MID-WEEK MARKETS

Posted by DB Wilson on Wednesday, January 25th, 2012 at 10:05pm.

The roller coaster ride is working again!  Since last Thursday we've seen rates on the 10 year Treasury, the dominant competition for mortgage rates, rise from below 1.9% to 2.07% as the fears of a weakening demand for US bonds due to the stabilizing situation in Europe, caused traders to move out of US bonds.  But today's bond auction showed strong demand for US securities and the yield dropped down below 1.95% before rebounding slightly to 2%. So what's all this mean?  In short, mortgage rates should drop down below 4%, although barely.
 
In other news, the Fed pledged to keep rates low through mid 2014.
 
The Center for Responsible Lending (CRL) released it latest study, "Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages". The study done in conjunction with the University of North Carolina's Center for Community Capital, is an in depth research paper on the benefits vs. the consequences of implementing different underwriting standards for the Dodd-Frank Bill's QRM proposal.  The entire report can be found at www.ccc.unc.edu/QRMunderwriting and has a great deal more support than can be listed here.  A synopsis of the report:  Although there was a need for industry reform, the overwhelming majority of the issues have been addressed by the removal of many of the non-traditional programs. Additional tightening to the LTV, credit score or Debt-to-Income ratios does very little to decrease default in relation to the number of people moved into higher cost (.75-4 points) loans or moved out of the market altogether. Conversely, the study shows  the additional tightening of Credit, LTV and DTI will dramatically limits access to mortgages and housing for lower income, lower-wealth households and certain minorities.  The mandatory 20% down payment requirement "could push 60% of creditworthy borrowers into high-cost loans or out of the market altogether" (and) "A mandatory 20 percent down payment requirement would exclude about 75 percent of African-American and 70 percent of Latino borrowers who could be successful homeowners from obtaining fairly priced mortgages." (National Mortgage Professional, Thu, 2012).  Obviously, if these QRM standards are imposed, it "would hobble a healthy segment of the housing market." (NMP, Thu, 2012).  Since Washington followed the advice of the Center for Responsible Lending in developing many of the new requirements on the mortgage industry, hopefully they will take this study seriously and re-consider the proposed standards.
 
This is a interesting 35 page study but make sure you have a cup of coffee and are wearing your academic hat when you sit down to read it.
 
We'll touch base again Friday.
 
Jed Marquis

 
 
Mortgage Consultant
NMLSR ID 274457
 
Colorado Capital Mortgage Co, LLC | 2425 Canyon Blvd Ste 110 | Boulder,  CO  80302
MAC C7286-010
Phone 720.833.7964| Cell 303.885.1532| Fax 855.387.7240
 
An Affiliate Of Wells Fargo Home Mortgage
 
Jed.Marquis@CoCapMtg.com
www.CallJedMarquis.com

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