Wow, what a crazy mortgage environment we are lending in. A lot of potential news on the horizon that could have a HUGE impact on the economy, and more importantly homeowners.
First off...RECORD LOW MORTGAGE RATES FACE TOUGH TEST ON FRIDAY. From our friends at Mortgage News Daily:
"The official Employment Situation report is slated to be released this Friday at 8:30am eastern. This event holds the most potential to move mortgage rates in the day's ahead. At the moment, conditions in the secondary market are not supportive of mortgage rates moving any lower. This implies anyone floating their loan on a short timeline, as in less than 20 days to closing, should strongly consider locking in as their is much more to lose than to gain. Anyone closing on a 30 day timeline is less sensitive to this data but should still consider the idea of locking as loan pricing is generally as aggressive as it's ever been in my lifetime"
Secondly...Look for a big push from the government to force Fannie Mae and Freddie Mac into doing one of two things, or both. Either a massive write down on principal balances owed on millions of mortgages to help borrowers that are underwater. (this is the only thing that will stop foreclosures, no one wants to get a loan mod on a house they owe 100K more than it's worth), or a loosening of guidelines to help people with bruised credit, late pays, etc. do refinances to lower their payments.
I would look for a combination of both. Most people cant refinance today because their home won't appraise. Question is...how loose are the guidelines going to get if at all? As long as we remain at full doc loans I think we will be fine. Verifying capacity (the ability to repay) should always be paramount in loan underwriting. Ignoring payment history would help, but it all boils down to how much a borrower owes vs how much the house is worth.
Here is a link to somoe Wall Street rumors regarding FNMA: http://blogs.reuters.com/james-pethokoukis/2010/08/05/an-august-surprise-from-obama/
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