HVCC Petition Submitted; Mortgage Rates Hit Floor

Trading action in the rates market yesterday was similiar to the previous session: early morning weakness, followed by a move higher in the lunch hour, which was then lost heading into the close.    News and events were fairly positive for the fixed income sector which helped spark the move higher in price, however profit takers were quick to step in and temper gains.  Sounds like a lot of back and forth with no real progress in either direction right? EXACTLY! This choppy price action illustrates a market that is "range trading", which is what we have been discussing since early summer.

This morning the Department of Labor released the weekly unemployment claims report, aka jobless claims.  This data totals the number of Americans who filed for first time unemployment benefits in the prior week.   Included within this report is continuing claims which totals the number of Americans who continue to file for benefits due to an inability to find a new job.  

The report shows that both initial and continuing claims came in right on expectations, unchanged from the prior week.  First time claims for the week ending Nov. 14 were 505,000 while continuing claims fell 39,000 to 5.61 million.   It appears that layoffs are decreasing but it is still difficult to find a new job as was indicated by the increase in the number of Americans receiving extended benefits which rose 119,000 to 4.16million.   President Obama on Nov. 6 signed into law a plan that extends unemployment benefits for jobless people for as many as 20 additional weeks.  

Next out this morning was manufacturing data from the Philadelphia Fed Survey.  This report provides a look into how busy the manufacturing sector is and where activity is headed.   Readings above 0 indicate a growing sector while readings below 0 indicate contraction.   Recent readings have shown the manufacturing sector improving with the survey breaking above and holding over 0 since August of this year.  Economists surveyed for this month’s report expected that trend to continue with the index moving from 11.5 last month to 12.0.  The release shows that conditions around the Philly region continue to improve with the survey jumping higher to 16.7.

The final report of the day (and week, no data tomorrow) was the Leading Indicators report.   This data is a composite index of ten economic indicators that lead overall economic activity.    Most of the components of this report have already been released so this data generally doesn’t have much effect on the markets.  Last month’s report jumped 1% for the sixth gain in a row and economists surveyed expect a 0.4% increase with this month’s report.   The release shows a smaller gain than expected at 0.3%.

Reports from fellow mortgage professionals indicate that mortgage rates are unchanged from yesterday.  The par 30 year conventional rate mortgage remains in the 4.625% to 4.875% range for well qualified consumers.  To secure the par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.   If you are seeking a 15 year term, you should expect a par rate in the 4.125% to 4.375% range with similar costs. 

Mortgage rates are testing the lower boundaries of their range. Given the currently expensive prices of MBS, we don't see much room left for mortgage rates to rally. Still in lock mode.

A petition was submitted to New York’s Attorney General Andrew Cuomo yesterday asking that the Home Valuation Code of Conduct be eliminated.  This new law has dramatically changed the way appraisals are ordered.  Many believe, myself included, that is has gone too far and has negatively impacted the consumer. 

First, it has increased the cost of appraisals because some appraisers must work through  a middleman, Appraisal Management Companies.  Instead of the appraiser earning the entire fee for performing the appraisal, they must split the fee with the AMC thus the increased price for appraisals. 

Next, it has extended the time period for closing.  With the start of HVCC, I have seen the time from ordering an appraisal to the report being submitted  extend by well over a week.  This delay in getting the appraisal has led to some locks expiring or closing dates missed causing the homeowner additional fees. 

Finally, since appraisers are earning far less per appraisal they want to perform as many as possible.  This has led to many appraisals being done by appraisers that must travel a considerable distance to the subject property.  If the appraiser is not familiar with the subject property’s area, many believe they will not be able to provide the best comparables and a fair opinion of value.

What is your opinion of HVCC and do you think it will be eliminated?