Mortgage Rates Near January Levels In Freddie Mac's Weekly Survey - February 22, 2008

Results of the Freddie Mac Primary Mortgage Market Survey® (PMMSSM) found that the 30-year fixed-rate mortgage (FRM) averaged 6.04 percent with an average 0.6 point for the week ending February 21, 2008, up from last week when it averaged 5.72 percent. Last year at this time, the 30-year FRM averaged 6.22 percent.

The 15-year FRM this week averaged 5.64 percent with an average 0.5 point, up from last week when it averaged 5.25 percent. A year ago at this time, the 15-year FRM averaged 5.97 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.37 percent this week, with an average 0.5 point, up from last week when it averaged 5.19 percent. A year ago, the 5-year ARM averaged 5.96 percent.

One-year Treasury-indexed ARMs averaged 4.98 percent this week with an average 0.6 point, down from last week when it was 5.00 percent. At this time last year, the 1-year ARM averaged 5.49 percent.

"After trending up in the past two weeks, long-term fixed mortgage rates are back up to nearly where they were at the beginning of the year. In contrast, average rates on adjustable-rate mortgages are about 0.5 percentage points below levels of the first week of this year," said Frank Nothaft, Freddie Mac vice president and chief economist. "As the spread between long-term fixed-rates and adjustable-rates widens, it's possible we could see a slight increase in the popularity of adjustable-rate mortgages.

"In Wednesday's release of the minutes of the Federal Open Market Committee's most recent meeting, the Federal Reserve reduced its forecast of economic growth for this year to a rate of 1.3 to 2.0 percent, down from the 1.8 to 2.5 percent forecast from last October. The sluggish housing market and tight credit conditions were among the factors contributing to lowered projections. Indeed, although January's housing starts showed an increase from December's level, the gains were from multifamily properties. Single-family construction in January fell to the lowest level since January 1991 and especially weak were single-family housing starts in the West, which experienced the slowest pace of construction since the beginning of the series in 1959."

Source: Freddie Mac

Housing Starts Remain Virtually Flat in January - February 20, 2008

Total housing starts remained virtually unchanged in January although single-family builders continued to pull in the reins on new-home production, according to newly released data from the U.S. Commerce Department. Starts rose by 0.8 percent for the month to a seasonally adjusted annual rate of 1.01 million units, with single-family production down 5.2 percent to a rate of 743,000 units and multifamily production – which tends to display significant month-to-month volatility – up 22.3 percent to a 269,000-unit rate that was still well below the previous quarterly average.

“Builders continue to do what they need to do to reduce the inventory of units on the market, both by limiting new production and pulling fewer permits for new homes,” said Sandy Dunn, a home builder from Point Pleasant, W. Va., and newly elected president of the National Association of Home Builders (NAHB). “We’re doing our part; Congress needs to do its part as well so that housing can once again be a major engine of economic growth.”

“Single-family builders in our latest surveys have indicated that improving affordability factors and the large selection of homes on the market are helping draw more potential buyers to model homes in recent weeks,” said NAHB Chief Economist David Seiders. “However, until that increased traffic of prospective buyers translates to higher home sales and significantly lower inventories, builders are doing the responsible thing to bring supply and demand back into alignment by keeping the brakes on new construction.”

Single-family housing starts, at 743,000 units, declined for a tenth consecutive month to their lowest rate since January of 1991. Single-family permit issuance was also at its lowest since January of 1991, at 673,000 units.

Overall permit issuance, which can be an indicator of future building activity, declined 3 percent in January to a seasonally adjusted annual rate of 1.05 million units. This was the lowest overall permit issuance since November of 1991. Single-family permits were down 4.1 percent, while multifamily permits were virtually unchanged for the month at 375,000 units.

Regionally, overall housing starts were mixed in January, with the two largest housing markets – the South and West – posting declines of 2.9 percent and 6.2 percent, respectively, and the two others – the Northeast and Midwest – each partially offsetting previous big declines in their territories with gains of 18.9 percent and 12 percent, respectively.

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Source: NAHB

Fixed-Rate Mortgages Dominate Refinance Market
February 20, 2008

McLean, VA – The latest Freddie Mac survey of mortgages originations found that in the fourth quarter of 2007, 92 percent of prime borrowers who originally had a 1-year conforming adjustable-rate mortgage (ARM) chose a new conforming fixed-rate mortgage when they refinanced and 89 percent of prime borrowers who initially had a conforming hybrid ARM refinanced into a conforming fixed-rate loan as well. The comparable numbers in the third quarter were 85 percent and 84 percent, respectively.

“The turmoil in the financial markets that started in August and continued through the fourth quarter led most mortgage lending institutions to tighten their underwriting standards and thus some ARM products were either no longer available or came with more restrictions,” said Amy Crews Cutts, deputy chief economist for Freddie Mac. “However, even with the financial market problems in the fourth quarter, conforming mortgage rates on all four of the ARM and fixed-rate products tracked by Freddie Mac's Primary Mortgage Market Survey® fell by roughly one-quarter of a percentage point. With 30-year fixed mortgage rates averaging 6.2 percent over the quarter, many conforming mortgage borrowers found this product very attractive. “The difference between 15-year and 30-year fixed mortgage rates is quite narrow at the moment. When these rates are within a half of a percentage point of one another we see borrowers are more inclined to choose the longer amortizing loan because of the large payment difference.”

The Refinance Product Transition Report indicates that 52 percent of borrowers who originally had a 15-year fixed-rate loan switched to a 30-year fixed-rate mortgage when they refinanced in the fourth quarter. The rate was 58 percent in the third quarter. Conversely, only 7 percent of borrowers with 30-year fixed-rate loans chose 15-year fixed-rate when they refinanced in the fourth quarter.

The Report also shows that in the fourth quarter 83 percent of borrowers who originally had a 30-year fixed-rate mortgage refinanced into another 30-year fixed-rate mortgage. This rate compares to 79 percent in the third quarter. More borrowers who originally had a hybrid ARM mortgage switched into a 30-year fixed, compared to the third quarter of 2007. The share of borrowers who originally had a balloon and refinanced into the same product rose to 12 percent in the fourth quarter from 2 percent in the previous quarter.

Borrowers who originally had a 1-year ARM, with interest-rate adjustments occurring on equal frequencies for the life of the loan, stayed with a 1-year ARM product 3 percent of the time when they refinanced in the fourth quarter of 2007, down from a 5 percent share in the third quarter and a 2 percent share a year ago. Three percent of 1-year ARM borrowers switched into a hybrid ARM product in the fourth quarter, down from 8 percent in the third quarter of 2007.

These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. Transactions are further screened to verify that the latest loan is for refinance rather than for home purchase.

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These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. Transactions are further screened to verify that the latest loan is for refinance rather than for home purchase. Where applicable, data include amortizing as well as interest-only or option-payment loans.

1/ Adjustable-rate mortgages with rate resets at 1-year intervals for life of loan; contains a small number of other equal-frequency reset ARMs such as 3/3 ARMs, etc.

2/ Adjustable-rate mortgages with first rate reset period longer than other regular rate reset periods, such as 3/1 ARMs, 5/1 ARMs, etc.

3/ Includes all maturities with one rate reset.

Source: Freddie Mac

Pentagon Federal Credit Union Chooses Fiserv for End-to-end Paperless Lending
- February 20, 2008

Fiserv, Inc. announced that Pentagon Federal Credit Union, with 764,000 members and assets in excess of $11.2 billion making it one of the largest credit unions in the United States, has chosen the Nautilus Enterprise Content Management (ECM) system to image-enable its mortgage processing functions.

To create a truly paperless lending environment, Pentagon FCU will utilize Nautilus with the UniFi® PRO loan origination system and Fiserv Loan Servicing Platform, both of which are already running at the credit union. By automating the mortgage lending process, Nautilus will route image files per pre-defined rules and prompt Pentagon staff to perform routine tasks that are established in the standardized workflows. Staff productivity and efficiency are maximized as bottlenecks become clearly identified through performance reporting and audit trails.

“Our initial attraction to Nautilus was its integration with the other Fiserv solutions we already have in place and the trust we have built up with them as a long term partner who has delivered for us,” said James Schenck, executive vice president and chief operating officer at Pentagon FCU. “In addition to the integration, we are looking forward to Nautilus bringing us operational savings and increased processing efficiencies as we create a completely paperless solution. We believe the Nautilus solution is in line with our corporate strategy of continuing to use technology to increase efficiency.”

Source: American Land Title Association - ALTA Technology News