Market Updates 11/16/2011

Prior to 8:30 this morning the 10-Year Note quieted but down 4/32 to 2.05%, mortgages down 4/32 (.12 bp). At 8:30 October CPI was -0.1% against forecasts of unch; the core (ex food and energy) +0.1% in line with estimates. Year-to-year overall CPI +3.5%, ex food and energy +2/1%. The slightly better inflation report turned the 10 to +6/32 to 2.03% -1 bp on the day, and mortgage prices up 1/32 (.03 bp). Early trade in stock indexes were weaker, the DJIA down 88 points. U.S. index futures and the euro fell after the Bank of England said failure to resolve Europe’s debt crisis may have “significant adverse effects” on the economy.

Europe continues to dictate to markets; about any sneeze from anyone in the region has some kind of reaction in global markets. Italian Prime Minister-designate Mario Monti will announce his new government today.  Two days of consultations with parties, unions and employers left him “convinced” that Italy can overcome the crisis, he said yesterday. Italian bonds gained for the first day in three, with the 10-year yield falling 15 basis points to 6.92%. Italy’s deficit, at 4.6 percent of gross domestic product last year, is about the same as Germany’s, lower than that of France and less than half the U.K.’s, at 10.3 percent. Still, its debt load is bigger than that of Spain, Greece, Ireland and Portugal combined. German Chancellor Angela Merkel said Germany is prepared to cede some national sovereignty to the European Union to achieve closer economic and political ties.

Treasuries are on hold the last couple of weeks with little change in interest rates; the 10-Year Note is between 2.10% and 2.00% while mortgage prices equally flat. News out of Europe at the moment is generally constructive, at least no more shocks in the last few days. Still have a safe haven trade in U.S. treasuries however, there is really no end in sight for Europe’s debt problems. French banks troubled, Germans resisting additional support although Merkel sounded somewhat conciliatory but we have heard plenty of that over the last year.

 

October Industrial Production at 9:15 was better than estimates, up 0.7% with estimates at +0.4%, however September production was revised to -0.1% frm +0.2%. October factory usage increased to 77.8% from 77.3%; September also better than expected. There was little reaction to the better data in stock and bond markets. Europe still trading with weaker markets, U.S. is like the faithful dog that never leaves the master’s side and these days Europe is the master and U.S. the faithful pup.

Crude oil this morning breached $100.00/barrel; at 9:15 $100.91 +$1.54 (see below for 9:50 level). Gold prices falling, down to $1760.00 -$22.00. 

At 9:30 the DJIA opened very weak, down 130; the 10 yr at 2.02% -2 bp and mortgage prices +5/32 (.15 bp) on 30s.

At 10:00, a few minutes ago the November NAHB housing market index, expected at 18 increased to 21 the highest in a very long time; October index revised from 18 to 17.

As long as the 10-Year Note fails to break 2.00% the opportunity for lower mortgage rates is absent. MBS markets have been flat for over two weeks, same as the 10-Year Note. Investors still hold somewhat of a bullish bias as a safe haven against the ever changing situation in Europe but for the last week or so there have been no additional shoes to drop. No shocks but no actual progress that is aimed at the banks in Europe that are in as bad if not worse shape than U.S. banks found themselves in 2008 when Lehman failed and the sub prime bubble exploded. U.S. banks were extremely leveraged just as Europe’s banks are now.

Market Updates 11/15/2011

Three economic reports at 8:30 this morning; October retail sales better than estimates, +0.5% overall and +0.6% ex auto sales, estimates were +0.4% and +0.2% respectively. November Empire State manufacturing index expected -0.8 frm -8.48 in Oct was +0.61; new orders component -2.07 frm +0.16, employment at -3.66 frm +3.77 and prices pd at 18.29 frm 22.47; any index lower than zero is considered contraction. The headline was better but the components didn’t look so good with employment and new orders weaker. Oct PPI expected -0.2% overall and ex food and energy +0.1%; as reported the overall was -0.3% and the core unch. Yr/yr overall PPI +5.9% while the core yr/yr +2.8%. At the wholesale level inflation is rather tame.

Prior to the 8:30 data the 10-YRAT Note once again traded down to 2.00%, once again it hasn’t held as 2.00% is a brick wall for long term rates. Although the 1 has moved under 2.00% it hasn’t been able to sustain it.mortgage prices prior to 8:30 up 7/32 (.22 bp), at 9:00 +5/32 (.15 bp).

In Europe the economy continued to muddle along. The EU’s gross domestic product increased 0.2% from the previous three months, when it rose at the same pace, according to EU data. The euro weakened as the cost of insuring French bonds climbed to a record and Spanish yields rose at an auction.  Mario Monti, Italy’s premier-in-waiting, faced political resistance on forming a Cabinet during talks in Rome yesterday. Monti wants a technocratic government without politicians, politicians in Italy refusing to go along.  French and Italian interestrates increased today. Germany and Britain exchanging words over Britain’s refusal to go along with a tax on financial transactions. 25% of Britain’s lawmakers are calling for a referendum vote to exit the EU. Germany has been at the forefront of calls for a European transaction tax, a levy Britain is only willing to countenance if the U.S. and Asian nations join in to prevent financial services from deserting London’s financial center. The European Commission has proposed a plan that it says would raise 57 billion euros ($77B) a year.

 

The DJIA opened -12 points at 9:30, the 10-Year Note +4/32 to 2.03% -1 bp and mortgage prices at 9:30 +3/32 (.09 bp).

At 10:00 September business inventories expected +0.1% were reported unchanged.

Chicago Fed Pres Evens out this morning advocating more easing from the Fed to lower the persistent high unemployment rate. Evens was the lone dissenter at the last FOMC meeting (11/2) when the FOMC decided to not announce anymore easing. Another Fed easing however won’t reduce unemployment; all the easing so far hasn’t done anything to lower unemployment.

We continue our concern that interest rates are running out of steam at the present levels. The 10 yr note hasn’t been able to move below 2.00% and hold it; recent turmoil in Europe that isn’t lessening but becoming worse hasn’t generated the kind of safe haven moves into treasuries the last few weeks. mortgage rates also finding resistance at present prices and yields. Although buying has slowed there isn’t much to suggest interestrates should increase either; the 10-Year Note is comfortable between 2.10% and 2.00% while mortgage ratesare stable at present rates. The equity market in the U.S. and the chaos in Europe are the issues; this morning so far a good example, the 10 yr was holding positive with a gain that had the yield at 2.00% when the stock indexes were weaker. At 9:45 the key indexes went positive and took mortgages and the 10 yr back to unchanged.

Mortgage Market Updates 11/14/2011

Treasuries and mortgage markets were closed last Friday for Veteran’s Day; the stock market and most other houses were open. The DJIA rallied 259 points, NASDAQ +54 and the S&P +24. Likely had the bond market traded, prices would have been lower. This morning the indexes prior to 9:30 were generally flat from Friday’s closes. U.S. interest rates are faltering at present levels; mortgage prices trading in a narrow range with the 10 yr note losing any momentum when it approaches 2.00%.

 

This week; still all about what comes from Europe as it continues to tilt at windmills unable financially to step up and cover the troubled countries that hang on the cliff of default. Italy made a positive step last week with Berlusconi agreeing to step down and a new leader in place (Monti), a financial guy, to form a technocratic government ( no politicians) to work out a budget that will save the country from defaulting. Italy is so big and carries more debt than the EU and ECB can handle. The bellwether 10-Year Note still is unable to break below 2.00% with any momentum (2.09% early Monday morning). mortgage prices and rates are stuck in a very tight range with very little change in rates for the last couple of weeks.

 

Italian bonds and stocks erased early gains and declined as Monti met with leaders of the country’s political parties to discuss Cabinet nominees. The yield on Italy’s benchmark 10-Year Bond rose 19 bps to 6.64% this morning.  The professor, as Monti is known, already faces resistance to appointing some politicians to his so-called technical Cabinet. Europe is a dead man walking when it comes to dealing with the debt crisis; even if the ECB wanted to pump funds to Italy, it doesn’t have enough to make a dent in the debt. Germany and France will not pony up anymore funds as their citizens resist the financial stress it would out on each country.The inability to contain a regional debt crisis that started in Greece more than two years ago led to a surge in Italian bond yields as investors bet on which nation may need aid next. Monti, an economist and former adviser to Goldman Sachs Group Inc., will try to reassure investors that Italy can cut a 1.9 trillion-euro ($2.6 trillion) debt load and spur economic growth that has lagged behind the euro-region average for more than a decade.

 

Italy’s bond sale today highlighted investor skepticism that euro area’s leaders will struggle to push through reforms needed to end the debt crisis. Italian bonds today fell for the first time in three days, after the government sold 3 billion euros ($4.1 billion) of 5-Year Notes, the maximum target, at the highest yield in more than 14 years. Rising yields highlighted the challenge facing the new government.

 

This week, no economic releases on Monday but we have a lot of key data through the rest of the week.Inflation reads, retail sales, reports on factory usage and output, housing starts and permits and the key Philly Fed business index. Economic releases recently have been secondary to the constant and confusing news that seeps out daily from Europe. This week leads into next week’s short week with Thanksgiving holiday taking 2 days out of play and likely thin volume as investors wind down. The rate markets are stumbling at present levels, the longer the 10-Year Note fails to break 2.00% the more tedious the outlook becomes.

 

This Week’s Economic Calendar:

 

11/15 @ 0830am: Oct PPI (-0.2%, ex food and energy +0.1%)

Oct retail sales (+0.4%; ex auto sales +0.2%)

Nov Empire State manufacturing index (-0.8 frm -8.48 in Oct)

                1000am: Sept business inventories (+0.2%)

11/16 @ 0700am: weekly MBA mortgage applications

                0830am: Oct CPI (0.0%, ex food and energy +0.1%)

                0915am: Oct industrial production (+0.4%)

Oct capacity utilization (77.6% frm 77.4% in Sept)

                1000am: NAHB Nov housing mkt index (18 unch)

11/17 @ 0830am: weekly jobless claims (+10K to 400K; con’t claims 3.648 mil frm 3.615 mil)

Oct housing starts and permits (starts -8.0%, permits +7.7%)

                1000am: Nov Philly Fed business index (6.8 frm 8.7)

11/18 @ 1000am: Leading economic indicators (Oct +0.6%)

 

There has been little movement in mortgage or 10 yr note rates for the last two weeks; regardless of the momentary and constantly conflicting news from Europe US long term rates are hitting key resistance levels (2.00%) on the 10 yr note and mortgage rates hanging in a 10 basis point yield range. The longer the rate markets find resistance at current levels the more concerned we are that rates may have found a bottom. Traders and those that seek safety against turmoil in Europe appear to resist buying when the bellwether 10 yr falls to 2.00%; although the rate has dipped below 2.00%, when it occurs it lasts no longer than a few hours before bouncing back.

Europe continues to control U.S. markets

Yesterday there was a passing thought that Italy’s debt problems would deal a serious blow to the country with its interest rates at record highs since the EU began. Yesterday another passing thought that the EU would eventually be restructured based on comments from French Pres Sarkozy that a two tier EU may be the best thing eventually. Yesterday the stock market dropped 389 points, the 10-Year Note yield fell 12 basis points to close under 2.00% at 1.96%. That was yesterday; like it has been the last few weeks, one day its doom and gloom, the next not as bad. No one actually knows what will happen tomorrow; therein lies the difficulty in attempting to assess the situation on a day to day basis.

Yesterday there were comments from supposed knowledgeable people that the ECB was precluded from buying bonds from individual EU countries; obviously that isn’t the case. We reported it as fact and one reason that the debt problems in the region were unlikely to be resolved for years and that there would be defaults in a number of countries. Overnight reports from the wires saying the ECB was in buying Italian bonds, so far no confirmation from the central bank.  Italy did sell bills today, the demand was strong and for the moment markets are less concerned that Italy can not fund itself. The country sold 5 billion euros ($6.8B) of one-year bills at an average yield of 6.087% after yields yesterday on 10-Year Notes surged past the 7 percent level.

In Greece there is apparently a new leader that will form an interim government;  former vice- president of the European Central Bank Lucas Papademos will head a national unity government for Greece, according to the country’s presidency.

At 8:30 this morning weekly jobless claims along with the every other day optimism about Europe driving stock indexes higher and interest rate prices lower. Weekly claims fell 10K to 390K the lowest claims in 7 months, expectations were for unchanged at 400K; continuing claims also fell, from 3.707 million to 3.615 million.

September U.S. trade balance declined to -$43.11B, if here is any consensus in the markets these days the forecast was for the balance to -$46.3B. October import prices fell 0.6% against estimates of -0.2%; export prices fell 2.1%.

At 1:00 this afternoon Treasury will complete borrowing $72B this week with $16B of 30-Year Bonds. The 10-Year Note auction yesterday was weaker than traders were expecting, sending rates higher on the reaction before regaining strength into the close with the 10-Year Note at 1.96%. This morning the 10-Year Note is hovering at 2.05%.

At 9:30 the DJIA opened +126, NASDAQ +30, and the S&P +13; the 10-Year Note 2.05% +9 bp and mortgageprices down 8/32 (.25 bp).

Attempting to trade on fundamentals these days is almost impossible with the constant changes happening in Europe. Looking solely at the technicals, the 10-Year Note presently is sitting right on its 40 day average at 2.05% with its 20 day average at 2.09%. 30-Year FNMA MBS today is trading below its 40 day and at the moment holding at its 20 day, similar to the 10-Year Note. The relative strength in both markets is hanging at neutral. The overall technical picture slightly positive but not by much. That the 10-Year Note this morning is back over 2.00% somewhat negates its close yesterday below 2.00%. With U.S. markets being completely dominated by what happens in Europe the outlook for U.S. interest rates in the end is impossible to anticipate. Bottom line; markets are adrift in a sea of uncertainty over Europe and the impact on the U.S. economy.

What Do Lower Conforming Loan Limits Mean To You?

If you’re in the market to buy a home, you know what I am talking about. If you’re in the market to buy a home and you don’t know what I’m talking about – keep reading! It is vital information!

On October 1, 2011, as part of POTUS’ attempt to repair the country’s housing finance system, Fannie Mae and Freddie Mac will be reducing the size of loans eligible for purchase by them, in other words – lowering the conforming loan limits. In high cost areas (like Los Angeles county) this means that they will only be purchasing loans no bigger than $625,000 (dropping it from $729,000).

What does this mean? Politically, it’s a move away from the government-reliant system we have in place today and a step closer to the privatization of the housing market. What does this mean for a homebuyer? Well, if you are looking to purchase a home with a loan in the $625,000 to $729,000 range – your loan will no longer be considered to be "conforming" and will now be "jumbo." Jumbo loans often have higher rates than conforming loans (which means you will pay more interest on this loan). The government is aiming to reduce the risk taken on by these government agencies, by reducing the amounts of the loans eligible for purchase. But for you potential homebuyers, (in this range) you’re potentially looking at bigger payments.

The next impact affecting homebuyers, is the impact on home prices. Although some argue that this reduction will drive up demand (thereby increasing prices) for buyers to buy before the limits drop, that effect will be very short-lived, and it does not take the stringent financing requirements that most lenders have in place today.

Another drawback for homebuyers is the related increase in costs and fees that the Federal Housing Administration will be charging homebuyers looking to use FHA financing (meaning that they want to buy a home with a 3.5% down-payment). It sounds like looking to limit the taxpayers’ risks is also going to cost the taxpayers lots more money.

Distressed Homeowners : You Must Read This!!!

Distressed Homeowners : You Must Read This!!!

This information is being brought to you directly from the California Attorney General’s Website:

SAN FRANCISCO --- Attorney General Kamala D. Harris today announced that the California Department of Justice, in conjunction with the State Bar of California, has sued multiple entities accused of fraudulently taking millions of dollars from thousands of homeowners who were led to believe they would receive relief on their mortgages.

Attorney General Harris sued Philip Kramer, the Law Offices of Kramer & Kaslow, two other law firms, three other lawyers, and 14 other defendants who are accused of working together to defraud homeowners across the country through the deceptive marketing of "mass joinder" lawsuits. "Mass joinder" lawsuits are lawsuits with hundreds, or more, individually named plaintiffs. This is the first consumer action by the Attorney General's Mortgage Fraud Strike Force.

Kramer's firm and other defendants were placed into receivership on Monday, Aug. 15. The legal actions were designed to shut down a scheme operated by attorneys and their marketing partners, in which defendants used false and misleading representations to induce thousands of homeowners into joining the mass joinder lawsuits against their mortgage lenders. Defendants also had their assets seized and were enjoined from continuing their operations. Nineteen DOJ special agents participated as the firms were taken over Wednesday, Aug. 17, along with 42 agents and other personnel from HUD's Office of Inspector General, the California State Bar, and the Office of Receiver Thomas McNamara at 14 locations in Los Angeles and Orange Counties. Sixteen bank accounts were seized.

"The defendants in this case fraudulently promised to win prompt mortgage relief for millions of vulnerable homeowners across the country," said Attorney General Harris. "Innocent people, already battered by the housing crisis, were targeted for fraud in their moment of distress."

"The number of lawyers who have tried to take advantage of distressed homeowners in these tough economic times is nothing short of shocking," said State Bar President William Hebert. "By taking over the practices of four attorneys accused of fraudulent marketing practices, the State Bar can put a stop to their deplorable conduct as part of our ongoing effort to protect the public."

It is believed that at least two million pieces of mail were sent out by defendants to victims in at least 17 states. Defendants' revenue from this scam is estimated to be in the millions of dollars.

As alleged in the lawsuit, defendants preyed on desperate homeowners facing foreclosure by selling them participation as plaintiffs in mass joinder lawsuits against mortgage lenders. Defendants deceptively led homeowners to believe that by joining these lawsuits, they would stop pending foreclosures, reduce their loan balances or interest rates, obtain money damages, and even receive title to their homes free and clear of their existing mortgage. Defendants charged homeowners retainer fees of up to $10,000 to join as plaintiffs to a mass joinder lawsuit against their lender or loan servicer.

Consumers who paid to join the mass joinder lawsuits were frequently unable to receive answers to simple questions, such as whether they had been added to the lawsuit, or even to establish contact with defendants. Some consumers lost their homes shortly after paying the retainer fees demanded by defendants.

This mass joinder scam began with deceptive mass mailers, the lawsuit alleges. Some mailers, designed to appear as official settlement notices or government documents, informed homeowners that they were potential plaintiffs in a "national litigation settlement" against their lender. No settlements existed and in many cases no lawsuit had even been filed. Defendants also advertised through their web sites.

When consumers contacted the defendants, they were given legal advice by sales agents, not attorneys, who made additional deceptive statements and provided (often inaccurate) legal advice about the supposedly "likely" results of joining the lawsuits. Defendants unlawfully paid commissions to their sales representatives on a per client sign-up basis, a practice known as "running and capping."

Defendants' alleged misconduct violates the following laws:

-False advertising, in violation of section 17500 of the Business and Professions Code

-Unfair, fraudulent and unlawful business practices, in violation of section 17200 of the Business and Professions Code

-Unlawful running and capping, in violation of section 6152, subdivision (a) of the Business and Professions Code (i.e., a lawyer unlawfully paying a non-lawyer to solicit or procure business)

-Improper fee splitting (defendants unlawfully splitting legal fees with non-attorneys)

-Failing to register with the Department of Justice as a telephonic seller.

Homeowners who have paid to be added to one of the lawsuits should contact the State Bar if they feel they may be victims of this scam. They can also contact a HUD-certified housing counselor for general mortgage related assistance.

The Department of Justice has seized the practices of the following non-attorney defendants:

Attorneys Processing Center, LLC; Data Management, LLC; Gary DiGirolamo; Bill Stephenson; Mitigation Professionals, LLC; Glen Reneau; Pate Marier & Associates, Inc.; James Pate; Ryan Marier; Home Retention Division; Michael Tapia; Lewis Marketing Corp.; Clarence Butt; and Thomas Phanco.

The State Bar has seized the practices and attorney accounts of the attorney defendants:

The Law Offices of Kramer & Kaslow; Philip Kramer, Esq; Mitchell J. Stein & Associates; Mitchell Stein, Esq.; Christopher Van Son, Esq.; Mesa Law Group Corp.; and Paul Petersen, Esq.

Attorney General Harris is challenging the defendants' alleged misconduct in marketing their mass joinder lawsuits; her office takes no position as to the legal merits of any claims asserted in the mass joinder lawsuits filed by defendants.

Victims in the following states are known to have received these mailers, or signed on to join the case. This is a preliminary list that may be updated:

Alaska, Arizona, California, Colorado, Connecticut, Florida, Hawaii, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Texas, Washington

The complaint, temporary restraining order, examples of marketing documents and photos of the enforcement action are available with the electronic version of this release at http://oag.ca.gov/news.

For more information, please visit:

http://oag.ca.gov/news/press_release?id=2552

Helpful Tips To Guide You In Buying Your First Home

Buying a home can be very exciting! It’s part of the "dream" we all have for ourselves, the marriage, the family, the pet, the white picket fence – all of these things are dependent on having a home. Having means owning, not renting; to those of us wishing to make the most of our hard-earned money. But making the most of your money is not always easy – it takes a little bit of savvy and a lot of consideration.

Consideration means research, research and some more research. You need to know the facts. Not just about the home you are buying, but also the city, community, history and future projections, to help you determine whether this investment is right for you. While buying a home is not permanent – it is long term and you need to make sure the home you select matches your long-term lifestyle choices.

Budgeting – this is key! You do not want to get yourself into a home you cannot comfortably afford, or you will end up working and never being home to enjoy it; or unfortunately even potentially risking losing it or other valuable items in your life.

•Get familiar with home buying terminology. Know the difference between the types of loans, insurance, interest rates and programs available to you.

•Figure out your budget. Work with your loan consultant to determine what you can actually afford to pay on a monthly basis. Remember, a mortgage payment is not just principal and interest, there are taxes and insurance that will need to be paid. Also, the community you select a home in may have a homeowner’s association that charges a monthly fee. These are all in addition to the increased utilities, maintenance and potentially security costs that go along with owning a home. Remember, there no "super" to call when that toilet gets clogged!

•Get rid of your old bills! You’ll have lots of new bills to replace those! Try to pay off all your existing credit card bills. The less debt you have, the better loan you will qualify for.

• Read your paper work. HUD has a handy booklet on its site called "Buying Your Home: Settlement Costs and Helpful Information." It describes the home buying and settlement process and explains most of the expenses you will encounter. Although your lender will give you a copy, it’s a good idea to read it before you even consider applying for a loan.

• Ask questions. Make sure your loan and real estate consultants are the kind of people who take the time to explain every single step of the process and answer each of your questions. They are there to serve YOU! Buying a home is a serious decision and the people helping you should appreciate the opportunity to serve you. The service you receive should be attentive, respectful and consistent!

 

For more information, please visit www.crestico.com.