Bad News in Greece is Good News for Mortgage Rates

May 21, 2012 by · Leave a Comment 

There continues to be a lot of economic focus onGreece.  Greek political leaders remain divided and have been unable to form a coalition government following recent elections.  There continues to be little support for the bailout package, which requires severe austerity measures, and it’s not clear what position a new government will take.  Statements from European Union (EU) officials suggest thatGreecemust comply with its austerity agreement to receive further aid.  Without aid,Greecelikely will be forced to leave the EU.  As a result, Fitch has again downgraded the debt ofGreece.

The turmoil in Greece has actually been positive for US mortgage rates.  The first reason why is that economic growth in the region has slowed, which reduces future inflationary pressures.  The second reason is that investors have responded to the uncertainty by shifting investments to relatively safer assets, including US mortgage-backed securities (MBS).  The economy of Greece is very small, but the increasing possibility that Greece will exit the EU calls into question the stability and the benefits of the monetary union, causing a wide range of problems outside of Greece.  Bond yields in other troubled European countries have risen, creating a further drag on economic growth.  People are beginning to withdraw their money from banks in these countries, increasing the risk of bank failures.  Europe‘s issues will not be resolved quickly and will continue to influence US markets for quite a while.

This is a busy week with Existing Home Sales to be released on Tuesday, New Home Sales on Wednesday, Durable Orders on Thursday, and Consumer Sentiment on Friday.  In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday and a G8 meeting over the weekend.  If the meeting results in an unexpected coordinated policy action to support Europe, it could impact US markets as well.  Mortgage markets will close early on Friday in observance of Memorial Day.

FHA MIP Factors (as of Apr 2012)

May 21, 2012 by · Leave a Comment 

FHA mortgage insurance is better known as “MIP”, which stands for “Mortgage Insurance Premium.”  MIP is collected two ways, up-front and per month.  Effective April 1, 2012, FHA has increased the up-front MIP by .75% and the monthly MIP by .1%.  The monthly MIP is calculated by multiplying the factor times the loan amount and then dividing by 12.  As of April 1, 2012, the new FHA MIP factors are as follows:

Up-Front MIP for all loans =                                                1.75%

30 Year Monthly Factor with min 3.5% down =          1.25%

30 Year Monthly Factor with 5% or more down =     1.20%

15 Year Monthly Factor with min 3.5% down =           .60%

15 Year Monthly Factor with 5% or more down =      .35%

15 Year Monthly Factor with 22% or more down =     0%