Dow picked up 155 points on some good manufacturing news. ISM Manufacturing index came in better than expected and signaled that orders were up. China posted its best manufacturing expansion in years.
Bonds also UP...FNMA 4.5% is up 25 BPS to $100.09 vs. the almost $102.00 a few weeks ago and $99.00 range in the recent past.
Interesting: The feds purchased just 9.3 billion in Mortgage Backed securities from Thurs-Thurs last week. Partially due to the holiday, but that is about 1/2 of what they have been spending in efforts to keep rates lowered. However: because they have been purchasing higher valued bonds like the FNMA 5.5% bond or even 6% bond offerings, they have been getting "paid" on those as they invest. That is becuase they represent loans that are/were being refinanced.
Example of the effect: Say they pour $25 billion or so into the MBS market buying securities to try to keep mortgage rates lower in a particular week. During that week: people holding mortgages that have been securitized into bonds that the government had bought previously completed their refinance and paid that money back.
NOW: The number of bonds sold back by the feds could be say 7 billion dollars worth due to the refinancing. The "net" investment then is only $18 billion in this example and the $1.25 trillion they have been investing can GO FARTHER. The effect of them buying $25 billion worth of securities and having to only spend 18 billion dollars to do it has been positive on the markets.
SO: Having 9.3 billion GROSS AND NET last week means that refinance has slowed and there are less bonds that they hold that are being paid out.
FHA INFORMATION UPDATE from our Builder Network Development Manager:
VA has informed our national condo team (verbally) that they are no longer accepting reciprocity with FHA approvals (DELRAP - direct, or HUD Direct) issued on or after December 7, 2009. This means a full VA approval (4-6 weeks process) is required on all new construction/newly converted projects where VA loans will be offered. In addition, VA will no longer reciprocate with FHA's lower pre-sale limits. VA's pre-sale is 70% (owner occupied or second home) based on closed or pre-sold homes (by legally recorded phase).
If you need VA approval, please submit the standard condo documents (same as agency) and we'll process accordingly. VA will be publishing a lender letter in the next few weeks.
(In the past FHA approval for a condo meant VA approval.)
Construction spending is down...but moods are UP.
Happy new year!
Cheers,
Chad
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Chad Schauers
Personal Cell: 406 799 8613
