Mortgage News from Ara Melkonians/ Week of 8/1/2011

Good Morning Everyone and Happy Friday! Wow, what a week it has been in equity markets and subsequently, the bond market. Yesterday's over 500 point drop on the Dow was the largest in 2 years, and this week's more than 7% drop in the stock market is the worst since the fateful market plunge of November 2008. A refi boon appears to be well in full swing. The selloff in global markets has erased more than $4.5 trillion in equity values since July 26.

As you know, bad news in equities means good news for mortgage rates. We've not seen the yield on the 10 year Note this low since last Fall. Speaking of refinances, Freddie Mac released the results of its 2nd qtr refinance analysis yesterday and the results are worth noting. In the Q2 of 2011, 77% of refinances of 1st trust liens maintained about the same loan amount or lowered their principal balance by paying-in additional money at the closing table.

According to the report, cash-out transactions accounted for only 23% of all refinance loans, compared to the average cash-out share during the 1985 to 2010 period which was 46% -- a telling sign of how borrowers are holding on to whatever equity they have. Also, the median interest rate reduction for a 30-year fixed-rate mortgage was about 1 percentage point.

Bank of America was in the news yesterday publicly complaining about how the GSE's Fannie Mae and Freddie Mac were changing the rules on purchasing loans from them. The "ever evolving" behavior of the GSE's has caused BofA to suffer increased claims. The behavior of the GSE's "is evolving in a way that diverges from our longstanding course of dealing with them" said Larry DiRita, a bank spokesman. BofA has already spent about $30 billion in settlements and writedowns to clean up mortgage liabilities since Ken Lewis stepped down as CEO last year.

This ever changing mortgage industry is a real uncertainly for investors as big banks continue to take on more water. Unfortunately, it has quite an impact on underwriting and fear for underwriters as they don't want to be responsible for a loan not being purchased. As far as the industry goes as a whole, this drop in rates is well overdue and may help us pull out, in terms of volume, a dismal year into at least a respectable one.

I hope you all have a terrific Friday and a very restful and relaxing weekend.

Ara Melkonians/ Week of 7/15/2011

Good Morning Everyone and Happy Friday! Equity markets have struggled this week after a brief run up the week before. The Dow, if it closes at this current mark, will have lost 220 points for the week. The yield on the 10 year Note had rocketed from 2.87% to 3.20% in the week subsequent, but we have all but made up those losses this week. Pricing is fabulous and we should be telling everyone we know about how great these rates are!

This week we learned from Data Quick that home sales last month in Southern California shot up 11.6% from the month previous. This is surprisingly great news as June is typically one of the best months of the year for home sales. In fact, June was the highest month of home sales in 2010, being the recipient of the much sought after tax credit program which helped many first time buyers secure their first home.

This year's June home sales number is down 14% from last June's number for So Cal which includes Ventura, LA, Orange, San Bernardino, Riverside and San Diego counties. The good news in all of this it that we are only 14% off from last year's number when we had the tax credit. What's more, July 2010's number plunged 21% after that big June as the tax credit had expired. We have no reason to expect such a plunge this year.

Have a great Weekend!

News From ARA MELKONIANS/ 6-20-2011

Good Morning Everyone and Happy Friday! Last week the Dow posted a positive close for the week, even though it was only 52 points, it broke the 6 week skid of losing weeks that traders have had to endure since the beginning of May. At this moment, the Dow is down 63 for this week having dropped about 30 points while I was writing this article. We'll need a heck of a turn around this afternoon rally to put is in positive territory for a 2nd week in a row.

This week's economic news was all about those 2 pesky 800 lb gorillas that continue to put a damper on any notion of economic recovery. Thursday's Initial Jobless Claims remained well above the 400K number reminding us that the employment situation in our country is still a viable fear.

NAR reported this week that existing home sales were down in May as temporary factors and financing problems weighed on the market. Existing-home sales fell 3.8% to a seasonally adjusted annual rate of 4.81M in May from a downwardly revised 5.00M in April. This is a noticeably precipitous drop of 15.3% from the 5.68M pace in May 2010 when sales were surging to beat the deadline for the home buyer tax credit.

The good news for all of us is the fact that with a flailing stock market, interest rates are fabulous and the buying power borrowers have today is unlike any other. Low home prices and low interest rates at the same time is a phenomenon not seen in this modern era of economics.

I hope you all have a terrific Friday and a very restful and relaxing weekend.

News from ARA MELKONIANS/ week of 6/20/2011

Good Morning Everyone and Happy Friday! Last week the Dow posted a positive close for the week, even though it was only 52 points, it broke the 6 week skid of losing weeks that traders have had to endure since the beginning of May. At this moment, the Dow is down 63 for this week having dropped about 30 points while I was writing this article. We'll need a heck of a turn around this afternoon rally to put is in positive territory for a 2nd week in a row.

This week's economic news was all about those 2 pesky 800 lb gorillas that continue to put a damper on any notion of economic recovery. Thursday's Initial Jobless Claims remained well above the 400K number reminding us that the employment situation in our country is still a viable fear.

NAR reported this week that existing home sales were down in May as temporary factors and financing problems weighed on the market. Existing-home sales fell 3.8% to a seasonally adjusted annual rate of 4.81M in May from a downwardly revised 5.00M in April. This is a noticeably precipitous drop of 15.3% from the 5.68M pace in May 2010 when sales were surging to beat the deadline for the home buyer tax credit.

The good news for all of us is the fact that with a flailing stock market, interest rates are fabulous and the buying power borrowers have today is unlike any other. Low home prices and low interest rates at the same time is a phenomenon not seen in this modern era of economics.

I hope you all have a terrific Friday and a very restful and relaxing weekend.

NEWS FROM ARA MELKONIANS/ week of 6/20/2011

Good Morning Everyone and Happy Friday! Last week the Dow posted a positive close for the week, even though it was only 52 points, it broke the 6 week skid of losing weeks that traders have had to endure since the beginning of May. At this moment, the Dow is down 63 for this week having dropped about 30 points while I was writing this article. We'll need a heck of a turn around this afternoon rally to put is in positive territory for a 2nd week in a row.

This week's economic news was all about those 2 pesky 800 lb gorillas that continue to put a damper on any notion of economic recovery. Thursday's Initial Jobless Claims remained well above the 400K number reminding us that the employment situation in our country is still a viable fear.

NAR reported this week that existing home sales were down in May as temporary factors and financing problems weighed on the market. Existing-home sales fell 3.8% to a seasonally adjusted annual rate of 4.81M in May from a downwardly revised 5.00M in April. This is a noticeably precipitous drop of 15.3% from the 5.68M pace in May 2010 when sales were surging to beat the deadline for the home buyer tax credit.

The good news for all of us is the fact that with a flailing stock market, interest rates are fabulous and the buying power borrowers have today is unlike any other. Low home prices and low interest rates at the same time is a phenomenon not seen in this modern era of economics.

I hope you all have a terrific Friday and a very restful and relaxing weekend.

ARA MELKONIANS MORTGAGE REPORT/ Week of April 1, 2011

Good Morning Everyone and Happy Friday! The stock markets have had quite a choppy week, but the bulls have prevailed 3 out of the 5 trading days, with today looking to be the biggest winner of the five. The Dow was up about 100 points for the week as of the close last night; however, today's 100 point rally so far looks to doubled that number for the total weekly gain. Fortunately, the bond market is taking everything in stride and rates are actually improved today over yesterday's rate sheet offering. Today being the first Friday of the month, we get to see the always much anticipated jobs report for the previous month. Nonfarm payrolls for March increased by 216K, better than the 185K additions that had been expected, but nowhere near enough to get the economy kick started. Private payrolls topped expectations and came in at 230K, besting the 203K anticipated. The headline unemployment figure dropped a notch down to 8.8% from 8.9%. Hence we're making some progress, but so many now are discouraged workers and aren't even looking for a job at this point. The stock markets are using the data to fuel buying efforts are certainly enjoying a nice Friday rally. I'm sure you all have heard now about the LO Comp Rule implementation that was put on hold by the US Court of Appeals late last night. The Feds were awfully determined to make this rule a reality and never wavered through the many questions and challenges that were presented to them throughout the last several months. I would like to hope that this ruling will be permanently overruled, but chances are, we're going to have the LO Comp Rule in some form or fashion implemented soon. There are some facets of the rule that are not necessarily bad for LO's, especially those who have a difficult time holding their commissions. The down side, of course, is that the income will be capped, or at least locked in, for 90 days at a time. However, the commission being made by the LO will not have to be a part of the conversation with the client when choosing a rate and subsequent rebate or cost. The banks have been doing it this way for years. Clients will be able to look at the rate sheet and choose their rate whether they want rebate to cover closing costs or discount to buy their rate down. The LO's commission just simply will not be a part of the conversation any more. It will be a much cleaner sell for some. It's a nightmare, however, for mortgage brokers and especially for us hybrids who have a mortgage banking channel and a mortgage broker channel. This set up, though advantageous to the LO, is certainly not designed for a "one size fits all" kind of compensation plan. At least we have a little time now to figure things out and so do those who will be eventually implementing some form of the LO Comp plan in the future. I hope all of you have a terrific Friday and a very restful and relaxing weekend!

Ara Melkonians/ Update#2/ week of January 17, 2011

Good Morning Everyone and Happy Tuesday! Equity markets are positive once again this morning. The S&P has completed seven consecutive weeks of positive closes, and really except for the month of November, the stock market as a whole has been on the rise since the 1st of Sept.

Just when we seem to be getting some momentum in credit markets, we get another setback. The 10 year note closed at 3.30% on Friday, its lowest Friday close of the year, only to give back all the gains of the last 1/2 of last week in the opening hour of trading this morning. We presently sit at 3.39% . . . again.

Earnings season continues this week with Comerica their latest quarterly earnings this morning. Not only did they beat the Street estimates, but also they announced that they will be acquiring Sterling Bank for $10 a share. Delta Airlines missed their earnings target set forth by the analysts.

So, though light, earnings really didn't have much impact on the markets this morning. The NASDAQ is hampered by Aaple's $12 drop in stock price after Steve Jobs this morning announced that he will be taking an indefinite medical leave of absence. The tech world will definitely miss his ingenuity.

There are no major economic news releases today except for the Empire State Index which had little impact on markets when it was released. Tomorrow brings us the report on building permits and housing starts, and Thursday brings us the largest offering of economic news of the week. We'll have to wait and see if Thursday has any big surprises.

I hope all of you have a terrific Tuesday and a very productive and profitable rest of the week

Update #3/ week of January 10, 2011/ ARA MELKONIANS

Good Morning Everyone and Happy Wednesday! The improvement in mortgage rates that we celebrated late last week was in large part due to the concerns that we have been discussing with the debt crisis' in Portugal, Spain and even Italy. Yesterday we talked about the good bond auction that took place in Greece and Italy which helped the stock market and hurt bond prices. Successful bond auctions overnight in Portugal and Germany are creating a more comfortable feeling about the situation over in the European Union, and thus we are watching bond rates move higher again today.

This good global news coupled with some positive minor economic news releases so far today is giving equities reason to cheer and so far bullish traders are taking full advantage of it. The Import Price Index for December made a month-over-month increase of 1.1%, which is a slower pace than the 1.5% monthly increase recorded for November. However, year over year, import prices for December increased by 4.8%, which is up from the 3.9% year-over-year increase recorded for the prior month.

Oil inventories are down slightly which is helping oil prices rise. Still to come this morning is the release of the Fed's Beige Book, the Treasuries December budget statement, and the results from the auction of 10 year notes. All of these could have some impact on the market, but a decline in the volatility index is probably keeping credit markets from absolutely running for cover. I guess that would be the silver lining to the rise in interest rates in the last couple days.

Mortgage applications for refinances were actually up last week by 4.9% according to the Mortgage Bankers Association. I don't suspect that's going to be the case this week. Purchase applications were actually down 3.7% last week. Single-family home prices slid 5.1% in November, according to Core Logic, the 4th consecutive monthly slide. However, Fannie Mae and Zillow expect home prices to start rising in the 3rd quarter of 2011. The MBA and NAR both expect higher home sales and construction in every quarter this year. That would be great, and set us up for some semblance of a housing recovery in 2012.

I hope all of you have a terrific Wednesday and a profitable and productive rest of the week!