Inside Lending for the week of May 3.....

For the week of May 3, 2010 – Vol. 8, Issue 18 Market Update  INFO THAT HITS US WHERE WE LIVE  Last Tuesday's S&P Case-Shiller home price index reported that homes in 20 major U.S. cities were WORTH MORE in February 2010 than they were in February 2009 -- the first year-to-year INCREASE in values in over three years! The good news of this 0.6% annual gain was tempered by a small monthly decline in prices from January to February. But remember, February's unusually stormy weather make it a tough month for real estate in much of the country. Corroborating Case-Shiller, a second home price index also showed a national gain in home prices for February 2010 compared to February 2009. This was the First American CoreLogic HPI, an index including distressed sales, which reported a home price increase of 0.3% for the year. Review of Last Week IT'S ALL GREEK TO WALL STREET... The stock market ended down after a volatile week whose off-putting news ranged from Greece to Washington to the Gulf of Mexico. Greek bonds were downgraded to junk, while Portugal and Spain got downgrades too. Goldman Sachs execs were grilled in Washington, then Friday came news of a federal criminal probe into the firm. Finally, energy stocks got hammered following a terrible oil spill in the Gulf of Mexico. In spite of these unfortunate events, the economy continued to offer up signs of recovery. On Tuesday, following the Case-Shiller annual home price INCREASE reported above, we got a big boost in the Conference Board's consumer confidence number for April. The 57.9 reading put it at its highest level since August 2008. The week ended with a great Chicago PMI measure of Midwest manufacturing. Then Advanced Q1 GDP came in UP 3.2%, marking the third straight quarter of economic growth, with that all-important consumer spending UP 3.6%! Things weren't too shabby on the corporate earnings front either. Of the 170 S&P 500 companies reporting Q1 results, 130 of them beat earnings-per-share estimates. Even better, 106 of these companies topped revenue expectations, showing that strong earnings performance didn't just come from belt-tightening. For the week, the Dow ended down 1.7%, to 11008.61; the S&P 500 was down 2.5%, to 1186.69; and the Nasdaq was off 2.7%, to 2461.19. Down-sliding stocks and off-putting news at home and abroad sent investors scurrying to bonds which sent prices up even after Friday's positive economic reads. The FNMA 30-year 4.5% bond we watch closed UP 75 basis points for the week, ending at $100.84. National average mortgage rates are holding steady, still at historically low levels, according to Freddie Mac's weekly survey. This Week’s Forecast INCOME, INFLATION, JOBS... A slight gain in Personal Income is expected today, along with a tick up in the PCE inflation measure. ISM Manufacturing and ISM Services numbers should show those sectors continuing to expand. Tuesday, March Pending Home Sales will be interesting, as we'll see if lots of people signed contracts to get in on the tax credit. The week's biggie is Friday's April Employment Report. Jobs should continue to be added at a modest pace, although the monthly increase in workforce will probably keep the Unemployment Rate level.  The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of May 3 – May 7  Date Time (ET) Release For Consensus Prior Impact MMay 3 08:30 Personal Income  Mar 0.3% 0.0% Moderate MMay 3 08:30 Personal Consumption Expenditures (PCE) Mar 0.6% 0.3% HIGH MMay 3 10:00 ISM Index Apr 60.1 59.6 HIGH TuMay 4 10:00 Pending Home Sales Mar 5.0% 8.2% Moderate WMay 5 10:00 ISM Services  Apr 56.0 55.4 Moderate WMay 5 10:30 Crude Inventories 5/1 NA 1.96M Moderate ThMay 6 08:30 Initial Unemployment Claims 5/1 440K 448K Moderate ThMay 6 08:30 Continuing Unemployment Claims 5/1 4.600M 4.645M Moderate ThMay 6 08:30 Productivity–Prelim. Q1 2.8% 6.9% Moderate F May 7 08:30 Average Workweek Apr 34.0 34.0 HIGH FMay 7 08:30 Hourly Earnings Apr 0.1% –0.1% HIGH FMay 7 08:30 Nonfarm Payrolls Apr 187K 162K HIGH FMay 7 08:30 Unemployment Rate Apr 9.7% 9.7% HIGH Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months  Coming out of last week's FOMC meeting, the Fed didn't change its policy to keep interests rates at the current level for an "extended period." Economists are now pushing off any rate hike to the end of this year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Jun 23 0%–0.25% Aug 10 0%–0.25% Sep 21 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Jun 23      5% Aug 10      10% Sep 21      17%

The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of Real Estate Mortgage Network and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of Real Estate Mortgage Network. Real Estate Mortgage Network is located at 70 Grand Avenue, Suite 109, River Edge, NJ 07661. Company NMLS ID #6521. Georgia Residential Mortgage Licensee #22495.

House Committee Approves Bill to Tighten FHA Approval Standards

House Committee Approves Bill to Tighten FHA Approval Standards

By Jon Prior

HOUSINGWIRE

The House Financial Services Committee approved a bill to increase capital reserves in the Federal Housing Administration (FHA) and reduce risks to its insurance fund. The bill will now move to the House floor for debate.

The bill would amend the National Housing Act by increasing the cap of annual premium payments collected by the FHA from 0.50% to 1.5%. It would also hold approved lenders accountable for the FHA loans they write. Under the new bill, if the FHA pays out a claim on a mortgage it finds did not meet its underwriting standards or detects fraud involved with the origination of the loan, it could require that lender to pay reparations for the loss to the insurance fund.

The bill also widens the authority of the FHA to terminate its approval of lenders to write its insured mortgages. If the FHA finds a lender has an excessive rate of early defaults and claims, it could remove the lender approval for any area in the country not just within its region.

As far as who determines the risk to the insurance fund, the bill also establishes a new position, a Deputy Assistant Secretary for Risk Management and Regulatory Affairs, who would be responsible for ensuring the performance of mortgages insured by the FHA.

“The FHA is playing a vital role in the current housing market. We must therefore remain vigilant in making sure that our reserves are strengthened and that our lenders meet the highest standards of conduct,” said Shaun Donovan, secretary of the Department of Housing and Urban Development (HUD). “This legislation puts FHA on firmer footing to achieve its dual mission of helping to stabilize the housing market during tough times and providing affordable homeownership options to underserved American families while protecting the American taxpayer by bolstering the strength of the fund.”

Not everyone is as optimistic about the new bill. The law firm K&L Gates said the bill and new regulations increasing the minimum net worth of FHA-approved lenders to $1m would “wreak havoc” on small business ^[1] trying to write these loans.

Inside Lending for the week of April 26.....

For the week of April 26, 2010 Market Update INFO THAT HITS US WHERE WE LIVE The week ended on the most dramatically impressive new home sales numbers in 47 years. March's 26.9% increase was the biggest monthly sales gain since 1963, taking us to a 411,000 annual rate! Supply dropped to 6.7 months,  inventories fell to 228,000 and the median price went to $214,000, up 4.3% versus last year. Some put the sales surge to the soon-to-expire tax credit, but the facts remain that the economy IS recovering and homes ARE substantially more affordable! The day before, March existing home sales came in UP 6.8% at a 5.35 million annual rate,  UP 16.1% from a year ago, with all regions showing gains! The existing home median price  went to $170,700, UP 0.4% from a year ago. These good numbers reversed a three-month slide and sent the supply of existing homes down to 8.0 months. On April 22, the EPA's new lead paint renovation rules went into effect. These require contractors who are disturbing lead-based paint in homes built before 1978 to hire certified renovators working for a certified renovator firm using lead-safe work practices. Realtors need to advise sellers to use certified professionals to fix up a home and to make sure it's safe for buyers to move into a home that's been renovated. The real estate disclosure must include any tests for the presence of lead paint and any dust wipe testing done after lead paint's been disturbed. Property managers with pre-1978 homes must also hire certified renovators. Find more info at http://www.realtor.org/government_affairs/lead_paint_main. Or visit the EPA at http://www.epa.gov/lead/pubs/renovation.htm. Review of Last Week RALLY CAPS BACK ON... After the prior week's flat stock market performance due to the Goldman Sachs-SEC troubles at the end, this week saw investors resume their 13-month-long market rally. The Dow is now firmly in 11,000 territory, the S&P 500 passed the 1200 mark and the Nasdaq crossed over 2500. First quarter corporate earnings certainly fueled the enthusiasm. Most of the 85 S&P 500 companies reporting beat both profit AND revenue expectations, meaning the good numbers weren't just from belt-tightening. Big stars included Amazon.com, American Express, Apple, Citigroup, IBM, McDonald's, Microsoft, SanDisk, Starbucks and UnitedHealth, all with nice Q1 earnings. The Leading Economic Indicators (LEI) index registered its twelfth consecutive monthly gain, up 1.4% in March. The Producer Price Index (PPI) put wholesale inflation up 0.7% for March, but Core PPI, excluding volatile food and energy, was up only 0.1% for the month and 0.9% for the year. New weekly unemployment claims were down 24,000, while continuing claims dropped by 40,000. Excluding volatile transportation, Durable Goods orders were up 2.8% for the month and up 13.5% over a year ago. For the week, the Dow ended UP 1.7%, to 11204.28; the S&P 500 was UP 2.1%, to 1217.28; while the Nasdaq went UP 2.0%, to 2530.15. Last week's improved economic data, along with Greece's move away from disaster, hurt bond prices, which tend to benefit from weak economic developments. Investors were also looking ahead to the huge levels of supply on offer this week. The FNMA 30-year 4.5% bond we watch closed down 41 basis points for the week, at $100.09. As reported in Freddie Mac's weekly survey, national average mortgage rates stayed flat, still at historically low levels! This Week’s Forecast THE FED, THE Q1 GDP... The Fed meets again this week, announcing their FOMC Rate Decision on Wednesday. Even though the economy is picking up, virtually no one expects a rate hike, given Fed Chairman Ben Bernanke's recent pronouncements on Capital Hill. We'll have a new look at the economy with Advance Q1 GDP on Friday. The only housing news comes Tuesday, with February's Case-Shiller home price index. We'll also get Consumer Confidence on Tuesday and University of Michigan Consumer Confidence on Friday. The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of April 26 – April 30 Date Time (ET) Release For Consensus Prior Impact Tu Apr 27 10:00 Consumer Confidence Apr 53.7 52.5 Moderate W Apr 28 10:30 Crude Inventories 4/24 NA 1.89M Moderate W Apr 28 14:15 FOMC Rate Decision 4/28 0%–0.25% 0%–0.25% HIGH Th Apr 29 08:30 Initial Unemployment Claims 4/24 440K 456K Moderate Th Apr 29 08:30 Continuing Unemployment Claims 4/17 4.625M 4.646M Moderate F Apr 30 08:30 GDP–Adv. Q1 3.2% 5.6% Moderate F Apr 30 08:30 GDP Chain Deflator–Adv. Q1 0.9% 0.5% Moderate F Apr 30 08:30 Employment Cost Index Q1 0.5% 0.5% HIGH F Apr 30 09:45 Chicago PMI Apr 59.8 58.8 HIGH F Apr 30 09:55 Univ. of Michigan Consumer Sentiment Apr 71.5 69.5 Moderate Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months Even though the economy is improving, the experts are taking Fed Chairman Bernanke at his word. To keep the recovery going, he wants to hold rates down as long as inflation remains in check -- and so far, so good on that front. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Apr 28 0%–0.25% Jun 23 0%–0.25% Aug 10 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Apr 28 <1% Jun 23 6% Aug 10 18%

The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of Real Estate Mortgage Network and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. The material does not represent the opinion of Real Estate Mortgage Network. Real Estate Mortgage Network is located at 70 Grand Avenue, Suite 109, River Edge, NJ 07661. Company NMLS ID #6521. Georgia Residential Mortgage Licensee #22495.