Strap on your seatbelt – the wild ride on mortgage interest rates isn’t over quite yet. Positive economic reports for last week helped mortgage interest rates decline to their lowest levels in 2 months, dropping approximately .125% over the last week. Exactly as predicted, Greenspan and the Fed left interest rates unchanged, causing no significant corresponding movement for mortgage bonds or mortgage interest rates.

How did the overall rate improvement impact home buying activity? According to the latest surveys, applications for loans to buy homes climbed last week, while the number of refinancing applications dropped. Frank Nothaft, Freddie Mac chief economist, was quoted as saying, "Although refinancing has fallen off somewhat, home buying activity remains vigorous, unfazed by market chatter that the end of the housing boom is near.” According to Richard Green, principal economist at Freddie Mac, “Thirty-year mortgage rates in the low 6s are not going to inhibit owner-occupied housing. I see nothing to inhibit owner-occupied housing.”

The National Association of Realtors does some detective work, and finds a surprising CLUE about homeowners insurance. Do your clients have a CLUE? Whether they know it or not, they sure do, and it may not be at all what they expect. Be sure to read The Mortgage Market View below for all the details, and valuable information to pass on to your clients…

No news is good news? Maybe - maybe not. In terms of economic reports that can drive changes in mortgage interest rates, not much news is coming until Thursday. Instead, mortgage rates will be more driven by technical changes in the mortgage bond market for the first part of the week. Examining the chart below, first take note that mortgage bond prices are indicated by the red and green “candlesticks”. Mortgage bonds generally trade within ranges between floors of support and ceilings of resistance. The current floors and ceilings are indicated below. NOW – since we can see that mortgage bond prices are close to their highs within the range, it would not be a surprise to see them “bounce” off of the current ceiling, and drop lower. This would cause a corresponding increase in mortgage interest rates.

The bond market thrives on bad news, as trouble in the economy typically causes a flow of money out of the stock market into the safe haven of bonds. Although there is a strong chance of a technical correction as explained above, the economic indicator reports due out at the end of the week will likely determine mortgage interest rate movement. Be sure to review the Economic Indicator Calendar below to see what action is due this week on Thursday and Friday. If the economic news is worse than expected, mortgage rates should remain at their presently low levels. If the news is better than expected, rates could quickly climb as much as a quarter percent higher. Although we would expect mortgage interest rates to stay somewhat stable early this week, mortgage bonds appear due for a correction. Keep that seat belt fastened, and the Mortgage Market Guide Weekly will continue to keep you informed.

Do You Have A Clue?

Have you ever been on the receiving end of some minor damage to your home and then called your insurance agent to find out if you are covered? You might want to think twice before making that phone call. Most homeowners aren’t aware of this but many home insurers count “inquiry calls”, those phone calls where you simply ask whether your policy will cover certain damages and then told that it won't, as unpaid losses. Most insurance companies file loss information, paid or unpaid, into a centralized database called the Comprehensive Loss Underwriting Exchange, known as “CLUE”.

Even if you, as the policyholder, just make an innocent phone call and do not report any damage, there's still a possibility the call will get logged into the CLUE report as an unpaid loss. The information stays in the database record for five years, and can ruin homeowners' chances of getting a standard policy the next time they apply for homeowner’s insurance. When a homeowner applies for a new policy, the insurance company usually orders a copy of his or her CLUE report. Two or more reported losses, depending on severity, can cause an applicant to be charged a double or triple premium or to be denied coverage altogether.

Innocent or not, many companies still report inquiry calls as losses, sometimes even when it's just policyholders calling with basic questions about their coverage. And in the state of California, it's required by law that all inquiries get reported. Many insurance companies say they report all loss information and inquiries because multiple calls and losses can point out troublesome homeowners. However, the way insurers use the information can be frustrating to consumers. So many homeowners have encountered problems with information on their CLUE reports that the National Association of Realtors has established a task force to examine the CLUE database, and how it can be improved. Even the company that operates CLUE, Choice Point Inc., sent a memo to insurance companies last June asking them to report only calls in which an actual loss is determined, not just simple inquiries. Choice Point’s chief marketing officer, James E. Lee said "Each carrier has its own set of rules. Some companies log every call."

While lawmakers in a number of states are trying to deal with this and restrain insurers over this issue, there's not much consumers can do to fight back. However, homeowners can take several steps to protect their CLUE reports:

1. Know the specifics of your insurance policy and the deductible. Avoid calling your insurance company to ask basic coverage questions that can be answered elsewhere.
2. Avoid preliminary calls. It's not necessary to get in touch with the insurance company unless you plan to file a claim and know the damage will be covered.
3. If you do need to call the insurance company, don't mention actual damage unless filing a claim. Any mention of damage will likely be recorded as a loss, whether it's covered or not.
4. When in doubt, call a professional repairman first to get an estimate. Insurance companies will often send out a repairman to estimate damages anyway before they will provide coverage.
5. Report only major damage. Reporting small damages can put too many unnecessary claims on your report.
6. Check your CLUE report. All consumers affected by their reports can ask for a free copy. Choice Point CLUE reports can be ordered from their Web site for $9. In a number of states, homeowners can get a free or discounted annual copy. Anything in the report can be disputed, and Choice Point has 30 days to settle it. You can access the Choice Point/CLUE website below:
   
   
   CLICK HERE FOR MMG WEEKLY LINK TO CLUE

In general, weaker than expected numbers would indicate the economy is not improving as quickly as expected, and could cause mortgage rates to improve. Positive numbers would indicate a strengthening economic climate, and could cause mortgage rates to gradually climb higher.

One of the economic releases having the greatest potential impact on mortgage rates this week is the Initial Jobless Claims report, due out on Thursday morning. Initial jobless claims are released weekly, and measure the number of filings for state unemployment benefits. This report provides a timely, but sometimes misleading, indicator of the direction of the economy, with increases or decreases in claims potentially signaling slowing or accelerating job growth. On a weekly basis, claims can be very volatile, and many economists therefore track a four week moving average to get a better sense of the underlying trend. It typically takes a sustained move of at least 30,000 claims to signal a meaningful change in job growth. The Initial Jobless Claims report can cause an immediate reaction in the bond market, and mortgage interest rates may move on this release. Heads up for the release this Thursday morning, and be sure to tune in to next weeks edition of the Mortgage Market Guide Weekly for all the details.

For the week of September 22nd - September 26th, 2003