Mortgage Rates Noticeably Higher After Jobs Data

The U.S. Department of Labor reported on the Employment Situation this morning. This release is the most important scheduled economic report published each month.  Essentially, it totals the amount of paid employees working both in the private and government sectors.  The amount can be positive if jobs are being added and negative if jobs are being lost.  There are more complicated parts of the report, but the "payrolls" component is generally considered of the highest importance.  This has been negative (accelerating losses) for quite some time and during this recession, job losses have approached the 600,000 and held over 500,000 for 5 months in late 08 and early 09.  But in January, accelerating losses turned a corner and began to abate with May marking a drastic decrease. 

Because of the slowing rate of economic contraction, some confidence has been restored in the marketplace. This month's results were expected to be particularly important considering the current "turning point" the economy seems to be in.

Today's report shows a substantial improvement on all fronts.  The nonfarm payrolls was expected to show a loss of 320,000 but the report shows only a loss of 247,000.  This is the smallest decline since August of last year.  May’s and June’s numbers were revised better showing 43,000 fewer jobs lost.  The unemployment rate which was expected to rise from 9.5% to 9.6% actually fell to 9.4%. 

It is being reported that the decline was due to a sizable drop in the labor force meaning many people stopped looking for a job.  Deeper within the Employment Situation report, the Department of Labor counts all unemployed workers including the discouraged ones that stopped looking for a job and workers that are under employed(working part time but want full time) which places the rate of unemployed closer to 16%.   The average work week posted a rise from 33.0 to 33.1 right on expectations and hourly earnings rose more than expected by .2% vs .1%.  This report is further confirmation of a turnaround for our economy.  Immediately following the release of this data, MBS moved considerably lower as did treasuries.  Expect mortgage rates to be higher this morning.

I spoke yesterday regarding transferring appraisals from now closed Taylor Bean and Whitaker to a  new lender.   The Home Valuation Code of Conduct has stated that appraisals should be portable from one lender to another.  I received an email from a major lender yesterday stating that they will not accept an appraisal transferred from Taylor Bean to them under any circumstance.  If you had a loan with Taylor Bean and the appraisal has been completed, you will now have to pay for another appraisal to complete your transaction. 

Early reports from fellow mortgage professionals are indicating higher rates this morning.  The par 30 year conventional rate mortgage is now in the 5.375% to 5.625% range for the best qualified consumers.  In order to qualify you must have a FICO credit score of 740 or higher, a loan to value of 80% or less and pay all closing costs including 1 point loan origination/discount/broker fee.   As always, you can elect to pay less upfront costs but your rate of interest will move higher.   In addition, you can elect to pay additional discount points to buy the rate even lower.   Think about it like a see-saw, the higher the costs, the lower the rate.