A rising tide lifts all boats:


Strong home price gains this spring, summer and fallhave given drowning homeowners a new supply of air.

While the number of borrowers in a negative-equity position on their mortgages is still high, at just over 14 million, that number is falling fast, especially for those most seriously underwater.

There were 6.9 million U.S. homes seriously underwater at the end of the third quarter of this year, according to RealtyTrac, a foreclosure sales and analytics company. It defines “seriously underwater” as owing at least 25 percent more on the mortgage than the home is currently worth.

The tally represents 12.7 percent of all properties with a mortgage. The number is down from 7.4 million at the end of the second quarter and is the lowest level since RealtyTrac began looking at underwater data in 2012.

“After a lull late last year and early this year, home sales volume and average sales prices picked up dramatically again in the second and third quarters of this year, resulting in a substantial drop in seriously underwater homeowners,” said Daren Blomquist, vice president at RealtyTrac.

More than 10 million properties today are considered “equity rich,” where the borrower owns at least half the home outright. That is 19 percent of all properties with a loan, according to RealtyTrac.But in this case we are not the walking undead but abandoned homes in some state of foreclosure but not yet repossessed by banks and put up for sale which can be a real eye-sore in the neighborhood.

All the improvements in home equity would seem to bode well for future home sales, but several barriers still stand in the way. First and foremost is the short supply of homes for sale in general, both new and existing. Homeowners don’t want to sell if they’re not sure they can’t find something better. Second is the fact that home prices are rising more than historical norms right now, and some sellers think they can do better if they wait longer.

What Happened to Rates Last Week?


Mortgage backed securities (FNMA 3.50 MBS) lost -36 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher from the prior week. For the entire month of October, MBS sold off -32 basis points which lead to mortgage rates being higher at the end of the month.

We had a very big week for economic data and Central Bank action. The biggest event of the week was the Federal Reserve policy statement on Wednesday. Mortgage rates increased on Wednesday and Thursday as a result of the market interpreting the statement as opening the door for a potential rate hike in December.

As expected, the Federal Reserve Open Market Committee left their key interest rate alone. But there were some changes between this statement and the September statement that long bond traders are focusing on. Overall, they said the economy is growing at a “moderate” pace and expressed concerns over a labor market that is still growing but not at the same pace that it was. They also reminded everyone that we are way below their 2% inflation threshold but it assess the progress towards “its objectives of maximum employment and 2 percent inflation.”

But that being said, the biggest reason for not raising rates in the September meeting (supposedly) was concern over global weakness. Here is where things got interesting, this time around they removed the entire section about concerns over global turmoil. The market is inferring that this means that they overstated that point in September and it is less of a concern at this point.

And the sentence that is getting the most attention: “In determining whether it will be appropriate to raise the target range at its next meeting,” This is very specific and shows that December is on the table as previously they skirted the issue by saying things like “In determining how long whether it will be appropriate to raise the target range at its next meeting” See the difference?

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Brought to you by:

Taff Weinstein
Office: 832-794-2136
Cell: 832-794-2136

First Imperial Mortgage
3409 Morrison St
Houston, TX 77009
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