Monday’s Market Trends Recapby Tim Manni
This week’s issue of HSH’s Market Trends Newsletter, “Fixed Mortgage Rates Dip,” examines how recent economic conditions have affected the movement of mortgage rates. This issue also discusses how the recent housing bill that was signed into law will mesh with the current state of the market.
August 1, 2008 — There’s nothing like some weak economic news to help mortgage rates to retreat from recent highs. Rates stormed higher in recent weeks on inflation concerns, ongoing credit market troubles, and some spotty signs of firming growth, but aside from credit market difficulties, the other two factors have changed course somewhat.
The overall average noted in HSH’s Fixed Rate Mortgage Indicator (FRMI), the overall average interest rate for 30-year FRMs of all stripes — including conforming, jumbo and expanded conforming offerings — shed a full tenth-percentage point, landing at a flat 7.00% for the week. The overall average for 5/1 Hybrid ARMs continues to be erratic, declining by 16 basis points to close the survey week at 6.68%.
A bill to help stabilize the housing markets was signed into law this week, the centerpiece of which is the ability for lenders to pull bad mortgages off their books, take an immediate loss, and refinance borrowers into an FHA-backed loan. Some $300 billion was made available by Congress, and some predict that as many as 400,000 homeowners may ultimately be helped. However, the plan is voluntary, and lenders will need to cull through their loan books on a loan-by-loan basis to determine if such a plan (or a loan modification, or even a foreclosure) represents the best chance to recover their money. As such, the process may be a slow one, but loans already in the mid-to-late stages of foreclosure may be immediately affected, provided borrowers can qualify for the new mortgage. Our guess is that it will help some homeowners, but like other initiatives will fall well short of hoped-for goals. Still, it may help to clean up lender loan books more quickly, and that could in turn help promote some additional healing in borrowing and lending processes.
HSH’s free, weekly Market Trends Newsletter, an in-depth analysis of various financial markets of the week prior, is published every Monday. Email subscribers — receive it in your inbox by Friday night, so sign up today!