Weaker than expected Employment data and increased concerns about Europe helped mortgage rates this week, and they ended lower than where they were before the March Employment report.

While slower employment growth is painful for the country in nearly every way, this generally bad news is actually favorable for mortgage rates. Against a consensus forecast of 200K, the economy added just 120K jobs in March. The Unemployment Rate dropped to 8.2%, the lowest level since January 2009, but the decline was due to people leaving the labor force rather than finding jobs. Average Hourly Earnings, a proxy for wage growth, increased at a 2.1% annual rate. Lower than expected job gains combined with tame wage increases helped mortgage rates move lower following the data.

European economic data released this week caused investors to question whether weaker European countries will be able to successfully grow their economies while putting in place required austerity programs. Spain has become the primary cause for concern. With the fourth largest economy in Europe, economic troubles in Spain have the potential to spread across the region. Investors reacted by selling bonds in weaker countries and shifting funds to relatively safer assets, including US mortgage-backed securities (MBS). The trend reversed somewhat on Wednesday, however, when an ECB official suggested that the ECB may start purchasing the bonds of troubled nations again.

Retail Sales will be released on today. Retail Sales account for about 70% of economic activity. Housing Starts and Industrial Production will come out on Tuesday. Existing Home Sales will be released on Thursday. Philly Fed, Leading Indicators and Empire State Manufacturing will round out the schedule.

Copyright @ 2012 MBSQuoteline

Little Error, Big Impact
Most consumers understand that bankruptcy or foreclosure is going to tank their credit score and then negatively impact it for the next seven years, but there are plenty of other small mistakes a consumer can make that can turn a good score of 750 or higher into a mediocre 680.

Here are some of the more common mistakes to steer clear of, plus tips on how to avoid them in the future.

Opening Too Many Accounts at Once
Credit card sign-on bonuses are certainly enticing, but you shouldn’t be signing up for every card that’s offering some cash back. This is because each application and subsequent credit pull will generate a hard inquiry that will appear on your credit report. (Credit pulls that aren’t used to decide whether you are actually getting a loan – for instance, one conducted by a landlord or by a bank when you are looking to get a checking account – are considered soft inquiries and will have no impact on your score.)

Each hard credit card inquiry will cost your score between three and five points and stays on your report for two years, though they only negatively impact your score for about half the time they appear.

Missing One Payment
One missed payment may seem innocuous enough, but in reality a single delinquency can cost a previously stellar credit score to fall more than 100 points. The good news: As long as the missed payment doesn’t lead to additional woes, your score will start to rebound relatively quickly and it can get back to good standing in about 12 months following the delinquency.

(Those who already had poor to mediocre credit prior to the new missed payment will experience less of an initial ding, but their scores won’t bounce back until well past the 12-month mark.)

To avoid taking the big hit, consumers can try calling creditors to ask for a good will deletion. They are more apt to oblige if the late payment was truly atypical behavior.

Closing an Old Account
You should think twice before officially closing that credit card you opened back in college, especially if you’re getting ready to apply for a new line of credit. Closing an old account can have a negative impact on your credit score since it can lower your credit-to-debt utilization ratio, which is essentially how much credit you have at your disposal versus how much credit you are actually using.

According to FICO, it can also cost you points you might have been netting by having an ideal number of credit cards in your wallet.

The exact effect this has on your score will vary, depending on the rest of your credit profile, but the advice is consistent.

“If there is no annual fee, just charge something small every now and then,” says Adrian Nazari, CEO of Credit Sesame. This will keep the issuer from deciding to close the account for you.

Maxing Out a Single Credit Card
As MainStreet has previously reported, it’s never a good idea to bump up against your overall credit limit because your credit utilization ratio will appear sky-high. However, according to Chris Mettler, founder of CompareCards.com, maxing out a single card can negatively influence your credit score as well. (Again, the exact impact would depend on the rest of your credit profile.) As such, if you do have a particular card that’s bumping up against its limit, you’ll want to pay that down as soon as possible.

“You don’t want your balance due to be over 33% of the available credit line,” Mettler says.

Racking Up a Bill Right Before Your Statement Closes
Credit card issuers typically only report two things to credit bureaus each month: whether you’re up-to-date on all your payments and what your balance at the time is. As such, running up big purchases right before your statement closes – and the issuer reports the information – can negatively impact your credit-to-debt utilization ratio and subsequent score, regardless of whether you go on to pay off that balance on time or not.

“The trick is to make sure your balance is low before it is reported,” Nazari says. This is why it can be a good idea to pay off purchases as you make them or prior to the end date of your billing cycle.

Not Checking Your Credit Report
Even if you’re not particularly credit active, it’s a good idea to take advantage of the free annual credit report the Fair Credit Reporting Act entitles you to, if only to scour it for incorrectly attributed delinquencies, accounts or inaccurate balances, which can all do varying amounts of damage to your score. This is because errors on credit reports are all too common. As MainStreet has previously reported, about 30% to 40% of all credit reports have some type of error on them, some of which can unfortunately be difficult (and time-consuming) to remove.

Ignoring an Account That Has Gone Into Collections
You may think that you don’t owe that unpaid medical bill that keeps getting sent to your house, but your score is still in jeopardy if you decide not to pay it. Many places that don’t lend money, like a hospital or cable company, will send their unpaid bills to a collections agency after a certain amount of time and they will report you to the credit bureaus. Similar to a missed mortgage, credit card or auto loan payment, this delinquency can cost good scores 100 points or more.

“Whether you are right or wrong, [the bill] will negatively impact your score,” Mettler says. As such, consumers may want to shore up the bill in an effort to spare their score or dispute the bill through proper channels to get it eradicated.

 

shared from: http://www.mainstreet.com/slideshow/moneyinvesting/credit/debt/7-small-mistakes-will-hurt-your-credit-score

With little US economic news this week, investors focused most of their attention on Europe, where Greece is attempting to avoid a debt default. A lack of progress in Greece late in the week caused a minor flight to safety, and mortgage rates ended slightly lower than last week.

For most of the week, it appeared that Greek officials were on track to deliver a package of austerity measures required for Greece to receive additional aid. The negotiations took an unexpected step backward on Friday, however, as Greek political leaders agreed on an austerity package on Thursday, but European Union (EU) officials stated that Greece will not receive additional aid until the Greek Parliament passes the package. Given the resistance among the Greek people, this is not a sure thing, and it extends the uncertainty about whether Greece will be able to avoid a debt default. As a result, investors shifted to relatively safer assets, including US mortgage-backed securities (MBS), which helped mortgage rates and hurt stocks.

In a light week for US economic data, the Jobless Claims report stood out. Weekly Jobless Claims unexpectedly dropped to 358K. Following several years of readings consistently above 400K, weekly claims have been mostly under 400K over the last couple of months. In the past, readings in this range have been consistent with an improving labor market. In January, the Unemployment Rate dropped to the lowest level since February 2009, and the recent Jobless Claims reports provide additional evidence that the labor market is moving in the right direction.

The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Thursday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Friday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Retail Sales will be released on Tuesday. Retail Sales account for about 70% of economic activity. Industrial Production, another important indicator of economic growth, will come out on Wednesday, along with the detailed FOMC Minutes from the January 25 Fed meeting. Housing Starts will be released on Thursday. Import Prices, Philly Fed and Empire State will round out the schedule.

Copyright @ 2012 MBSQuoteline

Wednesday’s Fed announcement was very favorable for mortgage rates. This week’s mixed economic data, Treasury auctions, and news from Europe had little influence. As a result, mortgage rates ended the week lower.

The forecasts from Fed officials for the fed funds rate contained some major surprises for investors. Fed officials now expect that economic conditions will allow the fed funds rate to remain at exceptionally low levels until at least “late 2014″. Prior statements extended the expected time frame only to mid-2013. In addition, comments from Fed Chief Bernanke suggested that Fed officials would like to see stronger economic growth, and they are open to the possibility of additional Fed easing. Many investors think it is likely that the Fed will announce additional MBS purchases at a later meeting. The expectation for a low fed funds rate and the possibility of additional Fed purchases of mortgage-backed securities (MBS) increased demand for MBS, which resulted in higher MBS prices and lower mortgage rates.

Friday’s release of Gross Domestic Product (GDP) showed an increase at a 2.8% annual rate during the fourth quarter of 2011, which was a little below the consensus forecast, but up from 1.8% during the third quarter. Early estimates for the first quarter of this year are for a slower growth rate. The long-run average growth rate for the economy is generally considered to be around 3.0%, and the economy usually grows at a faster than average rate following a recession. Given that the economy is growing below its potential and that inflation remains tame, the Fed’s expectation that monetary policy will remain very stimulative for a long time is understandable.

The biggest economic report next week will be the important Employment data on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before the employment data, Core PCE inflation and Personal Income will be released on Monday. Chicago PMI Manufacturing and Consumer Confidence will come out on Tuesday. ISM Manufacturing, Construction Spending, and ADP Employment are scheduled for Wednesday. Productivity, Factory Orders, and ISM Services will round out a busy week.

Copyright @ 2012 MBSQuoteline

Head-shaking continues regarding economic stimulus and recovery, the agency plans, and g-fee increases. A while back Steve T. with Primary Residential in Utah wrote and noted, “Let’s say we both put $20 into a box. I sell you the box for $30. We both make $10. Repeat for infinite cash flow: economic problems solved. Last year ‘in a bid to stem taxpayer losses for bad loans guaranteed by federal housing agencies Fannie Mae and Freddy Mac, Senator Bob Corker (R-Tenn.) proposed that borrowers be required to make a 5% down payment in order to qualify. His proposal was rejected 57-42 on a party-line vote because, as Senator Chris Dodd (D-Conn) explained, passage of such a requirement would restrict home ownership to only those who can afford it.’ What are we missing here?”

And Lindsay Hill with Compass Analytics noted, “The congressionally-mandated g-fee increases, established in part to pay for extensions of the payroll tax cut and unemployment benefits, has created somewhat of a disconnect between MBS prices and lender rate sheet prices. It creates an interesting dynamic when the government is purchasing mortgage-backed securities to keep rates low and help fuel a recovery in housing, and yet the same government is increasing rates on the g-fee side, increases that will trickle directly down to the borrowers that are hoped will lead a housing recovery.”

The g-fee “shall be determined by the FHFA Director to reflect the risk of loss, as well the cost of capital allocated to similar assets held by other fully private regulated financial institutions, but such amount shall not be less than an average increase of 10 basis points for each origination year above the average fees imposed in 2011 for such guarantees. The GSEs will be prohibited from offsetting the cost of the fee to originators, borrowers and investors by decreasing other charges, fee, or premiums, in any other manner. The director of the FHFA will determine appropriate g-fee to reflect the risk of loss, as well the cost of capital allocated to similar assets held by other fully private regulated financial institutions. FHFA can allow the increase in the g-fee charged by the GSEs to be phased-in gradually over a 2-year period from the enactment of the bill. The increase should be such that it provides uniform pricing among lenders, and takes into consideration the risk levels and conditions in the financial market.”

Some Wall Street MBS analysts believe that it is likely that the g-fee needs to increase by another 15-45bp over the next two years (on top of the 10bp increase) if the FHFA changes g-fee level such that it reflects the risk of loss as well as the cost of capital allocated to similar assets by other fully private regulated financial institutions as required by H.R. 3630. The analysts note that conventional securities could be worth .375-.625 more because of g-fee increase’s impact on current production, and older securities could be worth 1.5-2.0 points more since it will be more expensive to refinance, so fewer will do it, meaning that the securities are on the books longer.

Either way, mortgage borrowers end up footing the bill for the Tax Cut Extension. Despite the April 1st implementation, the letter of the new law states that the average G-Fees in 2012 must be 10 basis points higher than those in 2011. The bottom line is that rates must move higher on average and if lenders aren’t building the fee increase into their rates now, they’ll have to do so to a greater extent in the future to meet the “on average” guideline set forth by Congress.

- Excerpt from Mortgage News Daily by Rob Chrisman on 1/19/12

Increased concerns about Europe helped mortgage rates improve this week, although the impact of the recently passed extension to the payroll tax reduction is beginning to push up mortgage rates for certain loans (discussed below).

The news from Europe was mostly negative this week. Economic growth in Germany was slower than expected. Negotiations on restructuring Greek debt did not progress as planned, increasing the risk of default. S&P is downgrading the debt of several European countries, including France. Finally, the European Central Bank (ECB) provided no relief, as it gave no indication that it would increase the level of aid available to troubled countries. As a result, investors shifted funds to relatively safer investments, including US mortgage-backed securities (MBS), which helped mortgage rates move lower.

The recently passed extension to the temporary payroll tax reduction contained a lightly publicized revenue raising provision to increase the guarantee fees charged on Fannie Mae and Freddie Mac loans. This fee results in higher rates for borrowers, and mortgage rates for loans not expected to close within the next month or so have begun to reflect this coming increase in guarantee fees.

The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Industrial Production, an important indicator of economic growth, will come out on Wednesday. Housing Starts will be released on Thursday, and Existing Home Sales will come out on Friday. Philly Fed and Empire State will round out the schedule. Mortgage markets will be closed on Monday in observance of MLK Day.

Copyright @ 2012 MBSQuoteline

This week, the Fed announced new measures to boost the economy. Expectations are low for much economic growth to result from the measures, but they did help push mortgage rates to historic lows.

The Fed released its statement Wednesday afternoon, and MBS markets then staged a very strong rally for several reasons. First, quite simply, the Fed confirmed that there are “significant downside risks” to the US economic outlook. Slower economic growth reduces inflationary pressures, which is favorable for mortgage rates. Second, the Fed announced the widely expected Operation Twist program. This program will extend the average maturity of the Fed’s portfolio by purchasing $400 billion of longer-term Treasury securities and selling an equal amount of shorter-term Treasuries. The third major element from the statement helping mortgage rates was a surprise to most investors. The Fed will begin to reinvest principal payments from its mortgage-backed securities (MBS) holdings in additional agency MBS. Until now, the Fed has been reinvesting the MBS principal payments in Treasury securities.

With roughly $885 billion in MBS holdings in the Fed’s portfolio, these principal payments, along with Operation Twist, will create a significant source of additional demand for MBS. The impact of the announcement was priced in very quickly. Although the Fed has not yet begun to purchase securities under the new programs, investors have already factored in the expected impact of the added demand on MBS prices. Following prior Fed announcements about purchasing MBS, nearly all of the benefit took place right away.

Next week, New Home Sales will be released on Monday. Durable Orders will come out on Wednesday. The final revisions to second quarter GDP will be released on Thursday. Pending Home Sales, a leading indicator, will also come out on Thursday. Friday will be a big day with Core PCE inflation, Personal Income, Chicago PMI Manufacturing, and Consumer Sentiment. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Copyright @ 2011 MBSQuoteline

Friday’s Employment report was a disappointing indicator of the current state of the US economic recovery. This report, along with just about every other economic measure released this week, was weaker than expected. As a result, mortgage rates fell to a new low for the year. Against a consensus forecast of 150K, the economy added just 54K jobs in May, and the figures for prior months were revised lower as well. This was the lowest monthly level of net job creation since September 2010.

The big question about the economy is whether the slowdown in growth is mostly due to temporary factors or whether it will be longer-term. The earthquake in Japan caused a shortage of parts, which had a large impact on global manufacturing, and the swift rise in oil prices caused consumers to scale back on other spending. The Japanese earthquake was a one-time event, and oil prices have dropped back to $100 per barrel. Other investors, though, feel that economic troubles are more fundamental. They view debt problems in weaker European countries and a winding down of some fiscal and monetary stimulus programs in the US as major factors in the slower growth. Since mortgage rates are heavily influenced by the pace of economic growth, the degree to which the slowdown proves to be shorter-term versus longer-term will likely determine how long rates remain at these low levels.

The Economic Calendar will be very light next week. The Fed’s Beige Book will come out on Wednesday. The Trade Balance will be released on Thursday, and Import Prices will come out on Friday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday.

 

Copyright @ 2011 MBSQuoteline

Many factors were favorable for mortgage rates this week. Weaker than expected economic data, strong results for the Treasury auctions, and renewed concerns about weaker European countries all helped mortgage rates end the week at the lowest levels of the year.

 

All of the major economic data released during the week was weaker than expected. First quarter Gross Domestic Product (GDP), the broadest measure of economic growth, was unchanged at 1.8%. Most investors expected the figures to be revised higher to at least 2.0%. April Durable Orders fell 4% from March, which was the largest monthly decline since October 2010. Weekly Jobless Claims unexpectedly increased. These measures suggest reduced inflationary pressure, which is good for mortgage rates. In addition, the Core PCE price index confirmed that inflation remains very low.

 

Uncertainty in Europe also helped US mortgage rates improve. There is no clear solution to the debt problems of Greece, and the parties involved in aiding Greece disagree on what approach to take. European Central Bank (ECB) officials stated that Greece must adopt tough austerity measures to remain a member of the Euro zone. Greece has already sharply reduced spending, though, and further cuts will be difficult politically, increasing the likelihood of a default on Greek government debt. Investors also grew more concerned about similar problems in Spain and Portugal. Spending cuts or debt defaults are expected to lead to slower global economic growth.

 

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before the employment data, the Chicago PMI Manufacturing index will come out on Tuesday. The ISM Manufacturing index, ADP Employment, and Construction Spending will be released on Wednesday. Productivity and Factory Orders will come out on Thursday. ISM Services and Consumer Confidence will round out the schedule. Mortgage markets will be closed on Monday for Memorial Day.

 

Copyright @ 2011 MBSQuoteline

Weaker than expected economic data helped mortgage rates decline to the lowest levels of the year early in the week. On Wednesday, though, a reminder that the Fed will eventually sell its portfolio of mortgage-backed securities (MBS) helped to erase the improvement. These two influences offset each other, and mortgage rates ended the week nearly unchanged.

The economic data released this week fell far short of investor expectations almost across the board. The most significant report, April Industrial Production, was unchanged from March, which was well below the consensus forecast. Manufacturing output was hurt by a shortage of parts from Japan due to the earthquakes. The Index of Leading Indicators declined for the first time since June 2010. The housing sector data also showed weakness as Existing Home Sales, Housing Starts, and Building Permits all declined in April.

The FOMC minutes from the April 27 Fed meeting contained few surprises, but they highlighted the fact that the Fed’s eventual return to more normal monetary policy will include both asset sales and rate hikes. The minutes gave no indication of the timing of any Fed tightening. Longer term, officials believe that the Fed’s balance sheet should contain only Treasury securities, meaning that the Fed at some point will begin to sell its roughly $1 trillion portfolio of MBS. In order to disrupt the mortgage market as little as possible, officials said that the selling may be done over a period of many years, and any asset sales would be announced far in advance.

This week, New Home Sales will be released on Tuesday. Durable Orders, an important indicator of economic growth, will come out on Wednesday. Revisions to first quarter GDP will be released on Thursday. Friday will be the biggest day with Core PCE inflation, Personal Income, Pending Home Sales, and Consumer Sentiment. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Copyright @ 2011 MBSQuoteline