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SEE TODAY'S RATES ABOVE
See New 2009 Jumbo Loan Limits For all Counties Above.
We wish you and your family a Merry Chistmas and Happy New Year.
RATE'S ARE BACK TO JANUARY LOWS!!!!!
Los Gatos Lending Connection is pleased to announce Phase I of the Super Conforming loan program utilizing the new 2009 loan limits established in accordance with the Housing and Economic Recovery Act.
The new Super Conforming loan limit for 1-Unit properties in most areas is $625,500. The Super Conforming products that are initially available are 30 Year Fixed, 15 Year Fixed, and 5/1 LIBOR ARM (5/2/5).
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With an impound account we offer lower rates. With 60% Loan to Value we offer lower rates. Both scenarios require that you have a 740 credit score. Your good credit and high equity earns you the best rate. Call now and see how much you can save. (866) 660-0957.
Interest rates have been all over the board the for the past several months. The undercurrents in this economy make it impossible to predict the direction of interest rates from day to day. As the credit markets have tightened up it has pushed rates higher for many of you. If you need a new mortgage and you find a rate with a payment that works for you, our advice to you is to submit your application and be ready to lock it.
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Today's Economy 12/01/08
Monday's bond market has opened strong following weaker then expected economic news and a major sell-off in stocks. The stock markets are kicking the month off in the tank with the Dow down almost 400 points and the Nasdaq down 81 points. The bond market is currently up 30/32, which will likely improve this morning's mortgage rates by approximately .500 of a discount point.
The week's first piece of economic news was November's manufacturing index from the Institute for Supply Management (ISM) late this morning. It showed a reading of 36.2 that was below forecasts and is the lowest reading since May 1982. That indicates that manufacturer sentiment was weaker than many had thought last month. Since that hints at slower manufacturing activity it is good news for bonds and mortgage rates.
The recent rally in bonds has put us in uncharted waters in terms of their yields. The benchmark 10-Year Treasury Note is currently yielding 2.82%, which is it lowest on record. It broke below 3.00% last week for the first time since the Notes were issued in 1962. While mortgage rates have not recently plummeted as quickly as the yield has, they have fallen quite a ways and show signs of continuing to slide. The downside to that is the possibility of rates spiking higher at any moment. Bond yields and mortgage rates can worsen much quicker than they usually improve. Therefore, we need to remain extremely cautious during this rally as we could see an entire week's worth of gains erased in a single morning if any of the major influences on bonds turns negative.
The week ahead.
The next piece of data that we need to be concerned with comes Wednesday morning with the release of the revised 3rd Quarter Productivity report. This index is expected to show a downward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn't necessarily bad for the bond market. It is the conditions around economic growth, such as inflation that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 0.9%, down from the previous estimate of 1.1%.
The Fed Beige Book will be posted Wednesday afternoon. This report, which is named after the color of its cover, details economic conditions by region. It is relied on heavily during the FOMC meetings when determining monetary policy, so it results can influence bond trading and mortgage rates if it shows any significant surprises.
Overall, the most important day of the week is Friday with the employment figures being released, but today will also likely be one of the more important. Tomorrow will probably be the lightest day of the week, assuming we don't see another major sell-off or rally in stocks.
Have a prosperous new week.
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Mortgage Rates: Lock In or Float? Peter McDougall. Special to TheStreet.com
The fact is, it's difficult to predict where rates are headed. Although the federal funds rate contributes to the direction of mortgage rates, the two are not in lockstep -- you can't expect mortgage rates to go down just because the Federal Reserve implements another rate cut. Instead, mortgage rates correlate very strongly with yields on 10-year U.S. Treasury notes. And predicting the direction of U.S. Treasuries is like predicting the direction of the stock market -- it's extremely difficult for experienced investors, much less first-time homebuyers.
So what should you do? Since you can't predict where rates will go, the answer largely depends on your financial situation. If you can't afford to buy if rates go any higher, consider locking in now. Even just a quarter-percentage-point rise in rates on a $200,000 mortgage loan translates to $33 more per month and close to $11,800 more in interest payments over the life of the loan. Check out the caculators on this to see how a rate change will affect your monthly payments.
If you are a risk-taker by nature and can still afford your home if rates rise even further, then floating is always an option. There's a chance that the thawing credit markets will bring rates down, and you always have the opportunity to win big. But floating also means you might lose big. Just remember that gambling on the short-term direction of mortgage rates is like speculating where the stock market is headed. In short, trying to time the market is rarely a winning investment strategy.
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Federal Housing Agency, Fannie, Freddie to Speed Up Mortgage Workouts
WASHINGTON -- In the most sweeping effort so far to help troubled homeowners, the federal government and the mortgage industry on Tuesday will announce a plan to streamline the assistance process for hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, scheduled a press conference for 2 p.m. EST. Scheduled to attend were officials from the Treasury Department, Wells Fargo & Co., the Department of Housing and Urban Development and Hope Now, an alliance of mortgage companies organized by the Bush administration last year.
An industry official who worked on the plan said the new approach will allow lenders to modify more delinquent loans by establishing broad criteria to speed up the process. The official spoke on condition of anonymity because details had not been announced.
The new initiative will likely have tremendous importance because Fannie Mae and Freddie Mac own or guarantee about half of U.S. home loans.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to have home loans worth at least 90 percent their house's value. The interest rate or principal amount of the loan would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses, the industry official said.
The announcement comes as major banks are stepping up their efforts to curtail losses from souring mortgages. More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.
Citigroup announced late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. The New York-based banking giant also said it is also working to expand the program to include mortgages for which the bank collects payments but does not own.
Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal or increasing the term of the loan.
Late last month, JPMorgan Chase & Co expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.
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Fed Risks `Spitting in the Wind' With New Aid Pledges (Update2)
By Craig Torres and Scott Lanman
Nov. 26 (Bloomberg) -- The Federal Reserve's new $800 billion effort to combat the financial crisis is designed to make credit more accessible to shaken consumers who aren't sure they want more debt.
Households and lenders may not respond much because of the wealth destruction from plunging property and stock values, and the deepening economic slump, economists say. That means banks may end up returning the Fed's new liquidity through deposits at the central bank.
``We are sort of spitting in the wind,'' said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. ``Banks won't be throwing a lot of loans out there when they fear -- rationally -- those loans may not be paid back.''
Policy makers aim to kick-start markets for loans to students, car buyers, credit-card borrowers and small businesses with a new $200 billion program. Backed in part by the Treasury, the Fed will become a new buyer in the market for consumer loans at a time when many traditional holders of the assets, such as off-balance sheet bank units, have collapsed or been dissolved.
The announcement of the new efforts yesterday came amid rising criticism that officials were excessively focused on saving Wall Street firms, with the Citigroup Inc. rescue Nov. 23 the latest example. President-elect Barack Obama said repeatedly in the past two days he'll compose a plan to help ``Main Street'' as well as the financial industry.
1966 Powers
Obama and congressional Democrats have also pushed for a stronger response to the housing crisis. The Fed responded yesterday, invoking authority first granted in 1966 to buy $500 billion of mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.
Along with a $100 billion plan to buy the corporate debt of Fannie, Freddie and federal home loan banks, the step marks the central bank's biggest foray into a type of quantitative easing. That's an unorthodox monetary policy tool that goes beyond setting short-term interest rates. The central bank has already cut its benchmark rate to 1 percent.
``Rates are going to be kept down for a long time, the Fed's balance sheet is going to be expanded for a long time,'' said John Ryding, chief economist at RDQ Economics, New York. ``It does, as we have argued, represent a very significant quantitative easing.''
Mortgage rates and yield premiums on Fannie and Freddie debt tumbled after the announcement. The average U.S. rate for a 30- year fixed mortgage ended at about 5.5 percent after starting the day at 6.38 percent, according to Bankrate Inc.
Markets React
The spreads on most of Fannie's and Freddie's $1.7 trillion of corporate debt and $4.1 trillion of mortgage-backed bonds over comparable Treasuries tumbled to the lowest levels since early October. The cost to protect against defaults on corporate bonds and on securities backed by commercial mortgages also declined.
The question remains whether the lower rates will have much impact on the flow of credit and the economy. While the Fed has expanded its balance sheet by $1.3 trillion so far, banks have left much of the liquidity on deposit at the central bank itself, as so-called excess reserves. The surplus stood at $604 billion on Nov. 19.
Bank regulators have tried to cajole lenders, saying they ``expect'' them to lend, in a guidance letter issued Nov. 12. The Fed's most recent quarterly survey of bank loan officers showed that 70 percent of domestic firms had tightened lending standards for their best mortgage borrowers in the third quarter, and 60 percent had raised standards on credit-card loans.
`Non-Functioning'
``The root of the problem is our securitization markets are non-functioning,'' said Josh Rosner, managing director at New York research firm Graham Fisher & Co. ``We have capital problems at the banks so they can't take over.''
While officials yesterday contested claims that the Fed is undertaking quantitative easing, they acknowledged that the central bank's new actions will result in another injection of funds into the system. Officials said their objective is to affect credit markets rather than to target money supply.
The Bank of Japan is the only major central bank to deploy quantitative easing in modern times, from 2001 to 2006. Current Governor Masaaki Shirakawa said in May that the policy ``was very effective in stabilizing financial markets,'' while at the same time it had ``limited impact'' in resolving Japan's economic stagnation of the time because banks wouldn't lend and companies wouldn't borrow.
Fed Meeting
Fed officials next meet on Dec. 16-17, when economists anticipate they will cut their target rate for overnight loans between banks to 0.5 percent. The central bank expanded the meeting to two days, making it likely that the Federal Open Market Committee will explore the options for conducting policy with rates near zero percent.
``We can't look back to recent history'' as a guide for what to do, Mark Gertler, a New York University economics professor who has collaborated with Fed Chairman Ben S. Bernanke on research, said in a Bloomberg Television interview. ``We really do have to make it up as we go along.''
Yesterday's announcements continue the trend of the Fed and Treasury taking on more risk with public money, while private sector balance sheets contract. Earlier this week, the two agencies and the Federal Deposit Insurance Corp. offered a backstop for a $306 billion portfolio of Citigroup assets.
The new programs bring the estimated total government commitment to ease credit to about $8.5 trillion, with $3.17 trillion being used to date.
`Too Early'
``It's too early to tell whether the lending has increased or not,'' David McCormick, Treasury undersecretary for international affairs, said in an interview with Bloomberg Television today. ``We certainly expect that it will.''
Under the new Term Asset-Backed Securities Loan Facility, the Treasury will use taxpayer funds to protect the Fed against the first $20 billion of losses, or 10 percent, of $200 billion in exposure to AAA rated securitized consumer debt.
``I am willing to believe that these things that are rated AAA might have a maximum 10 percent loss if the assets behind them never changed,'' said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance. ``The collateral in credit card asset-backed securities changes.''
Ratings may be harder to judge when credit quality is deteriorating. Also, the government has less information than issuers, who could back the bonds with assets that pose the most risk of declining quality, Rutledge said.
Officials yesterday said the risk of loss is minimal, and noted that the Fed will put haircuts on the value of the ABS that it takes on. Treasury Secretary Henry Paulson said the mortgage debt purchases are a ``great investment for the taxpayer'' because the government already stands behind Fannie and Freddie.
To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net
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