HSH Market Trends

November 21, 2008 — The drumbeat of bad economic news continues, and grows louder. In other economic periods, this would often be accompanied by sliding fixed mortgage rates, but in the risk-averse and panic-market world of 2008, that’s simply not the case. Mortgage rates remain stubborn, reflective of the ongoing troubles in housing.

We saw a slight dip in rates this week. HSH’s Fixed-Rate Mortgage Indicator (FRMI) eased by seven basis points (.07%), finishing the week at an average 6.67%. Five-one Hybrid ARMs managed a larger downturn, losing 20bp to land at 6.32%.

HSH’s FRMI includes conforming, jumbo and expanded conforming mortgage prices. See the latest trending charts for these and other series.

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Popularity: 18% [?]

November 14, 2008 — A week light on economic data didn’t lack for activity. Stock markets continue to rage about, bond yields continue to bounce around, and our newly-activist government is engaged yet again.

This week, Treasury Secretary Paulson all but abandoned the original Troubled Asset Relief Program (TARP), which was intended to pull bad mortgage-related assets off of lender books in an effort to clear their balance sheets. The $700 billion program was supposed to shift bad debts to the government’s books at some market clearing price, but not a single transaction occurred. The process of culling rotten loans and securities turned out to be more cumbersome and slow than expected, and our guess is that lenders simply failed to show much interest in the program, which would have exposed those assets to some pretty harsh market valuations. If conditions stabilize or improve over time, those assets could prove to be more valuable than today’s market can bear.

Whatever the reason, the focus (and at least some of the remaining cash in the TARP) will be put toward building backstops for AAA-rated markets for auto loans, credit cards, and other kinds of loans. The goverment still hopes to spur this kind of lending, since it came to a crashing halt over the last few weeks with dire consequences for the economy, which continues to struggle considerably.
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Popularity: 19% [?]

Preface

We’re a little later than expected with this forecast. Frankly, there’s been so much going on in mortgage and financial markets, we forgot the self-imposed deadline of October 10. Oh well.

What’s happened since the last forecast? Well, the sweeping housing bill signed back in July has just started to kick in, but has since been dwarfed by other efforts. Fannie Mae and Freddie Mac were put into conservatorship by their regulator, effectively nationalizing their function in the mortgage market (buying loans from lenders to produce liquidity).

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Popularity: 20% [?]

Preface

It’s been a wild ride since our last forecast A new housing bill has been signed into law, producing new opportunities for lenders to rid their books of perhaps their worst-performing mortgages — that is, if they wish to realize those losses today, rather than ‘bleeding’ slowly over time. Fannie and Freddie’s mission will continue unabated, and new regulatory frameworks are coming into place. The FHA program will enjoy new prominence in housing markets, and some incentives to buy homes are now available.

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Popularity: 9% [?]

Preface

So far, despite a continuing slow period, the US economy has skirted an actual recession. Housing markets remain moribund, as bloated inventory levels and stiffer underwriting standards for mortgages are the order of the day. At some point, perhaps even later this year, when lower home prices and fiscally-prepared borrowers intersect, sales will firm and housing inventories will begin a slow process of reduction. For their part, credit markets have largely stopped deteriorating and have achieved a shaky stability as the process of raising capital and rebuilding loan-loss reserves continues.

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Popularity: 9% [?]