Hurricane Harvey Relief for Mortgage Payers

The Housing Market Update

Hurricane Harvey Relief for Mortgage Payers:
The Mortgage Bankers Association of America along with HUD and FHFA are all working together to offer financial relief to homeowners with mortgages.

Currently the affected area is limited to damaged caused by Harvey, however with an even powerful “Irma” on the way, there could be many more states added to the “disaster area” list:

The following forms of relief are available to people in impacted counties (Aransas, Atascosa, Austin, Bee, Bexar, Brazoria, Brazos, Caidwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Refugio, San Patricio, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy and Wilson counties.)
Foreclosure Relief.  HUD is granting a 90-day moratorium on foreclosures and foreclosure forbearance on Federal Housing Administration (FHA)-insured home mortgages located within the geographic boundaries of the disaster area.  A borrower can also qualify for foreclosure relief if he or she is a household member of someone who is deceased, missing or injured directly due to the disaster, or if his or her financial ability to pay mortgage debt was directly or substantially affected by  the disaster.  Separately, VA, Freddie Mac and Fannie have all announced a 90-day moratorium on Foreclosures.

Mortgage Insurance.   HUD’s Section 203(h) program provides FHA insurance to disaster victims who have lost their homes, enabling them to finance the purchase or rehabilitation of a home. Borrowers working with participating FHA-approved lenders may be eligible for 100% financing.  Additionally, HUD’s Section 203(k) loan program enables the purchase, refinance, and rehabilitation of a home that has been lost or damaged.

Wells Fargo, the nation’s largest mortgage lender, said Monday that it was suspending all negative reporting to credit bureaus, collection calls and foreclosure procedures against customers in the impacted communities at least through the end of September.

Fannie and Freddie have also announced a Disaster Relief Forbearance Plan where homeowners do not have to make any mortgage payments during the forbearance period without any negative impact to their mortgage or credit rating.  Homeowners can request a second or extended forbearance term if they need it.

In order to get a forbearance, you must first contact your mortgage servicer. You can visit the website here for a contact list of mortgage servicers.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained just +5 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.  However, we did hit a new intra-day high for 2017 which means the lowest rates of the year.

At a weekly change of just +5 basis points, it was not enough of a move to cause mortgage rates to change in a meaningful way and is basically a reflection that now that we are at our highs of 2017, there is very little room for further gains.  The week’s economic data was generally strong which is negative for MBS (higher rates) but geopolitical concerns continued drive up demand for U.S. based bonds which was positive for MBS (lower rates).  The two opposing forces “squeezed” MBS to trade in a sideways range.

Here are the major economic release last week:

Jobs, Jobs, Jobs: Its Big Jobs Friday!  You can read the official release from the BLS here.
Tale of the Tape:
– August Non-Farm Payrolls (NFP) increased by 156K vs est. of 180K
– July NFP was revised lower from 209K to 189K
– June NFP was revised lower from 231K to 210K
– The more important 3 month rolling average is now 185K, it was 195K in July.  For all of 2017, we have averaged adding 176K jobs each month.  2016’s pace was 187K per month.
– Average Hourly Earnings on a MOM basis rose 0.1% vs est. of 0.2%.  It is now at $26.39 per hour.
– On a YOY basis it remained at July’s pace of 2.5%.  The market was expecting a small increase to 2.6%.
– The U3 Unemployment Rate increased to 4.4% vs estimates of 4.3%.  This is the Headline SEASONALLY adjusted rate.  The Non-Seasonally Adjusted rate dropped from 4.6% to 4.5%
– The U6 Unemployment Rate (Non-Seasonally Adjusted) dropped from 8.9% down to 8.6%
– The Participation Rate remained at 62.9%
Hours Worked:
– We see a rare drop from being stuck at 34.5 hours a week down to 34.4 hours.

How is the bond market viewing this?  While the headline NFP looks like a big miss, it will be revised a couple of more times.  The Fed and the bond market look at trends and the trend of 185K per month is a good level.  Its still a mystery as to when (and if) wage inflation will appear but it is steadily showing monthly gains.  Overall, its actually a solid report. Its not too weak and its certainly not too strong.  The bottom line here is that the bond market was already not pricing in ANY Fed action until later in 2018 and today’s jobs data will do nothing to change that.

Manufacturing: The national ISM Manufacturing Index for August came in at 58.8 vs est. of 56.5 which is red-hot.  The ISM Prices Paid component remained at a very elevated 62.0.
The August Chicago PMI report hit 58.9 which beat out forecasts of 58.5 and matched July’s pace of 58.9.  This is an extremely robust reading considering any reading above 50.0 is good.  Its the second highest reading in 2 years.

Personal Outlays:  July’s Personal Income was a little higher than expected (0.4% vs est. of 0.3%) which is a very large increase from June’s pace of 0.0%.  Personal Spending hit 0.3% vs est. of 0.4% and was only a slight uptick from June’s revised pace of 0.2%.  Inflation?  Not here.  The headline Personal Consumption Expenditures (PCE) on a YOY basis hit 1.4% and so did the Core PCE reading. But both matched the market expectations of 1.4%.forward in its slow recovery.

What to Watch Out For This Week: