Posts Tagged ‘Government Shutdown’

Your Weekly Mortgage Time is Here…(better late than NEVER!)

October 29, 2013
MORTGAGE TIME
Mortgage Market News for the week of Oct. 25, 2013
Patrick Gardner
Mortgage Loan Officer
415-423-1424
Patrick.Gardner@EverBank.com
NMLS ID: 378888
Visit my website

JOBS FALL SHORT
With the end of the government shutdown, investors turned their attention to the economic data. The September Employment report was weaker than expected, while the rest of the data released this week was mixed. As a result, mortgage rates ended the week a little lower.

Delayed by the shutdown, the September Employment data was released on Tuesday. Against a consensus forecast of 180K, the economy added just 148K jobs. The Unemployment Rate unexpectedly dropped from 7.3% to 7.2%, the lowest level since November 2008. The decline was mixed news, though, since it was due to both job gains and to people who left the labor force, meaning that they stopped trying to find a job. Bottom line, the results were weaker than what Fed officials would like to see. Between the ongoing uncertainty about future fiscal policy and the slow pace of improvement in the labor market, investors now expect that the Fed will not begin to taper until at least the March Fed meeting.

While the labor market data disappointed investors, the housing market continued to perform well. September Existing Home Sales were just slightly down from the four-year high reached in August, and they were 11% higher than one year ago. Total inventory of existing homes available for sale was unchanged at a five-month supply. Since the Existing Home Sales data is produced by the National Association of Realtors, it was unaffected by the government shutdown. The New Home Sales report, which is produced by the government, is delayed.

ALSO NOTABLE
FHFA said Fannie/Freddie loan limits won’t be reduced for at least 6 months
Consumer Sentiment declined to the lowest level since December 2012
Oil prices dropped below $100 per barrel for the first time since early July
The Treasury will auction $96 billion in 2-yr, 5-yr, and 7-yr securities next week

WEEK AHEAD
Next week will be packed with economic news, as the calendar includes many reports that were delayed by the shutdown. Wednesday will be the biggest day due to the Fed meeting. Investors will be looking for indications that Fed policy will not change any time soon. The crowded calendar includes Industrial Production and Pending Home Sales on Monday, PPI and Retail Sales on Tuesday, CPI on Wednesday, Chicago PMI on Thursday, and ISM Manufacturing on Friday. And that’s not all, as there will be Treasury auctions on Monday, Tuesday, and Wednesday.

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MORTGAGE TIME

October 18, 2013

MORTGAGE TIME

Mortgage Market News for the week of Oct. 18, 2013

Compliments of:

Patrick Gardner

Mortgage Loan Officer

NMLS ID: 378888

415-423-1424

Email me

Visit my website

 

CONGRESS REACHES DEAL

Congress approved a deal on Wednesday to raise the debt ceiling and to fund the government for a few months. The news lifted both stocks and bonds. The S&P 500 index reached an all-time high. Mortgage rates also improved nicely after the deal was reported.

 

The deal extends the government’s borrowing authority until February 7, removing the risk of default. The deal also funds the government until January 15, ending the shutdown. It provides more time for negotiations, but it does not bring the two sides any closer to reaching a long-term agreement on the major fiscal issues. For mortgage markets, even the slight risk of default had been enough to prevent some investors from purchasing government bonds, including mortgage-backed securities (MBS). After the deal, these investors resumed their purchases of MBS, which lifted MBS prices and lowered mortgage rates.

 

Mortgage rates benefitted from the agreement for another reason. Investors now think that the Fed will wait longer to begin to taper its bond purchase program. Fed officials have expressed reluctance to reduce monetary stimulus while future fiscal policy remains uncertain. If history is any indication, the debate in Congress over a longer-term budget and deficit reduction package likely will continue right to the extended dates. In addition, before tapering the Fed will want to see how much the government shutdown slowed the economy. The flow of economic data produced by the government will resume next week, but it will take some time to sort out the impact of the shutdown from the underlying strength of the economy.

ALSO NOTABLE

•           The NAHB Home Builders confidence index fell slightly from multi-year highs

•           The Fed’s Beige Book reported “modest to moderate” economic growth

•           The Empire State index declined to the lowest level since May

•           The S&P 500 stock index rose to a record high

 

WEEK AHEAD

The end of the government shutdown means that the government will produce its economic reports again. The important September Employment report, originally scheduled for October 4, will be released on Tuesday. The other postponed reports, including CPI and Retail Sales, will be released in coming weeks. The rest of the schedule for next week includes Existing Home Sales on Monday, Jobless Claims on Thursday, and Consumer Sentiment on Friday. New Home Sales was originally scheduled for Thursday, but the report may be delayed.

Mortgage Market News

October 4, 2013
Compliments of:
Patrick Gardner

Mortgage Loan Officer
NMLS ID: 378888

415-423-1424
Email me
Visit my website

NO BUDGET DEAL
Congress failed to reach a budget deal for the new fiscal year, causing a partial government shutdown for the first time in 17 years. The impact on mortgage rates was surprisingly small, though. The reduced number of economic reports released this week also caused little reaction. Mortgage rates ended the week a little lower.

While the shutdown has caused disruptions in the mortgage origination process, the effect on mortgage-backed securities (MBS) prices, and therefore mortgage rates, has been minor. With respect to the shutdown, bond market investors adopted a wait and see attitude. The much more significant issue is the debt ceiling. According to the Treasury, the government will reach its borrowing limit around October 17. If Congress does not raise the limit, there is a risk that the government technically will default on its obligations. The results of this unprecedented event could be severe for the economy and financial markets. At this point, though, few investors believe that Congress would actually allow the US to default.

One consequence of the shutdown is that economic reports produced by government agencies are not being released. The first Friday of each month is usually notable for the reaction to the Employment report, but this month’s data has been delayed. Investors were forced to adjust their outlooks based on the less significant labor market data which did come out during the week, including the ADP forecast and Jobless Claims. These reports showed little change from recent readings, though, and had little impact.

ALSO NOTABLE

ISM Manufacturing rose to the highest level since April 2011
The Treasury will auction $64 billion in securities next week
The European Central Bank made no change in rates
Euro zone unemployment remained near record levels of 12%


WEEK AHEAD

Investors will continue to follow the budget and debt ceiling discussions next week. If the shutdown is not resolved, most of the economic reports scheduled for next week will be postponed, including Friday’s Retail Sales and Producer Price index data. Unaffected by the shutdown, the Minutes from the September 18 Fed Meeting will be released on Wednesday. These detailed Minutes provide additional insight into the debate between Fed officials. In addition, Treasury auctions are scheduled for Tuesday, Wednesday, and Thursday.

How the Government Shutdown will Effect Financing

October 2, 2013

How the Government Shutdown will Effect Financing

 

Most Government Sponsored Entities like Fannie Mae and Freddie Mac and VA are operating as normal and continue business as usual. FHA is staffed with limited personnel and trying not to delay closings or have their business deterred but I would watch FHA loans and applications very closely(like you weren’t already) to make sure there is no funny business.

 

The big challenge at the moment for all in the industry is the IRS having its doors closed. On nearly every mortgage loan application borrowers are required to complete the IRS Transcript request form called the 4506-T. This form is sent by the lender to the IRS and they provide the lender with tax transcripts verifying income from tax returns for the previous years requested. This is how the lenders quantify borrowers W-2’s, 1040’s, business income and just about every other possible income from credible tax returns or reported income. The IRS will likely not be processing any 4506-T requests during this shutdown. Depending on the duration of the shutdown, requests may be delayed and there may be a backlog of requests that the IRS will need to process when they do re-open. Additionally the Social Security verifications from the Social Security Administration are not available.

 

In the meantime, EverBank’s policy for this is if tax returns were prepared by a third party, our Processor and/or Underwriter must independently validate the existence of the third party via an internet search and/or obtain verification of the CPA license. If the returns were prepared by an entity such as H&R Block, the office location should be verified. In general EverBank will not suspend loan closings due to the absence of 4506-T validation, however Underwriters still have the responsibility to conduct proper due diligence of the income documentation provided in loan files. Any red flags need to be addressed as thoroughly as possible without the assistance of the tax return transcripts at this time. Significant red flags in a loan file that cannot be addressed or cleared may warrant postponing a closing until a tax return transcript can be obtained from the IRS.

 

In general lenders are hopeful mortgage loans will not be delayed and optimistic the shutdown will not last more than a few weeks. Origination companies, correspondent banks, and warehouse lenders may react differently as they access the risks associated with an extended shutdown. If it does last more than a month we may be in for some rocky times on the mortgage side, for now let’s go with business as usual and be mindful when entering contract with an FHA buyer.

 

Hope this information is helpful and re-assuring.

Thanks, Patrick

 

Patrick Gardner
Mortgage Loan Officer
Office: 415.423.1424
Cell:  510.599.8499
Fax: 415.477.2146
patrick.gardner@everbank.com

 

Everbank.com/pgardner
NMLS ID: 378888

Government Shutdown Threatening Housing Recovery

October 2, 2013

Government Shutdown Threatening Housing Recovery