Mortgage bond prices rose last week pushing mortgage interest rates lower. The bond market was buoyed by the announcement that US Treasury increased the credit lines of Fannie Mae and Freddie Mac a total of $400 billion. This was a signal to investors that those entities are “too big to fail” as viewed by the Treasury. The mortgage industry saw some weakness Thursday afternoon as retailers reported stronger than expected holiday sales. (Keep in mind that a recovering economy will drive the mortgage rates UP.) The employment report Friday was generally bond friendly. For the week interest rates fell by about 1/4 of a discount point which brought 30-year home mortgages down to 5.09% for the first decline in a month.
The inflation data that comes out this Friday will be the most important economic data this week. Signs of stronger than expected inflation would not be good for mortgage interest rates. (see above) The Treasury auctions will also dominate trading. Stronger than normal foreign demand could bode well for the overall level of interest rates. Weaker than expected bids would likely result in interest rate increases.
The good news here in Florida is that Fannie Mae announced last Thursday that it would comprehensively review hundreds of condominium projects in Florida. Through a new “Special Approval” designation, Fannie hopes to streamline mortgage approvals for projects that don’t currently fit Fannie Mae guidelines even though they present limited risk to the company.
More on the "Special Approval" designation tomorrow...
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