Mortgage Report for the week of 12/29/2013

This holiday-shortened week has only two monthly economic reports scheduled for release that are relevant to mortgage rates. One of those two is considered to be highly important to the bond and mortgage markets. There is nothing of importance tomorrow, but every other day does have at least one event scheduled that could have an impact on the financial markets and mortgage rates.

The Conference Board will post their Consumer Confidence Index (CCI) for December late Tuesday morning. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make large purchases. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a large increase in confidence from November's reading of 70.4. Analysts are expecting Tuesday's release to show a reading of 77.1, meaning consumers felt much better about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.

The bond market will close at 2:00 PM ET Tuesday ahead of the New Year's Day holiday, but the stock markets are scheduled to be open for a full day of trading. All banks and major U.S. financial markets will be closed Wednesday for the holiday and will reopen Thursday morning for regular hours. As a result of the holiday schedule, we should see lighter than normal trading a couple days. However, I don’t believe it will be as thin as we saw last week. That should help prevent larger moves in bonds on days with little or no news to justify the move like we saw last week.

After the holiday, the Institute for Supply Management (ISM) will post their manufacturing index for December late Thursday morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. That indicates manufacturing sector strength rather than contraction. Analysts are currently expecting to see a 56.9 reading in this month's release, meaning that sentiment softened from November's 57.3. A smaller reading will be good news for the bond market and mortgage shoppers, while a higher than expected reading could lead to higher mortgage rates Thursday morning as it would point towards stronger economic growth.

Also worth noting are a handful of Fed member speaking engagements all scheduled for Friday afternoon, including one by Chairman Bernanke. None of them are considered to be highly important or likely to be market-moving, but whenever they speak publicly, particularly the Fed Chairman, their words have the potential to influence the markets. There are five set for Friday with the first scheduled for 12:45 PM ET and the last at 5:00 PM ET. Chairman Bernanke is expected to speak in Philadelphia at 2:30 PM ET. This means any reaction to their speeches will come during afternoon trading.

Overall, I am expecting to see Thursday be the most active day for mortgage rates, although Tuesday morning could also be fairly busy as the year comes to an end. It is difficult to label any day as the calmest because even tomorrow that doesn’t have anything scheduled to be posted, could also be relatively busy following last week’s light holiday trading. The benchmark 10-year Treasury Note yield closed the week at 3.00% Friday, which is above the previous key level of 2.95%. Due to last week’s extremely light trading volume, I am not too concerned about it closing at that level. However, I am looking for it to move back below nearly immediately or we could be in for a sizable upward move in mortgage rates very soon. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Jenny's Guide to Home Loans: Dallas Morning News - D-FW foreclosure filings dow...

Jenny's Guide to Home Loans: Dallas Morning News - D-FW foreclosure filings dow...: Dallas Morning News Wednesday, October 20, 2013 "total foreclosure filings for the D-FW area so far in 2013 are at the lowest level i...

Dallas Morning News - D-FW foreclosure filings down 49% over last year

Dallas Morning News
Wednesday, October 20, 2013

"Total foreclosure filings for the D-FW area so far in 2013 are at the lowest level in almost a decade."
Foreclosure Listing Service CEO, George Roddy said this week "I think we are now running at normal numbers.  I can't think of anything that will bring it back up high."

Here are area postings on residential properties scheduled for foreclosure auction in November and change from a year  ago:

• Dallas County: -46%
• Tarrant County:  -49%
• Collin County:  -55%
• Denton Coutny: -53%
• D-FW area:  -49%

(Source: Foreclosure Listing Service)

This shows the strength of the economy in D-FW and surrounding areas.  Great time to be a Realtor!

Time Magazine Cover: THE UNITED STATES OF TEXAS

Front Cover of Time Magazine Oct. 28 Issue:  THE UNITED STATES OF TEXAS, Why the Lone Star State is America’s Future.

This article is an excellent reference for all Realtors in Texas.  Here are a few pointers from the article that are worth mentioning:

“The real reason Americans are headed to Texas is much simpler.  Migrants are being pushed (and pulled) by the major economic forces that are reshaping the American economy as a whole: the hollowing out of the middle class, the increased costs of living in the U.S.’s established population centers and the resulting search by many Americans for a radically cheaper way to live and do business."

“Along with the affordable housing and a warm climate, newcomers are drawn by the notion that in the case of Texas, jobs are plentiful.  Texas’ unemployment rate is currently 6.4% - high for Texas but below the national rate of 7.3%.”

“Over the past 20 years, more than 4 million Californians have moved to Texas, according to Weinstein.  “That’s two cities the size of Houston,” he notes.

“Jed Kolko, chief economist for San Francisco – based real estate website Trulia, says that from 2005 to 2011, 183 Californians moved to Texas for every 100 Texans who moved to California. “Home prices, more than any other factor, cause people to leave,” Kolko says.

“IT’S NOT JUST CHEAP LIVING that draws people to Texas.  It’s also jobs.  In the past 12 months, Texas has added 274,700 new jobs – that’s 12% of all jobs added nationwide and 51,000 more than California added.   In a Moody’s Analytics study, seven of the top 10 cities for projected job growth through 2015 will be in Texas.   Four Texas cities topped the list:  Austin, McAllen, Houston and Fort Worth.”

“In fact, from 2002 to 2011, with 8% of the U.S. population, Texas created nearly one-third of the country’s highest paying jobs.”

“From 2001 to 2012, the number of lower-middle-income jobs in Texas grew by 14.4%, and the number of upper-middle-income jobs grew by 24.2%.  If you look at the U.S. without Texas over the same period, the number of lower-middle jobs grew by an anemic 0.1%, and the number of upper-middle jobs shrank by 6%.  …… If you pull Texas out of the puzzle of the United States, the rest of the country falls down!”

My parents and I are originally from Taiwan.  They moved to Texas in the 80’s to seek better opportunities and a better future for me and my brother.  Although I love being Chinese and fortunate enough to experience dual cultures, I know my parents made the right choice.  I am able to give my children the kind of opportunities and education my parents worked so hard for.  

Reference: Time Magazine / October 28, 2013

Article by: Tyler Cowen

THIS WEEK'S ECONOMIC REVIEW / Why is the mortgage interest rate going up?

Economy Review This Week 09/12/2013

Employment figures were a key newsmaker last week, and whether or not the news was favorable depended on the eye of the beholder. Specifically, the economy added 169,000 in August, which put the unemployment rate at 7.3 percent, the Bureau of Labor Statistics reported last week. This was little changed form July, but the lowest since December 2008. On the face of things, that’s good news, but it skirts the issue of people who have given up looking for work, which is described by the labor-force participation rate. For August, the percentage of working-age people either working or looking for work, dropped to 63.2 percent from 63.4 percent in July. This was its lowest rate since 1978. Ignoring the participation rate and going by the 7.3 percent rate, the number of unemployed Americans totaled 11.3 in August, the number of long-term unemployed (those jobless for 27 weeks or longer) hovered at 4.3 million. The long-term unemployed accounted for 37.9 percent of the total unemployed population. The number of Americans involuntarily employed part time for economic reasons, such as their hours were cut or they were unable to find full-time work dropped by 334,000 to 7.9 million in August. While the monthly unemployment scenario’s progress was unclear at best, more recent employment scores were more upbeat, with first-time claims for jobless benefits remaining at a five-year low. First-time claims for unemployment insurance filed during the week ending Aug. 31 dipped to 323,000, a decline of 9,000 from the previous week's revised figure of 332,000, according to last week’s report from the Employment and Training Administration. The four-week moving average was 328,500, a drop of 3,000 from the prior week's revised average of 331,500. The total number of unemployed Americans covered by jobless benefits during the week ending Aug. 24 dropped to 2,951,000, a loss of 43,000 from the previous week's revised level of 2,994,000, the Administration also reported. The four-week moving average was 2,979,500, a decrease of 18,000 from the previous week's revised average of 2,997,500. Switching gears to real estate news, construction spending during July notched up 0.6 percent over June’s revised rate of $895.7 billion to hit an annual rate of $900.8 billion, the Census Bureau reported last week. Compared to last year, July’s rate was 5.2 percent over July 2012’s rate of $856.3 billion. Spending on private construction hit an annual rate of $631.4 billion in July, which was 0.9 percent higher than June’s revised June estimate of $625.6 billion. Residential construction hit an annual rate of $334.6 billion in July, which was 0.6 percent over June’s revised estimate of $332.7 billion. Finally, in international trade, the trade gap widened in July with exports of $189.4 billion and imports of $228.6 billion creating a trade deficit of $39.1 billion, which was up from $34.5 billion in June, the Census Bureau and the Bureau of Economic Analysis jointly reported last week. July exports were down $1.1 billion from June’s exports of $190.5 billion, while July’s imports were $3.5 billion higher than June’s imports of $225.1 billion. This increase in imports was due to a combination of increased crude oil prices as well as consumer spending on goods from overseas, which could point to an improving economy, according to some analysts. This week, we can expect: Monday — Consumer credit for July from the Federal Reserve. Wednesday — July wholesale inventories from the Census Bureau. Thursday — Initial jobless claims for last week from the Employment and Training Administration; August import and export prices from the Census Bureau; and August budget from the Treasury Department. Friday — August retail sales totals and July business inventories from the Census Bureau; and August producer price index from the Bureau of Labor Statistics.

"Am I in the right market condition to purchase a home?"

The basic question that every prospective buyer asks: "Am I in the right market condition to purchase a home?"

I started in the finance industry working for a large national bank and I've seen the real estate and mortgage markets change many times over.  So my answer to this question is, "Are you in the right financial condition to purchase a home?"

In first 6 months of 1994, when I just started my working career, the average mortgage rate at the time was 7.25%.  In Dec. 2001, my husband and I closed on our current house at around 7% for a 30 year fixed rate, which was the national average.  In Dec. 2002, we refinanced our house at 5% for a 15 year fixed rate, which was considered the historical low at the time. Afterwards, we saw the rate just kept dropping.  Did we make the right choice based on market condition?  Probably not, but we made financial choices that were good and right for us. 

As reported on The Dallas Morning News yesterday, under "Your Money" Section: Mortgage rates rose this week, Freddie Mac said in it's latest report, with lenders offering a 30-year fixed home loan to solid borrowers at an average of 4.57 percent - up from 4.51 percent last week and a full percentage point higher than a year ago. The average 15-year rate rose from 3.54 percent to 3.59 percent.

Our economy has gone through the recovery and the government says the economy is in the building phase.  Our GDP is up, auto sales are experiencing growth it hadn't seen for a long time,  and the unemployment rate has steadily dropped, so inevitably we will see interest rates rise again.  Still the current interest rate is very low compared to what my parents had to pay when they bought their house (around 9% in the late 80's).  Overall, we are in a very good economic period, so regardless of market condition, sit down with an experienced loan officer and go through your budget analysis.   It's not about the market, it's about investing in your future.  

Reference from The Dallas Morning News printed on Sept. 6, 2013. 
Reference from www.mortgage-x.com
http://www.mortgage-x.com/general/historical_rates.asp

From The Dallas Morning News "Are N. Texas home prices rising too fast?"

Here is some good news for Real Estate professionals. Steve Brown with Dallas Morning News wrote an article that puts Dallas real estate market in perspective:

"Dallas area has recouped everything lost in the recession and then some when it comes to residential real estate values."

"In July, the price of pre-owned single-family homes in North Texas was up 12 percent from a year earlier.  And pre-owned condominium prices jumped an unheard of 17 percent year of year."

"The median price of houses sold by real estate agents through their multiple listing service is about 40 percent higher than it was in January 2009."

Information courtesy of Steve Brown and The Dallas Morning News

FHA Underwriting Guidelines changes for Disputes on Credit Report

For most borrowers working with credit repair companies, "Disputes" listed on credit report are not allowed for most lenders under FHA Guidelines. Here is the revision FHA made effective October 15, 2013, to following:

*Guidance on collections and disputed accounts
*Clarify guidance on judgments

This guidance applies to all FHA programs with the exception of non-credit qualifying streamline refinances and the Home Equity Conversion Mortgage.

HUD 4155.1, Mortgage Credit Analysis for Mortgage Insurance 4.C.2.d, Collections and Judgments is re-named Credit Analysis of Collections and Judgments 4.C.2.e, Paying Off Collections and Judgments is re-named Capacity Analysis of Collections and Judgments 4.C.2.f, Previous Mortgage Foreclosure is re-named Handling of Disputed Accounts Re-designation of sections; Previous Mortgage Foreclosure through Short Sales, starting with 4.C.2.g to 4.C.2.m. HUD 4155.1 4.C.2.d Credit Analysis of Collections and Judgments Collections and judgments may indicate a borrower’s disregard for credit obligations and must be considered in the creditworthiness analysis. The guidance below applies to loans with collection accounts and all judgments. Medical collections and charge off accounts are excluded from this guidance. Documentation Requirements: Collection Accounts and Judgments Applicable to Manually Underwritten Loans: The lender must document reasons for approving a mortgage when the borrower has collection accounts or judgments. Regardless of the amount of outstanding collection accounts or judgments, the lender must determine if the collection account or judgment was a result of:  the borrower’s disregard for financial obligations;  the borrower’s inability to manage debt; or  extenuating circumstances. The borrower must provide a letter of explanation with supporting documentation for each outstanding collection account and judgment. The explanation and supporting documentation must be consistent with other credit information in the file. Applicable to Loans Run Through TOTAL Mortgage Scorecard: TOTAL Mortgage Scorecard Accept/Approve – There are no documentation or letter of explanation requirements for loans with collection accounts or judgments run through TOTAL Mortgage Scorecard receiving an "Accept/Approve" despite the presence of collection accounts or judgments. These accounts have been already taken into consideration in the borrower’s credit score. If TOTAL Mortgage Scorecard generates a "Refer," the lender must manually underwrite the loan in accordance with the guidance above applicable to manually underwritten loans with collection accounts and judgments. 4155.1 4.C.2.e Capacity Analysis of Collections and Judgments Collections - FHA does not require collection accounts to be paid off as a condition of mortgage approval. However, FHA does recognize that collection efforts by the creditor for unpaid collections could affect the borrower’s ability to repay the mortgage. To mitigate this risk, FHA is requiring a capacity analysis of collection accounts with an aggregate balance equal to or greater than $2,000, as described below. If the total outstanding balance of all collection accounts for all borrowers is equal to or greater than $2,000, the lender must perform a capacity analysis as detailed below. Unless excluded under state law, collection accounts of a non-purchasing spouse in a community property state are included in the cumulative balance. All medical collections and charge off accounts are excluded from this guidance and do not require resolution. Capacity analysis includes any of the following actions:  At the time of or prior to closing, payment in full of the collection account (verification of acceptable source of funds required).  The borrower makes payment arrangements with the creditor. If the borrower has entered into a payment arrangement with the creditor, a credit report or letter from the creditor verifying the monthly payment is required. The monthly payment must be included in the borrower’s debt-to-income ratio.  If evidence of a payment arrangement is not available, the lender must calculate the monthly payment using 5% of the outstanding balance of each collection, and include the monthly payment in the borrower’s debt-to-income ratio. TOTAL Mortgage Scorecard Accept/Approve/Refer - Regardless of the Accept/Approve/Refer recommendation by TOTAL Mortgage Scorecard, the lender must include the payment amount in the calculation of the borrower’s debt-to-income ratio.   4155.1 4.C.2.e Capacity Analysis of Collections and Judgments Continued Judgments - FHA requires judgments to be paid off before the mortgage loan is eligible for FHA insurance. An exception to the payoff of a court ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments. The borrower must provide a copy of the agreement and evidence that payments were made on time in accordance with the agreement, and a minimum of three months of scheduled payments have been made prior to credit approval. Borrowers are not allowed to prepay scheduled payments in order to meet the required minimum of three months of payments. Furthermore, lenders are instructed to include the payment amount in the agreement in the calculation of the borrower’s debt-to-income ratio. FHA requires judgments of a non-purchasing spouse in a community property state to be paid in full, or meet the exception guidance for judgments above, unless excluded by state law. Reference : For information on the Credit Analysis of Judgments, see HUD Handbook 4155.1 4.C.2.d. HUD 4155.1 4.C.2.f Handling of Disputed Accounts, Continued Disputed Derogatory Accounts Indicated on the Credit Report If the credit report utilized by TOTAL Mortgage Scorecard indicates that the borrower is disputing derogatory credit accounts, the borrower must provide a letter of explanation and documentation supporting the basis of the dispute. The lender must analyze the documentation provided for consistency with other credit information in the file to determine if the derogatory credit account should be considered in the underwriting analysis. Guidance for TOTAL Mortgage Scorecard Accept/Approve loans with disputed accounts . Disputed Derogatory Credit Accounts greater than or equal to $1,000 If the cumulative outstanding balance of disputed derogatory credit accounts of all borrowers is equal to or greater than $1,000, the mortgage application must be downgraded to a "Refer" and a Direct Endorsement underwriter is required to manually underwrite the loan as described above. Disputed Derogatory Credit Accounts less than $1,000 If the cumulative outstanding balance of disputed derogatory credit accounts of all borrowers is less than $1,000, a downgrade is not required. Excluded Accounts  Disputed medical accounts are excluded from the $1,000 limit and do not require documentation.  Disputed derogatory credit accounts resulting from identity theft, credit card theft, or unauthorized use are also excluded from the $1,000 limit. However, the lender must provide in the case binder a credit report, letter from the creditor, or other appropriate documentation to support the dispute, such as a police report disputing the fraudulent charges. Mortgagee Letter 2013-24, Continued HUD 4155.1 4.C.2.f Handling of Disputed Accounts, Continued Disputed derogatory credit accounts are defined as follows:  disputed charge-off accounts,  disputed collection accounts, and  disputed accounts with late payments in the last 24 months. Disputed derogatory credit accounts of a non-purchasing spouse in a community property state are not included in the cumulative balance for determining if the mortgage application is downgraded to a "Refer". Non-derogatory disputed accounts are excluded from the $1,000 cumulative total. Non-Derogatory Disputed Accounts and Disputed Accounts Not Indicated on the Credit Report. Non-derogatory disputed accounts include the following types of accounts:  disputed accounts with zero balance,  disputed accounts with late payments aged 24 months or greater, and  disputed accounts that are current and paid as agreed. If a borrower is disputing non-derogatory accounts, or is disputing accounts which are not indicated on the credit report as being disputed, the lender is not required to downgrade the application to a "Refer." However, the lender must analyze the effect of the disputed accounts on the borrower’s ability to repay the loan. If the dispute results in the borrower’s monthly debt payments utilized in computing the debt-to-income ratio being less than the amount indicated on the credit report, the borrower must provide documentation of the lower payments. Paperwork Reduction Act The information collection requirements contained in this document are pending approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0059. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

Reference from:  U.S. Department of Housing and Urban Development
Mortgagee Letter 2013-24

Mortgage Market Update

Monday’s bond market has opened in positive territory, erasing part of Friday’s intra-day losses. The stock markets are mixed with the Dow down 7 points and the Nasdaq up 4 points. The bond market is currently up 6/32, but due to significant selling Friday afternoon, we will still see an increase of approximately .250 of a discount point if comparing to Friday’s morning pricing.

There is nothing of relevance scheduled for release today that has the potential to influence mortgage rates. The rest of the week brings us the release of three reports that do, in addition to the minutes from the most recent FOMC meeting and a congressional speaking engagement by Fed Chairman Bernanke. Only one of the economic reports is considered to be highly important to the markets and mortgage rates, but the others do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.

Tomorrow also has nothing of importance scheduled, so look for stock movement to heavily influence bond trading and mortgage rates. Stock gains will probably pressure bonds and cause mortgage rates to move higher. If the major stock indexes show losses during the first couple days, we may see bonds thrive and mortgage rates remain unchanged or move slightly lower. It will also be interesting to see if last week’s pattern of afternoon selling in bonds carries into this week. Early gains in bonds this morning raises caution that it may. Therefore, proceed cautiously if still floating an interest rate and closing in the immediate future as the afternoon selling, for the most part, has been stronger than the morning buying. In other words, the afternoon revisions have been higher than the morning improvement s to rates.

Wednesday has three events that could affect mortgage rates. They include April’s Existing Home Sales report and Fed Chairman Bernanke’s appearance in front of Joint Economic Committee of Congress, both at 10:00 AM ET. That will be followed by the release of the minutes from the last FOMC meeting at 2:00 PM ET.

Overall, I believe Wednesday will be the most important day of the week for mortgage rates, although Friday should be active also as it has the most important economic report and will have an early bond market closing ahead of next Monday’s holiday.

Mortgage Market Update

This week brings us the release of seven economic reports that may have the potential to influence mortgage rates. There is data scheduled to be posted four of the five days, including today. We saw plenty of movement in rates last week despite the lack of factual economic reports. Unfortunately for mortgage shoppers, they moved higher and this week may not be any different. Therefore, please proceed cautiously as this could be another ugly week for rates if the data gives us stronger than expected results.

The first piece of data this week is April's Retail Sales at 8:30 AM ET Monday morning. This is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up over two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.3% decline in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Monday morning as it would signal that economic activity may not be as strong as thought. However, an unexpected increase could renew theories of economic growth that would lead to more stock buying and bond selling that would push mortgage rates higher.

There is nothing of relevance scheduled for Tuesday, but Wednesday has two reports that we will be watching. April's Producer Price Index (PPI) is the first at 8:30 AM ET. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond market improve. The overall index is expected to fall 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.1%. A decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds. As inflation rises, longer-term securities become less appealing to investors since inflation erodes the value of those securities’ future fixed interest payment. That is why the bond market tends to thrive in weaker economic conditions with low levels of inflation.

The second report of the day Wednesday is April's Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% decline in production, indicating that manufacturing activity is growing. A larger than expected decrease in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is considered to be moderately important, so it will likely need to show unexpected strength or weakness to cause movement in mortgage rates. The PPI report will probably be the biggest influence on bond trading and mortgage rates Wednesday.

April's Consumer Price Index (CPI) will also be posted at 8:30 AM ET Thursday. It is the sister report of Wednesday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.2% decline in the overall index and a 0.2% rise in the core data reading. As with the PPI, the core data is the more important of the two readings and will help dictate mortgage rate direction.

Also early Thursday will be the release of April's Housing Starts. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show a drop in new starts from March's reading, hinting at housing sector weakness. However, since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts, especially with a key measurement of inflation being posted at the same time.

The last two pieces of data come late Friday morning. May's preliminary reading to the University of Michigan's Index of Consumer Sentiment will be released just before 10:00 AM ET Friday. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident in their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 78.5, which would be an increase from April’s final reading, indicating consumers are more confident and more likely to spend than they were last month. If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower because waning confidence means consumers are less apt to make a large purchase in the near future.

The week’s calendar closes with the release of April's Leading Economic Indicators (LEI) at 10:00 AM ET Friday. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.3% increase from March's reading, meaning that economic activity is likely to strengthen slightly over the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher Friday.

Overall, it is likely going to be an active week for the financial and mortgage markets. I am predicting Monday or Thursday will be the most important day for mortgage rates, but we could see noticeable movement in rates multiple days this week. The lightest day will likely be Tuesday unless it is an overly volatile day for stocks.

Mortgage Market Update

This week has little scheduled that is expected to drive bond trading and mortgage rates. There are no relevant monthly or quarterly economic reports on the calendar. In fact, the only economic news even worth watching is the weekly unemployment update from the Labor Department that usually draws little attention. We do, however, have two Treasury auctions that can potentially affect rates the middle part of the week.

Friday’s Employment report led to a significant sell-off in bonds and a large spike in mortgage rates. With nothing scheduled to help bond traders forget about Friday’s selling, the negative tone in stocks could carry into tomorrow’s trading. This is especially true if stocks open the week in positive ground. In other words, we could be in for further increases to mortgage rates the next day or two.

The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons. After Friday’s selling, it is difficult to portray a scenario that gives us high hope for these auctions. At best, I believe we will be fortunate if they are a non-factor towards mortgage rates.

The week closes with a speaking engagement from Fed Chairman Bernanke mid-morning Friday. He will be speaking at a Fed banking conference in Chicago. Since this is the first time he will be public since last Friday’s employment news and the reaction the markets had, look for his words to cause a little volatility in the broader markets, and possibly mortgage rates.

Due to the lack of factual economic data to drive the markets this week, we should see bond trading and mortgage pricing to be heavily influenced by stock market direction. If the major stock indexes move higher, mortgage rates will probably follow suit. Ideally, mortgage shoppers should hope for stock market weakness as it would be the best scenario for mortgage rates to take back some of Friday’s increases.

Overall, I think we will see Monday to be a fairly active day as Friday’s stock and bond market sentiment will probably carry into today’s trading. That will likely mean we start off the week with an increase in mortgage rates, but to a much smaller scale as last Friday’s move. Wednesday’s 10-year Treasury Note auction could also cause movement in rates during afternoon hours.

Mortgage Market Update

This week is quite busy in terms of the number of economic reports and other events scheduled and the significance of the data being released. There are eight pieces of economic data that may influence mortgage rates along with a two-day FOMC meeting. There is relevant data being released every day of the week, so expect to see plenty of movement in mortgage rates the next five days.

March's Personal Income and Outlays data is the first of the economic releases, coming early this morning. It helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market due to the influence that consumer spending-related data has on the financial markets. If a consumer's income is rising, they are more likely to make additional purchases in the near future, fueling economic growth. This raises inflation concerns and has a negative impact on the bond market and mortgage rates. Current forecasts are calling for a 0.3% increase in the income reading and a 0.1% rise in spending. If we see smaller than expected readings, the bond market should open higher today, making an improvement to mortgage rates a good possibility.

The second report of the week is the 1st Quarter Employment Cost Index (ECI) early Tuesday morning that tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns rise as employers will need to pass those increases into the pricing of their products and services. That would cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.5%.

April's Consumer Confidence Index (CCI) will also be released Tuesday morning, but at 10:00 AM ET. This index is considered to be key indicator of future spending by consumers. The group surveys 5,000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to make large purchases in the near future. However, if they are concerned about issues such as job security and savings, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would keep inflation and economic growth concerns to a minimum. On the other hand, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday. It is expected to show a reading of 61.0, which would be an increase from March's 59.7 reading. The lower the reading, the better the news it is for mortgage rates.

The Institute for Supply Management (ISM) will post their manufacturing index for April late Wednesday morning. This is usually the first important economic report released each month and gives us an indication of manufacturer sentiment. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. This points toward more manufacturing activity and could hurt bond prices, pushing mortgage rates higher. Analysts are expecting to see a reading of 51.0, which would be a slight decline from March's 51.3. Ideally, bond traders would like to see a reading below 50.0 as it would hint at contraction in the manufacturing sector rather than growth.

This week's FOMC meeting will begin Tuesday but will not adjourn until Wednesday afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement. If the statement gives any hint of change in their current forecasts on when they expect to adjust key short-term interest rates, we could see a sizable change to mortgage rates Wednesday afternoon.

Thursday has two pieces of monthly or quarterly economic reports scheduled, but neither is considered to be highly important. The first comes from the Labor Department, who will release its 1st Quarter Productivity and Costs data early Thursday morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a smaller increase than what is forecasted could cause bond prices to drop and mortgage rates to rise slightly Thursday morning. It is expected to show a 1.2% increase in productivity.

March's Goods and Services Trade Balance report will also be released early Thursday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $43.5 billion trade deficit, but it is the least important of this week's data and likely will have little influence on Thursday's mortgage rates.

Friday brings us the release of the almighty monthly Employment report, giving us April's employment statistics. This is where we may see a huge rally or major sell-off in the bond market and potentially large changes in mortgage rates. The ideal situation for the bond and mortgage markets would be an increase in the unemployment rate and a much smaller number of payrolls added to the economy during the month than was expected. Just how much of an improvement or worsening in rates depends on how much variance there is between forecasts and actual readings. This could turn out to be a wonderful day in the mortgage market, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings. Current forecasts are calling for the unemployment rate to remain at 7.6% and that approximately 150,000 jobs were added during the month.

March's Factory Orders data will be posted late Friday morning, giving us another measure of manufacturing sector strength or weakness. It is similar to last week's Durable Goods Orders, except this report includes non-durable goods such as food and clothing. Generally, the market is more concerned with the durable goods orders like refrigerators and electronics than items such as cigarettes and toothpaste. This is why the Durable Goods report usually has more of an impact on the financial markets than the Factory Orders report does. Still, a noticeably larger decline than the 2.5% that is expected could push mortgage rates slightly lower if the employment data matches forecasts.

Overall, I believe Friday will be the most important day of the week with the employment data being posted since Wednesday’s FOMC meeting likely won’t yield any surprises. The employment data can easily erase the week's accumulated gains or losses in mortgage rates if it shows noticeable variances from forecasts. We may actually see a sizeable change in rates Wednesday also if the ISM index shows favorable or unfavorable results, but I am predicting Friday to be the most active. 

Mortgage Market Update

This week has five pieces of economic data for the markets to digest in addition to two potentially relevant Treasury auctions. The week’s data starts late tomorrow morning with the release of March's Existing Homes Sales numbers from the National Association of Realtors at 10:00 AM ET. This report gives us an indication of housing sector strength and mortgage credit demand. It is considered to be moderately important to the markets, but can influence mortgage pricing if it shows a sizable variance from forecasts. Ideally, the bond market would like to see a drop in home resales because a soft housing sector makes a broader economic recovery difficult. Analysts are expecting to see a small increase in sales between February and March. The larger the increase, the worse the news it is for bonds and mortgage rates.

The sister report to tomorrow’s housing data is March's New Home Sales. It will be released late Tuesday morning, but tracks a much smaller portion of all home sales as Monday’s report does. It also gives us an indication of housing sector strength and future mortgage credit demand, however, it is the week's least important report. Unless it varies greatly from analysts' forecasts, I am not expecting the data to cause much movement in mortgage rates. Analysts are currently forecasting an increase in sales of newly constructed homes.

Wednesday morning's data is March's Durable Goods Orders that will be released at 8:30 AM ET. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances and electronics. Current forecasts are calling for a decline in new orders of 3.1%. This would be a sign of manufacturing sector contraction, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A much larger decline would be considered good news for bonds and mortgage pricing, while a large increase would indicate manufacturing sector strength. A sign of solid manufacturing growth could lead to higher mortgage rates Wednesday.

In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours.

Friday has the two remaining reports, one of which is highly important to the financial and mortgage markets. That would be the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measure of economic growth or contraction. I expect this report to cause sizable movement in the financial markets Friday and therefore the mortgage market also. Analysts are expecting it to show that the economy grew at an annual rate of 2.9%, which would be a much quicker pace than the final quarter of last year. A smaller increase would be considered good news for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates Friday morning.

The last piece of a data is the University of Michigan's update to their Index of Consumer Sentiment for April. This report gives us an indication of consumer sentiment. I don't expect it to have a significant impact on bonds and mortgage pricing unless it varies greatly from forecasts, especially since it comes after the GDP reading. Current forecasts are calling for little change from the preliminary reading of 72.3. This means that surveyed consumers were just as optimistic about their own financial situations as they were earlier this month. This data is relevant because rising sentiment means consumers are more apt to make a large purchase in the near future, fueling economic growth.

Overall, look for a fair amount of movement in the financial markets and mortgage rates this week. Friday is the most important day due to the GDP, but we should see movement in rates several days, particularly days that stocks are active. Tuesday appears to be the best candidate for the quietest day for mortgage rates. If this week's reports reveal weaker than expected economic conditions, the bond market could extend its recent rally and mortgage rates should fall for the week.

Mortgage Market Update

Monday’s bond market has opened up slightly following early stock losses. The major stock indexes are retreating away from last week’s record levels with the Dow down 87 points and the Nasdaq down 21 points. The bond market is currently up 2/32, which will likely keep this morning’s mortgage rates close to Friday’s levels or possibly slightly lower.

There is nothing of importance scheduled for release today, so any changes to mortgage rates intra-day will probably come from stock movement. The rest of the week brings us the release of five economic reports that have the potential to affect mortgage rates. In addition, we have a bunch of corporate earnings releases that can significantly impact the stock markets and help direct funds into or away from mortgage-related bonds.

Tomorrow has three of the week’s five reports, beginning with March's Consumer Price Index (CPI) at 8:30 AM ET tomorrow. This index is one of the most important pieces of data we see each month. It is similar to last week's PPI but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. There are two readings in the index that traders watch- the overall and the core data that excludes more volatile food and energy prices. Analysts are expecting to see a 0.1%decline in the overall readings and a 0.2% rise in the core reading. The core data is the more important reading, which ideally will show a decline in prices at the consumer level.

March's Housing Starts is the next report, also coming early tomorrow morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking starts of new home construction and the number of permits issued for future starts. This data usually doesn't cause much movement in mortgage pricing unless it varies greatly from forecasts. It is expected to show a small increase in construction starts of new homes. Good news for the bond market and mortgage rates would be a decline in home starts, indicating housing sector weakness.

The third report of the day is March’s Industrial Production data that will be posted at 9:15 AM ET. It tracks output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for an increase in production of 0.3%. This data is considered to be only moderately important to rates, so it will take more than just a slight variance to influence bond trading and mortgage pricing. Signs of manufacturing sector strength are considered negative news for mortgage rates, so a decline in output would be good news for the bond market and mortgage shoppers.

Overall, it will likely be a moderately active week for mortgage rates. However, unlike many weeks, the most important news comes earlier in the week. I am labeling tomorrow as the most important due to the data that is scheduled and Friday appears to be the best candidate for the least active day. The stock markets could also heavily influence bond trading and mortgage pricing any day this week as we get more corporate earnings releases. I don’t think this will be one of the more active weeks in terms of mortgage rate movement, although we should see minor changes a couple days.

Mortgage Market Update

Monday’s bond market has opened flat as investors take a breather after Friday’s volatility. The stock markets are showing relatively minor losses with the Dow down 36 points and the Nasdaq down 4 points. The bond market is currently unchanged from Friday’s close, but that is a little higher than Friday’s morning level when mortgage rates were posted. Bonds weakened a little during afternoon trading, leading to some lenders to make upward revisions to their rate sheets late Friday.

There is nothing of relevance to mortgage rates scheduled for today. The rest of the week brings us the release of three relevant economic reports, in addition to a couple of Treasury auctions and the minutes from the last FOMC meeting. Corporate earnings season also kicks off today with Alcoa posting this afternoon. That report is usually a focal point because it is the first Dow component to report earnings each quarter. There are other companies scheduled to post this week that will also influence the markets and broader economic theories, but AA is the first of the key earnings. Generally speaking, weaker than expected reports hurt stock prices and make bonds more attractive to investors.

Tomorrow also has nothing of importance scheduled for release. The first events of the week will come Wednesday afternoon when we get the release of the minutes from the last FOMC meeting and have one of the Treasury auctions worth watching. Market participants will be looking at the minutes closely as they give us insight to the Fed's current thought process and individual Fed member opinions. The 10-year Treasury Note auction helps gauge investor demand for longer-term securities, including mortgage-related bonds.

Overall, look for the most movement in rates the latter part of the week, particularly Friday with all three of this week’s economic reports coming that day. The PPI and Retail Sales reports are considered highly important monthly reports, both of which will be released early Friday. Also look for the stock markets to influence bond trading and mortgage rates a good part of the week as traders react to the earnings news, but I believe we will see the most movement in rates the latter part.

Mortgage Market Update

Monday’s bond market has opened fairly flat following the three plus day holiday weekend. This morning’s economic data was good news for the bond market but weaker than expected reports that were posted Friday when the markets were closed are limiting this morning’s improvements. The stock markets are also having an uneventful morning with the Dow up 6 points and the Nasdaq down 11 points. The bond market is currently up 1/32, which may lead to a very slight improvement to mortgage rates if comparing to Thursday’s pricing.

The Institute for Supply Management (ISM) gave us today’s only relevant economic data with the release of their manufacturing index for March. They announced a reading of 51.3 late this morning that was noticeably lower than forecasts of 54.0 and February’s 54.2. This indicates that fewer surveyed manufacturers felt business improved during the month than did in February, hinting at manufacturing sector weakness. The reading remained above the benchmark growth indicator of 50.0, but is very close to falling below that level. Therefore, we should consider this data favorable for the bond market and mortgage rates.

Tomorrow’s only relevant data is February's Factory Orders at 10:00 AM ET. This Commerce Department report is similar to last week's Durable Goods Orders report, except it includes orders for both durable and non-durable goods. It will give us another measurement of manufacturing sector strength, but is one of the week’s less important reports. Unless it varies greatly from forecasts of a 2.5% increase, I suspect that it will be a non-factor in the mortgage market tomorrow.

Overall, Friday is the biggest day of the week due to the significance of the monthly Employment report and its impact on most of the financial markets and mortgage rates. The middle part of the week should be relatively calm unless something unexpected happens overseas or in the stock movements. 

Mortgage Market Update

This week brings us the release of six pieces of relevant economic data along with two Treasury auctions that have the potential to affect mortgage rates. This is also a holiday-shortened week with the bond market scheduled to close early Thursday and remain closed Friday in observance of the Good Friday holiday. The stock markets will be closed Friday only. 

Monday's only event is a speaking engagement by Fed Chairman Bernanke early afternoon. He will be speaking at the London School of Economics at 1:15 PM ET tomorrow. The topic of his speech is what was learned from the past financial crisis. I am not expecting this to be a market moving appearance, but anytime he does speak, the markets listen. Therefore, we will be watching for any reaction to his words.

There are three pieces of data set for release Tuesday. The first will come from the Commerce Department at 8:30 AM ET, who will post February's Durable Goods Orders. This report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be volatile from month to month but is still considered to be of fairly high importance to the markets. Analysts are expecting it to show an increase in new orders of approximately 3.8%. A much larger increase would be considered negative for bonds as it would indicate economic strength and could lead to higher mortgage rates Tuesday morning.

March's Consumer Confidence Index (CCI) will be posted at 10:00 AM ET Tuesday morning. This index gives us an indication of consumers' willingness to spend. Bond traders watch this data closely because consumer spending makes up over two-thirds of our economy. If this report shows that confidence in their own financial situations is falling, it would indicate that consumers are less apt to make a large purchase in the near future. If it reveals that confidence looks to be growing, we may see bond traders sell as economic growth may rise, pushing mortgage rates higher Tuesday morning. It is expected to show a decline from February's 69.0 reading to 66.9 for March. The lower the reading, the better the news it is for bonds and mortgage rates.

The Commerce Department will also give us February's New Home Sales figures late Tuesday morning. They are expected to announce a small decline in sales of newly constructed homes. This report tracks a much smaller percentage of home sales than last week’s Existing Home Sales report covered, so it should have a much weaker influence on the markets and mortgage pricing. A large increase in sales would be negative for the bond market and mortgage pricing because it would point towards economic strength.

The next relevant data is Thursday's final revision to the 4th Quarter GDP. This is the second and final revision to January's preliminary reading of the U.S. Gross Domestic Product, or the sum of all goods and services produced in the U.S. It is expected to show that the economy grew at an annual pace of 0.3% last quarter, up slightly from the previous estimate of 0.1% that was released last month. Analysts are now more concerned with next month's preliminary reading of the 1st quarter than data from three to six months ago, so I don't expect this report to affect mortgage rates much.

Friday has two reports that could affect mortgage rates, but since the financial and mortgage markets will be closed we will have to wait for next Monday to see them react to these reports. The first is February's Personal Income & Outlays report early Friday morning. This data helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending- related information has on the financial markets. If a consumer's income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.8% increase in income and a 0.6% rise in spending. Smaller than expected increases would be ideal for bond traders and mortgage shoppers. 

The final report of the week comes from the University of Michigan just before 10:00 AM ET Friday. Their revision to their March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers' willingness to spend. As with Tuesday's CCI report, rising confidence is considered bad news for the bond market and mortgage pricing. Friday’s report is expected to show a small increase from the preliminary reading of 71.8. Favorable results for bonds and mortgage rates would be a decline in confidence.

In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.

Overall, I believe Tuesday will be the most active day for mortgage rates with three reports scheduled, including the week’s most important (Durable Goods). I would not be surprised to see pressure in bonds Monday due to progress in Cyprus this weekend, so be prepared to see movement in rates today also. There doesn’t appear to be too much to be concerned with, however, any day could bring something unexpected that leads to a big move in the markets and mortgage pricing.