Danny Salas

FHA MI Premium Increasing

1.75% Financed Premuim Is Going Away

Per HUD Mortgagee Letter 2010-02, the upfront mortgage insurance premium for FHA loans will increase to 2.25% on all loans for which the case number is assigned on or after April 5, 2010.

FHA Increasing Mortgage Insurance Costs

HUGE FHA Announcement

The Federal Housing Administration (FHA) has announced that they are close to meeting their maximum capital ratios.  Since there are no other real alternatives to Fannie Mae and Freddie Mac financing options, other than FHA loans, they now contribute to approximately thirty percent of the market share of new loans.  Therefore, FHA has announced that they will be increasing their mortgage insurance requirements.  Currently, the Mortgage Insurance Premium (financed into the loan amount) is 1.75% of the loan amount.  This will increase to 2.25%.  Also, the currently monthly Mortgage Insurance calculation is 0.55% of the loan amount, divided by 12 months.  This fee will increase, as well, however, that factor is being negotiated.  Also, any borrower, with an FICO score less than 580, will have to put 10% down.

More to Come…

Chico, CA Interest Rates Market Report – Economic Influences – January 20, 2010

Who Will Win...Bears or Bulls?

Push Me-Pull You

Remember the Push Me-Pull You in Dr. Dolittle?  I’d imagine that it struggled with what direction to take.  That’s what’s happening with interest rates, right now.  We are moving back and forth above and below the 200-Day Moving Average. Yesterday, we managed to climb above this very important level, to only end the day below it.  Remember, when bond values move down, yields, and therefore rates, move up.  Today, we’ve managed to climb above this trend line, but it will be interesting to see where we end up.  It we can muster enough strength to stay above this line, it could set the state for lower rates, over the next couple of weeks.

CPI Helps Rates

The Core Producer Price Index (PPI) came in at expectations at a reading of 0.0%.  The PPI came in at 0.2%, a little hotter than expected.  This would generally move rates slightly higher, however, since the readings were far below November’s readings of 1.8%, the bond traders took this news quite kindly.

Housing Starts / Permits

Housing starts came in at 557,000.  For the year, housing starts dropped 38.8%, however, the future signs look promising, as new housing permits came in a 653,000 and were only expected to come in at 580,000.  This is the highest New Housing Permits number since October of 2008.

HUGE FHA Announcement

The Federal Housing Administration (FHA) has announced that they are close to meeting their maximum capital ratios.  Since there are no other real alternatives to Fannie Mae and Freddie Mac financing options, other than FHA loans, they now contribute to approximately thirty percent of the market share of new loans.  Therefore, FHA has announced that they will be increasing their mortgage insurance requirements.  Currently, the Mortgage Insurance Premium (financed into the loan amount) is 1.75% of the loan amount.  This will increase to 2.25%.  Also, the currently monthly Mortgage Insurance calculation is 0.55% of the loan amount, divided by 12 months.  This fee will increase, as well, however, that factor is being negotiated.  Also, any borrower, with an FICO score less than 580, will have to put 10% down.

Locking Advice

Today, we ride it out!  There’s food at both sides of the Push Me-Pull You, so let’s play it out, to see which side wins!  It could be a nice opportunity.  If the “bear” side starts to win, and rates start to move under the 200-Day Moving Average.  It might be a nice opportunity to lock in…

Related Must Reads

Moving Averages and Trend Lines…Why They’re Important
How FHA Loans Work

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Chico, CA Interest Rates Market Report – Economic Influences – November 10, 2009

We Bounced Right Off The 25-Day Moving Average

President Obama Signs Extension of Loan Limits

Conforming loan limits, as well as FHA loan limits, will remain at their higher levels through 2010.  This will help keep some liquidity in the markets as Fannie Mae and Freddie Mac may still purchase loans with amounts up to $417,000 in most areas of the United States.  Other “high cost” areas will allow the Guaranteed Security Enterprises to purchase loans with amounts up to $725, 750.00.  And FHA loan limits will remain at $400,000 in Butte County.

$40 Billion 3-Year Treasury Note Auction

Wow…$40 Billion!  The Auction fared quite well, actually.  It helped keep rates really low.  My concern would be with the longer termed Treasuries and the riskier investment those can pose.  It will be interesting to see how the rest of the Auction throughout the week will fare.  Foreign participation has been fairly respectable.  It’s understood that the more the foreign market participates, the stronger the dollar will remain.  The stronger the dollar, the more we can purchase foreigners’ exports.

Locking Advice

It’s a great time to lock.  We’ve seen Mortgage-Backed Securities touch the 25-Day Moving Average.  Actually, later this morning, we were above that level of resistance, however, we come back down and are sitting on it, as I write this blog.  If you don’t lock, and float into the week, you had better be prepared to lock, quickly.  I don’t see a lot of economic data that will push us up, over this 25-Day Moving Average level of resistance.

Related Must Reads

What Lead To Higher Conforming and FHA Loan Limits?
Why Be Leery of Yesterday’s Treasury Auction
How Levels of Resistance Effect Rates

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