May 28, 2008: Chase & Indy tweak programs while rates creep up

May 28, 2008: Chase & Indy tweak programs while rates creep up Rob Chrisman

I made a mistake today. The “recency effect” says that a person best remembers items from last on a list. One offshoot is that people also tends to remember the last song that they heard on the radio before turning it off, and has that song running through their head all day. For me this morning, that song was Starland Vocal Band’s “Afternoon Delight”. Ouch.

Speaking of not-so-great things, the S&P/Case-Shiller Home Price Index continue to show housing price declines at a rapid pace. Year-over-year, prices are now off 14.1% according to the index, with prices off slightly more in the 20 major metropolitan areas. California and the Sunbelt states were hit the hardest. Sales of new homes rose 3.3% in April for the first time in six months, although March was revised down and the unexpected increase still left activity near the lowest level in 17 years. The increase is a typical bounce following very large declines; there are substantial downward revisions and months’ supply remains very high. Economists believe that new home sales will remain weak for some time as the housing industry struggles with falling prices and rising mortgage foreclosures, which are dumping even more homes on an already glutted market. On top of that, the Commerce report showed that the median price of a new home sold in April dropped to $246,100 in April, down 4.2 percent from April 2007.

We also had Consumer Confidence drop to 57.2 – very low. The Conference Board’s index was worse than expected, although at this point everyone, and their brother, realizes that confidence is not high, especially for anyone buying gas or employed in mortgage banking. What will help confidence? How about for oil prices to fall $30.00? Not likely. Nor is housing expected to bounce back dramatically until we rid ourselves of the excess inventory by people getting back into the housing market and getting mortgages! Along those lines, mortgage applications fell 4.6% last week, with the purchase index +0.1% and the refi index -8.9%.

The 10-year yield is up to 3.98% today, and the market seems like they want to push it above 4.0%. Mortgage prices are worse by .250-.375 after April Durable Goods (new orders for long-lasting U.S. manufactured goods) fell a smaller-than-expected .5% as transportation orders dipped, but a key barometer of business confidence posted a surprisingly sharp gain. Analysts polled by Reuters were expecting durable goods orders to drop 1.0 percent as the weak U.S. economy impacts construction and motor vehicle industries. We also have the Treasury selling $30 billion in 2-year notes today.

Indymac announced the addition of Fannie Mae’s guidelines as part of their Agency Jumbo program offering. They are also rumored to be, on June 1st, removing all declining markets restrictions for <=80% LTV (including Jumbo).  Everything over 80% LTV will follow MI guidelines which have declining markets rules.

Chase, for their Fannie Mae product, communicated several changes to product guidelines and policies that are effective with the release of Desktop Underwriter Version 7.0 on June 1, 2008. Fannie’s announcement included changes that are applicable to products eligible for delivery to Chase including minimum credit scores for MyCommunity, multi-units, and changes to their foreclosure and delinquency policies. Chase is also revising their “eligibility parameters on all Agency products delivered to Chase on or after August 1, 2008, as follows: For second homes and investment properties, the borrower may not own more than four 1- 4-unit properties that are financed, including the subject property, for cash-out refinance mortgages, the borrower must own the property for at least 6 months prior to the note date, and for Home Possible® loans, multiple property ownership is no longer permitted.”

A passenger in a taxi leaned over to ask the driver a question, and tapped him on the shoulder. The driver screamed, lost control of the cab, nearly hit a bus, drove up over the curb, and stopped just inches from a large plate glass window.

For a few moments everything was silent in the cab, and then the still shaking driver said, “I’m sorry, but you scared the Hell out of me!”

The frightened passenger apologized to the driver, and said he didn’t realize a mere tap on the shoulder could frighten him so much.

The driver replied, “No, no, I’m sorry, it’s entirely my fault. Today is my first day driving a cab….. I’ve been driving a hearse for the last 25 years.”

Rob