WeeklyBasis 1/15/10: Bank Earnings To Drive Rates Next Week, New Loan Disclosure Rules

Rate Update & Market Preview
Rates are down about .125% from last week as mortgage bonds rallied on weak retail sales, benign consumer inflation, and well-received Treasury auctions. The extent of the bond rally would suggest lower rates, but lenders are holding the line on pricing to see if the rally holds next week. When mortgage bond prices rise on a rally, yields (or rates) drop and vice versa.

Stock and bond markets are closed Monday January 18 in observance of the Martin Luther King holiday. The Senate will resume talks Tuesday on the nomination of Fed chairman Ben Bernanke to a second four-year term. On Wednesday, markets will see if business inflation numbers confirm what consumer inflation numbers told us this week, and also voting FOMC member and New York Fed head William Dudley will be making a public speech on the economy.

Throughout the week, we also have quarterly bank earnings from major firms including Goldman Sachs, Citigroup, Bank of America, Wells Fargo. JP Morgan Chase today reported their fourth quarter profit quadrupled but they’d face big loan and credit card losses. Their stock traded lower on the report, taking the financial sector and stock markets overall down with them. Bonds were the beneficiary, which also contributed to better rates. Bank earnings will be a key market mover next week.

Notes On New Mortgage Disclosure Rules
Effects of the new 2010 Good Faith Estimate and disclosure rules won’t be known until all transactions beginning now get to the closing phase. As with any new regulation, each lender is interpreting them slightly different. What homebuyers and Realtors need to know is that the new Good Faith Estimate is essentially a binding agreement instead of an estimate—this is complicated because transactions change as buyers and sellers constantly negotiate price, terms and timing after Good Faith Estimates have been issued.

So any fee line item associated with a transaction that changes will cause delays. This WeeklyBasis report will cover this topic in more detail as closings under these new rules start to happen and it’s easier to pinpoint the trouble spots. Happy to answer questions on specific transactions in the meantime.

CONFORMING RATES ($200,000 – $417,000) – 1 POINT
30 Year: 4.875% (4.99% APR)
FHA 30 Year: 5.0% (5.13% APR)
5/1 ARM: 3.875% (3.99% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) – 1 POINT
30 Year: 5.25% (5.36% APR)
FHA 30 Year: 5.25% (5.38% APR)
5/1 ARM: 5.25% (5.37% APR)

JUMBO RATES ($625,500 – $3,500,000) – 1 POINT
30 Year: 5.875% to 6.25% (6.02% to 6.37% APR)
5/1 ARM: 5.25% (5.43% APR)