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FHA Announces Policy Changes to Address Risk and Strengthen Finances

New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities

WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.

The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement. U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.

“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”

Announced FHA Policy Changes:

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
   • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
   • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
   • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
   • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2. Update the combination of FICO scores and down payments for new borrowers.
   • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
   • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
   • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3. Reduce allowable seller concessions from 6% to 3%
   • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
   • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
4. Increase enforcement on FHA lenders
   • Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
     • This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
   • Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
     • Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
     • This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
   • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
     • Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
   • HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
     • Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
     • Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.

“Your Partner In Success!”

Tony Frerking

Sr. Mortgage Consultant

PMZ Home Loans

1600 N. Carpenter Rd Ste. A-1

Modesto CA 95351

Direct: (209) 404-2200

Fax: (888) 345-2768

FHA revises their property 90 day flipping rule!

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS
Measure to help bring stability to home values and accelerate sale of vacant properties

For more details go to: http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011

Hello all!

Below is a great link for all the information you will need on the revised first time home buyer tax credit as well as the new repeat buyer tax credit!  Check it out and let me know if I can help!

http://federalhousingtaxcredit.com/

As we do, we will start the day by floating; however, unless mortgage prices increase at least 6/32 (.18 bp) from morning pricing we will likely lock and keep flat over the long weekend. Next week the bond market has to face supply and given the relentless (albeit flat for the past month) stock market and that the 10 yr note so far has failed to break resistance at 3.28% (currently 3.35%) the rate markets are vulnerable to some retracement.   

Prior to 8:30 treasuries and mortgages were trading weaker this morning. At 8:30 the long-awaited August employment report hit. the unemployment rate jumped 0.3% to 9.7%, 0.2% higher than markets were expecting. However, the non-farm payrolls declined only 216K, about in line with estimates and better than what we were expecting. July NFP jobs were revised lower by 30K. The average hourly earnings increased 0.3%, a little better than 0.2% expected; yr/yr average hourly earnings are up 2.6%. The unemployment rate in August us the highest since June 1983.

The initial reaction was as you would expect, a lot of volatility. The stock indexes were trading better ahead of the employment rate and rate markets were being pressured; on the knee jerk the 10 yr note rallied back to unchanged, the stock indexes fell to unchanged. But in 15 minutes the stock indexes were improving while the 10 yr note and mortgages also improved from the initial reaction but were still weaker on the day. The employment report had something for everyone; bears and bulls. The jump in unemployment, a stat done by telephone interviews is troublesome, implying jobs are scarce while the 216K job losses is a lot better than ADP estimates and actually better than what traders were whispering yesterday. Bottom line, the report didn’t change a thing; markets continue to believe we can have an economic recovery without the consumer, while the bearish view remains that without the consumer there will be no noticeable recovery. In the meantime stock markets want to shrug off any negativity and keep on kneepan on. At 9:00 the 10 yr note -5/32 at 3.36% +2 BP, mortgage prices -3/32 and the DJIA index +25. At 9:30 the DJIA opened +7, 10 yr note -4/32 and mortgages -2/32. (see below for 10:00 levels)

No matter how you slice it, the employment report isn’t good news; 9.7% unemployment is seen this morning by some as probably the high in unemployment in this recession. Not a chance in our view, unemployment is very likely to top 10.0% and maybe 10.5% before we see the high. Businesses are not hiring in any significant way and those that are are entry level low income jobs. Recall the geniuses in Washington lead by the President increased the minimum wage two months ago, a drag on hiring. The other side of the debate goes like this; since the number of people losing jobs is slowing to just 200K+ a month businesses will soon begin hiring. After jobs were being cut by 700K a month early this year, chopping 1.6 mil jobs, cutting 200K a month is seen as good news and signs of recovery. Can’t keep up cutting jobs by 700K a month or we would be in very deep water. Job cuts obviously had to slow, but new jobs of sizeable numbers is not on the radar for many months. One dude on CNBC this morning, “consumers are back”, an ostrich in street clothes. And, we don’t have to bring up the recession in housing or consumers up to their bellies in debt and have no desire or ability to borrow more.

This is a very short day; the bond and mortgage markets close at 2:00. The three day weekend will likely keep markets in check. Looking to next week, Treasury will auction $70B of 3 yr, 10 yr and 30 yr debt, always a factor in the rate markets. The stock market, for all the positive spin this morning on the less job losses than were expected, isn’t doing much so far. 

10 yr note:                   102.08 -2/32 3.35% +1 BP

5 yr note:                     100.12 +1/32 2.29% -1 BP

2 Yr note:                     100.06 +1/32 0.91% -1 BP

30 yr bond:                   105.10 -12/32 4.18% +3 BP

Libor Rates:                  1 mo 0.253%; 3 mo 0.314%; 6 mo 0.712%; 1 yr 1.288%

30 yr FNMA 4.5 Oct:     100.13 +1/32 (+1/32 frm 10:00 yesterday)

15 yr FNMA 4.0 Oct:     100.27 unch (+1/32 frm 10:00 yesterday)

30 yr GNMA 4.5 Oct:    100.14 -3/32 (.09 bp) (+1/32 frm 10:00 yesterday)

15 yr GNMA 4.0 Oct:    101.16 +1/32 (+1/32 frm 10:00 yesterday)

Dollar/Yen:                  92.85 +0.41 yen

Dollar/Euro:                $1.4204 -$0.0039

Gold Dec:                     $988.40 -$9.40

Crude Oil Oct:              $67.55 -$0.41

Goldman-Sachs

Commodity Index:      439.48 -0.88

DJIA:                           9351.78 +7.17

NASDAQ:                     1986.20 +3.00

S&P 500:                     1004.62 +1.38

**Please note I will be out of the office 9/17-9/23**

“Your Partner In Success!”

Tony Frerking

Sr. Mortgage Consultant

PMZ Home Loans

1600 N. Carpenter Rd Ste. A-1

Modesto CA 95351

Methods of contact:

Direct: (209) 404-2200

Fax: (888) 345-2768

Contact Via Skype / Skype name = aplynow

Starting at 7:00 this morning; the weekly MBA mortgage applications. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.2%. The Refinance Index decreased 3.1% from the previous week and the seasonally adjusted Purchase Index decreased 1.0% from a week ago. The only segment of the survey that posted an increase in activity was the government Purchase Index, which rose 0.5% from the prior week on a seasonally adjusted basis — the seventh consecutive weekly gain.  For the month of August, the government-insured share of purchase applications was 40.4%, up from 38.3% in July and 31.7% in August 2008.  The share was the highest since February 1991. The refinance share of mortgage activity remained unchanged this week at 56.5%. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 6.5% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.15% from 5.24%, with points increasing to 1.09 from 1.07 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.57% from 4.58%, with points decreasing to 0.85 from 1.18 (including the origination fee) for 80% LTV loans.

 At 8:15 the August ADP employment data; ADP says job losses in the private sector were 298K, substantially more than the 200K expected from the BLS on Friday, but ADP does not include government jobs, since government jobs generally increase if we add an estimated 20K jobs for government total comp[arable job losses would be 278K, still a larger decline than what has been estimated. We noted last Friday that job losses would likely be larger than the optimistic 200K expected.

 At 8:30 Q2 revision of productivity, expected to be revised lower from 6.4% on the advance report to 6.1%, it actually increased to 6.6%; the implication, business is squeezing more out of workers after job losses, and workers are stepping up fearing for their jobs. Unit labor costs fall as productivity increases, labor costs for the Q were -5.9%, the largest decline in quarterly unit labor costs since Q2 2000. More evidence businesses are benefiting from pushing workers harder.

 At 9:30 the stock market opened -20, the 10 yr note +3/32 and mortgage prices +3/32. The rest of the day will be as it has been—interest rate markets moving inversely with the stock market, stocks up, prices for treasuries and mortgages lower. (see below for 10:10 levels)

 At 10:00 July factory orders; expected to be +2.2%, were +1.3%; July orders were revised to +0.9% frm +0.4%. Excluding transportation orders -0.7%, July ex transportation orders revised to +2.7% frm +2.3%. No initial market reaction to the data.

 At 2:00 this afternoon the FOMC minutes from the 8/12 meeting. Interesting but generally nothing significantly new in the minutes from what we have heard through Fed officials since then. Nevertheless, markets always pay attention to the minutes looking for little pearls of information and clues.

 Still hearing more talk that the Fed should consider slowing the pace of MBS purchases; mostly founded on the declining interest rates for mortgages these days. The logic, slow it down when it isn’t needed and use the rest of the $1.25T (about $460B) when needed to combat increasing interest rates. Will the Fed slow down? Hard to say but it is something the Fed is likely considering. 

 Is this the end times for Fannie and Freddie as we know them? If the MBA has its plan adapted it would be the end of the two behemoths as they are now constituted but not completely eliminating them. MBA’s plan, create smaller private companies that are government sponsored. MBA wants select private enterprises to collect and securitize MBSs, sell them in the markets with the principle and interest guaranteed to investors through an insurance fund paid by the new enterprises. As we understand the outline, the government would manage the insurance fund to assure there will be enough to cover any serious losses. Still a work in progress and just one of a few thoughts being tossed around these days. Investors would have no risk on the credit in the securities but would have the risk on interest rate movements. Sounds a lot like FHA/VA. Our first thought is that big banks would be the private enterprises and take another step for six or seven banks controlling all of the mortgage markets. Stay tuned for more details, this isn’t something that can or will happen anytime soon.

PRICES @ 10:00 AM

10 yr note:                    102.08 +3/32 3.36% -1 BP

5 yr note:                      100.10 +3/32 2.30% -3 BP

2 Yr note:                      100.06 unch 0.91% unch

30 yr bond:                   105.12 +22/32 4.18% -5 BP

Libor Rates:                  1 mo; 0.254%; 3 mo 0.330%; 6 mo 0.726%; 1 yr 1.295%

30 yr FNMA 4.5 Oct:     100.12 +3/32 (.09 bp) (+14/32 (.43 bp) frm 10:00 yesterday)

15 yr FNMA 4.0 Oct:     100.24 -1/32 (+9/32 (.28 bp) frm 10:00 yesterday)          

30 yr GNMA 4.5 Oct:    100.19 +3/32 (.09 bp) (+10/32 (.31 bp) frm 10:00 yesterday)

15 yr GNMA 4.0 Oct:    101.10 -3/32 (.09 bp) (+7/32 (.21 bp) frm 10:00 yesterday)

Dollar/Yen:                  92.57 -0.30 yen

Dollar/Euro:                $1.4211 -$0.0008

Gold Dec:                     $966.90 +$10.40

Crude Oil Sept:             $67.94 -$0.11

Goldman-Sachs

Commodity Index:       441.55 -1.66 

DJIA:                            9302.89 -7.71

NASDAQ:                      1968.86 -0.03

S&P 500:                      997.11 -0.93

**Please note I will be out of the office 9/17-9/23**

“Your Partner In Success!”

Tony Frerking

Sr. Mortgage Consultant

PMZ Home Loans

1600 N. Carpenter Rd Ste. A-1

Modesto CA 95351

Methods of contact:

Direct: (209) 404-2200

Fax: (888) 345-2768

Contact Via Skype / Skype name = aplynow

 Started a little better early this morning,

the 10 yr at 7:30 up 3/32 at 3.39%; at 8:00 still up 3 clicks but by 8:30 some softness in very light trading, the 10 yr -3/32 and mortgages started -1/32. The early trade in the stock indexes pointed to another lower open; the DJIA at 8:30 -40. At 9:00 the 10 yr -2/32, mortgages -3/32 and the DJIA -49 points. At 9:30 when the NYSE opened for business the DJIA opened down 30 points, the 10 yr -4/32 and mortgages -2/32. (see below for 10:10 levels)

At 10:00 three economic releases; the most significant, the August ISM manufacturing data. The overall index was expected at 50.2, right on the key pivot (any read under 50 is contraction, over it expansion; as the index moves away from 50 the strength or weakness increases). The index hit at 52.9; the internal components were a lot better than thought, new orders at 64.9 from 55.3 in July, prices pd at 65.0 frm 55.0 and employment at 46.4 frm 45.6. The overall index and new orders now imply expansion although the employment segment is still negative but inching higher each month. The initial; reaction was as we would expect, selling in the bond and mortgage markets and support in equities.

 July construction spending, expected to be unchanged from June, was down 0.2%; what was the estimate late last week before analysts moved to unchanged forecasts.

 Finally at 10:00 NAR reported pending home sales index; contracts signed but not closed, up 3.2%, the highest sales in 2 yrs. The estimates were for an increase of 2.0%. Pending home sales have risen for the past six months and brings the debate back to the housing recovery.

 Each day now we move closer to the mother of all data, the employment report, where the rubber meets the road; the so-called consensus is for job losses to be just 200K, but the range of guesses is very wide (-365K to -115K). The unemployment rate is expected at 9.6%, up 0.2% frm July.

 Earlier this morning at 7:45 the Goldman-Sachs weekly chain store sales was down 0.5% from the previous week. The report filters out the back to school stuff and indicates consumers are not spending. The data is related to the general merchandise portion of retail sales. It accounts for roughly 10% of total retail sales. At 8:55 the Johnson Redbook retail sales reported a decline of 4.1% yr/yr same-store sales pace for the Aug. 29 week, at the very top of recent trend but still of course very weak. The report said the back-to-school season is still on as teenagers are waiting for school to begin before choosing apparel and accessories. Slice it anyway and the data continues to confirm sales are not increasing at the retail level.

 This afternoon August auto and truck sales will be reported beginning at 12:00; sales will be up with the clunker stuff. Estimates of 690K cars sold under the clunker program. 

10 yr note:                  101.18 -10/32 3.44% +4 BP

5 yr note:                    99.27 -2/32 2.41% +2 BP

2 Yr note:                    100.01 unch 0.98% unch

30 yr bond:                  104.09 -38/32 4.25% +7 BP

Libor Rates:                 1 mo; 0.256%; 3 mo 0.334%; 6 mo 0.728%; 1 yr 1.296%

30 yr FNMA 4.5 Oct:    99.30 -6/32 (.18 bp) (unch frm 10:00 yesterday)

15 yr FNMA 4.0 Oct:    100.16 -3/32 (.09 bp) (+3/32 (.09 bp) frm 10:00 yesterday)

30 yr GNMA 4.5 Oct:   100.10 -2/32 (.06 bp) (+7/32 (.21 bp) frm 10:00 yesterday)

15 yr GNMA 4.0 Oct:   101.04 -3/32 (.09 bp) (+4/32 (.12 bp) frm 10:00 yesterday)

Dollar/Yen:                  93.13 +0.22 yen

Dollar/Euro:                $1.4323  -$0.0005

Gold Dec:                     $957.20 +$3.70

Crude Oil Oct:              $70.88 +$0.92

Goldman-Sachs Commodity Index: 455.00 +1.21

DJIA:                           9504.60 +8.32

NASDAQ:                     2023.53 +14.57

S&P 500:                     1022.66 +2.04

“Your Partner In Success!”

Tony Frerking

Sr. Mortgage Consultant

PMZ Home Loans

1600 N. Carpenter Rd Ste. A-1

Modesto CA 95351

Methods of contact:

Direct: (209) 404-2200

Fax: (888) 345-2768

Contact Via Skype / Skype name = aplynow

Early this morning the rate markets were looking good, by 9:00 however the early gains in treasuries and mortgages were gone with both markets at 9:00 unchanged, the DJIA was off 61 points at 9:00, the 10 yr note unch and mortgages unchanged. At 9:30 the DJIA opened -75, the 10 yr note +4/32 and mortgage prices +4/32. (see below for 10:00 levels)

This is a busy week for financial markets with key economic data culminating with the August employment report on Friday. No supply this week from Treasury but come Thursday treasury will announce the amounts of more borrowing next week; issuing 3 yr and 10 yr notes next week.

China’s stock market, one of the things that has been supporting the US stock market, is cracking under corrective action. Down 7.0% last night and own 10% in the past three sessions. If that were the DJIA it would be down over 900 points. Inch by inch the US equity markets are moving closer to that well overdue correction everyone has been looking for. Once we get it the rate markets will likely improve as safe haven activity will move money to safety. Mortgage rates on a major equity market correction will slide under 5.00%l whether it will hold long under 5.00% depends on how deep a correction in stocks and how long stocks will stay down before more buying hits.

At 9:45 this morning the Chicago purchasing mgrs index, expected at 47.2 frm 43.4, jumped to 50.0; new orders component at 52.5 frm 48.0, prices pd at 50.0 frm 35.0 and employment component at 38.7 frm 35.3. On the whole it was much better than expected but not much initial reaction to it in the markets. Any index read under 50 is contraction. Once again manufacturing data beats the estimates; but who is buying? Consumers have a lock on their pocketbooks.

This Week’s Economic Calendar:

        Tuesday;

            10:00 July construction spending (-0.2%)

                     August ISM manufacturing index (50.2 frm 48.9)

                     July pending home sales

             2:00 August auto and truck sales

       Wednesday;

             7:00 Weekly MBA mortgage applications

             8:15 ADP August non-farm jobs estimate (-246K)

             8:30 Q2 productivity revision (+6.1% frm +6.4%)

             10:00 July factory orders (+1.5%)

             2:00 FOMC minutes frm 8/12 meeting

      Thursday;

             8:30 weekly jobless claims (-8K to 562K)

            10:00 ISM services sector index (48.0 frm 46.4)

      Friday;

            8:30 BLS August employment data ( unemployment (.6% +0.2%)

                    Non farm jobs (-200K, -247K in July)

           2:00 Early bond and mortgage market closes (Labor Day on Monday)

The remainder of the session will be watching equities trade. The stock market looks very soft a the moment but recent volatility is such that we don’t place a lot of confidence on how the markets will finish the session.

The bellwether 10 yr note yield is now at its very best since the middle of July; mortgages following the leader. Technically the rate markets are in good shape; all of our analysis points to lower rates. Problem is however, there is a high degree of uncertainty and with volatility on the high side any sustained reversal could easily turn the markets around. Go with it and take it one day at a time in terms of trading. Re-finance prospects should be mined now as we expect a decline in rates between now and the end of Sept. Timing is based on when the equity markets actually sustain selling for more than a day or tow as has been the case all summer.

“Your Partner In Success!”

Tony Frerking

Sr. Mortgage Consultant

PMZ Home Loans

1600 N. Carpenter Rd Ste. A-1

Modesto CA 95351

Methods of contact:

Direct: (209) 404-2200

Fax: (888) 345-2768

Contact Via Skype / Skype name = aplynow

Starting off this morning at 7:00 AM the weekly MBA mortgage applications report; overall apps increased 7.5% last week, re-financings led the way, up 12.7% with purchase apps up 1.0%. Re-financings accounted for 56.5% of all apps last week according to the MBA. The four week moving average for the seasonally adjusted Market Index is up 3.5 percent.  The four week moving average is up 1.7% for the seasonally adjusted purchase Index, while this average is up 4.8% for the refinance Index. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.24% from 5.15%, with points increasing to 1.07 from 0.98 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.58% from 4.52%, with points increasing to 1.18 from 0.93 (including the origination fee) for 80% LTV loans.

At 8:30 July durable goods orders were better than expected; +4.9% against +3.0% expected for the overall increase; however, when transportation orders are extracted orders were slightly less than expected at +0.8% against 1.0% expected (removing trains, planes and automobiles)  is the more significant aspect of the report. The jump in orders is the largest month-to-month increase since July 2007. Inventories fell 0.8%. Looks good on the surface but it is a volatile series subject to huge revisions. The more significant question hanging over orders is whether those orders will trickle down to finished goods being purchased. There was no market reaction to the report in either the rate markets or trading in stock indexes.

At 8:30 the 10 yr note and mortgages were unchanged; at 9:00 the 10 yr +1/32 and mortgages +2/32, the DJIA was down 12 points. At 9:30 the DJIA opened -30, the 10 yr +2/32 and mortgage prices at 9:30 +1/32 frm yesterday’s close. (see below for 10:10 price levels)

Next up were July new home sales; expected to increase 1.5%, as reported sales jumped 9.6% to 433K against 390K expected. June sales were revised higher also, frm 384K units to 395K units (annualized). The increase is the largest month/month since Feb 2005. There is a 7.5 month supply against an 8.5 month supply in June. The median sales price $210,100.00. The reaction is what we would expect; the DJIA was off 50 points it flipped to +10 points; the 10 yr note and mortgages gave up their earlier gains back to unchanged.

At 1:00 this afternoon Treasury will offer up $39B of 5 yr notes on the second of the three legged auction week. Yesterday’s 2 yr went OK in terms of bidding and demand but the rate it went for was higher than where it traded in the morning yesterday in the when-issued market.

Can China pull the global economies out of the recession? Not on its own, it will take the US consumer to return to spending and that isn’t likely looking out the next year. US consumers account for 17% of all global spending. Not only US consumers, consumers around the world are not likely to return to spending sprees that drove global economies to record levels before the US sold junk sub prime mortgages to the world; crashed the world’s financial systems, and revealed the greed that dominated financial markets.

“Your Partner In Success!”

Tony Frerking

Sr. Mortgage Consultant

PMZ Home Loans

1600 N. Carpenter Rd Ste. A-1

Modesto CA 95351

Methods of contact:

Direct: (209) 404-2200

Fax: (888) 345-2768

Contact Via Skype / Skype name = aplynow

Treasuries and mortgage markets opened weaker this morning after the selling on Friday that pushed interest rates up 13 basis points. No economic releases today but the rest of the week does have data to chew over. The main focus this week for treasury and mortgage markets is Treasury auctioning $109B of notes (2 yr, 5 yr, and 7 yr). Supply from Treasury generally keeps interest rates under pressure. Not only supply, but the stock market is playing against treasuries and mortgages as it continues to defy traders, technicals and fundamentals as it resists any sustained selling. Traders are being ripped up daily trying to short equity markets, with the high majority of market participants (including the most bullish) expecting a big retracement. It just won’t happen as long as that is what is widely anticipated.

At 8:30 this morning the 10 yr note was off 10/32, mortgages were down 7/32. At 9:00 the 10 -8/32, mortgages off 5/32 and the stock indexes were aiming for a better open at 9:30, ( the DJIA +40) after a run of 156 points on Friday. Expect more volatility today as trading volumes remain very thin. With no data to think about the rate markets will move with equity market trading. Tomorrow Treasury will start the borrowing with $42B of 2 yr notes. Over the past two months Treasury has had little trouble selling new notes, demand from indirect bidders continues to be strong.

“Your Partner In Success!”

Tony Frerking

Sr. Mortgage Consultant

PMZ Home Loans

1600 N. Carpenter Rd Ste. A-1

Modesto CA 95351

Methods of contact:

Direct: (209) 404-2200

Fax: (888) 345-2768

Contact Via Skype / Skype name = aplynow