Thanks for visiting The Mortgage Reports. To stay absolutely current on mortgage markets and important guideline changes, be sure to take my free daily email alerts.

The Witching Hour: In November, the 3:00 P.M. hour generated 26 percent of the total S&P 500 volume for the month; the last 30 minutes accounted for 17 percent.  Markets are closing out the day in spastic fashion and mortgage rate shoppers often pay the price.  When markets move towards stocks, rates rise.

The Future Of The U.S. Dollar: Each time the federal government issues new debt, the U.S. dollar loses some of its value.  For now, it's not a big deal -- global demand for the greenback is still high.  Once global economies improve, however, expect a rapid dollar devaluation which will dampen demand for mortgage bonds.  Rates will rise. 

More on the U.S. Dollar: Commodities such as oil, wheat, and copper are priced in U.S. Dollars.  If the dollar loses its value, it's reasonable that commodity prices will adjust northward.  This would create an inflationary cycle that will be very difficult to control as much for its psychological factors as its fundamental ones.

Why Delinquencies Happen: This "Why Homeowners Default" chart is more impactful now than it was at the time it was published.  According to Countrywide Home Loans, 60% of mortgage defaults are the result of job loss.  With unemployment numbers climbing, it's no surprise that delinquency rates are climbing, too.

Lending The Government Money For Free: Briefly, yields on U.S. treasuries went negative last week.  This highlights how frightened investors are about their holdings.  Traders would rather guarantee a small loss with "good" securities as opposed to holding money as cash.  This is the ultimate in Safe Haven Buying and, in the near-term, should help mortgage rates to improve.

Changing Rates: You've got less than 4 hours to shop for that mortgage rates, folks.  Make the most of it.

Americans Accept The Economy: Sometime in the past month, Americans stopped doubting the onset of recession.  Instead of "How much worse will it get?", the questions are now "When do you think it get better?"  This is a positive step because stock markets no longer sell-off with each piece of terrible, horrible, no good, very bad news.  Last week proves it.

The Power Of The Human Spirit: The University of Michigan reports that Consumer Sentiment rose last week, despite a litany of disgusting economic reports -- probably the worst to hit the U.S. in years.  Give credit to the incoming administration.  Americans are feeling hopeful and Hope can reverse a souring economy.

Foreclosures Can't Be A Bellweather Statistic For Housing Anymore: As states pass anti-foreclosure laws and lenders introduce foreclosure moratoriums, foreclosure statistics lose their usefulness to housing analysts.  Foreclosures fell 7 percent in November 2008, but that says little about rising delinquencies nationwide and the number of home loans willfully modified.

Was It Really A Crisis?  Option ARMs Adjusting Lower: Because the Option ARM adjusts according to the 1-year U.S. treasury note, those "exploding", "toxic" ARMs are actually adjusting lower lately.  There's still the looming danger of recast, but for now, at least, homeowners should feel good about their loan choice.

The (Nascent) Return Of Foreign National Mortgages: After a dearth of options for international investors, several funding sources for foreign national mortgages are emerging.  And, just in time, too -- there's loads of condominiums upon which to close, and a sinking dollar against which to leverage.

Inflation May Be Just Around The Bend: Government intervention reminds me of the old supersaturated Sodium Acetate experminent.  The economy is the beaker solution and, eventually, the government adding just one extra "seed" will start the process of nucleation into inflation.  Or, if science isn't your thing, think Mr. Creosote.

Mortgage Fraud Soars 45 Percent: According to an industry group, the number of fraudulent mortgage applications in Q2 2008 rose sharply from the year prior.  This is stupefying considering how much attention underwriters give to each new mortgage application.  If you engage in fraud, you will get caught -- mortgage fraud is a federal offense and the Feds are prosecuting with vigor.

The Future of Gas Prices: Gas prices are based on the price of oil, and oil is priced in U.S. dollars.  If the dollar loses its value, therefore, expect fill-up costs to spike at your neighborhood gas station.  Yes, I'm beating a dead horse with this dollar thing.

Refinance Now, Or Wait For Lower Rates? This one's easy -- refinance now and then refinance again, later.  The key is to use "no cost" refinancing.  Don't increase your loan balance and have your loan officer pay all of your closing charges.  This strategy limits your sunk costs and is a clear winner should rates fall again in the future.

The Fed Does Not Control Mortgage Rates: The Federal Open Market Committee adjourns tomorrow and is expected to cut  the Fed Funds Rate below 1.000 percent.  Historically, mortgage rates rise on FFR rate cuts because stimulus eventually overheats the economy. If you don't know the The Fool In The Shower theory, check it out.

What If You Lost Your Job Today? Random layoffs are happening everywhere and if you're not working, you can't close on a home loan. Just one more reason to refinance to today's low rates as soon as possible.  Remember, you can always refinance again, later.

Beware Of Vacations: Mortgage lenders -- like everyone else -- are short-staffed during the holidays.  If you lock a loan this week, meet your 30-day rate lock by being extra-responsive to your loan officer.  Return documents within a day, schedule your appraiser as soon as possible, and be on call for follow-ups.  Getting ahead of the schedule will protect your rate lock and save you money.  Remember -- it's the Chocolate Factory in there.

Twitter: If you're not following me on Twitter, you're only getting half the story.

Historically, mortgage markets are boring place for everyday Americans.  I know this because every day I write the blog. 

Over the past few weeks, however, it's been anything but boring.  There's been so much news that keeping up with it all has been a challenge.

To help you sort through what matters and what's trivial, I thought I'd just brain dump on you, Twitter-style. 

What follows is a handful of short-burst stories and commentary on today's market, linked out to interesting sites and sounds.

---

All you need is just a little patience: First, let's be clear about something -- credit markets aren't going to thaw overnight.  Like Jamie Moyer, the Treasury Plan will get better with age.  If you want instant results, try coffee.

The Float-or-Lock Dilemma: The toughest part about choosing to lock a mortgage rate is that to lock means to commit to a long-term plan whose success is highly dependent on what the mortgage market is doing this exact instant.  No wonder people get hamstrung about it.

Prime Rate : According to the Federal Reserve Bank of Cleveland, the Federal Open Market Committee is likely to cut the Fed Funds Rate at its Oct 28-29 meeting.  This will drop credit card and HELOC rates for Americans, but should cause mortgage rates to rise.  The Fed Funds Rate does not control mortgage rates.

The Treasury went zig, not zag: When the government announced its $250 billion plan to buy mortgage debt, rates dropped because markets expectated the government to create new demand for mortgage bonds.  When the government changed its mind, however, and bought banks instead, mortgage rates started to roll back and then some.  Rates are up a lot this week as a result.

Mortgage rates are volatile: I could spell it out for you or just take my word for it.  Either way, by the time you finish this sentence, lenders will have likely issued new rate sheets again.

I've seen 18 recessions and I've rocked them all:  In its history, the United States has entered into recession 18 separate times.  Earth has survived each of them. 

Bad news for real estate investors: Private mortgage insurance companies will no longer insure new investor mortgages over 80 percent loan-to-value.  This includes both lender-paid MI and borrower-paid MI features.  Given Fannie Mae's high fees, though, investors may want to put down 25 percent or more anyway.

Pleasant diversions: If portfolio performance has got your down, this 3-minute video should cheer you up.

Where to find Super Jumbo Mortgages: As Big Bank exit the super jumbo mortgage market, niche banks are stepping in to fill the void.  For holders of mortgages of $1 million mortgage or more, it means more product and at lower rates.  Today's super jumbo mortgage rates are actually lower than conforming mortgage rates for similar 5-year ARMs.  Wow.

Adaptive headlights for economists: If the economy was a long and winding road and the world was traveling by car, we'd see massive monetary supply inflation just around the next bend.  When we finally get there, mortgage rates are going to soar.

3:00 PM stock market rallies: The last 60 minutes of trading each day are like last call at a college bar -- everyone rushes to get their orders in.  The 3:00 PM hour has caused mortgage rates to move more than any other hour in the day by far since September.

Making up for losses: Private mortgage insurers recently raised insurance premiums on all new mortgages and borrowers.  The irony here is that today's borrower is likely to be exceedingly more qualified for a home loan than yesteryear's because of tighter mortgage guidelines.  In the eyes of the insurers, it's as if we're all driving little red corvettes now.

Home Equity is the new Full Documentation: Speaking of PMI, most private mortgage insurers eliminated coverage on non-owner occupied properties Thursday and will discontinue coverage on primary residence cash out refinances effective November 1.  Once again, what lenders will do is more important that the rate at which they'll do it.

Nobody knows nothing: In May 2008, analysts at Goldman Sachs predicted $200 oil.  Now, it predicts $50 oil.  That's some about-face.  In the end, folks, remember -- experts are paid to make guesses.

The dollar is on a tear: For non-resident aliens investing in U.S. real estate, don't forget that a strengthening U.S. dollar makes your downpayment relatively more expensive. If you have a pending purchase, consider moving earnest money into escrow as soon as possible.

How quickly fear turns to greed: In 1974, The stock market lost 27 percent of its value in its worst year since the Depression.  The next year, the Dow gained 38 percent in its second-best year since the Depression.  This pattern repeats itself throughout history. 

Desperate for deposits:  Shortly before its failure, Countrywide offered CD yields vastly higher than its competitors.  IndyMac did the same before its failure and Washington Mutual did, too.  See whose CD yields are highest today on Bankrate.com's High Yield Rates report.

Freddie Mac's stale mortgage data:  Each week, Freddie Mac surveys mortgage lenders and reports back the national "average mortgage rate".  That's fine, except that it takes Freddie 48 hours to compile and publish the report and rates change every 3.85 hours.  You want real-time rate quotes?  Talk to a loan officer, not a government group.

The 40-year cycle: We get these big market dips every 40 years or so -- 1929, 1973, 2008.  We've been through them before, we'll go through them again.  Long-term investing will always include short-term losses somewhere on the timeline.

Don't underestimate the American Shopper: Retail Sales were down dramatically in September, driving analysts to predict that holiday shopping will be weak and that the economy will move into recession.  I say no way.  Americans outspend themselves every year during the holidays and with huge retail discounts already in place, 2008 will be no different.

Four fingers pointing back at me:  Yes, I recognize that my Retail Sales prediction is a guess about the future, like the Goldman Sachs oil thing.  But, you may feel better about my predictions after knowing that I subscribe to the Bill and Ted philosophy on wisdom.  That's me, dude. 

Questioning behavioral economics:  And, on the subject of "sales", it's interesting to me how people will wait in line to buy discounted toys, clothing and cars but will run like the wind from discounted stocks and bonds.  Odd.

The obvious truth about mortgage rates:  Look, it doesn't matter how far mortgage rates fall if you can't get a mortgage approval.  Underwriting is tightening so if you know you need a new home loan soon, stop waiting to see if rates fall.  Just get it done.

Early expiration for the jumbo-conforming mortgage program:  It can take a mortgage lender 30 days to get loans off its books and sold to Fannie Mae.  So, without clear guidance on 2009 jumbo conforming loan limits, lenders are requiring jumbo conforming loans to fund no later than December 1, 2008.  That's 42 days from now.

Burning questions:  There are two great mysteries in life.  The first is "Why do people still believe that the 10-year treasury note is a proxy for mortgage rates?".  The second is best referenced by video.  I don't think we'll ever know the answer to either for sure.

How to keep your 30-day mortgage rate lock from expiring:  Mortgage refinance applications spiked last week which means that loads of new loans will soon enter the underwriting .  If you want to preserve your rate lock, put yourself in the front of the stack -- not the back.  Get your pending applications signed and supporting documents in, like, now.

Don't look now: But, mortgage rates have changed again.

Like a fine movie with endless details, mortgage markets were dense last week and in need of a second (and third) look.  Here's that extra look, in Brain Dump format.

Follow me: Come to Twitter and get my mortgage market updates, wriitten several times daily.  If you followed me, you'd know that rates jumped 0.125% this morning.

Pending Home Sales are up: The number of homes under contract increased in June. Some call it hope for housing but that's premature.  These are contracts, not closings.  To make the data count for something, the buyers have to be approved and that's getting tougher week by week.

Credit card holders (and their FICO scores) get pinched: File this story under "unintended consequences".  As credit card companies cut their borrower's credit lines, consumers get harmed.

The Godfather, Part II was a rarity: Not every sequel can be as good as the original.  That's why I'm not even trying.

Freddie Mac adds new mortgage fees: Like its cousin Fannie Mae, Freddie Mac upped its "adverse market delivery fee" to 0.500 percent Friday, and changed its risk-based pricing, too.  Freddie's fee update also includes heavy adjustments for investment units.

Beware rising CD yields: In a clear case of moral hazard, CD yields are inching up despite a general feeling that inflation is subsiding.  That's abnormal and may be proof that banks are shoring up their reserves at the expense of taxpayers the FDIC. 

Oh, and the CD Yield Trick is nothing new: Remember this story about Countrywide from a year ago? 

Bad news for homeowners with construction loans: Construction loans from when home values were rising are tough to pay off after home values have fallen.  No wonder local banks are left holding the paper. 

Mortgage brokers are the department stores of home finance: When Wachovia shut down its retail mortgage offices in 19 states, it reminded us that getting mortgages from a branch bank is like shopping at specialty stores -- it's one brand and limited products.  Brokers, by contrast, are like department stores -- all the brands and all the products.

Only Miss Cleo can predict the future:  Economists are much better at interpreting the past than predicting the future.  And they change their minds a lot.

Alt-A loans are going the way of sub-prime: Now that Fannie Mae is swearing off Alt-A mortgages, homeowners with large tax write-offs or oversize home loans will find that buying or remortgaging a home is considerably more expensive.  Alt-A home loans are expected to disappear prior to 2009.

Yes, even you will find it harder to get a loan:  It doesn't matter if you have impeccable credit, stand-out income and rock-solid assets.  The rules of lending have changed and you're going to have to make a larger downpayment than you expected.

July 15 is a milestone date: It's the last calendar date on which gas prices went higher.  Every day since July 15 -- all 27 of them -- gas prices have fallen.  This is good for mortgage rates and the economy.

This just in: Oil prices move higher on Russia's invasion of Georgia (UPDATE @1:45 PM ET : ... but then retreat.)

The Fed Funds Rate may remain on pause for a while: The Federal Reserve lowered the Fed Funds Rate to 2.000 to stimulate the economy.  It didn't expect gas prices to skyrocket, however, sparking inflation.  With gas prices falling, the Fed can afford to sit back on its heels a while longer.  This is good news for people with home equity credit lines.

Adjusted The Barenaked Ladies For Inflation -- If I Had $1,000,000,000: There's a lot of common-sense mortgages to be made in this market and nobody's invented a Prosper for home loans.  If you've got money and want to meet my clients, send me an email.

Foreign nationals should speed up the process: If you're a non-U.S. citizen and you're thinking of buying a home in the states, consider getting under contract as soon as possible.  It's better to leverage a weak dollar than a strong one.

Gold Medal commercials: The Olympics is every bit the commercial lovefest that the Super Bowl is, but with 100 times more class.

Beauty is in the eye of the beholder: One of the best parts of FHA is that underwriting is highly subjective.  When one underwriter says no, another underwriter says yes.  This is one more reason why FHA's portfolio should deteriorate in the coming years.

CNN Top 10 Alert spam: 8 million spam sent per hour.  I'm getting half of them.

(Image courtesy:  Wikipedia)

There's a scene in Awakenings when Dr. Sayer theorizes about Leonard's condition.  He wonders if the trance-like paralysis is the result of an extreme tremor:

If compulsions in the patient were somehow accelerated --- the hands, the shaking, the tics, the head bobbing, the quickening speech -- might they not cave in on themselves and, in effect, turn the person into stone?

And that's my blog post lead-in.

Over the past two weeks, I have had so much to say that I can't seem to say anything at all.  It's like a sink clogged with hair and I just need to push everything through with a pipe-clearning snake.  So, the plan is to just barf all over this Web page and dirty it with everything I've mentally eaten lately.

There's a lot of bullet points to read, a lot of links to follow, and if you're not careful, you might learn something before it's done.

Okay... I think I'm gonna hurl.

Read the rest of this entry »