Karl's Blog

Monday, July 14, 2008

Latre Friday had some major market moving news come out after the markets closed, which followed through the weekend with fed meetings. Late Friday Indymac officially imploded and fell under the umbrella of the federal government. That Whole FDIC insured sticker on the window came into play and clients with more than $100,000 are now wondering what to do. Over the weekend the Federal Reserve and white house both set down plans on how to shore up the Freddie/Fannie issue, leading to an initial gain and then downturn in stocks. Add to that Bush ending lifting the ban on offshore drilling and we have a stagnant oil market. The hope today is that the bond market will be the big winner and so far it has been. The only concern is the chance of a turn in any of the markets will drop the bond like it did on Friday.   So far the bond has been hovering around 40-50 Bp up today. With investors still trying to digest all the news over the weekend (and some wondering if they are FDIC insured), I expect the real rally to happen later in the day. Keep a close eye out as this is going to be a fun ride. Until then, lets float in hope of better rates.

Karl Menzer

http://www.tooelehomeloans.com

435-849-0212

Friday, July 11, 2008

And so it goes again.  The bond started off on a very good note today up almost 60Bp toucing the 100 & 200 day moving average. All signs pointed to yes today and then...  Treasury Secretary Henry Paulson came out this morning with a short and not too sweet speech about how they were going to do something about Freddie and Fannie's financial crises. The not too sweet part was not explaining the when and how of it.  This initially hurt the Dow bringing it down well over 200 points and putting it below 11,000 for the first time in 2 years. The bond held ground most of the day, but trading took a turn for the worse about an hour and a half ago under fears that the government may just step in and take over the whole thing as opposed to the recent bailouts we have seen. Let's remember that the FNMA part of that bond is after all Fannie Mae.  Although it is likely we will see a really soon, we are firmly in the lock em' as you get em' mode.

Karl Menzer

http://www.tooelehomeloans.com

If you have a pulse odds are you have heard the Freddie fannie news. The bond has just turned negative. Although it may be short lived, if you have an accepted contract, i would have your clients lock to be safe. More to come in the bond report.

Karl Menzer

http://www.karlmenzer.com

Foreclosures are up, the dollar is gaining strength, and John Mayer admitted to a fling with a fan. Hey in this emotional market, anything can change the tide.  The biggest market movers today are Retired St. Louis Fed President William Poole's comments on how Freddie and Fannie are basically done and the government is propping them up (your retired dude act it), and Treasury Secretary Henry Paulson's testimony before the House Financial Services Committee basically stating the exact opposite of what Willy said. No wonder the bond is bouncing around today. The DOW is on a tech rally so we need to keep an eye for a selloff on one sector or another. Great gains or losses in the Stock market today will decide the bonds movement.  Now if we can just keep the retired Feds quiet...

As always if you have any questions, please don't hesitate to call.

Karl Menzer

435-849-0212

http://www.karlmenzer.com

Wednesday, July 09, 2008

Iran would test a missile that would reach Israel? Really?...  Although I don't see the surprise, investors did and retreated from the Dow today. They initially moved to oil, but then the Bond Gods shined down and gave us a massive drop in the Dow and oil seemed to settle. Finally, the market is moving like it is supposed to do. When worries arise, the bond is the safety net everyone climbs under. Although the FNMA 5.5% is only up 42 Bp, the real test is that it passed the 50 day moving average. Without much meat in any economic news this week, global threats, recession fears, and banking issues are going to be the big market mover.  As long as the FED reassures investors that they will do what it takes to help the mortgage crisis, the bond should hold.  We have a long way to go till 5.5%, but 6.125% on a 30 yr FHA will keep my clients happy. Although most are calling it a strong float day, I prefer the word cautious, as emotions, like small children, are given to tantrums.

Karl Menzer

435-849-0212

Http://www.tooelehomeloans.com

JOB MARKET

Weekly Jobless claims Jumped 16,000 from the previous week, along with beating estimates by 24,000. Unemployment nationally stayed the same, but with the number of layoffs announced this week it is expected to take a small rise in July. A sure sign that oil is hurting the auto industry and banking is still in the slumps, just take a quick look at the headlines and you will see companies like GM and Indy Mac dramatically reducing their workforce. Locally, we are still way below the nation with 3.2% unemployment and a job growth of 1.4% in Utah. A strong sign that we are still in pretty good shape.

BOND MARKET

Remember when bonds go down rates go up

Fannie and Freddie  Mac started off with worries, this week over fears that they needed to raise some fat cash to cover rising defaults. With the reassurance that they are in good standing mortgage backed securities (bonds) should be in better shape. For those who missed the implode-o-meter, Indy Mac has stopped accepting any new loans, a strong sign that we are far from over this mess.  With the recent run of comments from the FED board, both that we are not near the end of this mess, and the commitment that they are going to step up and help more, investors have a lot to digest before deciding what to do next.  

HOUSING MARKET

Existing home sales rose slightly in May. It may only be 2% but you take the good news when you can get it.  Median home prices did however drop to $208,600. Something expected with the tremendous growth in the past few years.  Not to be outdone, pending home sales (under contract) fell 4.7% in May. Take into account that some of those will fall through, and June ain't lookin' to purty. Statewide, our median sales price is holding much better at $235,500. Sales may be down, but with prices holding when sales do pick up we should be in a better position than most.

CURRENT RATES

 As of July 7^th      

30yr Fixed Average    15d                  6.38%

15yr Fixed Average    15d                  6.00%  

Source Freddie Mac

ONE LAST THOUGHT

Coming soon to a lender near you...RETURN OF THE SISA... Yes it sounds too good to be true.... And it is. What I have been seeing is that although you can "State" the income. Most Lenders (all) are requiring a 4506T to be signed by the borrower. This form allows the lender to pull tax records for the past 2 years to see if the numbers match the "stated" income. In the past it was a formality used only when the borrower went into default. Now however, most lenders (all) are using the form to get copies of taxes. If they don't match, the loan gets dropped. In short, you can state the income, but they better be able to prove it.... Isn't that called Full Doc? To really kill the buzz over it, the LTV is maxed out at 80%, and expect rates to be higher. It is kind of like the FHA secure program... sounds good on paper but not worth much more than that.

Number of lender who have shut their doors over this:   266

Karl Menzer

435-849-0212

http://www.karlmenzer.com

The late fear yesterday was that both Fannie Mae and Freddie Mac were in trouble and needed to raise some fast cash to stay afloat. With mortgage backed securities starting with FNMA, although the market was primed for better rates, no one seemed to be able to get past that.  It almost made the fact that Indy Mac was shutting its lending side seem trivial. Today the news (and bonds) is better. With the Fed coming out stating that they would do whatever it would take to fix this and Freddie and Fannie both saying that it was overstated,  rates are seeing something that they haven' seen in a while.... A re-price for the better.  The NAR also came out stating that pending home sales dropped 4.7% and are now not expecting the market to recover until 2009, something re-iterated by California Federal Reserve President Janet Yellen. Really giving a boost to us today is oil's slip of over $9 a Bbl in the past 2 days. It seems that Iran really isn't ready to go to war.  As I Type, The FNMA 5.5% is up 73 Bp for the day.  Lets keeps our fingers crossed.

Karl Menzer

435-849-0212

http://www.tooelehomeloans.com

Monday, July 07, 2008

Look up, look down, look all around.... Most of us remember how the last line goes, and it is about the same with mortgage backed securities today. The bond was down as much as 38 Bp when I started writing this article today... then it rebounded up 17 Bp, and now it is up 7 Bp for the day and 31 Bo since rate sheets came out. Without any major economic news today, the bond is taking the lead form the DOW and oil today. With the down giving up its earnings today and oil (thankfully) below $140, it looks (for the moment) like investors are still worried about upcoming 2Q earnings reports. Keeping the positive, the dollar gained some strength on currencies, also helpful in bringing down the cost of oil. We bounced off the level of support on the bond today, which is a good sign for rates staying in the same range for the time being. We are still in a lock mode though with the market as volitile as it is. As always, if anything changes, I will be sure to let you know.

Karl Menzer

http://www.karlmenzer.com

435-849-0212

Tuesday, July 01, 2008

For those of you who had the joy of living through the punk rock scene in the 80's you may remember a band called FEAR that had this lovely little ditty called "let's have a war". It seems like today the main market mover is the fear of just that. With Israel more comfortable pushing for war, while Bush is still in office, with Iran over the threat of nuclear weapons, like the ones that Israel has, oil is once again taking center stage. Add to this of a signed military budget that resembled more of WW II than a small conflict, and we have seen oil reach new record territory. Thankfully, for us, the DOW seems to be taking most of the brunt of this today, allowing the bond to remain flat for now. The big concern isn't about if rates will go up, but when. Let's stay in lock mode for now as any bargain basement shopping on the Dow today will come at the expense of the bond. 6.25% is what is available on a 30 yr FHA today. As always, if you have any questions, please don't hesitate to call, e-mail, fax, send smoke signals, etc.

Karl Menzer

http://www.karlmenzer.com

Monday, June 30, 2008

Bonds have remained flat for most of the day. Currently the FNMA 5.5% 60 yr is down 6 Bp for the day and has been between -6 and +12. With investors  looking at a $162 billion war spending bill marked for a volatile region, oil is where the eyes are today With oil passing a $143 a Bbl today, bonds are going to be hard pressed to make any major gains. The only potential mover out today was the Chicago PMI, which once again came in under 50 (showing contraction in the economy). With this number coming in close to estimates, it had little effect to the market. I would suggest locking for the short term and keeping a close eye on oil to see which way the speculators are going to send the market.

Looks like 6.25% is right there

Karl Menzer

435-849-0212

Http://www.karlmenzer.com