Jun. 25, 2007: Mortgage chatter

Jun. 25, 2007: Mortgage chatter Rob Chrisman

I walked into a McDonald’s with a buy-one-get-one-free coupon for a sandwich. I handed it to the girl and she looked over at a little chalkboard that said “buy one-get one free.” “They’re already buy-one-get-one-free”, she said, “so I guess they’re both free” She handed me my free sandwiches and I walked out the door.

Is it too late to buy stock in mortgage insurance companies? Borrowers are increasingly moving to fixed-rate loans instead of ARM’s, and these loans often carry MI.  Applications for private mortgage insurance, or PMI, rose 56% from February to March, according to the Mortgage Insurance Companies of America. Volume fell in April, but remained well above rates from last year. Private mortgage insurance is typically required of a buyer who wants a fixed-rate mortgage but has a down payment of less than 20%. It costs a fixed percentage of the total loan, usually less than 1 percent, and insures the lender against default.

What’s ahead of us this week? Well, so far prices are a “tad” better than on Friday afternoon, which might help locks as apparently lock volume with many lenders was down last week over 50%. This week will likely prove to be very active in terms of mortgage rate movement due to the economic data and other events that are scheduled – the full calendar is below. In addition to the data, another Federal Open Market Committee (FOMC) meeting will be held this week.* Together, we have the makings of a potentially volatile week in the financial and mortgage markets. Tuesday brings us the first important report of the week with the release of June’s Consumer Confidence Index, important to the financial markets because it measures consumer willingness to spend, which is important because consumer spending makes up two-thirds of the U.S. economy. Later this week the markets will also absorb the Treasury’s 2-year and 5-year T-Note auctions.

* Everyone expects the Fed to leave their overnight rates unchanged, and only a 50% chance of a rate cut during the next year!

This Week’s Calendar

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