Get Your FHA Mortgage Before Costs Go Up
The Federal Housing Administration (FHA) , facing a $16.3 billion deficit, will increase mortgage fees next year. FHA, the primary source of funding for first-time home buyers and those with modest incomes, said it would raise the premiums it charges on loans it guarantees by 10 basis points, adding, on average, about $13 per month to a borrower’s cost.
The FHA’s role in the mortgage market has expanded rapidly since the U.S. housing bubble burst. It now insures about 1.2 million mortgages, supporting about 15 percent of all U.S. home loans, up from 5 percent in 2006. It is often the preferred loan choice among first time homebuyers as it gives them a lower down payment option compared to conventional financing through Fannie Mae or Freddie Mac.
This round of fee increases could just be the first step in higher costs for FHA insured mortgages, so it might be the right time to take advantage of the lower rates and fees that are in place now before they go up.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -27 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move slightly higher. We had our highest mortgage rates on Thursday and our lowest rates on Tuesday morning.
It was a holiday-shortened week with the bond market closed in observance of Veteran’s day. MBS traded in a fairly narrow range for most of the week. Pricing was supported by a very strong 50 day moving average and capped by our 10 day moving average.
We had some very mild inflationary news as measured by both the Consumer Price Index and the Producer Price Index. They were both very tame on a month-over-month basis. Retail Sales were a tad lighter than expected and some regional manufacturing news was much weaker than expected. But the driving force for mortgage rates was the market’s concern over the fiscal cliff. Essentially, as the market interprets the statements of our political leaders – the markets will determine if these statements are positive or negative towards a compromise that will actually work and will not only stave off the fiscal cliff but also is an actual solution (as opposed to just window dressing and kicking the can down the road).
If traders think that actual progress is being made in the negotiations, then bonds will sell off (pushing up rates). If traders think that the negotiations are going poorly then bonds will rally (lowering rates).
What to Watch Out For This Week:
The following 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:
|Date||ET||Economic Release||Actual||Market Expects||Prior|
|19-Nov||10:00 AM||Existing Home Sales||4.79M||4.70M||4.75M|
|19-Nov||10:00 AM||NAHB Housing Market Index||46||42||41|
|20-Nov||8:30 AM||Housing Starts||–||845K||872K|
|20-Nov||8:30 AM||Building Permits||–||870K||894K|
|21-Nov||7:00 AM||MBA Mortgage Index||–||NA||12.60%|
|21-Nov||8:30 AM||Initial Claims||–||433K||439K|
|21-Nov||8:30 AM||Continuing Claims||–||3400K||3334K|
|21-Nov||9:55 AM||Michigan Sentiment – Final||–||84.5||84.9|
|21-Nov||10:00 AM||Leading Indicators||–||0.20%||0.60%|
|21-Nov||10:30 AM||Crude Inventories||–||NA||1.089M|
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.