yr note yield up 4 bps to 2.07%. 30 yr FNMA 3,5 coupon -16 bps frm yesterday’s close and -11 bps frm 9:30 yesterday.
Nothing left on the calendar today. Fed speakers went back into their shells now until after next week’s FOMC meeting. The meeting on Tuesday and Wednesday isn’t likely to increase the FF rate. Today’s starts and permits another report that keeps the Fed continuing to talk but not acting. Traders in the FF futures still betting that a rate increase won’t occur until next March. 

The International Monetary Fund
lowered its 2015 global growth forecast yesterday to 3.1% from its 3.3% estimate in July, citing China as well as weakness in Europe and Japan and the slowdown in countries producing commodities. The IMF, the Fed, the World Bank continue to revise downward their forecasts for the last 18 months. Nevertheless the bullish sentiment in US equities remains firm. Quarterly earnings are not as strong as Q2 so far. Main Street media and many Wall Street pundits believe the worst is over… that we’re well on the road to recovery… that we’re at the start of a multi-year bull market. Be very careful in that belief and idea. 

The 10 yr is at 2.08% +5 bps frm yesterday’s close, MBS prices continuing to slip frm 9:30 levels.
We don’t think there is much to it, mostly some selling after the 10 has failed to crack 2.00% as we have been noting. Traders don’t like hanging around too long when any market resists further advances, we have stayed flat and haven’t floated recently because of the resistance at 2.00% on the 10 yr. MBS prices and rates follow risk-free treasuries. The FOMC meeting next week, the ECB meeting this Thursday will keep the bond and mortgage markets frm improving much. Thankfully we don’t have to suffer more Fed officials until next Wednesday. Near term, we suggest keeping locked; the longer outlook though should see lower rates; let the market tell you when and don’t bet on it yet. 

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Fickle Economy

10/5/2015

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Wednesday marked the end of the third quarter -- the end of a brutal quarter. Oil futures finished lower on Wednesday. Oil was down 24 percent in the third quarter. Prices based on the most active contracts are trading 15 percent lower year to date. Most of the concern with oil is in the build-up of supplies. The latest U.S. Energy Information Administration report posted an increase in the U.S. supply and also a small drop in U.S. oil production.
 
Another commodity having a rough year is gold. Gold futures were down 4.8 percent in the third quarter. There are a number of factors working against gold. ADP showed that U.S. companies added 200,000 private-sector jobs in September, better than expected. As positive economic news comes out, the better the chances that the Federal Reserve will raise interest rates, which would be good for the U.S. dollar and bad for gold. A strong U.S. dollar is bad for gold prices, as well as with a number of other commodities. Gold finished the quarter at $1,115.20 an ounce on Comex, the lowest closing price in more than two weeks. Silver was down 6.8 percent for the quarter, closing at $14.518 an ounce. Platinum closed Wednesday at $907.20 an ounce for October. This marks a 25 percent decrease year to date. Copper has fallen 17 percent year to date and closed at $2.341 a pound.
 
Despite the stock market woes and global worries, Consumer Confidence in the U.S. grew in September. A survey of consumer confidence showed an increase in September to a level or 103.0. That is up from the August level of 101.1. The Present Situation Index, which is a measure of current conditions, climbed to an eight year high. It’s not all positive, however. The Future expectations Index fell from 91.6 to 91.0. This indicates that U.S. consumers do not see growth picking up in the near future. While consumers are feeling pretty good right now, there are still a lot of signs that show that the economy has a long way to go to fully recover. Annual growth in the U.S. has not reached 3 percent since 2005 and more than 16 million people who would like a full-time job cannot find one. There is good news, as well. Hiring is strong, job openings are at an all-time high, and there are some signs that wages are starting to increase as the unemployment rate shrinks.
 
The stock market got some positive news from China on Thursday. Chinese manufacturing numbers were stronger than expected. Unfortunately, the U.S. manufacturing numbers were not as positive. The Institute for Supply Management reported its Manufacturing Index dropped from 51.1 percent in August to 50.2 percent in September. The stronger dollar, along with a weaker global economy, are hurting U.S. exports.
 
Two other reports came out this week with concerning news. Jobless Claims increased last week to 277,000 -- up 10,000 from the previous week. Although this is the highest number of new claims in a month, the weekly average for the year is the lowest since the early 1970s. The news got worse Friday morning as the Non-Farm Payrolls rose by 142,000 in September -- missing expectations of a gain of 200,000 jobs. In addition, the August numbers were revised sharply lower to an increase of 136,000. It is believed that hiring in the U.S. has slowed due to the weakening global economy. This news sent the stock market lower. This may lead the Fed to delay an increase in interest rates.
 
In other news, U.S. house prices rose .6 percent in July. Cities in the west; such as, Portland and San Diego led the increase. Consumer Spending was higher in August. New automobile sales and strong back-to-school sales were driving factors in the increase.
 
This week we having the following reports coming out:
 
  • Monday -- ISM Nonmanufacturing Index
  • Tuesday -- Trade Deficit
  • Wednesday -- Consumer Credit
  • Thursday -- Weekly Jobless Claims and FOMC Minutes
  • Friday - Import Price Index and Wholesale Inventories
     
Have a good week and thank you for your business.
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