MBA – refinances increase

Smart Real Estate News & Commentary by Chris McLaughlin August 25, 2010

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You asked for it. You get it: Part 2 of

“Demystifying Fraud in the Short Sale Fog.”

https://www2.gotomeeting.com/register/862050594

Chris McLaughlin, Florida attorney and short sale expert,

and Ron Ballard, best known as The California Short Sale

Lawyer, return to continue clearing the fog surrounding

issues of legality and fraud in short sales TODAY at

2 PM ET, 11 AM PT in a LIVE webinar.

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MBA – refinances increase

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 4.9% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 4.5% compared with the previous week.  The Refinance Index increased 5.7% from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 0.6% from one week earlier. The unadjusted Purchase Index decreased 1.1% compared with the previous week and was 38.8% lower than the same week one year ago.  “The volume of refi applications last week was up 26% over their level four weeks ago.  Mortgage rates dropped to their lowest level in the survey, going back to 1990, as incoming data continue to indicate that economic growth has slowed,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

“We are at a new 15 month high for the Refinance index.  With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing refi application activity.”  The four week moving average for the seasonally adjusted Market Index is up 5.0%.  The four week moving average is down 0.3% for the seasonally adjusted Purchase Index, while this average is up 6.2% for the Refinance Index.  The refinance share of mortgage activity increased to 82.4% of total applications from 81.4% the previous week, which is the highest share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 5.8% from 5.7% of total applications from the previous week.

10 year yield sets new low

The yield on the benchmark 10-year note was 2.49% at 4:30 p.m. yesterday in New York. That’s down from 2.6% late Monday and is the lowest level since the 10-year yield closed at 2.4% on January 20, 2009, according to data from the Federal Reserve.  The yield on the 2-year note dropped to 0.48%, holding near an all time-low, while the 5-year yield slid to 1.33%. The yield on the 30-year bond was 3.56%, down from 3.66%.  The flight to safety boosted demand for the $37 billion worth of 2-year notes that the government sold Tuesday, with investors submitting bids totaling $115 billion for the notes. 

The bid-to-cover ratio, a measure of demand, was a relatively strong 3.12. But the ratio was higher at the last 2-year sale in July, and has averaged 3.17 so far this year.  It was the first of three auctions this week totaling $102 billion in U.S. debt. On Wednesday, the U.S. will offer $36-billion in 5-year notes and will offer $29 billion in 7-year notes on Thursday.  Treasuries are widely considered one of the most secure assets available. As a result, prices often rise when investors are nervous about the economic outlook. Stocks, however, fell sharply after the housing report came out.

Low home sales could sink the recovery

With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the recovery.  Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Two months after the end of the tax credit, sales are 34% below April’s tax incentive-induced peak.  “Home sales were eye-wateringly weak in July,” said economist Paul Dales of Capital Economics. “It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse.” 

The sales pace of all homes — single-family homes, town homes, condominiums, and co-ops — is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.  Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.  The housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.  “Falling housing prices strain the overall confidence in the economy and discourage Americans from spending,” Dales said. “They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy.

Durable goods fall more than expected

The Commerce Department reports that new orders for long-lasting U.S. manufactured goods, excluding transportation equipment, posted their largest decline in 1.5 years in July, while overall booking rose far less than expected.  The report was the latest to indicate subdued U.S. economic growth and an increased risk of a slide back into recession, though most analysts still do not believe a double-dip recession is imminent.  The Commerce Department said durable goods orders excluding transportation dropped 3.8%—the biggest fall since January 2009—after rising 0.2% in June. Overall orders rose 0.3% following a revised 0.1% fall in June.  Analysts polled by Reuters had forecast orders increasing 2.8% last month from June’s previously reported 1.2% fall.

Orders excluding transportation had been forecast to increase 0.5% from a previously reported 0.9% fall.  Defense aircraft orders dropped 8.3 after rising 5.7% in June, while motor vehicle orders rose 5.3% after June’s 4.0% rise.  Orders outside transportation were depressed by weak bookings for machinery, electrical equipment and computers and related products and Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 8.0% last month after a 3.6% increase in June. Markets had expected a 0.4% rise last month.  Durable goods inventories rose 0.6% after increasing 1.3% in June. It was the seventh straight month of gains in inventories.  Shipments, which go into the calculation of gross domestic product, last month rose 2.2%, adding to June’s 0.2% gain.  Unfilled orders slipped 0.1% after rising for three straight months.

DsNews.com – 2/3s of mortgages untouched

According to a new report from state attorneys general and bank supervisors from across the country, more than 60% of homeowners with seriously delinquent loans are still not involved in any form of loss mitigation with their servicer.  The ratio is disconcerting considering the group also found that one of servicers’ primary loss mitigation options today, loan modifications, are resulting in significant payment reductions with fewer redefaults.  The State Foreclosure Prevention Working Group says loans modified in 2009 are 40 to 50% less likely to be seriously delinquent six months after modification than loans modified at the same time in 2008.  “This improvement in loan modification performance suggests that dire predictions of high redefault rates may not come true,” the group said in a paper released Tuesday. “This positive trend suggests that increased use of modifications resulting in significant payment reduction has succeeded in creating more sustainable loan modifications.” 

The consortium of state regulators and chief attorneys also found that recent modifications that significantly reduce  the principal balance of the loan have a lower rate of redefault compared to loan modifications overall, suggesting that servicers should strategically increase their use of principal reduction modifications to maximize prospects for success.  Principal writedowns, though, have been slow in finding their way into the mod equation. The group’s study shows that only one in five modifications reduce the loan principal, and in fact, some 70% actually increase the loan amount by adding servicing charges and late payments to the loan balance.

Credit card debt lowest in 8 years

The average combined debt for bank-issued credit cards — like those with a MasterCard or Visa logo — fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.  The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.  More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year.  That’s the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion’s financial services unit.

The rate fluctuates during the year, he said, but the improvement is more evidence that consumers are working to make sure their credit cards remain in good standing.  Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don’t make mortgage payments, he suggested, they have a short-term cash boost.  “That can provide extra money to pay down credit cards,” he said.  Besides paying down debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 percent from last year.

Now for our real estate education section…

Does Your Marketing Use a Microphone or Megaphone?

Let’s face it, if you are like most real estate agents or investors, chances are your Internet marketing efforts either resemble a microphone or a megaphone. Both get the word out, but one does it a lot more effectively than the other. Find out if your message is loud and clear with this quick quiz:

1.Hub versus business card. Is your website a one stop shop for everything related to real estate in the area or a glorified business card?

Tip: A glorified business card may be sufficient for some endeavors but real estate is all about relationships. Even if someone isn’t able or willing to do business today, they might be tomorrow. Even more importantly, they probably know someone else who is ready to wheel and deal. Make your online presence felt by providing the information and tools needed to establish a long term relationship; become a central hub for communication.

2. Look Who’s Talking. What you say isn’t as important as what others are saying about you!

Tip: Find out what your reach is with social media and other websites. What good does it do to have a website if people aren’t sharing information with others? Make it simple to share and take the time to monitor what is being said about you from time to time.

3. Check the Pulse. Does your website even have a pulse?

Tip: Many people have no idea where their website or blog ranks, how many visitors they have or even who bothers to visit. Sign-up for some basic tracking software that provides some insight into who is visiting, when and what they are reading…then provide some more of it to keep them coming back. Add an RSS or other feed to allow users to get automatically updates without having to repeatedly visit.

4. What’s Your Grade?

Tip: If you have no idea where you measure up, visit www.website.grader.com (free) and www.37signals.com to see important details about your site or find terrific tools that are simple to use and have already been evaluated by others. Remember, the actual number of visitors isn’t as important as the sharing of information and long term relationships built online.

Make it easy for prospective clients to find you by expanding your total reach through a combination of blogs subscribers, social media websites, links to your site and of course…city specific keyword content.

See you at the top!

Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
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