Monday’s Market Trends Recapby Tim Manni
In the latest issue of HSH’s Market Trends Newsletter, we discuss last week’s economic events, reports and how they influenced the economic environment. “Economy Sours But Rates Hold Steady; Loan Mods Modified Again” also begs the question that has repeatedly been on the minds of many: where are the “real incentives for the majority of Americas who aren’t getting a loan mod, bailout, or direct support?” We’re still waiting.
November 21, 2008 — The drumbeat of bad economic news continues, and grows louder. In other economic periods, this would often be accompanied by sliding fixed mortgage rates, but in the risk-averse and panic-market world of 2008, that’s simply not the case. Mortgage rates remain stubborn, reflective of the ongoing troubles in housing.
We saw a slight dip in rates this week. HSH’s Fixed-Rate Mortgage Indicator (FRMI) eased by seven basis points (.07%), finishing the week at an average 6.67%. Five-one Hybrid ARMs managed a larger downturn, losing 20bp to land at 6.32%.
Two weeks ago HSH published a story discussing the disappointing results and projections of HUD’s Hope for Homeowner’s program. Seemingly aware of the program’s immediate lack of results, HUD worked to improve the initiative:
The only-recently-underway Hope for Homeowners plan for modifying thousands of troubled first mortgages was significantly enhanced this week, and now seems to provide a much greater set of incentives for lenders to press forward with migrating borrowers into more affordable loans. Originally, lenders were required to write down the value of the first mortgage to a 90% LTV, and any second lien holder would get nothing but a token payment — and not even that until the home was sold at some point in the future. The new plan calls for a first-lien writedown of just 3.5% (96.5% LTV) and the second-lien holder to get a cash payment (of, so far, undeclared size) immediately upon the loan’s modification. The plan’s change seems likely to get the process into a much higher gear.
Despite reports that further prove our economy is tanking, we never fail to provide some good news:
If there’s one bright spot, it’s that gasoline prices continue their march downward, adding crucial dollars to stressed household budgets. After worsening the early stages of the economic downturn by absorbing billions of dollars out the economy at $4 per gallon, prices have now descended to below $2 per gallon.
To finish reading the rest of this week’s issue of HSH’s Market Trends Newsletter, click here. 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! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.