Aloha Friday,

Well, here we are, May 1st. Not only are we heading into the summer season, but we officially start the season of HVCC. The Home Valuation Code of Conduct was brought on from the Washington Mutual days when on official records they told the appraisal company they used that they needed to get the values higher as they were not producing appraisals that were reflecting the increase in values that were occurring at a record pace. Upon their collapse Gov. Andrew Cuomo filed a lawsuit against them and part of the settlement was a new law that requires lenders to now order appraisals with “management companies”. There is to be no communication between the lender and appraiser directly. If an appraisal needs a rebuttal for value then the lender must submit the supporting documentation to a arbitrary review department for the company that will review the information. So far I am 0 for 3 this week on increasing values in the rebuttal process. Yikes!!

What does this mean to you? It will affect us all as the caliber of appraisers being used for this type of work are not your true seasoned professionals. I truly encourage you to call NAR and HAR and get their lobby behind getting this changed. The Miller/Childers Amendment lost in the Senate this week by only 5 votes and is scheduled to be voted on by the House of Representatives on May 7th. I truly encourage you to contact your Representative and let them know to vote Yes on this amendment which will suspend the HVCC code for another year while it is reviewed.

Let’s talk about rates. Why are this up this week and will they go up further? I am a betting man and I say rates will go up. Treasuries fell Friday after better-than-expected reports on manufacturing and consumer sentiment curbed demand for safe-haven assets (bonds). The Institute for Supply Management's manufacturing index rose to 40.1 in April from 36.3 in March versus forecasts for a rise to 38.4. Any reading under 50 indicates the sector is contracting, but the report contained signs the decline in manufacturing is slowing.

In other words, the economy is slowly showing signs of a tapering of declines. Many companies posted better than expected earnings this past week which signals to investors that they have trimmed the costs and are running lean again. This means when sales again pick up the profit margins will be much greater.

Investors are leaving the bond market to take the ride back up in the stock market. The bond market then has to raise rates to attract investors and that is why we will see an increase in mortgage rates. The fact that the government has printed over $1 Trillion dollars of money and flooded the system also provokes inflation in times to come, but that is a totally different conversation.

According to the Primary Mortgage Market Survey (PMMS) by Freddie Mac, 30-year fixed-rate mortgages (FRM) are down to 4.78 percent for the week ending April 30, 2009, from 4.80 percent last week. The 30-year FRM is now at the same record low set in April 7, 2009, the lowest ever recorded in Freddie Mac's survey since it began in 1970. Last year at this time, the 30-year FRM averaged 6.06 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.80 percent this week, down from last week when it averaged 4.85 percent. This set another record, since the 5-year ARM is at the lowest it has been since Freddie Mac began tracking it in January 2005.

A year ago, the 5-year ARM averaged 5.73 percent. "Rates for fixed-rate mortgages hovered at record lows this week as ARM rates eased further," said Frank Nothaft, Freddie Mac vice president and chief economist. "In aggregate, borrowers who refinanced during the first quarter reduced their mortgage payments by about $2.5 billion over the coming year." Oh yes, and not to feel left out of the good news gang, Nothaft added the obligatory: "The housing market may be edging towards a bottom."

Please let me know how we can help you this weekend.