Shelter Six:  Dodd-Frank Changes to be Proposed

1. The chairman of the House Financial Services Committee says he’ll unveil a new draft of a bill to overhaul the Dodd-Frank Act by the end of the month.

2. The revised bill is expected to drastically slash the authority of the CFPB placing it more under White House control while eliminating a single director in favor of a commission.

3. The first round of the French Presidential election took place over the weekend with two finalists now headed for a May 7th runoff.

4.  The French election is significant because France is a key member of the European Union (EU) and it is uncertain what a France exit from the EU would mean to the global economy.

5. The first round leader, Emmanuel Macron, supports France sticking with the EU, which is good for political stability but bad for U.S. mortgage rates, which most likely would go up as investors shift back to riskier assets.

6. Friday’s housing market data was encouraging as March Existing Home Sales rose 4% to the highest level since February 2007.  The median price was also 7% higher than a year ago and properties stayed on the market for only 34 days, down from 45 days in February.

Rate Update

Last week was a volatile one for mortgage rates ahead of yesterday’s French election.  The daily movements were offsetting, however, and mortgage rates ended the week with little change, remaining near the best levels of the year.

This Week

New Home Sales will be released on Tuesday, Durable Orders and Pending Home Sales on Thursday, and the first reading for 1st Quarter GDP on Friday.

April 24, 2017 by · Leave a Comment

Shelter Six:  Trump Comments Point to Lower Rates

1. Last week, President Trump said that the U.S. dollar is “getting too strong” and that he likes “a low-interest rate policy.”  Since Trump appoints the Fed Chair, his support for looser monetary policy caused mortgage rates to decline.

2. The first round of the French election is April 23 with the second round two weeks later.  The current leader in the polls favors a French exit from the European Union, which could lead to further major changes in Europe.

3. The First Quarter of 2017 is history and the news for Metro Atlanta Real Estate is good with closings up 4.3% and Pending Sales up 6.8% over the first three months of last year.

4. The Metro Atlanta March Average Sales Price is up to $290,000, 6.6% higher than last year and on a record-breaking pace.

5. Metro Atlanta March Inventory is up 5% from February but still down 4.6% from last year as the overall months of supply is down to only 2.9 months (six months considered normal).

6. Despite global uncertainties around the world, the University of Michigan Consumer Sentiment Index actually moved slightly higher sustaining post-election levels.

Rate Update

Comments from President Trump, concerns about the election in France, and the conflicts in Syria and North Korea all contributed to investors seeking the safety of the U.S. bond market, which has led to lower rates approaching the best levels of the year.

This Week

The NAHB Housing Confidence Index will be released on Monday, Housing Starts and Industrial Production on Tuesday, and Existing Home Sales on Friday.  Geopolitical events could continue to influence U.S. markets as well.

April 17, 2017 by · Leave a Comment

Shelter Six:  Automated Underwriting to be Made Available for Those without Traditional Credit

1. Starting in June, Freddie Mac is going to allow automated underwriting for borrowers who lack credit scores but have non-traditional sources of credit.

2. The key will be borrowers being able to document timely housing payments over the previous year.

3. Freddie Mac currently allows lenders to “manually” underwrite loans for borrowers without credit scores, but automation stands to streamline the process and make it more mainstream.

4. A National Association of Realtors study found that 87% of non-homeowners think they need at least a 10% down payment to buy a home.  Realtors and lenders must work together to change this thinking.

5. Friday’s key Employment Report showed that the economy added just 98,000 jobs in March, well below the consensus forecast of 180,000 jobs.

6. Incredibly warm weather likely boosted the number of jobs in February, while a severe storm seems to have slowed hiring in March.

Rate Update

Mortgage rates fell last week to near the best levels of the year as Thursday’s U.S. missile strike in Syria caused investors to shift money to the safer U.S. bond market.  The weaker Employment Report and comments from House Speaker Paul Ryan that tax reform will take longer to accomplish also contributed.

This Week

Investors will continue to keep a close eye on events in Syria.  The JOLTS Report is due out on Tuesday, the Producer Price Index (PPI) on Thursday, and both Retail Sales and the Consumer Price Index (CPI) on Friday, a day that the financial markets will be closed for Good Friday.

April 10, 2017 by · Leave a Comment

Shelter Six: Special Report on Student Loan Payments

1. Over the past  year, there have been lots of changes with how student loan payments affect a borrower’s qualification.  Below is a quick overview for each of the major types of loans available today.

2. Freddie Mac (Conforming) uses the actual student loan payment documented from either the credit report or the student loan company, unless it is unknown, and then 1% of the outstanding balance is used.

3. Fannie Mae (Conforming) uses the greater of the actual documented payment or 1% of the balance; however, if the actual payment is less than 1%, then it can be used with proof that the loan is fully-amortizing.

4. FHA previously did not require student loan payments to be counted at all if the loan was deferred for at least a year, but now FHA uses the greater of 1% of the balance or the monthly payment shown on the credit report with proof the loan is fully-amortizing.

5. VA remains the most friendly as payments do not have to be counted if the loan is deferred at least 12 months beyond the closing date.  Otherwise, the payment has to be calculated using a more complex calculation that is more or less the higher of the payment on the credit report or 5% of the outstanding balance (divided by 12).

6. USDA uses the greater of the monthly payment shown on the credit report or 1% of the balance.

Rate Update

There were two main influences on mortgage rates last week.  The canceled health care bill vote was positive for mortgage rates, while an impressive rise in consumer confidence was negative.  The net effect is mortgage rates staying mostly flat with little change.

This Week

The ISM National Manufacturing Index and Construction Spending will be released on Monday, the ADP Employment Change and the ISM National Services Index on Wednesday, and Employment figures on Friday.

April 3, 2017 by · Leave a Comment

Shelter Six:  Political Policy Concerns Lead to Lower Rates

1. The health care bill not getting passed as expected last week has investors concerned about whether Trump “pro-growth” policy changes, such as tax cuts, deregulation, and infrastructure spending, will stall out as well.

2. The strong recent economic outlook has led to a surge in the stock market, bond yields, and mortgage rates.  If the outlook weakens, expect stocks to as well, and mortgage rates to potentially fall back.

3. February ‘Existing Home Sales’ fell off from January’s strong pace but, according to NAR, this was mostly due to a shortage of inventory.  February ‘New Home Sales’ rose to the highest level in months.

4. Buyer demand remains very strong.  Nationally, ‘Days on the Market’ dropped to only 45 days in February, down from 59 days last February.

5. According to the Mortgage Bankers’ Association, the Adjustable Rate Mortgage (ARM) share of mortgage applications has increased to 7.2% of all applications, led by the 7/1 ARM with the 5/1 and 10/1 ARM’s close behind.

6. Historically, the ARM share has increased when rates rise as home buyers tend to look for ways to extend their purchasing power, and ARM’s are one way of doing that.


Rate Update

Increased concerns over President Trump’s ability to deliver pro-growth policy changes as quickly as expected was favorable for mortgage rates, which ended the week slightly lower.

This Week

Pending Home Sales will be released on Wednesday while both the Core PCE Price Index and Personal Income will roll out on Friday.  There will also be Fed speakers each day this week as well.

March 27, 2017 by · Leave a Comment

Shelter Six:  The Fed Increases Short-Term Rates as Expected

1. As expected, the Federal Reserve raised the Federal Funds Rate by .25% last week.  Fed Chair Janet Yellen said that “the simple message is the economy’s doing well.”

2. Another big factor influencing the Fed is that inflation is “moving close” to the Fed’s target level of 2% after falling short for years.

3. February single-family housing starts and building permits both rose to the highest levels since 2007.  In addition, the March National Association of Home Builders Housing Index showed that home builder confidence jumped to the highest level in over a decade.

4. Per the Consumer Data Industry Association, starting this summer the three major credit-reporting firms will stop collecting and reporting many tax liens and civil judgments, thereby omitting negative information from their reports.

5. This is mainly a response to regulatory concerns and a solution to the sloppy credit reporting that has plagued the industry for years.

6. The removal of this derogatory information will boost credit scores and make more people eligible for loans, but the reduced information will make it more difficult for lenders to measure borrowers’ default risks.

Rate Update

Over the last few weeks, mortgage rates have pushed higher in anticipation that the Fed would announce a plan that short-term rates would go up more quickly in 2017.  Rates stabilized and dropped slightly last week when these fears were not realized.

This Week

Economic reports released this week include Existing Home Sales on Wednesday, New Home Sales on Thursday, and Durable Orders on Friday.

March 20, 2017 by · Leave a Comment

Shelter Six: Consumer Housing Confidence Reaches All-Time High

1. Consumer confidence in housing has reached an all-time high, according to new data from Fannie Mae.

2. The Fannie Mae Home Purchase Sentiment Index (HSPI) spiked last month to the highest level since Fannie Mae started keeping records.  Five of the index’s six components were up, with three hitting all-time highs.

3. The net share of Americans who believe that now is a good time to buy a home spiked 11%, the share who believe it’s a good time to sell rose 7%, and the share of Americans who report a significant increase in their household income rose by 4%.

4. The Bureau of Labor Statistics reported on Friday that the economy added 235K jobs in February, well above the consensus forecast of 190K jobs.

5. With the recent string of strong economic data, investors are now nearly certain that the Federal Reserve will raise the Fed Funds rate at its March 15 meeting.

6. Investors have also significantly raised their outlook for the pace of rate hikes in 2017.  In addition, Europe’s economy is strengthening and there seems to be less of an urgency to provide new stimulus measures.


Rate Update

Stronger than expected U.S. labor market data was negative for mortgage rates last week.  Increased expectations for tighter monetary policy from the central banks in the U.S. and Europe also were unfavorable.  As a result, mortgage rates ended the week higher.

This Week

Retail Sales and the Consumer Price Index (CPI) are both due out on Wednesday morning.  The results of the latest Federal Reserve meeting are due out on Wednesday afternoon.  The Fed is widely expected to hike rates, so investors will be focused on hints about the pace of future tightening.  Housing Starts will be released on Thursday and Industrial Production on Friday.

March 13, 2017 by · Leave a Comment

Shelter Six: Strong Economic Data Points to Higher Rates

1. Economic data continues to surpass expectations.  Last week the ISM National Manufacturing Index surged to the highest level since August 2014 while the ISM National Services Index rose to the highest level since April 2015.

2. In the meantime, the stock market has really taken off.  Eight years ago this week, the Dow Jones Industrial Average hit the bottom point of 6547.  Friday it closed at 21,005!

3. Since the election, consumers and businesses are clearly more optimistic about the economic outlook.  February’s Consumer Confidence increased to the highest level since 2001.

4. Even the Federal Reserve is more optimistic.  Comments from Fed members last week painted a stronger economic picture and, as a result, investors have now placed a 75% chance of a Fed rate hike on March 15, up from 25% just a week ago.

5. The news is good and encouraging but stronger economic activity raises future inflationary pressure, which is always bad for mortgage rates.

6. Also, as the Fed raises short-term rates they will also reduce their holdings of mortgage-backed securities (MBS), which most likely will influence rates even higher.


Rate Update:

Stronger than expected economic data combined with a projected Fed rate hike next week pushed mortgage rates higher last week.

This Week:

There is an important European Central Bank (ECB) meeting on Thursday. No policy changes are expected, but guidance about the outlook for future policy could influence U.S. markets. The big economic release will be Friday’s Employment Report.

March 6, 2017 by · Leave a Comment

Shelter Six: Home Sales Remain Hot Despite Lower Inventory

1. January Existing Home Sales were hot and rose to the highest level since February 2007!

2. Sales would have been even stronger if inventory levels had been higher.  The total inventory of existing homes for sale remains near record low levels with just a 3.6-month supply.

3. There is a lot of market uncertainty about the outcome of upcoming elections in several European countries.  Investors are very focused on the presidential election in France, which will take place on April 23 and polls show a close race between Marine Le Pen and Emmanuel Macron.

4. Le Pen’s campaign has been centered on plans for France to leave the European Union (EU) and to stop using the Euro currency, while the centrist Macron has run on a more traditional platform.  It is not clear what would happen to the EU if France decided to exit.  Expect rates to drop if Le Pen wins and vice versa if Macron does.

5. The Fed was a source of volatility last week but rates stabilized when Fed Meeting minutes made little mention of a plan to reduce Fed holdings of Mortgage-Backed Securities.

6. We now have a 90% Jumbo loan (> $424,100) that does not require PMI!  Loan amounts go up to $1.5M, with credit scores starting at 720.

Rate Update

It was another volatile week for mortgage rates.  Uncertainty about the outcome of the elections in Europe influenced rates lower while the Fed minutes and economic data had little net effect.  As a result, mortgage rates ended the week lower.

This Week

Pending Home Sales and Durable Orders are due out on Monday, the Core PCE Price Index and the ISM National Manufacturing Index on Wednesday, and the ISM National Services Index on Friday.  Fed Chair Yellen is also scheduled to speak on Friday as well.  The next Employment Report will come out on March 10 (due to February being a shorter month).

February 27, 2017 by · Leave a Comment

Shelter Six: Strong Economic Data Puts Upward Pressure on Rates

1. Strong economic data dominated the news last week as the economy appears to be hitting on all cylinders early in the year.

2. Retail Sales in January were much higher than expected. This is important as consumer spending accounts for about 70% of economic output.

3. January Housing also surpassed expectations as did two regional manufacturing indexes, which not only beat estimates by a wide margin but one reached the highest level since 1984.

4. Federal Reserve Chair Janet Yellen also last week delivered a very optimistic outlook in her semi-annual testimony to Congress.

5. Yellen said that the Fed expects that strong economic progress will lead to increases in short-term rates in the near future.

6. She also said that the Fed will soon begin reducing the Fed’s portfolio of mortgage-backed securities (MBS). Although the process will be gradual, rates will rise most likely rise as this happens.
Rate Update
The stronger than expected economic data, the optimistic comments from the Fed, and the stock market rally all contributed to rates pushing slightly higher last week. Rates did settle back down toward the end of the week and, surprisingly, didn’t go up more than they did.

This Week
The minutes from the February 1st Fed meeting will come out on Wednesday. These minutes provide additional insight into the debate between Fed officials and have the potential to significantly move markets. Existing Home Sales will be released on Wednesday and New Home Sales on Friday.

February 20, 2017 by · Leave a Comment

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