The housing market is improving, no
question. Home prices are rising, interest rates are low, inventory levels have
fallen and fewer borrowers are falling behind on their mortgage payments. All of
this helped to temporarily put a curb on new foreclosure filings by banks in
October (the most recent data published).
Processing Services reported that the decline also has to do with changes in
mortgage servicing that went into effect in September under the $25 billion
mortgage settlement. Servicers are now required to give borrowers a 14-day
notice in writing before referring a loan for foreclosures. Those letters began
going out in September.
Another reason for the drop in new foreclosures
may be a surge in loan modifications involving principal reduction. These are
also mandated by the mortgage servicing settlement. Principal reduction
modifications jumped 62 percent from October to November.
the reason, the fewer homes on the market at depressed prices, the better it is
for the housing market.
Happened to Rates Last Week?
backed securities (MBS) lost -40 basis points from last Friday to the prior
Friday which caused 30 year fixed mortgage rates to move higher. We had our
highest mortgage rates on Friday and our lowest rates on Wednesday.
had a mixed bag of economic data last week: The ISM Manufacturing Index
(representing 1/3 of our economy) was much weaker than expected and showed
contraction in that sector. However, the ISM Services Index (representing 2/3 of
our economy) was much stronger than expected showing economic expansion. Private
Payrolls were weaker than expected but the Unemployment Rate and the more
closely watched Non-Farm Payrolls data was better than market
MBS sold off Friday morning on the strength of Non-Farm
Payrolls report which gave us our highest mortgage rates of the
to Watch Out For This Week:
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.