Some good news today….
NAMB Releases New Trend Data on 2007 Mortgage Markets
Conservative Trend Continues As Market Corrects
Washington, DC – July 24, 2007 – The National Association Mortgage Brokers (NAMB) (www.namb.org) today released new trend data that shows mortgage brokers continue to close fewer non-traditional or “subprime” loans than in 2006.The data is part of an ongoing survey of mortgage brokers nationwide that is conducted by NAMB’s research partner Wholesale Access Mortgage Research and Consulting, Inc. The latest update confirms that the trend toward more traditional loans continues to be the norm in 2007 as the market corrects from a decade-long housing expansion. “This data shows that brokers are anticipating and meeting the changing needs of their customers,” said NAMB President George Hanzimanolis. “The shift in the market toward more traditional loan products is yet another reason we have cautioned Congress not to overreact to existing concerns and allow the market to adjust.”Prime loans continue to make up the majority of all loans originated by mortgage brokers, according to the study. Though their share of the marketplace dipped slightly in April – to roughly 56%, down from 61% in March – prime loans were still by far the most widely used class of mortgages. In April, only 11% of all loans offered were subprime.In 2006, 13% of all loans offered were subprime loans, designed for homebuyers with credit scores below 620.“This ongoing study further puts subprime mortgage issues in perspective,” said Hanzimanolis. “For all the attention that these loans have received in the media, we’re talking about a small – and shrinking – portion of the homebuying market.”The survey responses came from more than 200 brokers, and were analyzed to compare types of loan products offered, adjustable versus fixed-rate offerings and combined loan to value ratios. To view a chart of these finding, click here.###The National Association of Mortgage Brokers is the voice of the mortgage broker industry with more than 25,000 members in all 50 states and the District of Columbia. NAMB provides education, certification and government affairs representation for the mortgage broker industry, which originates over 50% of all residential loans in the United States.Let’s hope this happens…..
Merrill Says Fed to Cut Rates in October on Slowdown (Update2) By Daniel KrugerAug. 6 (Bloomberg) — Merrill Lynch & Co.(http://www.ml.com/index.asp?id=7695_15125) said the Federal Reserve will cut interest rates in October as the turmoil in the credit markets and falling home prices slow U.S. growth. The central bank will reduce the target rate for overnight loans between banks by a quarter percentage point to 5 percent, Merrill chief economist David Rosenberg said in a report today. In June, Rosenberg said the central bank wouldn’t lower borrowing costs until next year. An almost 100 basis point increase in the difference in yields on corporate and government debt, a 15 percent decline in equities and another 5 percent drop in home prices will slow gross domestic product growth to 1.5 percent next year, Merrill said. The firm had predicted GDP of 2.3 percent. Rosenberg’s earlier forecast of a 4.25 percent year-end federal funds rate was among the lowest of economists surveyed by Bloomberg News. “The Fed will cut rates to 3.75 percent by mid-2008,” Rosenberg said today in the report. That would bring the Fed funds rate to the lowest level since October 2005. Merrill is one of 21 so-called primary dealer firms that trade directly with the Fed.
Market Line Reports Some Big News….
08/09/2007
The big news today is from overseas as the European Central Bank, in an unprecedented response to a sudden demand for cash from European banks roiled by the subprime mortgage collapse in the U.S., loaned $130 billion to alleviate a credit crunch. The U.S. Federal Reserve added $24 billion in temporary reserves to the U.S. banking system in a sympathy move. The credit crunch came as BNP Paribas, France’s biggest bank, halted withdrawals from three investment funds because it could not fairly value their holdings, which included subprime loans. Now here is something you will not hear from the news readers on CNBC or Bloomberg. It is not the subprime loans themselves that are the problem, as delinquencies on these loans are quite close to delinquencies on FHA/VA loans. The problem arises when a hedge fund raises capital to invest in bonds backed by subprime loans, and then uses that capital to borrow additional funds that are used to buy more bonds. This is called leverage and it increases the rate of return if all goes as planned. However, any hiccups along the way create the problems we now see. The value of the bonds is decreasing so the hedge fund is receiving a margin call, which in some cases they cannot meet, so the fund suspends withdrawals. The central banks get involved because the banks that lent money to the hedge funds are probably not going to be repaid, creating a loss to the bank. The Fed and ECB get involved as it is supposedly their duty make sure the banking system is sound, which will not be the case if the banks experience to many losses. This is a cliff notes version, but hopefully it helps you understand the problem. The U.S. treasury market rallied on a flight to quality bid as the equity markets were selling off. Stability seems to be coming back into the markets as the day progresses, so we may see the bid in the treasury market unwind.
Information provided by Southern California Mortgage Exchange
In addition, US Census stats were released today from the 2nd quarter . Demographic information can also assist you in various aspects of your business. Sign up for this free service….
“The economy grew at an annualized 3.4 percent in the second quarter of
2007, and the unemployment rate for the months of April, May, and June was
4.5 percent. Meanwhile, small businesses and consumers were more
pessimistic about the future than the previous quarter, according to the
new Quarterly Indicators: The Economy and Small Business.
A copy of the Quarterly Indicators: The Economy and Small Business can be
found at: http://www.sba.gov/advo/research/sbqei0702.pdf. For inquiries
about the quarterly indicators please feel free to contact Chad Moutray at
advocacy@sba.gov or (202) 205 6533.”
More Tomorrow…
Denise