Friday, May 9
Posted 2 p.m. EDT
SCOOP ON RATES: If you're a diligent Bankrate reader, you already know that long-term fixed rates dipped this week, after three straight weeks of small rate rises. The 30-year fixed fell 3 basis points, to 6.13 percent, in Bankrate's weekly survey that was conducted Wednesday.

Since then, the benchmark rate has dropped a little lower, but hardly enough to notice. You might be getting a slightly better bang for the buck when you pay discount points.

I regret the dearth of posts lately. Last week was jury duty, and this week I'm at the National Association of Real Estate Editors, or NAREE, conference in Dallas, and every day the schedule is full. There are lots of interesting panel discussions and tours, but little time to think or to blog. Or, for that matter, to follow the news.

ABOUT THE NEWS: The House has passed a bill to encourage lenders to forgive delinquent borrowers' debt enough to allow those borrowers to qualify for FHA-insured loans. The administration says the bill is unacceptable as passed. I have a hunch that a compromise measure will become law this summer, in time for the Republican convention.

The bill that was passed by the House yesterday was crafted by Barney Frank, D-Mass., who is a serious legislator, not a posturer, and who will search for mutually acceptable compromises among the House, Senate and White House. As far as the White House goes, I think the most important negotiating point will be "risk-based pricing" of FHA mortgage insurance premiums.

The federal housing commissioner, Brian Montgomery, appeared at NAREE yesterday and said that the Bush administration has two demands for overhaul of the FHA, or Federal Housing Administration.

First, Montgomery said, Congress needs to allow the FHA to charge higher insurance premiums to riskier mortgage borrowers. Right now, FHA insurance premiums are the same for everyone -- those with credit scores of 550 who are borrowing 97 percent of the home's value, and those who have credit scores of 680 who are borrowing 90 percent.

Montgomery implied that the FHA might reduce premiums for less-risky borrowers, compared to the premiums charged today.

Second, Montgomery said the Bush administration wants to ban seller-funded down payment assistance. This would end the down payment assistance programs pioneered by Nehemiah and Ameridream, in which sellers indirectly fund buyers' down payments. Montgomery said the delinquency and foreclosure rates on those properties are much higher. The down payment assistance industry disputes that assertion.

Key Democrats are loath to ban down payment assistance programs, and risk-based pricing hasn't had a particularly warm reception, either. My guess is that the Dems will agree to phase out down payment assistance, and to agree to a pilot FHA program with risk-based pricing, and both parties will go into the fall campaigns with the ability to brag that they did something to address foreclosures.

Friday, May 2
Posted 11 a.m. EDT
EXPECTATIONS GAME: It's kinda weird to go to Marketwatch and read a big headline that says: "April drops just 20,000 jobs." Nonfarm jobs shrank by 20,000 in April, which isn't good news, especially for those 20,000 people. But the consensus forecast among economists was that nonfarm payrolls would drop by about 80,000. So a net loss of 20,000 jobs doesn't seem so bad.

The unemployment rate fell, too -- from 5.1 percent in March to 5 percent in April. That number seems to be depressed because a lot of people have part-time jobs, even though they would prefer to work full-time.

When looking at this news, the bond market regards the glass as half-full. Mortgage bond yields are rising a bit, which adds to the upward pressure on rates that we've been seeing lately.

HOP ALONG: The FDIC wants homeowners "with unaffordable mortgages" to be able to borrow directly from the U.S. Treasury to pay down up to 20 percent of the principal. Then homeowners would refinance their mortgages to borrow the rest. The idea of the Home Ownership Preservation, or HOP, program would be to get problem loans off servicers' books, mark home values to market and, in the FDIC's words, "avoid unnecessary foreclosures."

(There are certain combinations of adjectives and nouns that we seldom recognize as propaganda: "free" trade, tax "burden" and "unnecessary" foreclosures are examples. In the last case, it would be good to know how "unnecessary" is defined, and whether someone with another viewpoint would have a different definition.)

Under the FDIC's proposed guideline, an "unaffordable" mortgage would be one where the mortgage payment was more than 40 percent of the borrower's income when the loan was originated. Does that include pick-a-payment mortgages? The FDIC doesn't say. More important, the FDIC doesn't address fraud. What about people who exaggerated their incomes a few years ago?

A lot of folks with "unaffordable" mortgages were people with bad credit, or who exaggerated their incomes so they could qualify for unwieldy loans. Among those borrowers, most foreclosures are going to be necessary.