MBA - increase in applications
Mortgage applications increased 4.0% from one week earlier,
according to data from the Mortgage Bankers Association’s
Weekly Mortgage Applications Survey for the week ending April 29,
2011. The Market Composite Index, a measure of mortgage loan
application volume, increased 4.0% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index
increased 4.1% compared with the previous week. The Refinance
Index increased 6.0% from the previous week. The seasonally
adjusted Purchase Index increased 0.3% from one week earlier.
The unadjusted Purchase Index increased 1.1% compared with the
previous week and was 36.9% lower than the same week one year
ago. The four week moving average for the seasonally adjusted
Market Index is down 0.9%. The four week moving average is down
2.4% for the seasonally adjusted Purchase Index, while this
average remained unchanged for the Refinance Index. The
refinance share of mortgage activity increased to 62.7% of total
applications from 61.6% the previous week. This is the highest
refinance share of the month. The adjustable-rate mortgage (ARM)
share of activity increased to 6.7% from 6.5% of total
applications from the previous week.
Slow growth in the job market
Payroll processing company ADP said private sector payrolls grew
by 179,000 in April, after a upwardly revised 207,000 increase in
March. Economists were expecting a gain of 200,000 private sector
jobs, according to consensus estimates from Briefing.com.
Monthly gains in employment over the last four months have been
holding steady around 200,000 since the start of the year, ADP
said, which is "consistent with only modest declines in the
unemployment rate," the report said. Smaller businesses led the
charge in April. Medium-size businesses, defined as those with
between 50 and 499 workers, and small businesses, defined as
those with fewer than 50 workers, each added 84,000 jobs in the
month. Larger businesses, with 500 or more workers, added just
11,000 last month.
A separate report released today showed employers announced fewer
planned job cuts in April, even as government sector layoffs
mounted. The number of jobs cut fell 12% to 36,490 from March's
41,528, according to outplacement consulting firm Challenger,
Gray & Christmas. Year over year, job cuts dropped 5% from 38,326
in April 2010. Government positions dominated planned job cuts,
accounting for 10,731 job cuts last month, bringing the
four-month total to 52,660. Economists expect the unemployment
rate to hold steady at 8.8% while employers added 185,000 jobs in
April. For the full year, economists expect 2.3 million new jobs
- just under 200,000 per month - and an unemployment rate of 8.4%
by year end.
Bill creates new mortgage market
A bill to create a new market for financing mortgages that would
help wean the $10.6 trillion US mortgage market off government
support advanced in the House of Representatives Tuesday. The
bill aims to establish a market for covered bonds, securities
issued by banks and backed by pools of loans. The loans
underlying covered bonds remain on the issuer's balance sheet.
That is different from the current US mortgage system, where
lenders sell many of the loans they make to government-sponsored
Fannie Mae and Freddie Mac, which then repackage them as
securities for investors.
The Obama administration supports the legislation in the House
Financial Services Subcommittee on Capital Markets and Government
Sponsored Enterprises which is backed by voice vote legislation
from Republican Representative Scott Garrett. The bill would
have to be approved by the full committee, then the full House
and the Senate before being sent to President Barack Obama for
his signature into law. Garrett, of New Jersey, thinks a covered
bond market could lessen the role of Fannie Mae and Freddie Mac.
Senator Charles Schumer, a New York Democrat, said in March he
was considering introducing a version of Garrett's bill in the
Senate.
Factory orders up
The Commerce Department said new orders for manufactured goods
rose 3% to a seasonally adjusted $463 billion, well above Wall
Street economists forecasts for a 1.9% pickup. February orders
previously reported as having fallen by 0.1% were sharply revised
to instead show a 0.7% increase. Excluding volatile
transportation goods, March orders were up 2.6% following a 0.6%
February rise — an eighth straight gain in this key orders
category. Orders for primary metals, machinery and electrical
equipment all were higher in March though orders fell for
fabricated metal products and computers. Orders for non-defense
capital goods excluding aircraft — often taken as an indicator
of businesses future investment plans — were revised to show a
4.1% rise in March following a 0.9% increase in February. It was
the strongest rise in investment plans since a 5.1% increase last
August.
Olick - inside the foreclosure pipeline
"For the first time in years, a guy who quantifies the
foreclosure crisis got to report some good news. Kyle
Lundstedt's colleagues at LPS Applied Analytics call him Dr.
Doom, as he calculates all the numbers for the monthly Mortgage
Monitor Report. But this month he got to report a drop in
mortgage delinquencies, down more than 11 percent month-over
month, to the lowest level since 2008. 'We're starting to see
that there are a lot of folks who are still hanging in there,'
says Lundstedt. 'The population is a better credit quality
population.' The subprimes, Alt-A's, the bad lending of the
housing boom, have largely moved through the system already, not
to mention that big banks and servicers are getting far more
aggressive with loan modifications. One quarter of the loans that
were more than 90 days delinquent last year are now current.
That's not to say they will all stay current, but that's a good
sign.
Unfortunately, that's all Dr. Doom could muster on the bright
side: 'It's progress; it's not game-changing.' That's because
the foreclosure pipeline, that is loans 90+ days delinquent or in
the foreclosure process, is enormous. Foreclosure inventory is at
a new all-time high. There are so many loans still waiting to go
into foreclosure...in fact the total number of loans 90+
delinquent is 45 times the size of the current monthly
foreclosure sale number. 45 times! It would take 4 years, at the
current foreclosure sales pace, to process all those troubled
loans, and that's just selling the loans back to the bank, not
selling the foreclosed properties onto the housing market; you
can add another year for that. And that's why I'm not exactly
ready to call a bottom to home prices.
All that foreclosure inventory, for that long period of time,
will weigh on prices no question. But isn't it just in those few
bad states, like Florida, Arizona, Nevada and California? No.
Those were the states with the biggest subprime lending problems,
which means they have seen the bulk of the foreclosures completed
already. Yes, their volumes, their absolute levels, will be the
highest, but the greatest increase in REO (bank-owned) activity
is yet to come in places like the East Coast, the Rockies and the
Pacific Northwest. That's where the borrowers fell behind because
of unemployment and the recession, not because of the quality of
their loans. So is the foreclosure crisis over? I think that all
depends on the ultimate cost of the clean up."
WJS - mortgage rates down
Mortgage rates declined in the latest week, with the average rate
on 30-year fixed-rate mortgages edging lower, according to
Freddie Mac's weekly survey of mortgage rates. "Mortgage rates
followed Treasury bond yields lower this week amid weak local
economic data reports on business conditions and house prices,"
said Freddie Chief Economist Frank Nothaft. Mortgage rates
generally track Treasury yields, which move inversely to Treasury
prices. Rates have slumped for months, setting record lows in
the process, as yields on Treasurys slid amid economic
uncertainty. But yields began to rise at the end of August.
Mortgage rates generally track the yields, which move inversely
to Treasury prices.
The 30-year fixed-rate mortgage averaged 4.78% for the week ended
Thursday, down slightly from the prior week's 4.8% average and
5.06% a year ago. Rates on 15-year fixed-rate mortgages were
3.97%, down from 4.02% in the previous week and 4.39% a year
earlier. Five-year Treasury-indexed hybrid adjustable-rate
mortgages averaged 3.51%, down from the prior week's 3.61% and 4%
a year earlier. One-year Treasury-indexed ARMs were 3.15%, down
from 3.16% and 4.25%, respectively. To obtain the rates, the
fixed-rate mortgages required payment of an average 0.7 point and
the others required an average 0.6 point. A point is 1% of the
mortgage amount, charged as prepaid interest.
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