May 2, 2017
Which Report Was Right?
This week we will get evidence of which jobs report was an accurate depiction of the current employment picture. The January and February jobs report showed major increases of over 200,000 jobs. The March jobs report showed a relatively modest increase of just under 100,000 jobs. The average for the past 12 months has been about 180,000 jobs per month and, therefore, the quarterly numbers were right on target in this regard.
The question is, will we return to the strong numbers of January and February, stay with the lower figure for March, or move back to the norm? If you are confused as to where the true numbers lie, imagine what the Federal Reserve Board must be thinking when they meet this week. They don't get the benefit of April's numbers because they meet before the employment report is released. And yet they must decide whether to raise rates again at this meeting.
Most are predicting that the Fed will hold steady at this week's meeting. Until last week, the stock market had cooled significantly since their last meeting, international tensions are higher and the inflation data released recently was decidedly tame. Of course, we can't predict their decision, but the evidence supports this hunch. As we have pointed out in the past, the Fed controls short-term rates and if the Fed acts when the markets are not expecting it, volatility in the bond and stock markets can follow. It will be an interesting week.
Rates on 30-year fixed loans rose after falling to 2017 lows the previous week. For the week ending April 27, Freddie Mac announced that 30-year fixed rates rose to 4.03% from 3.97% the week before. The average for 15-year loans increased to 3.27%, and the average for five-year adjustables moved up to 3.12%. A year ago, 30-year fixed rates averaged 3.66%. Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield rose about 10 basis points this week. The rate on 30-year fixed loans moved with Treasury yields, rising 6 basis points to 4.03 percent. Despite recent swings in rates, the housing market continues to show signs of strength—both existing and new home sales in March exceeded expectations, and the Case-Shiller Home Price Index posted another solid gain." Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated April 28, 2017
|6-month Treasury Security
|1-year Treasury Security
|3-year Treasury Security
|5-year Treasury Security
|10-year Treasury Security
|| 1.790% (Mar)
|| 0.692% (Mar)
|11th District Cost of Funds
|| 0.591% (Feb)
|| 4.00% (Dec)
| Fannie Mae has moved to help the 44 million Americans that have student loan debt and want to own homes or use their homes to lower their student loan burden. It’s no surprise this debt inhibits many borrowers from becoming homeowners, even though homeownership can be an important step toward building wealth. The new policies are designed to help borrowers qualify for a home loan and reduce student debt. The policies are effective immediately and will empower lenders to:
Though the new guidelines are "effective immediately" upon the issuance of Fannie Mae's Lender Letter on April 25, there may a short lag time for pricing changes as the markets adjust. Source: Fannie Mae -- For more information on these changes, feel free to contact us.
- Offer borrowers an option to pay off debt and get a better interest rate. Lenders can offer homeowners who have at least 20 percent equity in their homes a cash-out refinance to pay off one or more student loans. Borrowers will have an opportunity to convert higher interest rate student debt to a lower interest rate and potentially reduce their monthly debt payments. When at least one student loan is paid off directly to the student loan company, the lender can offer a lower interest rate through Fannie Mae.
- Exclude debt paid by others, potentially making it easier for a homebuyer to qualify. Lenders can exclude a borrower’s non-mortgage debts that have been paid by others for the past 12 months from the ratio calculation, with proper documentation. Examples of debts that qualify would include credit cards, auto loans and student loans.
- More flexibility on calculating student debt payments. Lenders can accept the monthly student debt payment amount listed on the credit report as opposed to using a percentage of the outstanding balance for the payment which must be used in qualification calculations.
Millions of students planning to attend college in the fall are scrambling to find enough money to pay for their education. Financial aid and federal loans don't always cover the staggeringly high cost of higher education. To bridge the gap, many families take out private loans. That can be a big mistake, financial experts warn. Most private student loans require a cosigner — typically a parent — who must put their good credit on the line to get the loan approved. Cosign a loan and you're a co-borrower, but many parents don't seem to understand that. "It's portrayed to them as if they're going to simply be a reference or endorser, when the truth is they'll be obligated to pay this loan if something happens and the primary borrower can't pay," said Seth Frotman, Student Loan Ombudsman at the Consumer Financial Protection Bureau (CFPB). "We now see more and more cosigners going into retirement facing unprecedented levels of student debt." A report from LendEDU, a website that specializes in private student loans and student loan refinancing, quantifies the risk to cosigners. The survey of 500 parents who had cosigned student loans found that a third admitted they did not fully understand the potential consequences. Thirty-five percent said they now regret doing it. About 57 percent of the cosigners said they believe their credit scores were negatively impacted as a result. And that makes sense, since cosigning a loan adds debt to your credit file, and that extra debt can lower your credit score. More than a third (34 percent) said these lower credit scores hurt their ability to qualify for a home loan, auto loan or other type of financing. Source: NBC News