Yesterday, President Bush signed H.R. 3648, The Mortgage Forgiveness Act of 2007, into law, sparing homeowners the tax burden associated with canceled mortgage debt. Prior to this action, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was considered taxable income. The new law, however, temporarily waives these taxes for debts forgiven (as high as 35%) from the beginning of 2007 to the end of 2009. The bill also extends the tax deduction for mortgage insurance premiums through 2014. Keep Reading...

Today the Federal Reserve Board, under the authority of the Truth in Lending Act, unanimously voted to propose important changes to the mortgage industry. According to Business Week, the following proposed changes would affect subprime loans or those loans the Fed defines as “higher-priced mortgage loans” (loans with rates at least 3 percentage points above a comparable Treasury security for first mortgages and 5 percentage points for second loans, or home-equity loans):

• Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers’ ability to repay the loan.
  
• Creditors would be required to verify the income and assets they rely upon in making a loan.
  
• Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase.
  
• Creditors would have to establish escrow accounts for taxes and insurance.

The Fed also proposed another set of rules for all mortgages, including what the Los Angeles Times called “stricter disclosures on ‘yield spread premiums.'” These rules include: Keep Reading...

I think it is important to note that the bond and mortgage-backed security markets have already priced-in a December rate cut of 25 basis-points and are well along the road to pricing in a 50 basis-point rate cut.

If you’re looking for additional rate and price improvement following the official monetary policy decision announcement on December 11th I’m afraid you may be disappointed. The risk is that you’ll be sharply disappointed if the Fed chooses to cut short-term rates by 25 basis points.

It is almost always surprising data or events that catch a large number of traders leaning in the wrong direction that causes big price and rate swings in the mortgage market. Experienced market participants (those that have been burned more than once) tend to live by the old market saw that says, Buy the rumor ¦ sell the fact.

Looking ahead to next week traders will be nervously fidgeting with their positions ahead of Friday’s November nonfarm payroll report (scheduled for release at 8:30 a.m. ET).

The general consensus among market participants I’ve talked to is that a headline payroll number less than 80,000 together with a national jobless rate that bumps up to 4.8% ( currently 4.7%) will make a 50 basis-point rate cut from the Fed the following Tuesday much more likely.  If the headline payroll number exceeds 110,000 and the jobless rate doesn’t budge from 4.7% — most believe the Fed will choose to be more cautious cutting short-term rates by only 25 basis points.

In case you weren’t aware of details of a government-sponsored plan to temporarily freeze interest rates on certain troubled subprime loans may be announced as early next week.

In general, the government and a coalition of mortgage-related companies and private alliances have largely agreed to extend the lower introductory rate on home loans for certain borrowers.

Exactly which borrowers will qualify for the freeze and how long the freeze will last are yet to be determined. I’ll keep you posted as this developing story gains more detail.

If you would like to apply for a Mortgage Loan, you can APPLY ONLINE HERE, you can call John Thomas at 302-703-0727.

John R. Thomas – NMLS 38783

Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

248 E Chestnut Hill Rd, Newark, DE 19713

Stock jocks viewed the data has an indication that the trend in manufacturing weakness may be in the early bottoming stage while bond daddies looked at the same data and see it indicating that the Fed will undoubtedly have to sharpen up their short-term rate cutting scissors. It is highly unlikely both camps will be right on their market call – so the overall picture remains muddled.

In other news of the day, the National Association of Realtors reported that October existing home sales fell 1.2%. The decline in the headline number was sharper than most economists anticipated but after a moment of indecision, most traders shrugged the number off when a closer examination of the report detail showed big drops in multi-family and condo sales while single-family unit sales remained flat.

The Mortgage Bankers of America released their weekly report on mortgage applications this morning. The report showed that mortgage applications declined 4.3% in the week ended November 23rd.  Seasonal factors likely played a large part in the decline since 30-year note rates slipped 9 basis points lower to a national average of 6.09% last week. Jumbo and adjustable note rates both moved fractionally higher during the period.

If you would like to apply for a Mortgage Loan, you can APPLY ONLINE HERE, you can call John Thomas at 302-703-0727.

John R. Thomas – NMLS 38783

Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

248 E Chestnut Hill Rd, Newark, DE 19713