ARMs Were 3% Of All 2009 Home Purchase Loans, Lowest Since 1982

ARMs Only 3% Of Total Agency Loans In 2009
An annual report on the ARM market published by Freddie Mac shows adjustable-rate mortgages accounted for just 3 percent of all conventional home purchase loans in 2009. That’s the smallest percentage for ARMs since at least 1982.

Market & Economic News Update
Yes, today we have the 7-yr Treasury Note auction. Yesterday’s 5-yr was “fair-to-pretty-good”. The auction came in at 2.37%, with “indirect buyers” nabbing 53% of it and a strong 2.80 bid-to-cover ratio. And for market news today, we had Jobless Claims and Durable Goods. New orders for durable goods were +.3% in December, less than expected but still better than the -.4% in November. Durable goods orders are a leading indicator of manufacturing activity & a good measure for overall business health, and for 2009 fell a record 20.2 percent. Jobless Claims dropped 8,000, which is good, but the drop was less than expected, which is bad. With these two pieces of news we find the yield on the 10-yr back up to 3.67% and mortgage worse by between .125 and .250.

Fed Holds Rates, Will End MBS Buying
As expected, the FOMC left overnight rates unchanged yesterday. Some of the language contained in the release, however, caused rates to move up slightly, and the stock market to improve. “Economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. While bank lending continues to contract, financial market conditions remain
supportive of economic growth.” They believe that inflation is likely to be subdued for some time, and therefore expect to leave Fed Funds near 0% for “an extended period”.

More importantly to mortgage folks, once analysts picked apart every word of the announcement, is that the FOMC announced that its $1.25 trillion agency mortgage-backed security purchase program will be slowing down as the end of March nears, and ending March 30th. So it is now official. Personally, I believe that the sun will come up again this morning, my car will start, and life will be close to normal. But anticipation is running high for a steepening of the yield curve as long term rates move higher and the short end remains low.

Mortgage Insurance Losses
MGIC reported a fourth-quarter loss but said it received fewer default notices and sold new policies that it hopes are better underwritten. On the news all of the publicly traded MI stock prices rallied. In the release, however, MGIC disclosed that Bank of America has ceased doing business with the company as a result of MGIC’s rescission practices. Bank of America/Countrywide accounted for 12% of all new insurance written in 2008 and 8% of new insurance in the first nine months of 2009 at MGIC, so not having that business going forward, if that happens, will have an impact. This backlash from a major lender hampers income growth at a time when MGIC needs to bring in new income to offset rising claims payments on foreclosed mortgages.

New Home Sales Down -7.6%
We learned yesterday that New Home Sales dropped 7.6% in December, worse than expected. It is the fourth decrease in the past five months, in spite of the tax-credit extension. For the year sales declined 23% to 374,000, the lowest level since records began in 1963. The median sales price of new houses sold in December 2009 was $221,300; the average sales price was $290,600. Sales of new homes plummeted by 41% in the Midwest and 7% in the south. But they skyrocketed 43% in the Northeast and 5% in the West.

Daily Humor
Dan was a single guy living at home with his father and working in the family business.

When he found out he was going to inherit a fortune when his sickly father died, he decided he needed to find a wife with whom to share his fortune.

One evening, at an investment meeting, he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away.

“I may look like just an ordinary guy,” he said to her, “but in just a few years, my father will die and I will inherit $200 million.”

Impressed, the woman asked for his business card and three days later, she became his stepmother.

Women are so much better at financial planning than men.