20080209 - Gee, $40 and a mule.

Pinnacle Report 2-9-08

30 yr – 5.67% w/ 0.4% in fees. DOWN from 5.68%. 1 yr ago - 6.28%
15 yr – 5.15% w/ 0.4% in fees. DOWN from 5.17%. 1 yr ago – 6.02%
5/1 ARM – 5.21% w/ 0.4% in fees. DOWN from 5.32%. 1 yr ago – 5.99%
1 yr ARM – 5.03% w/ 0.5% in fees. DOWN from 5.05%. 1 yr ago – 5.49%
(Average mortgage rates according to Freddie Mac’s Primary Mortgage Market Survey®, as of 2-7-08)

Note: These rates should be used for trend line analysis only and NEVER for comparison shopping. Your rate will vary depending on multiple factors. In general, this simply helps demonstrate which direction mortgage rates have moved from week to week.

Summary: Not much market moving news this week. That’s OK. Sometimes roller-coasters can make you sick. Going on a nice long drive on a smooth, slightly curving highway can sometimes bring some beautiful scenery and relaxing times. As a result, average mortgage rates remained very steady and didn’t move much this past week.

Manufacturing – The index from the ISM manufacturing report indicated a reading of 44.6. Any reading above 50.0 represents expansion, anything below represents contraction. This reading is down from 59.0 a year ago. This isn’t really a surprise to anyone, but does represent the first significant reading below 50.0 for the first time in several years.

Unemployment – claims for benefits was 356,000 for the week ending 2/2/08. About in line with expectations and right in line with the 4 week moving average. No real impact on mortgage rates.

That’s it for the data cupboard this week. Since my editor has allocated more space to this issue, I’ll think of things to write some more as I go along here. Hmmmmm….

White House Stimulus Package - The stimulus package coming out of Washington is expected to have a feature that will raise the conforming loan limit. In addition to the giving back of money to people that actually pay taxes and a gift of money to those that don’t, the increase in conforming loan sizes may help a good number of people in high-priced areas of the country.

Conforming loan limits are distinguished from jumbo loan sizes. Most states have a maximum conforming loan limit of $417,000, while high cost areas are higher. Anything under $417k can be sold to FNMA and FHLMC, quasi-government entities that provide liquidity to the mortgage market, and ultimately have lower rates than loans exceeding the conforming loan limis, also known as jumbo loans. In all their wisdom in Washington, they are going to raise these limits. What does this mean?

Borrowers in high cost areas…let me back up…”QUALIFIED” borrowers in high cost areas may have the opportunity to re-arrange their mortgage financing out of higher cost jumbo loans to lower cost conforming loan limits. Supposedly, this will help 200,000 people avoid foreclosure due to the lower cost of borrowing. While that’s a good thing, I can’t imagine that ½ percent savings on a $500,000 loan in San Jose is going to keep someone afloat.

From the more pessimistic side of my mind, I think this is really more of a ploy or scheme to help get more loans off the books of banks and into the portfolio of FNMA (Fannie Mae) and her cousin FHLMC (Freddie Mac). This way, if these loans do go bad, the bank doesn’t take the hit -- the US taxpayer is there to help bail these quasi government entities. Always happens – nothing is too expensive if it can be spread amongst the millions of taxpayers. Now don’t get me wrong…I love my country, but I understand, at least a little bit, how politicians do these things. Isn’t it great; look at us. “We’re doing something, we’re doing something.” Speaking of which: If the stimulus package, which returns our tax dollars back to us, is such a wonderful idea, why don’t the politicians just not take it from us in the first place? “Gee, $40 dollars and a mule.”

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Thought of the Week: "Stop spending money you don’t have!” -- Jim Casler