The collapse of the housing market affected homeowners in different ways. One of the more frustrating predicaments many homeowners have faced is negative equity—owning a property that is currently worth less than the balance of their mortgage (what is colloquially referred to as having one’s property “underwater”). One avenue for helping these homeowners avoid foreclosure would be refinancing their mortgage under lower interest rates, but the declining property value itself acts as an obstacle to being approved for that refinancing. Recently, the United States government instituted expanded and enhanced provisions to the Home Affordable Refinance Program (HARP), designed to help these at-risk homeowners and stabilize the housing market.

Homeowners suffering from negative equity should speak with their mortgage lenders about the possibility of refinancing through HARP.  Note, however, that the mortgage must be guaranteed or owned by Fannie Mae (FNMA) or Freddie Mac (FHLMC). Homeowners can determine whether their mortgage is owned by either Fannie Mae or Freddie Mac by checking the following websites:

www.freddiemac.com/mymortgage OR www.fanniemae.com/loanlookup

This purchase will need to have occurred prior to May 31, 2009. If you qualify for HARP help and need assistance, discuss your options for refinance with your lender immediately! The HARP program can help divert you from the path to a damaging default on your mortgage.

Market Comment
Mortgage bond prices finished the week slightly higher, helping rates improve. The market remained relatively stable. Political changes in France put into question the willingness of Eurozone countries to continue austerity measures. Greece failed to put a coalition government in place and Spain stepped in to rescue one of their largest banks. This increased concerns that Greece will eventually leave the Euro. Flight-to-quality buying of US debt instruments continued as a result. The 30Y bond auction showed decent foreign demand.

Looking Ahead

Industrial Production
The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally, the Fed likes to see steady growth in the economy with little price pressures.

Mortgage interest rates generally react favorably to weaker-than-expected industrial production data. In times of economic weakness, investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks. We have seen these patterns frequently in recent months. Floating into significant economic data always has some risk involved. Now is a great time to take advantage of mortgage interest rates at these historically low levels.

Copyright 2012. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com  The information contained herein is believed to be accurate, however no representation or warranties are written or implied.

Market Comment
Mortgage bond prices finished the week slightly higher, helping rates improve. The market was relatively stable after many weeks of volatile trading. We started the week on a positive tone as the PCE core index came in as expected. Trading was calm following the indication that inflation was in check. ISM Index data came in higher than expected, which initially pressured rates, but only slightly. The ADP employment figure was weaker than expected while the weekly jobs release was stronger than expected. The heavyweight employment report did little to settle the disparity as it was mixed.

Looking Ahead

Oil
Inflation fears tied to rising energy prices remain on the minds of traders. Inflation, real or perceived, erodes the value of fixed-income investments such as mortgage-backed securities, causing prices to fall and rates to rise. Tensions with Iran over sanctions tied to their nuclear activities increase concerns that they will reduce their oil supplies to the world. Last week OPEC Secretary General Abdullah el-Badri indicated, “We’re working hard to bring down the price. We’re not comfortable.” OPEC indicates they are comfortable with oil around $100 per barrel. U.S. consumers are comfortable with price targets considerably lower than that. Unfortunately, that doesn’t look to be a possibility at this time. OPEC blames rising prices on excessive speculation and noted they have been able to meet consumer needs.

Oil prices have fallen in the short term following signs of slowing US economic growth, reports that US inventory supplies are at record highs, and weakness in China’s demand. Falling energy prices are generally good for mortgage interest rates. The great news is that mortgage interest rates remain very favorable. Now is a good time to take advantage of these low rates to avoid any uncertainty with the future. The current rates are a sure thing while waiting for the possibility for lower rates is risky.

Copyright 2012. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com  The information contained herein is believed to be accurate, however no representation or warranties are written or implied.

Market Comment
Mortgage bond prices finished the week slightly higher, helping rates improve. The up-and-down trading pattern continued throughout the week. Rates were better Monday morning tied to stock weakness. Those gains were erased after Spain and Italy had another round of relatively successful debt auctions Tuesday. Fortunately, MBS prices bounced back Thursday following reports out of Europe that consumer confidence there continued to slip. This reignited some of the flight-to-quality buying of US debt instruments. The Treasury auctions generally showed strong foreign demand.

PCE
The US Department of Commerce’s Bureau of Economic Analysis releases the core PCE price index. The report provides the average increase in costs for personal consumption expenditures excluding food and energy. As of July 2009 the figure now includes food services in the figure.

The report is significant in that the Fed uses the PCE in determining inflation as opposed to the prior use of the consumer price index. The reports vary in that the CPI in that the PCE includes the price of spending for and on behalf of households. This includes health care spending paid for a household by a business. The CPI only reflects out-of-pocket expenses paid directly by consumers.

The Fed noted last week that inflation in the short term has escalated. However, they also indicated that long-term inflation projections show tame expectations.

Mortgage interest rates will likely spike higher in the short term if the PCE core reading is higher than expected. A reading in line with expectations will likely help rates stay in check.

Copyright 2012. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com  The information contained herein is believed to be accurate, however no representation or warranties are written or implied.

One of the costs associated with owning a home is maintaining a current homeowner’s insurance policy, which protects you and your property in case of damage of loss. Although the premiums have the potential to be steep, based on the condition, location, and other factors, there are methods to manage how much you’re paying each year.

Finish Paying Your Mortgage – This is simple in theory and challenging in practice…but it’s a sure-fire way to see your premiums go down. Your insurance provider presumes that once you own the home free and clear you are that much more likely to take care of it—and they reward you with a lower premium.

Research Discounts for Maintaining Other Policies – If your homeowner’s insurance provider also underwrites other policies, such as auto, see if they offer a discount for bundling all of your insurance needs through them. You could save more on all policies they provide.

Obtain a Higher Deductible – Requesting that your policy maintain a higher deductible is a trade-off: Your premiums will go down, but you will end up paying for more out of your own pocket if damage occurs. Still, if your budget is currently in need of tightening, this could be a viable, temporary solution.

Consider Insurance Effects of Construction/Renovation – New construction or renovations add both monetary and enjoyment value to your home, but they can also increase your premiums if you don’t carefully review your plans. Certain building materials will cost more to insure due to their vulnerability to fire or weather damage, and luxury builds such as swimming pools will also raise your premiums, being potential hazards.

Add Alarms and Security – Investing in the security of your family with warning systems and alarms won’t just bring you peace of mind, it will also reduce your insurance premiums.

Homeowner’s insurance is a necessity in order to satisfy the conditions of most mortgages, but just because you’re required to keep a policy doesn’t mean you can’t find ways to ease your financial burden. Talk with your mortgage specialist to see if there are any other strategies that fit your specific situation.