Are You Ready? Is Your Lender Ready?

There is a big change coming later this year...All mortgage applications taken after August 1 will require the closing documents to be provided to the consumer at least three business days prior to consummation. This is thanks to the new TILA-RESPA Integrated Disclosure rule. I have attached a brief recap below. (I say brief because the actual document is over 1,600 pages).

Think about this for a minute: When was the last time your lender had your client’s closing package to the attorney and the attorney had all of the documents prepared 3 days ahead of closing? I know, it’s frightening to consider. Well, in less than 6 months, that is going to be the new reality for all of us.

Fortunately, for my team, we have exceeded getting all of our purchase closing packages to the attorney at least 48 hours in advance of closing, over 85% of the time, covering the past 4 years. But even with an exceptional track record like ours, we are going to have to raise the bar even higher.

Our goal, starting at the beginning of this year, is to get every purchase closing package to our attorney 72 hours in advance. Granted, we can’t hold the attorneys accountable at this point to also prepare their docs, but we can certainly keep up with our performance. The reality is that when we get to August, we will likely need to have our closing docs out at least 4 days prior to closing, to give the attorney a day to prepare the docs for signature. Raise the bar again!!

Change is a constant for all of us in real estate. I’d suggest you start thinking now about how you can tweak your own process and timeline. A simple example would be to make sure you are scheduling all home inspections within 3 days of contract acceptance. This will allow your lender to get the appraisal ordered sooner, particularly on a deal with a short time frame. And, you certainly need to be thinking through all of the potential contractual issues, those that are typical and those out of the norm that tend to come up at the last minute, causing a change to the contract affecting the numbers. Any change to the numbers affecting the Closing Disclosure will require a restart to the 3 day wait. It’s a brave new world!

I’d also suggest that you work with a lender that is prepared for what is coming. Those that consistently miss closing dates and/or have packages coming in at the last minute are going to struggle mightily with this. Now is the time to start preparing!

Click Here if you'd like to read a recap of some important related items.

Lions and Tigers and Bears, Oh My!!!

A couple of pretty important announcements/notices came out in the past week and a half that I thought worth mentioning (a couple of good ones and another – not so much):

Rates (Lions): Barry Habib, probably the most well-known prognosticators of mortgage interest rates, came out this week and boldly predicted that mortgage rates would actually fall in 2015.  The culprit?  He believes oil is driving the latest trend.  He is dead on right now as we are at the lowest level for fixed rates that we’ve seen other than the window of time from late 2012 to early 2013.

http://thenationalrealestatepost.com/barry-habib-predicts-big-rate-drop-for-2015/

FHA (Tigers):  In a move designed to bring more first-time homebuyers into the housing market, President Barack Obama said Wednesday the Federal Housing Administration (FHA), the government insurer of home loans, will lower its annual insurance premiums from 1.35 percent to 0.85 percent.  He didn’t give a timeframe, but indicated that it would be sooner than later.  This would in effect drop someone’s payment on the MI portion, assuming a purchase price of $200,000, from $217 per month to $137 per month (regardless of the interest rate).  That is pretty substantial and quite the statement that FHA wants back in the mortgage game.

http://www.cnbc.com/id/102318078

Fannie (and Bears):  On January 26th, Fannie Mae is rolling out its Collateral Underwriter (CU). The objective of CU is to assist lenders with assessing property eligibility and appraisal quality by providing risk scores, flags, hard stops and messages all in real time.  I use that term “assist” very loosely here.  There will be 21 different messages related to eligibility violations that can hold up a lender from being able to proceed with an appraisal if not properly addressed.  Comparables will be analyzed more thoroughly and in a more systematic way, requiring appraisers to be much more thorough with their analysis.  To prevent delays, it will be important to you and your clients that you are working with a great lender (I know one if you need a referral J) during this period of change with the way appraisals are going to be handled.  Found a great blog on the topic:

http://www.mortgageorb.com/e107_plugins/content/content.php?content.16311

Make it a great week!

Your Mortgage Matters

I mentioned in my update two weeks ago that I had a special gift for you. Hopefully by now you will have received a copy of "Your Mortgage Matters." I’m not much of a writer, and this is my first attempt at putting this type of instruction together in book form. But I think there is some really good information in there that applies to all homeowners, and especially those getting in position to buy their first home.

I’d love your feedback and I'm happy to provide additional copies if you know of friends/family/clients that might benefit from the information. And please let me know if you did not receive a copy.

Couple of quick industry notes:

• FHA is NOT Extending the Flipping Waiver. The flipping waiver was issued in Feb 2010, and allowed an FHA loan to be closed without the seller owning theproperty for 90 days  BEFORE a contract is written. They are Not extending this.  For contracts written Jan 1 and later,  seller must have owned/had title (recording date) for 90 days before a contract is written on Day 91.
• Fannie is rolling out the 97% loan. I’ll provide more information on this in a later update, but wanted you to be aware of new offering. It will be available for first-time homebuyers with good credit starting this week. My guess is the rate will be a little higher as will the cost of the mortgage insurance. As I mentioned in an update a couple of weeks ago, I wish Fannie would look at loosening the guidelines for income/asset documentation for customers putting 20% or more down with excellent credit. But I guess we’ll consider this progress and move on.  Ultimately, we will need to compare each customer’s individual scenario to see how the 97% conventional loan stacks up against FHA to determine which is better. But that is something I love to do for clients, so no worries there.
• Great article from Quentin Fottrell at MarketWatch on why home buying is now much more beneficial than renting. According to Zillow, US renters spent nearly 30% of their monthly income on rent in the third quarter of 2014 (versus 15% towards their mortgage payment not counting taxes and insurance). Here is the link to the article: http://www.marketwatch.com/story/buying-a-home-is-now-twice-as-affordable-as-renting-2014-12-11

Real Estate Tech Trends

How are buyers searching for property? Where do buyers/sellers come from and what information do they find useful? How important is communication and what is the role of technology? These are just some of the questions answered in a commentary by Properties Online Inc. Click the link below and check out one of the most informative articles you will read this year.

Here are some quick stats from the piece:

• Mobile apps and searches increased over 400% from 2012 to 2013
• Searches in newspapers have dropped over 50% from 2007 to 2013
• Roughly 80% of buyers found pictures and detailed property information very useful in their search versus just 19% using videos
• Over 50% of buyers/sellers chose a Realtor from referral or past use
• There are some very interesting statistics from California (maybe where we are heading) about where buyers/sellers found their real estate agent
• Communication and expected response time from buyers/sellers might surprise you
• Social media must become a tool for you (Facebook is currently king)

It’s worth a 5-10 minute read. Click below. Have a great week!

http://propertiesonline.com/Reports/annual-real-estate-trends-report.pdf

Best Deal in Town

We just closed a deal this week where the buyer bought a $200,000 priced home with only $300 out of pocket and got a 30 year fixed rate at 3.25%. How in the world was that possible???

He got a USDA loan. I mentioned in an update a couple of weeks ago how USDA has expanded their lending territory from a geographical standpoint – including all of Wilson county and now even including small sections of Davidson county that boarder outlying counties. While I realize that this program only applies to people wanting to buy in these areas, and having income that fits within the household limit (which for most of the counties around middle TN is $77,200 per year), it is a program that you should definitely be familiar with.

In the case referenced above, my buyer’s agent was able to negotiate a contract where the seller paid the buyer’s closing costs. USDA allows the buyer to obtain 100% financing, so that combination created the ability to get our client into the property for virtually no money out of pocket. The monthly fee that USDA charges for “mortgage insurance” (they call it a guarantee fee) is less than 40% of what FHA charges and the rates are fantastic.

Click the link below to learn more about income eligibility and property eligibility. There might be an opportunity here for a client that could surprise you.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

A Personal Dilemma (Part 2) The Solution

I shared last week about my dilemma of the disconnection between what I’m selling and what the ultimate end user is buying. I sell service, but my customer, a borrower wanting a home loan, is buying a commodity. Earlier in the year, I had one of my best referral partners make this comment to me: “Mike, you provide better coaching and communication than any loan officer in town, but your rates are killing you.” He went on to tell me about another lender, who is actually a friend of mine, “He provides great service too, but he also has the best rates in town. That is an unbeatable combination. You only offer one of the two.” That statement has been haunting me for almost six months.

Knowing that home buyers want the best deal as their number one priority, I have spent the summer talking to numerous banks and mortgage companies comparing rates and fees. I want my clients, both referral partners and the borrowers they refer, to know that when they call me, they don’t have to worry about someone else offering a better deal. I’ve been giving my clients what I want to give, which is a great service platform. Now I’m also going to give what the client wants, and that is the best deal. So after much prayer and research, I have decided to move my mortgage practice to a place that will allow me to offer both, F&M Mortgage.

It is a win-win combination for everyone and I can’t tell you how excited I am to be able to offer this!

The Week Ahead
Looking ahead, there will be a summit on Saturday between EU officials and Ukrainian officials. This may lead to additional sanctions against Russia. In the US, the important monthly Employment Report will be released on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, ISM Manufacturing will be released on Tuesday. The ADP Employment Change will come out on Wednesday. Productivity and ISM Services will be released on Thursday. Mortgage markets will be closed on Monday in observance of Labor Day.

The Week That Was
The US economic data released last week struggled to elicit a reaction in the market. Instead, investors focused on increased expectations for asset purchases by the European Central Bank (ECB). This news was favorable for US mortgage rates, which ended near the lowest levels of the year.

The ECB has a reputation for being tougher on inflation than the Fed, and monetary policy has been tighter in the euro zone than in the US. Recent comments suggest that the ECB is headed in the opposite direction, though. While an improving US economy has caused the Fed to wind down its bond purchase program, ECB officials have expressed growing support to implement an asset purchase program to counter weak euro zone economic growth. Investors have added European bonds to their portfolios ahead of this expected added demand from the ECB, pushing their yields lower. This has made global bond yields in other regions relatively more attractive, including US mortgage-backed securities (MBS). The extra demand for MBS has helped push down mortgage rates.

Recent data on the US housing market has been mixed. The Existing Home Sales report released last week showed nice improvement, while this week's New Home Sales data revealed a slight decline. The July Pending Home Sales report, which is a leading indicator of future activity, rose to 105.9, the highest level since September 2013. The National Association of Realtors (NAR), which issues the report, defines a reading of 100 as an "average level of contract activity".

A Personal Dilemma

For the last few years, I’ve struggled with a fundamental flaw in my business. I sell service. I provide a phenomenal process for my clients. We communicate incredibly well with all parties involved. I have 24+ years of experience that I use to counsel homeowners and homebuyers on the best way to use their resources to finance their homes and try to help them do that in a manner that meets their lives’ overall financial goals. My referral partners know this and know that we navigate the process in a manner that gets our clients to closing efficiently.

But, in the end, my borrowing clients are ultimately buying a commodity – a mortgage. Sure, they are concerned about the service they receive, but ultimately the customer’s decision is based on the product they will receive. They want the best deal (the rate and fee combination that the mortgage I sell offers). So there is a disconnect.

What I’m selling, superior service, is ultimately not what the customer has as his or her number one priority. It is important, but if my product is not better than those selling the same product, my sale is in jeopardy – regardless of the level of service I provide.

So what can I do about my dilemma? I think I have a solution – be sure to tune in to next week’s update….

Have a great week!

New FICO Scoring Coming

I read an interesting article this week called "How FICO’s New Scoring Could Boost Your Score."

Here are the main takeaways from the article:

1. If you have medical bills in collections, you may see your credit score rise.
2. Paying off a bill in collections now makes sense.
3. Some consumers may now receive better loan rates.
4. The new credit score system will take a while to implement.

Click the link below for the full story.

http://www.cbsnews.com/news/how-ficos-new-scoring-could-boost-your-score

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
This week, investors will continue to closely monitor the situation in Ukraine. In the US, the Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Tuesday. CPI looks at the price change for finished goods which are sold to consumers. Housing Starts also will be released on Tuesday. The FOMC Minutes from the July 30 Fed meeting will be released on Wednesday. These detailed Minutes provide additional insight into the debate between Fed officials. Existing Home Sales and Philly Fed will come out on Thursday.

The Week That Was
An escalation in the conflict in Ukraine was favorable for mortgage rates last week. Concern about the pace of global economic growth also was positive for mortgage rates, which ended the week near the lowest levels of the year.

Investors remain very sensitive to geopolitical events. This was evident on Friday when news services reported that Ukrainians destroyed part of an armed Russian convoy which had crossed the border into Ukraine. A shift to safer assets quickly took place, causing stocks to decline and increasing the demand for bonds, including mortgage-backed securities (MBS). This added demand for MBS pushed mortgage rates lower.

One concern about the conflict in Ukraine is that it will reduce the level of economic activity in Europe. Euro zone second quarter GDP data released this week revealed very weak growth. Sanctions imposed on Russia are adding to the burden, and any additional sanctions would create an even larger obstacle for the economies in the region to overcome.

In the US, the economic news showed that some parts of the economy are slowing as well. The biggest report was Retail Sales, which account for roughly 70% of US economic activity. During the end of the first quarter, Retail Sales showed a nice bounce back from depressed levels due to unusually severe winter weather. The momentum did not continue, though. For the last several months, the gains in Retail Sales have been diminishing, and the July data showed no increase from June. Slower economic growth reduces future inflationary pressures, which is positive for mortgage rates.

Millennials Balk at Buying

I read a great article in “Real Estate and Lending Insider” about the significant shift in our market concerning first-time home-buyers (link to the article is below). Market conditions have improved greatly for home-buyers since 1984, yet first-time home-buyers are now more hesitant than ever to buy.

Check this out (2014 percentages based on data through May):

First-time buyers affordability index: 1984 – 64.9 | 2014 – 116
Interest rates: 1984 – 13.9% | 2014 – 4.1%
Mortgage payments as a share of income: 1984 – 28.2% | 2014 – 14.2%
Unemployment among 24-25 year olds: 1984 – 7.9% | 2014 – 6.9%
1st home-buyers as a share of the market: 1984 – 37% | 2014 – 27%

All the statistics indicate the market is more favorable for first-time home-buyers today than it was 30 years ago. Yet, the percentage of first-time buyers is down 10% from that point and even further when you consider that historically, the market has been closer to a 40% concentration rate of first-time buyers. Why are first-time home-buyers now so hesitant to buy? Couple of thoughts:

• Student loan debt is bogging first-time buyers down (see my weekly update on 7/28/14 - https://www.facebook.com/MikeSmallingMortgageAdvisor )
• They viewed the financial meltdown in 2006-09 from the front row – became the first group in a long time to realize that housing prices don’t always go up.
• They like renting and the lifestyle that goes with it.
• They are not ready to commit to the responsibility of home ownership.
• Qualifying guidelines are more stringent for obtaining a loan than they’ve been in a long time.

So what do we do?

We have to start providing more education to this generation on the benefits of homeownership and how to prepare for it – and it probably starts in high school, before they become jaded by debt (particularly student loans). But therein lies the problem: those that need to hear the message are so young that they won’t be potential homeowners for at least a half a decade or more. So there isn’t any money to be made educating that group – at least not now. Let’s do it anyway. It will cure a lot of ills and give us a pipeline of customers down the road.

http://martinhladyniuk.com/2014/07/11/hes-the-top-u-s-mortgage-salesman-his-daughter-isnt-buying-it/

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
The conflict in Ukraine will remain a primary focus this week. The biggest economic report will be Retail Sales on Wednesday. Retail Sales account for about 70% of economic activity. Before that, the JOLTS report, which measures job openings and labor turnover rates, will come out on Tuesday. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Friday, along with Industrial Production. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

The Week That Was
With a light slate of economic reports last week, the conflict in Ukraine had the greatest effect on mortgage rates. Shifting sentiment about the likelihood of escalation caused some market volatility during an otherwise quiet week. Mortgage rates ended the week a little lower.

On Tuesday, a Polish official suggested that Russia is massing troops on the border with Ukraine to prepare for an invasion. While there has been a lot of debate about the accuracy of this statement, just the suggestion was enough to worry investors. The concern centers around how the US and European nations would respond. Another round of sanctions would be expected. The level of uncertainty about the outcome of this conflict is very high.

Europe is still struggling to avoid another recession, and trade restrictions with Russia make this even more difficult. GDP growth in the euro zone has been just slightly positive for four quarters after several years of negative readings. Since slower global economic growth reduces future inflationary pressures, this has been favorable for mortgage rates.

A Great Story of Real Estate Success

It seems like we’ve been reliving one horror story after another for the past 6 years about people who bought a home in the 2005 – 2008 range and either lost it all or have been playing the waiting game, hoping to see their equity restored to the level where they purchased. I can’t even count how many clients I’ve counseled over the past few years who have nightmare stories like this. So I thought I’d share a quick story of real estate success!

We closed a loan in February of last year for a client that bought a home over in East Nashville for $240,000 (using an FHA loan). Without doing any significant renovations, he sold it this month for $350,000. Not a bad 18 months worth of appreciation (it’s over 30% annualized if you are doing the math). He was able to take the proceeds from the home he bought last year and buy another comparably priced home this month with an 80% conventional loan, eliminating the $250 per month mortgage insurance that he had been paying on the previous loan.

Is this an exception? Absolutely. But it sure is nice to hear stories like this versus the ones we’ve been hearing for years.

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
The economic calendar will be very light this week. ISM Services and Factory Orders will be released on Tuesday. The Trade Balance and Productivity will come out later in the week. None of these reports are generally market movers. Investors likely will be more focused on events outside the US. The number of potential trouble spots around the world has increased. Growth fears in Europe, conflicts in Ukraine and the Middle East, banking troubles in Portugal, and a debt default in Argentina all could influence US mortgage rates.

The Week That Was
In a packed week, the two big economic reports were the main drivers of mortgage rates. The outperformance of the GDP data relative to expectations outweighed the small miss in the Employment report, causing mortgage rates to end the week a little higher. Last week's Fed meeting contained no surprises and had little impact.

Investors expected that the economy had bounced back during the second quarter from weather related weakness in the first quarter, but they were still caught by surprise by the strength of Wednesday's GDP report. The first reading for second quarter GDP, the broadest measure of economic growth, showed an increase of 4.0%, far above the consensus of 3.0%. In addition, revisions to the first quarter results caused improvement from -2.9% to -2.1%. Second quarter recovery was seen in nearly every area, including the key components of Consumer Spending and Business Investment. The GDP report was great news for the economy, but faster growth raises future inflationary pressures, which is negative for mortgage rates.

Friday's Employment report also showed continued improvement, but it fell slightly short of investor expectations. Against a consensus forecast of 230K, the economy added 209K jobs in July. The Unemployment Rate increased from 6.1% to 6.2%. Average Hourly Earnings, a proxy for wage growth, came in below the consensus. Bottom line, the sixth straight month of job gains above 200K was also great news for the economy, but because investors had anticipated even stronger results, mortgage rates declined following the news.

My Client Loves the House, Except...

Have you ever had a client almost love a house, but would really want to buy if it just had that one thing that’s missing? Have I got great news for you.

With our new Cornerstone Renovation loan program, your clients can buy a home and renovate it at the same time! It doesn’t matter if the renovation job is big or small. You can add a bedroom or just replace the kitchen counter-tops. Your client can get that repair done that the seller is unwilling to make, or just improve the house in conjunction with the purchase. Either way, this program works.

Another great feature- this is a conventional loan. No mortgage insurance is required if the loan to value is 80% or less. If a larger loan to value is needed (up to 95%), conventional mortgage insurance applies versus FHA. For borrowers with excellent credit, this is a huge advantage. This program works like a 203K, but is a Fannie Mae program – so conventional guidelines apply versus FHA. The loan to value is based on the acquisition cost (sales price plus renovation costs) or appraised value – whichever is less.

Highlights:

• One loan and only one closing
• Loan to value up to 95% on owner occupant properties
• Second homes and investment properties allowed
• Up to 6 months of housing payments can be financed if house is not habitable during construction (if supported by appraisal)
• Good for room additions, foundation work, in-ground pools, decks, and any permanently-affixed interior or exterior renovations that add value to the property

Call me if you have any questions!

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
This week, the focus will remain on the Middle East and Ukraine. Increased tensions in either region likely would cause a larger flight to safety. In the US, the Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Tuesday. CPI looks at the price change for finished goods which are sold to consumers. Existing Home Sales also will come out on Tuesday. New Home Sales will be released on Thursday. Durable Orders, an important indicator of economic growth, will come out on Friday.

The Week That Was
Geopolitical events were the primary influence on mortgage rates again last week, while the economic data had little impact. After a quiet weekend, investors were willing to take on a little more risk early in the week. Shocking news on two fronts caused an abrupt reversal on Thursday, however, and mortgage rates ended the week just slightly higher.

When a conflict breaks out which could affect global markets, investors generally respond with a "flight to safety". Uncertainty created by the threat of escalation causes investors to reduce the level of risk in their portfolios. This typically involves shifting from stocks to relatively safer assets such as gold and bonds, including mortgage-backed securities (MBS).

Heading into the previous weekend, investors were concerned about the possibility of an escalation in the conflict between Israel and Gaza, so they shifted to safer assets. When there was little change in the situation early last week, investors unwound these positions, pushing rates higher. Then on Thursday, Israel announced a ground offensive in Gaza and a Malaysian passenger plane was shot down in Ukraine. These events caused investors to quickly return to safer assets, offsetting much of the earlier rise in rates.

In the US, there was mixed news from the housing sector. The National Association of Home Builders (NAHB) Housing Market Index revealed that builder confidence jumped sharply in July to the highest level since January. Less positive, the Housing Starts data released last week, which covers the month of June, showed a decline of 9% from May. This data can be quite volatile from month to month, though.

Financing MI on a 90% Loan Versus the 80-10-10

For many years, borrowers have been able to put down 10% and avoid mortgage insurance (MI) by doing a piggyback loan, or an 80-10-10, where there is a 10% down payment and a 10% second mortgage to go with an 80% first mortgage.  But now that Fannie and Freddie have increased pricing for the combo route, there isn’t as much benefit as there used to be with the combo.  Assuming we are talking about a borrower with a great credit score (740 or above), there is a .75 bump to the points (which is the equivalent of .125-.25% in rate) when doing a combo.  The cost to pay the MI up-front on a 90% loan is 1.29 points, or a bump to the rate of .25-.375%.

So here is an example:  Sales Price is $250,000 and borrower has 10% to put down.  For example purposes, we’ll say that the rate would have been 4.25% for this same customer if he/she had 20% to put down.  Option 1 is to do the 80-10-10.  The rate would be 4.5% on the first mortgage and probably prime plus 1.5% on the second (a home equity line of credit with interest only payments and prime is at 3.25%).  Option 2 would be to do a straight 90% loan paying the MI up-front, but building it into the rate, which would be 4.625% in this example.

• Option 1 (80-10-10):  P&I - $1,013 plus payment for second mortgage of $99 (interest only at prime plus 1.5%);  Total: $1,112
• Option 2 (financed MI): P&I: $1,157

So the 80-10-10 still offers a better payment solution in this example ($45 per month cheaper).  But it also means that $25,000 of the total money borrowed is on a fluctuating rate (subject to change with prime) and interest only is being paid.  Versus Option 2 where the total amount of the loan is fixed, so no adjustments to worry about, and principal is being paid towards the entire balance.  We still use the 80-10-10 regularly, particularly for clients that plan on making significant principal reductions to the second mortgage over the short term.  But doing the deal with the straight 90% loan, financing the MI, probably makes more sense if the borrower has no intentions of paying extra.  We will counsel the borrower on which one makes the most sense for the specific situation.

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
This week, investors will continue to monitor events in Europe and the Middle East. The biggest US economic report will be Retail Sales, which will be released on Tuesday. Retail Sales account for about 70% of economic activity. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Wednesday. Industrial Production and NAHB Housing also will be released on Wednesday. Housing Starts and Philly Fed will round out the schedule on Thursday.

The Week That Was
Unexpected events outside the US had the greatest influence on mortgage rates last week. Violence in the Middle East and economic concerns about Europe caused investors to shift to safer assets, helping mortgage rates. Bond friendly comments from the Fed added to the improvement, and mortgage rates ended the week lower.

During periods of uncertainty, investors commonly reduce the risk in their portfolios. Generally, they shift from riskier assets such as stocks to relatively safer assets such as gold or US guaranteed bonds, including mortgage-backed securities (MBS). Added demand for MBS helped mortgage rates to improve last week as investors were confronted with concerns on two fronts. Violence in Israel caused tensions in the Middle East to increase. In addition, there were signs that the largest bank in Portugal may default on its debt. This caused investors to question the level of reserves held by the banks in Europe and the outlook for economic growth in the region.

The news from the Fed last week also was favorable for mortgage rates. There were no big surprises in the FOMC Minutes from the June 18 Fed Meeting and no new guidance on the timing of the first fed funds rate hike. The positive news for mortgage rates came as the Fed provided a little more detail on its plans for its mortgage-backed securities (MBS) portfolio. The Fed's portfolio has been growing at a scheduled pace as the Fed has been reinvesting principal payments received and adding new MBS. The Minutes indicated that the purchases of new MBS will end in October as expected. After that time, the Fed plans to continue to reinvest principal payments received, which will hold the size of its portfolio steady, at least until the first fed funds rate hike. Principal payments have been averaging $16 billion per month, so investors were pleased that the reinvestment will continue for quite a while, as the added demand for MBS helps keep mortgage rates low.

Communicate And Close On Time - It's What We Do

It is a very rare occasion that I use this format to promote what we do here at Cornerstone. I heard something last week that just made me laugh. A buddy of mine, who works for a competing mortgage company here in town (a large bank), told me that in his regional meeting this past week, their regional manager was commending them on increasing their “closing date met efficiency” to 56% in the month of May. In other words, he was pleased that they met the expected closing date a little over half the time. Are you kidding me???

When we opened our Cornerstone office 3.5 years ago, I spent a lot of time interviewing referral partners and potential referral partners asking them what were the most important things for them when working with a mortgage professional. I made a list from a variety of answers such as good rates, great programs, experience, ingenuity, friendliness, availability, etc...  But the two items that were on everyone’s list were Effective Communication and Close on Time. So that has been our focus here. I believe that we offer all the other items on the list as well, but our only real focus is closing on time and communicating well along the way.

We have created a process that is super efficient. Other than a handful of situations outside of our lending process, we haven’t missed a purchase closing date in 3 years. We also communicate in an incredibly effective manner. We have at least 10 touch points with each customer and another five with our clients’ Realtor throughout our process. Over the past 18 months, we have delivered our purchase closing packages to the attorney 48 hours or more in advance of the closing 86% of the time. For us, it is a complete failure if the HUD is not prepared and ready for review 24+ hours in advance of the closing.

If a customer wants nothing but the best rate, s/he should go to the internet to get their loan. I’m certain they can find an interest rate that can beat local lenders. But if they want to close on time and have an efficient process built on effective communication, while still getting a good rate and product, we are tough to beat.

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
This week, the JOLTS report, which measures job openings and labor turnover rates, will come out on Tuesday. The FOMC Minutes from the June 18 Fed meeting will be released on Wednesday. These detailed Minutes provide additional insight into the debate between Fed officials. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

The Week That Was
The big story last week was that job gains in June were significantly higher than expected. Since faster economic growth adds to future inflationary pressures, though, this was negative for mortgage rates, which ended the week higher.

Against a consensus forecast of 210K, the economy added 288K jobs in June, and the figures for April and May were revised higher as well. This was the fifth straight month of job gains above 200K which has not occurred since the late 1990s. The Unemployment Rate declined from 6.3% to 6.1%, the lowest level since September 2008. Average Hourly Earnings, a proxy for wage growth, were 2.0% higher than one year ago. This was a solid report nearly across the board.

Given the surprising strength of recent job gains, the increase in mortgage rates could have been larger. One significant factor in the jobs data has remained favorable for mortgage rates, however. The 2.0% annual rate of wage gains is relatively low by historical standards and creates little concern for future inflation. Fed Chair Yellen has described wage inflation as one of the important indicators of when the Fed needs to raise the fed funds rate. If the pace of wage gains were to increase, then Fed officials would face more pressure to tighten monetary policy.

6 Things Highly Productive People Do Every Day

I read a great article this week that I want to share. You may do several of these things already, but I thought if you get even one additional idea, it is worth the read.  You can read the FULL ARTICLE HERE

Here is my quick recap:

1. Manage Your Mood
   a) If you start the day calm, with a routine, it’s easy to get the right things done and focus.
   b) Studies demonstrate that happiness increases productivity and makes you more successful.
2. Don’t Check Email in The Morning
   a) When you read an email, you are putting yourself in position to react instead of taking initiative.
   b) You wind up giving your best hour(s) of the day to someone else’s goals instead of your own.
3. Before You Try To Do It Faster, Ask Whether It Should Be Done At All
   a) Many times the answer to “Why can’t I get everything done?” is because I’m trying to do too many things.
   b) Do what is important AND NOT MUCH ELSE.
4. Focus Is Nothing More Than Eliminating Distractions
   a) Distractions make us stupid.
   b) Have a place that you can “hideout” and escape distractions – for at least portions of the day.
5. Have A Personal System
   a) Productive people have a routine.
   b) Great systems work because they make things automatic – and don’t tax our very limited supply of will power.
   c) Adapt a system using the 80-20 rule where you spend 80% of your time and energy on the most important activities.
6. Define Your Goals The Night Before
   a) Research proves that you are much more likely to accomplish something when it is specific and written down.

Have a great week!!

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
With the current focus on inflation, Thursday's report on the May Core PCE price index will be significant. Investors also will be watching the housing data next week. Existing Home Sales will be released on Monday and New Home Sales will come out on Tuesday. Durable Orders, an important indicator of economic activity, will be released on Wednesday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Outside the US, the situation in Iraq will remain the primary focus.

The Week That Was
Inflation concerns were the main influence on mortgage rates last week. A surprising jump in CPI caused mortgage rates to rise on Tuesday. The Fed downplayed the threat of high inflation on Wednesday, however, causing mortgage rates to decline. The net result was that mortgage rates finished the week a little lower.

The May Consumer Price Index (CPI), one of the most widely watched inflation indicators, was 2.1% higher than one year ago. Core CPI, which excludes food and energy, was 2.0% higher, up from an annual rate of 1.6% just two months ago. Core CPI has now reached the Fed's stated target level for core inflation of 2.0%. Another inflation indicator released this week, the prices paid component of the Philly Fed report, also showed a sharp increase. Since expectations for future inflation are a primary factor in setting mortgage rates, this data was unfavorable for rates.

The impact of the negative news did not last long, however. While Wednesday's highly anticipated Fed statement was very similar to the prior one, Fed officials indicated little concern about inflation. Comments from Fed Chair Yellen suggested that current readings reflected normal volatility in monthly inflation data and that the recent uptick did not change the Fed's long-term forecast. In addition, Fed officials place more weight on a separate monthly inflation report, the Core PCE price index. Core PCE measures a different basket of goods than Core CPI, and Core PCE recently has provided readings a good deal lower than Core CPI. In short, looking at Core PCE, inflation remains well below the Fed's 2.0% target, giving them comfort in maintaining an accommodative monetary policy. Not all investors are as confident as the Fed that inflation will remain low, though, and this will be an important area to watch in coming months.

Integration - Taking Balance to the Next Level

"The goal is not just balance, it is integration"

I heard this quote earlier in the week and it has really resonated with me. My goal has always been to have a well balanced life – so that I’m devoting the proper time and attention to the things that are important to my life’s purpose. It doesn’t matter if it is work versus family/play time, eating habits, sleeping habits or exercise – I want to have a positive balance with all those things! I think balance makes sense because I can measure it. In other words, I can examine a 24 hour day and monitor exactly how I spend every hour, making sure that all of the important components of my life’s priorities get their allotted time requirement. Or, I can examine my diet or exercise routine and monitor exactly what I am consuming or the effort put forth in the gym. I’m not saying it is easy to accomplish balance, I’m just saying it is somewhat easy to measure.

But is balance as important as integration? I looked up the term “integration” and it simply means the act or process of making whole. Integration is more than just making sure everything gets its proper attention. To me, it is living out my life’s purpose- taking all of my life’s priorities, those that I’ve always wanted to make sure have the proper balance, and mingling them all together so they are all part of an interwoven theme. Everything I do then becomes integrated for my life’s purpose. Exercise and diet become the fuel that allows my body to be the best it can be for my purpose. My work, my family time, my relationships, how I rest and recreate all become woven together, or integrated, for this same beneficial purpose.  This becomes the motivation then for everything I do.

Having balance is great, but when everything I do becomes part of my life’s purpose and vision, balance takes care of itself.

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
This week, the big news will be Wednesday's Fed meeting. Investors will be looking for hints about when the Fed will begin to raise the fed funds rate. The biggest economic data this week will be Tuesday's release of the Consumer Price Index (CPI), the most closely watched monthly inflation report. Industrial Production, Housing Starts, and Philly Fed also will come out next week. In addition, investors will be keeping a close eye on the violence in Iraq. Further escalation could cause investors to shift to safer assets.

The Week That Was
Mortgage rates were influenced by a wide range of factors last week, resulting in a good deal of volatility. Violence in Iraq, comments from the Bank of England, divergent US Treasury auction results, and mixed US economic data all had an impact. Overall, the unfavorable news slightly outweighed the favorable, and mortgage rates ended the week a little higher.

Improvement in the labor market is clearly good for the economy, but it is a negative factor for mortgage rates. Following solid job gains in last week's Employment report, this week's indicators also suggested that the labor market is gaining strength. The JOLTS report measures job openings and labor turnover rates. Because it helps to construct a more well-rounded view of labor market conditions, Fed Chair Yellen is a fan of this data. It showed that job openings jumped to 4.5M in April. This was the highest level in seven years. In addition, a May survey of small businesses revealed that optimism rose to the highest level since September 2007. Small businesses are an important source of job creation.

While many factors affected mortgage rates this week, it was notable that one formerly significant report has lost much of its influence. The May Producer Price Index (PPI) showed a decline from April, while the forecast was for a small increase. This followed a much larger than expected increase in April. At the start of the year, the calculation of PPI was changed to include price changes in services in addition to goods. PPI now captures roughly 75% of the economy, up from around 33%, but the new components make the measure much more volatile month to month. As a result, investors are less likely to react to swings in the PPI data.

Home Prices Continue To Rise BUT, Is That All Good?

According to the latest report from Corelogic, home prices rose year over year for the 26th consecutive month in April. Furthermore, the Federal Reserve reported that due to rising home prices, household equity increased by $758 billion in the first quarter alone. While that is great for so many homeowners who lost a tremendous amount of equity in their homes during the Great Recession, what is it doing to home affordability now and moving forward?

According to a report just provided by Hart Research Associates, over half of Americans (52%) have had to make at least one major sacrifice in order to cover their rent or mortgage over the last three years. These sacrifices include getting a second job, deferring saving for retirement, cutting back on health care, running up credit card debt, or even moving to a less safe neighborhood or one with worse schools.What’s more, the report also showed that at least 15% of American homeowners are living in housing markets where the monthly mortgage payment on a median-priced home requires more than 30% of the monthly median household income. The 30% figure has always been considered  the maximum for rent/mortgage repayments.

Although mortgage rates are still very low, the three most common hurdles for buying a home (which are down payment, credit and tighter underwriting guidelines), especially among young people, still exist. The attached article indicates that ~84% of young people are delaying major life decisions due to the poor economy – and that the slow jobs recovery for them has made saving money difficult. That is likely to be a continued drain on home buying moving forward as first time home buyers represent around 40% of all buyers right now. Increased prices have also caused many investors to jump back on the sidelines as the great deals are no longer available, adding another drain to future home purchases.

So while rising values have certainly helped millions gain back lost value from the recession, it has created other challenges for new homebuyers moving forward.  The good news is that our market continues to be very resilient, still providing quality opportunities for progress.  But we are going to have to be on our A game going forward and continue to add value to our clients in the service we provide.  When we do that, we will continue to see personal success regardless of the market conditions.

Click to read the FULL REPORT

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
This week, the biggest report will be Retail Sales, which will be released on Thursday. Retail Sales account for about 70% of economic activity. Before that, the JOLTS report, measuring job openings and labor turnover rates, will come out on Tueday. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Friday. Consumer Sentiment and Import Prices will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

The Week That Was
Ahead of two major economic events, mortgage rates moved higher early in the week. When there were few surprises in either the Employment report or the ECB announcement, though, mortgage rates recovered some of their losses and ended the week just a little higher. This was the first weekly increase in rates in six weeks.

After slowing over the winter due to unusually severe weather, the economy has seen job gains above 200K over the last several months. This was the first time in 14 years that job gains exceeded 200K for four straight months. Against a consensus forecast of 210K, the economy added 217K jobs in May. The Unemployment Rate was flat at 6.3%. Average Hourly Earnings, a proxy for wage growth, were a moderate 2.1% higher than one year ago. The May Employment data was right on target with the forecasts in nearly every area.

The European Central Bank (ECB) took a middle of the road approach in easing its monetary policy. After weeks of hinting that further monetary stimulus is needed to boost economic growth, ECB officials announced a rate cut on Thursday. They also will implement measures to encourage bank lending. Investors were most interested in hearing about a bond purchase program, but ECB President Draghi essentially just suggested that they were holding this key option in reserve to use in the future if necessary. The ECB stimulus did cause bond yields around the world to move a little lower.

Happy Memorial Day!

Thank you God for my freedom. Thank you that as I get up every morning, I can do whatever I want to do.  I’m an American and I’m free! Thank you for the men and women who went before me to provide that freedom I have and thank you for those that go before me still. Please bless them and their families today and every day.

Amen

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
This week, Durable Orders will be released on Tuesday. Pending Home Sales will come out on Thursday. Core PCE inflation, Chicago PMI manufacturing, and Personal Income will be released on Friday. Consumer Confidence and Consumer Sentiment will round out the schedule. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Mortgage markets will be closed today in observance of Memorial Day.

The Week That Was
Investors viewed the news from the Fed last week as favorable for mortgage rates. A very light batch of economic data contained no major surprises and had little impact. As a result, mortgage rates ended the week a little lower.

Following comments from Fed officials last week, attention was turned to the Fed's plans for its enormous bond portfolio. After years of bond purchases to boost the economy, the Fed owns close to two trillion dollars of mortgage-backed securities (MBS). Investors expect that the Fed will continue to steadily taper its purchases of additional bonds, ending the program around the end of the year. At that point, the Fed's balance sheet will stop growing.

A remaining question is how long the Fed will replace balance sheet runoff (principal payments, prepayments, and maturing securities) to hold the size of its portfolio steady. So far, the Fed has been replacing runoff with new MBS. Prior to last week, the Fed had given little guidance about the timing of future policy changes in this area. Last week, Fed officials indicated that they may continue replacing runoff for a long time, possibly even after the first fed funds rate hike. This would mean more MBS purchases by the Fed than had been previously anticipated, which was favorable for mortgage rates.

The housing data released last week reflected improvement. April Existing Home Sales posted the first monthly increase this year, while April New Home Sales increased 7% from upwardly revised March figures. One factor holding back the pace of home sales activity over the last few months has been a lack of inventory, and the news on this front was also positive. Total inventory of existing homes available for sale jumped 17% from March to a 5.9-month supply.

Credit Cards Are Evil. Really??

First, let me say that I really appreciate Dave Ramsey – I believe he has the heart of a teacher and wants to help people be financially successful. Secondly, I firmly believe that one of the biggest contributors to financial failure, for many people, is credit card debt. I’m adamantly opposed to it myself, but is the best solution to follow his advice of not having credit cards? He and I disagree on the answer to this question.

If you avoid getting any credit cards, it will remove the temptation of over-spending and I get that. However, responsibility is the real issue here. Not spending more than you can pay off at the end of each month and not overspending because "there is less emotional pain when paying with a card", should always be our practice. Now, if you completely buy in to avoiding all debt and not having any credit cards, where does that leave you? It may keep you out of debt, which I am a HUGE fan of, but it is also going to keep you from having a credit score.

Does that mean you can’t get a mortgage loan? No. Does that mean it is going to make it much more difficult? Absolutely. There are options where non-traditional credit (things that don’t show up on your credit report like rent, utility payments, insurance etc.) can be provided to support a loan. Many times options like FHA and THDA work just fine, but what about conventional loans?

I worked with a client this week that has the ability to put 20% down, which will enable her to avoid mortgage insurance. In her case, a conventional loan is the best option. She has a great job, low debt to income ratios and plenty of cash. She has lived a very disciplined life and has no debt – and no credit. Period. For several reasons (interest rates being tied to credit scores as the primary), it is going to be incredibly difficult to get her the financing she deserves. We’ll find options for her, but it will require additional documentation on her part and will likely be less favorable pricing. There is a better way.

For clients like this, who live frugally and are committed to saving, what is the danger to owning a couple of credit cards? In my opinion, when done strategically, there isn’t any. I have a daughter in college that has been taught from the time she had a concept of money, that she better never carry a balance on a credit card. When she graduates, she will have at least two cards that will have been opened for 24+ months. They will have no annual fee and have a maximum limit of $500. She can’t get in trouble this way and she will have a stellar credit rating when she graduates. So let's be responsible and take advantage of building good credit to our advantage.

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
The biggest economic release this week likely will be the Fed Minutes from the April 30 FOMC Meeting which will come out on Wednesday. These detailed Minutes provide additional insight into the debate between Fed officials. Investors also will be watching the housing data. Existing Home Sales will be released on Thursday and New Home Sales will come out on Friday. Mortgage markets will close early on Friday in observance of Memorial Day.

The Week That Was
The two biggest reports on economic growth released last week both fell short of the forecasts, which was favorable for mortgage rates. In addition, expectations increased for a bond purchase program by the European Central Bank (ECB), which also was positive for mortgage rates. As a result, mortgage rates ended the week near the lowest levels of the year.

In recent weeks, the economic data generally has shown a solid rebound from the weather-related slowdown seen this winter. Last week's data for April activity caused investors to grow a little more cautious about the outlook for the rest of the year, however. While the forecast was for a third straight month of large gains, April Retail Sales rose just slightly from March. Retail Sales account for roughly one third of consumer spending, so a big miss is significant. Another important indicator of economic activity, Industrial Production, showed a sharp decline, surprising most economists.

A bright spot in last week's economic data came from the housing sector on Friday, and the better results offset some of the improvement seen in mortgage rates earlier in the week. April Housing Starts increased 13% from March, far exceeding the consensus forecast, and they were 26% higher than one year ago. April Building Permits rose 8% from March to the highest level since June 2008. Most of the increase came from multi-family units, however. Excluding multi-family units, Housing Starts showed much more modest gains.

Navigating Mortgage Insurance

I'm finding that more and more customers are opting for financed mortgage insurance on conventional loans. When a borrower has a very good credit score, there's only about a .25% addition to the interest-rate, even on a 95% loan, to forgo the monthly MI payment. So, for example, someone borrowing $200,000 on a 95% conventional loan would pay $1,013 for principal and interest at 4.5% and another $90 for mortgage insurance, for a total of $1,103 not counting taxes and homeowner's insurance. The same person could take a rate that is .25% higher and have a payment with no monthly MI payment. The principal and interest would increase to $1,043 per month, but with no mortgage insurance payment, the total is $60 less per month.

Obviously, the main advantage of financing the MI is a lower monthly payment. The other significant advantage is a little more interest to deduct from a tax perspective. The main disadvantage is that the borrower now has a permanent rate that is .25% higher than it would have been had they taken the lower rate and paid the monthly MI. Most mortgage insurance payments are only required to be made for two years and then only until the loan is paid down to 80% of the home's current value. So at some point the mortgage insurance can be dropped which would leave the borrower with a payment that is a little less long-term, taking the monthly mortgage insurance payment option.

The key is finding the break-even point of how long someone would need to stay in the home, paying on that loan, to determine which option works best. That is where we come in - to advise clients on how to structure this part of their loan so that they receive the most benefit. But it is important for you to understand that there are options.

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
This week, Retail Sales will be released on Tuesday. Retail Sales account for about 70% of economic activity. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for finished goods which are sold to consumers. Housing Starts will be released on Friday. Industrial Production, Philly Fed, and Consumer Sentiment will round out the schedule.

The Week That Was
Last week was a light week for economic data, and investors mainly focused on the central banks of the US and Europe. Comments from Fed and ECB officials remained favorable for bonds, and mortgage rates moved down a little during the week, to the lowest levels of the year.

At the beginning of the year, the consensus outlook was for a moderate pace of economic growth in the US and for mortgage rates to slowly climb higher. Despite a weather-related slowdown over the winter, the growth outlook appears to be on target, yet mortgage rates have moved lower this year.

There are several factors which have contributed to the decline in mortgage rates this year. One reason is that inflation has remained low. The major indicators, such as the Consumer Price Index (CPI) and the PCE index, show that core inflation is well below the Fed's target level of 2.0%, and it is expected to remain low in coming months. Expectations for future inflation are a major factor in setting mortgage rates.

The conflict in Ukraine is also favorable for mortgage rates. During periods of uncertainty, investors typically shift to relatively safer assets, increasing the demand for mortgage-backed securities (MBS). Another influence has been the expectation that the European Central Bank (ECB) will begin a bond purchase program similar to the one used by the Fed over the last few years. The expected added demand for bonds from the ECB has pushed down rates around the world.

Beggars Can't Be Choosers!

I wonder, how many times have you said this? I can’t count how many times I've repeated those words, particularly when someone gives me something that he or she may not think is much of a gift, or might even be embarrassed to be giving.  But hey, if it is something I need, and they don’t, and they are willing to give it to me, I love it.  Beggars can’t be choosers, right?

I was greeted once again this past week by the guy that sells papers on the exit ramp from Old Hickory Blvd. to I-65. I always try to buy a paper from him when I get stopped there. He was smiling and waving to everyone, like he always does, as I rolled down my window to buy my paper. Not realizing that I didn’t have any bills on me as I rolled the window down, I started scrambling for change. Then I realized that the papers were now $2 versus the $1 that they had always been, so I’m scrounging for nickels and dimes to come up with the $2. I give him the handful of change and apologize for taking so long and loading him down with coins. He looked at me with a big smile and said, “Hey, beggars can’t be choosers. I really appreciate you.”

That really hit me and I can’t get the thought, or vision of him, out of my head. I’ve bounced all over the place with it. First, I'm thankful that I've been blessed with a life that allows me to choose versus beg. Second, I'm amazed at the grateful attitude and response from an individual that sees himself as a mere beggar. I wonder why this guy isn’t in sales somewhere instead of being homeless – with a personality like that, shouldn’t he be able to find a great job? Is that even fair for me to ask? I know nothing about him.

So what does that mean for you and me? Just thinking here... What if I treated everyone that crossed my path on a daily basis the same way this guy does? With a smile and an attitude of gratefulness. That would create quite an impact!  That’s my plan. How about you?

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
Next week will be packed with major economic events. The next Fed meeting will take place on Wednesday. Investors expect the Fed to continue scaling back its bond purchases, but comments about the strength of the economy or the timing of the first fed funds rate hike could have a large impact. First quarter Gross Domestic Product (GDP), the broadest measure of economic growth, will be released the same day. The important monthly Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Pending Home Sales, ISM Manufacturing, Construction Spending, Core PCE inflation, and ISM Services will round out a crowded schedule.

The Week That Was
The last two weeks have been relatively light ones for economic news. Mortgage rates moved a little higher late last week ahead of Easter weekend, and they reversed that increase during this week. Headlines from Ukraine added a short burst of volatility but had little lasting impact.

Overall, the economic data released this month has been better than expected. After slowing due to unusually severe winter weather, most sectors of the economy appear to be picking up. The economy added jobs at a healthy pace. Retail Sales and manufacturing posted solid gains. This week, Consumer Sentiment jumped to the highest level since July of last year.

Despite the good results this month, however, investors require more evidence that the improvement is sustainable before they will raise their long-term outlook for economic growth. The steady economic outlook over the last several months has helped keep mortgage rates in a fairly narrow range.

One sector which has lagged in its pace of improvement is housing. March Existing Home Sales were roughly the same level as February, which was very close to the consensus forecast. A tight supply of inventory in many regions was one factor holding back sales. Offering potential for future activity, the total inventory of existing homes available for sale rose 5% in March. March New Home Sales showed a sharp drop from February, but this data is extremely volatile month to month.