Aloha Friday,

The Labor Department reported a lower-than-expected drop in weekly jobless claims and an increase in continuing claims. The Census Bureau reported that the trade gap narrowed in January to $37.3 billion -- significantly less than expected. A report on foreclosure rates showed an increase on a year-over-year basis but the pace slowed.

This kept rates the same for the most part this week. There was a slight .125% increase to certain point structures, but, overall was flat.

The results of this week’s rates come as recovery in the U.S. housing market has weakened in recent months. Demand for new and used homes, after strengthening earlier last year, has dropped because of cold weather and continuing high levels of joblessness.

New-home sales unexpectedly hit a record low in January, while existing-home sales also slumped. The National Association of Realtors' index for pending sales of previously owned homes, an indicator of sales to come, fell as well.

Rates overall are still great and the 5 and 7 year fixed rates for Jumbo mortgages are looking great.

Delinquencies on jumbo loans continue to rise

Jumbo mortgages are those with an initial principal amount of over $417,000 (in most areas of the U.S. or over $729,750 in certain specified areas), a limit set by Fannie Mae and Freddie Mac. Fitch Ratings, a credit rating agency, says the performance of prime jumbo loan performance in the residential mortgage-backed securities (RMBS) category dropped again in January as serious delinquencies (60+ days past due) rose for the 32nd consecutive month and edged closer to 10%. Prime jumbo loan delinquencies have been rising since the second quarter of 2007. In 2009, the delinquency rate nearly tripled during the year. The serious delinquencies rose to 9.6% in January from 9.2% in December.

“The new year has brought no relief from declining jumbo loan performance,” said Fitch managing director Vincent Barberio. “The trend line for delinquencies indicates the 10% level could be reached as early as next month.” California, which has a 44% share of the total jumbo market, saw the delinquency rate rising to 11.3% in January from 10.8% in December. Delinquency rates rose in 4 other states – New York, Florida, Virginia, and New Jersey -- which along with California constitute the top 5 states in market share. The jumbo market in the country is valued at $376 billion and dropping. Grant Bailey, a senior director for the RMBS group at Fitch, said: “In the 05, 06, 07 vintages, close to 50% of borrowers are underwater. That keeps a negative pressure on borrowers and, therefore, we keep a negative outlook on delinquencies.”

Mortgage rate continues to remain below 5%

A survey released by Freddie Mac says interest rates on 30-year fixed-rate mortgage averaged 4.95% for the week ending March 11, down from the previous week’s 4.97%. "During a light week of mixed economic reports, mortgage rates eased somewhat," said Frank Nothaft, Freddie Mac vice president and chief economist. Analysts believe mortgage rates will rise as the year progresses. I still think rates are going up as the rest of the year goes on,” said George Mokrzan, senior economist at Huntington National Bank. “The odds, at this point, point to an improving economy and with that rising interest rates in general.” Homeowners seem to be adopting a wait and watch approach as home inventory rises. Diane Saatchi, senior vice president at Saunders & Associates, said: "Prices will not tick up until buyers agree to pay above six month-ago prices, and it will happen, but meanwhile sellers who want to sell now, need to give in to the market, not their hopes." The 15-year fixed-ra te mortgage averaged 4.32% in the latest week, down from 4.33% the prior week.

Home price decline slows down

Real estate website Trulia.com says homeowners cut prices for about 19% of listings as of March 01, down by 10% from the previous month. This is the first time price reduction levels have dropped below 20% in almost a year. “Consumer engagement on Trulia remains at an all time high, but home sales have dropped nationally during the past few months because there has been a lower sense of urgency to ‘buy now’,” said Pete Flint, Trulia co-founder and CEO. “As we get closer to the government incentives running out, we expect price reductions to increase as sellers begin to feel the pressure to lure buyers in, in advance of the tax credit expiration.” The average discount for a median house was 11% from the original value. The latest data confirms the downward trend in listing price reductions from the beginning of this year. Trulia.com says homes priced at $1 million and above were discounted at an average rate of 14% on the original list price. Trulia collects data f rom brokers and agents, third-party providers and multiple-listing services. Undeveloped land and foreclosed properties are excluded from the survey.

Green homes do not find favor with appraisers

Homeowners looking to buy green homes are finding it difficult to convince appraisers to consider the value of energy efficiency equipment while processing the loan application. Lower appraisal value means higher down payment for borrowers. Analysts say this could have a negative impact on equipment manufacturers. "We can't get lenders to appreciate the value, and if we can't get the values recognized, manufacturers can't justify moving these products forward," said Bill Nolan, a home building consultant. Appraisers say they cannot do much to help. If an equipment costs $50,000 at the time of installation and fetches only $25,000 on resale, the appraisal cannot reflect the full $50,000 value. “It doesn't do a lot of good to simply add value based on cost," said David Snook, an appraiser who serves on the real property committee on education for the American Society of Appraisers. “The question is 'How much will the market pay on resale?’” Homeowners say there is a dea rth of appraisers who fully understand how going green adds value. Analysts believe the market participants will appreciate the need for going green in the medium to long-term. "As more American homeowners green their homes, there will be more and more of a premium paid for green homes," said Ben Kaufman, founder of GreenWorks Realty. "I can imagine a miles-per-gallon type sticker on homes for sale and the marketplace will absolutely favor fuel-efficient homes.”

Retail sales rise unexpectedly in February

According to data released by the Commerce Department, retail sales rose 0.3% in February; this is the fourth gain in the last 5 months. Retail sales excluding autos rose 0.8%. The rise well exceeded estimates made by analysts who expected the winter storms to have a negative impact on retail sales and estimated a drop of 0.2% in retail sales. “The storms were apparently not quite as disruptive as anticipated,” said Adam York, an economist at Wells Fargo Securities. Analysts say consumer spending, which is critical to economic recovery, is showing encouraging signs. “As we start adding jobs in the spring, employees will gain income and hours and retail sales should follow,” said York. Ten of 13 major categories reported an increase in sales in February. Sectors that reported sales increases included restaurants and bars, 0.9%; electronic and appliance stores, 3.7%; food and beverage stores, 1.3%; clothing stores, 0.6%; general merchandise stores, 1.0%; sporting goods,
hobby, book and music stores, 1.2%; building material and garden supplies dealers, 0.5% and furniture retailers, 0.7%. Retail sales data are an important indicator of consumer spending, which constitutes 70% of the U.S. economy.

30-Year Mortgage Rate Remains Below 5 Percent

Market, not their hopes,' she said. Low Rates, Limited Appeal The Mortgage Bankers Association said Wednesday U.S. mortgage applications nudged up last week, reflecting increased demand for home purchase loans even as interest rates trekked higher.
 

Foreclosure rates up by smallest amount in 4 years  

The foreclosure crisis isn't over, but the pace of growth may finally be slowing down.
RealtyTrac said Thursday that the number of U.S. households facing foreclosure in February grew 6% from the year-ago level, the smallest annual increase in four years.
 

Appraisal Organizations Oppose Use of BPOs in HAFA Program

In a letter to Treasury Secretary Timothy Geithner on Monday, four appraisal organizations, representing more than 35,000 real estate appraisers, voiced their opposition to the Home Affordable Foreclosure Alternatives (HAFA) program, set to take effect April 5, 2010.

The Obama administration’s program allows broker price opinions (BPOs) to be used to determine the value of properties to establish a minimum offer of a short sale. However, BPOs are only estimated values of a property as determined by a real estate broker and are not the same as appraisals.

In the letter, the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers said, “We strongly believe continuing to allow BPOs in the property valuation component will not adequately protect the public interest (consumer, borrowers, etc.) or the interests of the various parties to the loan (lenders, loan servicers, etc.) and is likely to exacerbate mortgage fraud.”
The letter noted that law enforcement officials have highlighted loan modification fraud — including fraud involving short sales — as a new form of mortgage fraud. To mitigate such conflicts, the coalition, which was led by the Chicago-based Appraisal Institute, urged the department to reestablish independence in the valuation process to protect the safety and soundness of financial institutions, improve transparency, and safeguard the public trust.

Specifically, the appraisers said any arrangements to encourage short sales should require competent appraisals prepared in accordance with the Uniform Standards of Professional Appraisal Practice.

“Generally speaking, real estate agents and brokers are not independent or properly trained valuation specialists,” the letter said. “They have an inherent bias towards quick results and actions which produce a fee for themselves, irrespective of whether the lender, servicer, investor, property owner, and/or borrower gets a fair return on the short sale.”

The organizations said HAFA guidelines should be revised to prohibit the use of BPOs for property valuation requirements involving foreclosure alternatives, including short sales. There are an ample number of qualified real estate appraisers to perform valuation services, and revising the program guidelines will reestablish independence in the valuation process and guard against conflicts of interest in short sales, the coalition said.