The expected extension and expansion of the tax credit (probably the last one), is expected to be voted on as soon as today and probably signed in the next few days, at best. The signing may happen in spite of the administration preferring a slightly different version. The latest, not voted on by the Senate, would extend the credit to home sales that go under contract by April 30 and close by June 30, 2010. A new, $6,500 tax credit would be available for buyers of owner occupied primary residences who have owned during five of the eight years prior to the purchase. Although the House may have its own version, this extension includes a few items such as the home price limit would be $800,000, and the annual income limit to qualify for the tax credit would be $125,000 if you’re single and $250,000 for couples.

The other pieces of the puzzle are the loan limits. Appropriations committees in the House and Senate are proposing to extend the temporary limits for conforming jumbo loans, keeping the $729,750 loan amount through 2010 in some markets. If San Francisco does not qualify, I don’t know what market will. The committees recognize that the government must do what it can to not de-stabilize the housing markets, and are thus recommending this action. At this point there is no reason not to extend the limits, it just hasn’t been done yet.

For the week ending on October 28^th (yes, they ended their week in the middle of the calendar week) the Federal Reserve's MBS program was a net buyer of $18 billion agency MBS, which was the similar to last week. For the year purchases of agency MBS stand at $977 billion. Recently the Fed has had an appetite for 30-year 5.0s and 5.5s (which include 5.25-6.125% mortgages). The Federal Reserve finished its $300 billion Treasury purchase program yesterday, and at this point the mortgage purchase program will end in March.

Bond prices went down and rates went up, the equity markets saw some nice gains, oil moved above $80 per barrel again, and the 7-yr auction went nothing like the 2 & 5-yr sales from Tuesday and Wednesday. Was all that due to a slightly-stronger-than-expected GDP number? Some of it was, although analysts quickly point out that a good portion of the increase is due to government spending (ergo not sustainable).

Fortunately for mortgage rates, relative to Treasury yields, locks and supply are down somewhat and there is decent demand for new production, so mortgage rates did better than other yields. The major earnings announcements are behind us, and many companies feel that they are done cutting costs and now are hoping for actual revenue growth. Imagine that!

Most of the United States begins Daylight Saving Time at 2:00 a.m. on the second Sunday in March and reverts to standard time on the first Sunday in November. So by my calculations, that means that this Sunday here in the U.S. most of us "fall back" and it will dark by dinner time.

Slow day, click on this link if you want some giggles. FHA is becoming the new subprime.

Ryan Ogata Senior Mortgage Consultant Residential Pacific Mortgage tel: 415-869-6132 fax: 866-565-0621 rogata@rpm-mtg.com http://ryanogata.blogspot.com/

The month of May was the third month in a row for stock market gains. I realize that many in my audience of real estate professionals have had a hard time enduring this market, but if you have anything left in the bank, my advice would be to throw it at stocks. Alright, it’s not that easy, but simply put, stocks have been appreciating as the credit freeze and bank liquidity crisis has settled down. The S&P 500 has gained about 34% since its March low, jobless claims are slowing down, consumer confidence is increasing and oil prices are rising. All good news right?

Not so fast. As one would imagine, this has not helped mortgage rates as of late. Follow the logic even further and you should be fearful that these higher rates will put a damper on our beloved housing market that was just finally starting to take off. The good news is that rates are only part of the "home buying equation". Think about this for a second. Our industry does not thrive on appreciating markets, but rather transaction volume. Many houses are now more affordable, families are saving money for down payments, and rates are still relatively low.

As you know, the Federal Open Market Committee (FOMC) is meeting today and tomorrow to discuss the direction of interest rates. It will make a statement tomorrow at 11:00 AM PST. Here are my predictions:

1. The Federal Funds (Prime) rate will stay the same
2. The Fed will make a statement that inflation is "contained"
3. And of course there will be some of ambiguous statement to the tune of "the weakness in the economy is still a major factor to be dealt with."

What the mortgage market is looking for is some clue that the Fed will continue to inject money into the economy by buying Treasuries and mortgage bonds from Fannie Mae and Freddie Mac. If they make this statement, expect rates to drop dramatically for a few days. Who knows, we may see rates as low as 5% or below.

Ryan Ogata Senior Mortgage Consultant Residential Pacific Mortgage tel: 415-869-6132 fax: 866-565-0621 rogata@rpm-mtg.com http://ryanogata.blogspot.com/

I am the first to admit that if I had to make a living as a day trader, I would be bankrupt within a month. I guess my fallback plan of being a mortgage consultant will have to do for now, but it seems as if common sense and fundamental laws are being broken every day. Yesterday was a perfect example. The "Bank Stress Test" results were leaked out to the public and further confirmed what everyone already knew. Citi, Bank of America, and Wells Fargo will all require additional capital to stay in business. So what happened? Citi and BofA stock went up 17%, while Wells Fargo went up about 16%. HUH???

The long awaited temporary $729,750 Jumbo Conforming loan amount program has been rolled out by lending institutions everywhere. There are some minor guideline differences from the permanent $625K limit, but all things considered this is a really good loan program to help stabilize the real estate market. Watch out for subordinate financing (2^nd mortgages) on refinance transactions and if your client needs cash out, it’s very limited. Second homes and investment properties have been limited to 65% LTV and credit score requirements are stricter than ever. Like I said, minor differences, but the flip side is that it expands conforming pricing some $100K for the next 7 months. Go out and sell!

Last Friday the "HVCC" (Home Valuation Code of Conduct) was put into action. "No employee, director, officer, or agent of the lender, or any other third party acting as joint venture partner, independent contractor, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, bribery, or in any other manner including but not limited to…" To summarize, lending professionals are no longer allowed to "interfere" with the appraisal process for all Fannie Mae and Freddie Mac mortgage applications, and there now exists a buffer between the appraiser and the loan officer. In my opinion, this latest reform to the lending industry comes way too late and is going to cause more problems than it will solve. Think about this for a moment. Here we are right in the middle of a refinance boom and we are about to start adding applications to the system, further impacting lender turn times, before value for the property has been established. Not exactly the brightest move, but only time will tell how this one plays out.

In other news…

Looks like the FDIC is trying to come up with a politically correct term for "junk loans". They don’t call bad loans "troubled assets" or "toxic waste" any more, instead, they are moving ahead with their "legacy loan" program. Part of the Financial Stability Plan, the Treasury Department has released the details of its public-private investment plan to remove "legacy loans" from bank balance sheets. It is hoped that $1 trillion can be sold using advantageous financing provided by the FDIC and the Federal Reserve (tax payers), including acquisitions of mortgages and mortgage-backed securities. Sales of "legacy loans" should free up obstacles to lending, while sales of legacy securities will unclog the secondary markets and help bring back jumbo financing.

MGIC (Mortgage Insurance) reported its seventh straight unprofitable quarter, posting a $184.6 million loss. Are you surprised? This loss has widened from the $34.5 million loss they posted in the same quarter a year ago, and makes you wonder just how much longer non FHA mortgage insurance transactions are going to be around for.

If you did not know, realtors now have their own credit union. REALTORS FCU serves the 1.2 million members of the National Association of Realtors (NAR), their families and staff. It will offer residential mortgages, along with lines of credit, consumer loans, and checking and savings accounts. The Web site for the credit union is www.realtorsfcu.org

Do you think mortgage lenders will get their own CU soon? I highly doubt it!

Ryan Ogata Senior Mortgage Consultant Residential Pacific Mortgage tel: 415-869-6132 fax: 866-565-0621 rogata@rpm-mtg.com http://ryanogata.blogspot.com/