What is Earnest Money?

Earnest money is a money deposit made by a buyer to a seller as a sign of good faith that you are seriously interested in buying a home.  This earnest money is credited to the down payment at closing.  It is held in a non-interest bearing trust account until the time of closing. Typically, the buyer submits $500 to $1000 with the offer.  Once the offer has been accepted, the transaction moves forward to Purchase and Sales where another deposit is required.  This amount combined with the offer deposit will come to 5% of the accepted transaction amount.

The Do’s: Home Buying Process Made Easier

Last month I talked about The Don’ts: Home buying deal killers, the things that can negatively affect your mortgage approval process.  There was a very extensive list of don’ts but as you can see from a quick glance below….The Do’s list is quite a bit smaller.  Although this list is smaller, the following are essential in having a smooth mortgage process.


Do Stay Current on your Existing Accounts:  Late payments on your existing mortgage, car payments, or anything else that can be reported to a Credit Reporting Agency can cost you.

Do Continue To Use Your Credit As You Normally Would:  Red flags are easily raised within the scoring system.  If it appears you are diverting from your normal spending patterns, it could cause your score to go down.  For example, if you’ve had a monthly service for internet access billed to the same credit card for the past three years, there is no reason to drop it now.  If you want to make your changes, do it after the loan funds.

Do Get Pre-Approved:  Having your credit reviewed, your financials analyzed and an official  pre-approval gets you prepared for what you can afford ahead of time.  This will also allow you time to fix any issues that come up during this process as opposed to being in the middle of the transaction.

Do Call Your Loan Consultant:  Start out on the right foot – call a professional today who can guide you through the process every step of the way.

Although the mortgage approval process is much more extensive than it was in recent years, it really hasn’t changed much.  The key is being prepared.  By practicing these tips and keeping yourself from getting caught up in the Don’ts, you will find the process flowing smoother.  And your return will be greater!  So, don’t wait…now is a great time to buy a new home or refinance your current one!

Send me an email today for more information bill@billnickerson.com

FHA to Increase Fees Once Again…

Effective April 1st…funny April Fool’s joke….NOT!  FHA announced this past Monday that the cost of government-insured mortgages will increase slightly for some new homebuyers.  The rise in up-front fees on mortgages was deemed necessary to build up dwindling capital.

FHA is increasing what is known as the Upfront Mortgage Insurance Premium “Upfront MIP” from 1.00% of the loan amount to 1.75% of the loan amount.  This fee is added directly to the total loan along with the monthly mortgage insurance premium.

So, on a $200,000 loan amount, based on today’s rate of 1.00%, you would pay $2,000 in MIP; with the new increase of 1.75% you would be paying $3,500 to the loan amount; an increase of $1500.  Then you add in a monthly mortgage insurance premium of 1.1% per thousand which costs $183 per month.

Although the FHA’s acting commissioner, Carole Galante, states this will raise the average homeowners payment by only $5 per month, FHA consumers are already paying about $183 more a month than those consumers that don’t pay any mortgage insurance.  Such programs as the Masshousing Loan that allows a 3% down payment with no mortgage insurance can save homeowners thousands of dollars over the course of the term of the mortgage.

The FHA fees which were just raised in the last year affected current FHA holders by preventing them from refinancing to lower rates.  The increased fees have become so high; it did not make sense for many homeowners to drop their rate a full percent.  This latest move will result in much higher costs to buyers.  A mortgage rate of 4.00% will be a net rate of 5.400% when you factor in the mortgage insurance. This is a difference in $170 per month higher payment for FHA clients compared to those who may obtain the Masshousing Loan with No Mortgage Insurance

Several economists when interviewed in regards to this latest increase agreed this would have a negative impact on the already struggling housing market.  First time home buyers represent a large percentage of the market and with these additional costs it will discourage many new buyers from entering the housing market in areas that need it most.

The FHA program was designed to be a very affordable alternative for those with a low down payment and credit that was considered less than perfect.  The FHA mortgage is still a very good option for those with credit scores under 680, but new alternatives are becoming available every day and consumers should look at all their options.

When shopping for a mortgage, make sure your lender offers Masshousing, FHA, USDA, Fannie Mae and Freddie Mac, this will allow to compare all the programs available to ensure you are getting the best possible option and the most cost effective mortgage.

Please contact me with any questions you may have regarding this article:  bill@billnickerson.com

Mortgage Rates Go Up?

So, you’ve probably heard in the news….rates are at historic lows and that the government extended the payroll tax cut.  Do you have idea how they relate to each other and how they ultimately affect you?  Check out the KCM Blog below to find out the details.

The KCM Blog: Two Things You May Have Missed

February 16, 2012

Before the end of the year, Congress and the President agreed to extend the payroll tax cut. In that bill, there were two items of interest for those involved in real estate.

1.) The hike in the Guarantee Fees charged by the GSEs Fannie Mae and Freddie Mac.

The 10 basis point increase in the fees has translated to a .375% to .5% increase in mortgage rates for conventional loans. Many customers who started their loans a couple of months ago are being “surprised” with higher than expected rates. Heck, everything you read in the papers says rates are at historic lows and will likely stay there through 2014. Many consumers feel as if their lender is being unscrupulous. However, your lender has fallen victim to the increase in Guarantee Fees and how the secondary market is passing on the cost. What looks like possible lender greed is just a passing on of the increased expense imposed by the government. Sadly, the increased revenue isn’t even being used to help aid an ailing Fannie Mae or Freddie Mac. It is being turned over to the US Treasury to cover the temporary extension of the payroll tax cut.

2.) Permission for HUD to increase the insurance premiums they charge on FHA loans.

If you remember, HUD charges two insurance premiums – a monthly one and an up-front one that is usually added into the loan. Most recently, they reduced the up-front mortgage insurance premium (UFMIP) and dramatically raised the monthly fee (MMIP). It is widely anticipated that, maybe as soon as April, we will see a hike in the UFMIP with no adjustment to the MMIP. While this will help shore up the reserves in the insurance fund, it will simultaneously make buying a home more expensive. No one knows the effective date or amount of the increase. Buyers should look to buy before the increase in fees.

We always hear how our government officials tuck away things in their bills. In this case, while the headlines during the holidays praised Washington for preserving the payroll tax cut, they may have hurt us more in the long run.

Another Week of Volatility

Updated on October 16, 2011 8:23 PM EST:   This week brings us the release of seven economic reports for the markets to digest, in addition to a speaking engagement by Fed Chairman Bernanke. Also worth noting is the fact that this will be an extremely busy week for corporate earnings, which usually translates into stock volatility. The most important economic reports are scheduled for the middle part of the week, but we may see movement in mortgage rates each day. Intra-day revisions to mortgage rates on more than one day are also possible. Therefore, proceed with caution if closing in the near future.

Tomorrow has September’s Industrial Production data scheduled to be posted. It will be released mid-morning, giving us an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% increase in output from August’s level, meaning that manufacturing activity rose slightly. A larger than expected increase in production would be negative for bonds and mortgage rates as it would indicate economic strength. A decline in output would likely push mortgage rates lower tomorrow morning.

September’s Producer Price Index (PPI) will be released early Tuesday morning. This is one of the two very important inflation readings we get each month. This index measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could raise concerns in the bond market about future inflation and lead to higher mortgage rates Tuesday. However, weaker than expected readings should result in lower rates.

Wednesday has three reports scheduled that may influence mortgage rates. The first is the sister report of Tuesday’s PPI. This would be September’s Consumer Price Index (CPI). It measures inflationary pressures at the more important consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.3% in the overall index and an increase of 0.2% in the core data reading. A larger than expected increase in the core reading could raise inflation concerns, pushing bond prices lower and mortgage rates higher. Inflation is the number one nemesis of the bond market because it erodes the value of a bond’s future fixed interest payments. When inflation is a threat, even down the road, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers.

September’s Housing Starts is Wednesday’s second release, also coming at 8:30 AM ET. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show an increase in new home starts between August and September. I believe we need to see a significant surprise in this data for it to influence mortgage rates.

The final report scheduled for release Wednesday will come during afternoon trading when the Federal Reserve posts its’ Beige Book at 2:00 PM ET. This data details economic conditions throughout the U.S. by region and is relied upon heavily by the Federal Reserve when determining monetary policy at their FOMC meetings. If it reveals stronger signs of economic growth from the last release, we could see mortgage rates revise higher Wednesday afternoon.

Thursday has the last two reports of the week with the release of September’s Existing Home Sales data and Leading Economic Indicators (LEI), both at 10:00 AM ET. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.3% from August’s reading. This would indicate that economic activity is likely to increase moderately over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline in the index.

The National Association of Realtors will release September’s Existing Home Sales data. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales. I don’t see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts’ forecasts could lead to a slight change in mortgage pricing. It is expected to show a decline in sales from August to September, meaning the housing sector remained soft. That would be favorable news for the bond market since a weak housing sector makes a broader economic recovery less likely.

Overall, it appears that Tuesday or Wednesday are the likely candidates for the most important day of the week. In addition to the economic data Tuesday, Fed Chairman Bernanke will speak at a Boston Fed conference during early afternoon hours. This adds to the days’ value as his words always have the potential to cause volatility in the markets. Besides the economic reports, there are many companies posting earning reports during the week, including some big names that include Apple, Citigroup, IBM and Intel. If the corporate earnings releases are generally weaker than forecasts, stocks may suffer, making bonds more appealing to investors. The end result would likely be an improvement in rates. The flip side though is stronger than expected earnings that drive stocks higher, pushing bond prices lower and mortgage rates upward. Accordingly, please maintain contact with your mortgage professional if still floating an interest rate.

Market Update

Updated on October 11, 2011 12:26 PM EST

Tuesday’s bond market has opened well in negative territory as a reaction to yesterday’s rally in stocks. The bond market was closed yesterday in observance of the Columbus Day holiday, but the stock markets were open for trading. The Dow and Nasdaq both rallied yesterday 330 points and 86 points respectively as news from overseas eased financial fears, at least temporarily. Since the bond market was closed, the reaction in bonds is taking place early this morning.

This morning’s stock trading is less troublesome for the bond market with the Dow with and Nasdaq mixed. Dow is currently down 5 points while the Nasdaq has gained 16 points. The bond market is currently down 18/32, pushing the yield on the benchmark 10-year Treasury Note up to 2.14%.This will likely equate to this morning’s mortgage rates being approximately .125 – .250 of a discount point higher than Friday’s morning pricing.

There is no relevant economic data being posted this morning, so look for the stock markets to be the biggest influence on bond trading and mortgage rates. If the major stock indexes move noticeably higher than current levels, we could see further weakness in bonds and upward revisions to mortgage rates later today. However, if they move much lower than where they are currently, the result could be improvements to mortgage pricing this afternoon.

The rest of the week brings us the release of only three economic reports that are of interest to the mortgage market along with the minutes from the last FOMC meeting and two important Treasury auctions. The week also gets heavy in quarterly earnings releases for companies, which could cause significant movement in the stock markets. The earnings results could affect bond trading as investors move funds into stocks if the reports are good. The other possibility is that earnings would generally disappoint, meaning investors may move funds out of stocks and into bonds as a safe-haven. The latter would be good news for the bond market and mortgage rates.

Tomorrow afternoon brings us the release of the minutes from the Fed’s last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over the economy, inflation and the Fed’s next move. If Fed members were concerned about the economy slipping into another recession, we may see the bond market move higher and mortgage rates lower after the their release at 2:00 PM ET tomorrow. It will be interesting to see how much debate and disagreement amongst members took place during the meeting. Also, investors will be looking for any indication of what the Fed may do next to help boost economic activity. I suspect that we will see some movement in the markets as a result of this release tomorrow afternoon.

Also tomorrow is the first of two important Treasury auctions this week. The sale of 10-year Notes will be held tomorrow while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as the auctions are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

Overall, I am expecting to see a fair amount of movement in mortgage rates this week, especially the latter part of the week. The key economic report is Friday’s Retail Sales data but tomorrow’s FOMC minutes also have the potential to heavily influence the markets. Therefore, we can label tomorrow or Friday as the most important day of the week. Also worth noting is the active week for corporate earnings that can cause a great deal of volatility in stocks and mortgage rates any day of the week. Accordingly, please proceed cautiously and maintain contact with your mortgage professional if you have not locked an interest rate yet.

Mortgage Rates Improve on the downgrade of the US Credit Rating

You know by now S&P late Friday lowered the US credit rating to AA+ frm AAA; treasuries and mortgages markets opening better today on safety and panic moves while the stock market is being hit hard on the open. S&P has been warning for weeks it was preparing to lower the credit rating, the next thing in the ratings game is that Moody’s and Fitch may follow in the next few weeks. What is the real impact? Initially equity markets will be pressured and interest rates will benefit, in the long run S&P has done us a great service in making the move. Congress and the Administration clearly demonstrated they are not willing to make any significant hard choices, maybe the cut in our rating (which is more symbolic than substantive) will shake up voters and politicians that the country is headed for a debt cliff at 100 miles and hour. Lets not get too worked up over S&P move, the US can pay our debts, the country is still the economic engine for the world, and compared to any other country the US is in every respect the strongest and safest place to invest. Don’t fall into the camp that is spending the early part of the morning comparing our new credit rating to places like France and other so-called AAA countries.


Tim Geithner out this morning castigating S&P for their decision; Geithner and the Administration are wrong. The downgrade isn’t going to matter much, markets understand exactly where the US stands and won’t, in the long run, make much of this except that it may help drive home the point the country is on the wrong path and must get serious about the growing debt. S&P can be criticized for the move, the agency has little credibility in our view after being primarily responsible for the subprime disaster that triggered the global financial meltdown. The agency rated CDOs made up of junk mortgages AAA, then after Wall Street couldn’t sell the highest risk tranches of the CDOs, it rated the worst of the junk AAA again. If S&P couldn’t understand junk mortgages why does anyone expect they know what they are into now? 


There are no economic reports today.


This week has little in the way of data to deal with but there is plenty for the bond and equity markets to think about. Tuesday the FOMC meets and has a lot to talk about, a weakening economic outlook and the rating cut. Treasury will auction $32B of 3 yr notes Tuesday, $24b of 10 yr notes Wednesday, and $16B of 30 yr bonds on Thursday. On Friday July retail sales are expected up 0.5%, ex autos +0.2%. Also on Friday the U. of Michigan consumer sentiment index is expected down to 62.5 frm 63.7, likely that will be revised lower now with the S&P move. 


Crude oil falling again, gold up over $1700.00. The stock market opening very weak as investors are totally over doing the situation. The stock market is of course reacting to the economic slowdown but also this morning investors just dumping everything they can. All of it in the early going is a reaction to S&P which as noted, in our judgment not as big a deal as it seems to be in markets.  


At 9:30 the DJIA opened -210, NASDAQ -85, S&P -22; 10 yr note +26/32 2.47% -11 bp and mortgage prices +7/32 (.22 bp)


The early going is volatile, lets keep our heads though. Mortgages are better but lagging the 10 yr and treasuries in general. Equity markets will drive treasuries through the day; with the FOMC meeting tomorrow and the weakened economic outlook stocks are struggling. Technically the stock market is very oversold in the near term, the bond market overbought. Fundamentally the outlook for the economy is weakening. Over-extended technical’s but the fundamentals are presently over-riding what normally would be improving equities and lower prices on treasuries. As long as panic dominates technical indicators have to take a back seat.

Bill Nickerson

Vice President Mortgage Network

179 Great Road Suite 214, Acton MA 01720


Bill’s Blog

Providing Mortgages Since 1991

NMLS # 4194

Commercial   Residential     Reverse FHA/VA

Mortgage Rates Improve on more bad Economic news…

Treasuries and mortgage markets were rallying early and got an additional boost at 8:30 on weekly jobless claims. Claims were thought to be about unchanged, as reported up 9K to 429K, the 11th week in a row over the key 400K level. Labor said six states were “estimated” due to computer issues so we don’t really know what impact that might have had on the data. The data this week is the data that will be used to get to the employment data for the month of June.  Last week’s claims were revised higher, to 420K from 414K. Continuing claims were about unchanged, from 3.698 mil to 3.697 mil. The 4 wk moving average on claims was unchanged. The slightly weaker report added to the rally moving the 10 yr note from +12/32 to +18/32 on the initial reaction. The stock market was hit yesterday, the DJIA down 80, at 8:45 this morning the index traded down 86 points and falling.


Yesterday Ben Bernanke and the FOMC meeting confirmed what most had known for two months, the US economy isn’t growing much. The Fed lowered its outlook for GDP to +2.7% this year; earlier this yr the Fed was forecasting 4.0% growth but has been lowering the forecast at each FOMC meeting since Feb. Bernanke’s press conference is shaking the economic bulls both late yesterday and this morning. For all the debate and discussions about the economy it is becoming more difficult to paint lipstick on the outlook. We have warned for months the economy won’t grow much as long as confidence levels remain low.


The FOMC policy statement, its revisions for GDP growth less than previous, and Bernanke’s press conference yesterday have cast an “official” pall on markets. Most traders had already recognized the economic slide, now with the Fed joining in the current sentiment has sunk to a new recent low. Increasing concerns of weakness in the outlook were confirmed by the Fed, the final so-called authority.


The decline in confidence in Washington is multiplying rapidly, as it does businesses are less willing to hire and consumers less willing to spend. It should be apparent now that consumers are smarter than most in Washington, getting their budgets under control. In the past consumers were responsible for 70% of GDP, over the next year or two if the economy is to gain growth it will rest on US exports. The short response to that, the US cannot grow if we have to rely on increasing exports.


At 9:00 the IEA (International Energy Agency) held an emergency press conference. The IEA is going to release 60 million barrels of oil to make a move to revive the global economies that are slipping quickly; 2 mill barrels a day for the next 30 days. America will release 30 mil of the total. In Europe sovereign debt problems continue to drag on worsening its outlook. Oil prices at 9:15 down $4.30 (see below for 10:00 level); gold is being slammed this morning on the dollar strength, down $28.00.


The dollar rose against all of its 16 major counterparts after Bernanke signaled yesterday that the central bank won’t add to stimulus measures that could erode the value of the currency. The euro weakened against the greenback before European leaders begin a two-day summit in Brussels today to discuss Greece’s financing needs as the nation struggles to stave off default. That the EU, IMF and Germany and France and Greece cannot get to finality is evidence that Europe’s debt problems spread far more than just Greece and the tenuous condition facing the EU and its currency. How the Greek situation is resolved will likely set the tone for Spain, Ireland and Portugal and possibly Italy and then the EU overall.


At 9:30 the DJIA opened down 145, S&P -17 and NASDAQ -33. The 10 yr note 2.92% -6 bp and mortgage prices +8/32 (.25 bp). Running for the door with oil prices and gold falling. Yesterday’s FOMC meeting, Bernanke’s comments and the never-ending saga in Greece are piling on this morning. The 10 yr note though so far has not cracked 2.90%. The rest of the day in US financial markets will likely see increased volatility.


At 10:00 May new home sales, expected down 4.6%, were down 2.1%. 6.2 month supply. 319K units annualized. Median sales price $222,600 down 3.4% yr/yr. No immediate reaction in the markets on the data.


Although the 10 yr still hasn’t pushed to test recent low yields, we will revert to floating overall except for closings occurring in the next 7 days. The Fed has finally agreed that the economic outlook isn’t good and with inflation under control and Europe still slipping the bond and mortgage markets should hold. How much lower interest rates can decline is still a huge question in my mind, but there is little reason now to worry that rates will increase. The 10 yr note continues in its 10 basis point yield range. We expect market volatility to remain high for the next week or so.  

Bill Nickerson

Vice President Mortgage Network

179 Great Road Suite 214, Acton MA 01720


Bill’s Blog

Providing Mortgages Since 1991

NMLS # 4194

Commercial   Residential     Reverse FHA/VA

The Real Market News

Early this morning the 10 yr note made a new low yield at 2.88% from 2.97% at the end of yesterday on increasing concerns over Europe’s debt problems headlined by Greece. The European Union’s failure to contain the Greek debt crisis is sending fresh shockwaves through currencies, money markets, equities and derivatives. The cost of protecting corporate bonds soared to the highest level since January, with credit-default swaps anticipating about a 78% chance that Greece won’t pay its debts. Equities declined around the world, while a measure of fear in fixed-income markets jumped the most since November. Market moves suggest heightened concern that authorities won’t be able to keep Greece’s debt troubles from spreading after Moody’s Investors Service said it may downgrade BNP Paribas SA and two other big French banks because of their investments in the southern European nation.


At 8:30 weekly jobless claims and May housing starts and permits pushed yields up as the data was better than expected; weekly claims were down 16K to 414K. forecasts were that claims would be 421K, continuing claims also fell (21K). May housing starts were about what was expected, up 3.5% with single family starts up 3.7%; April starts were revised from -10.6% to -8.8%. Building permits were thought to be down 0.5% but reported up 8.7% the highest permits since Dec 2010; multi family was the main reason for permits higher, multi-family permits jumped 23%. The two data points took the wind out of the bond market and safe haven buying that had set a new low yield on the 10 yr and had mortgage prices up 8/32 (.25 bp) from yesterday’s close.


At 8:30 the Q1 current acc’t deficit was -$119.27B lower than -$130B expected. The current account measures the United States’ international trade balance in goods, services, and unilateral transfers on a quarterly basis. The levels of exports, imports and the current account indicate trends in foreign trade.


By 9:15 the 10 yr note yield climbed back to 2.96% from 2.88% prior to the 8:30 data, mortgage prices at 9:15 unchanged after being up .25 bp at 8:15. The DJIA futures traded had the index unchanged at 9:15 after being down 70 points at 8:15. Volatility remains high as we noted yesterday.


Keeping the running story going, at 9:30 the DJIA opened down 6 points, the 10 yr at 9:30 +7/32 at 2.95% -2 bp and mortgage prices very volatile this morning up 3/32 (.09 bp). Trade between 9:30 and 10:00 wasn’t significant with the 10:00 Philadelphia Fed business index due. Always significant to traders, this time it is even more so after yesterday’s NY Fed manufacturing report went negative indicating contraction.


At 10:00 continued volatility with the Philly Fed business index; the index went NEGATIVE indicating contraction. The index was expected at +8 it fell to -7.7 the second report in the last 24 hours that the economy is contracting. New orders in the June report were negative at -7.6 indicating orders declined, the employment component fell to 4.1 from 22.1 in May while prices pd fell to 26.8 from 48.3. May Philly Fed was 3.9. The initial reaction put a small bid back into bonds and mortgages but not as much as we might have thought. The DJIA at 10:06 +26, the 10 yr +9/32 at 2.94% and mortgage prices +3/32 (.09 bp).

Provided by Sigma Research

Bill Nickerson

Vice President Mortgage Network

179 Great Road Suite 214, Acton MA 01720


Bill’s Blog

Providing Mortgages Since 1991

NMLS # 4194

Commercial   Residential     Reverse FHA/VA

What’s really happening

Stocks fell in Europe for a sixth day, U.S. index futures declined and the yen strengthened as concern deepened the global recovery may slow. Copper led commodities lower, while oil dropped as OPEC meets. The US stock indexes traded weaker all morning into the open with the DJIA lower; a close lower today will be the first time since 2009 the DJIA fell six days in succession. The bond and mortgage markets benefiting as the economic outlook weakens.

Treasuries and mortgage markets started better, still better but have slid back from levels at 8:30; at 9:30 the DJIA opened flat after trading weaker n pre-market trade. The 10 yr note at 9:30 +5/32 at 2.98% and mortgage prices +4/32 (.12 bp).

OPEC was widely expected to announce production increases today, it didn’t; in the meantime with the economies in Europe and the US showing signs of stalling crude is lower today. “There is still much uncertainty about the strength of the world economic recovery,” Mohammad Aliabadi, the acting Iranian oil minister and current OPEC president, said in a speech in Vienna before the group announces its decision.  OPEC was expected to raise its production quota for the first time in almost four years to help replace lost Libyan supplies and meet growth in demand later this year, a Gulf delegate said yesterday. The group last collectively agreed a production increase on Sept. 11, 2007, setting a quota of 27.253 mil barrels a day. That the group didn’t increase production is evidence that there is serious divergent opinions within OPEC. The announcement came at 9:20 am this morning, crude oil was down $0.60 then spiked up $0.60.

It is another day with no direct economic releases; at 2:00 the Fed will release its Beige Book, the Fed staff’s report on the economy in all 12 Fed districts. A lot of detailed specifics but generally about what markets already have discounted.

Mortgage applications decreased 4.0% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending May 27, 2011.  The Refinance Index decreased 5.7% from the previous week. The seasonally adjusted Purchase Index was essentially unchanged from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 3.0%. The four week moving average is up 1.1% for the seasonally adjusted Purchase Index, while this average is up 3.8% for the Refinance Index. The refinance share of mortgage activity decreased to 65.7% of total applications from 66.8% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.2% from 5.8% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.58% from 4.69%, with points increasing to 1.01 from 0.69 (including the origination fee) for 80% loans. The 30-year rate is the lowest since November 2010. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.78%, with points increasing to 1.07 from 1.04 (including the origination fee) for 80% loans.

The bond and mortgage markets will likely hold steady until 1:00 when treasury auctions $21B of 10 yr notes, re-opening the 10 yr note issued last month. Yesterday’s 3 yr auction saw good demand, today’s 10 yr is more crucial to mortgage rates. Strong demand will support rates but weak bidding will pull interest rates up a little. The auction and how equity markets act through the rest of the day will drive the bond market. The 10 yr note trading at 3.00% area, critical level technically and psychologically.


Bill Nickerson

Vice President

Mortgage Network

179 Great Road

Acton MA 01720

978-264-4803  office

978-268-5023 fax

978-273-3227 cell


NMLS # 4194

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