Ways To Money

Applications for both home purchase and refinance were essentially flat during the week ended February 10.  The Mortgage Bankers Association’s (MBA) Market Composite Index, derived from its Weekly Mortgage Applications Survey was down 1.0 percent on a seasonally adjusted basis from the previous week and virtually unchanged on an unadjusted basis.

The Refinance Index increased a slight 0.8 percent from the week ended February 3 but this was enough to bring it to the highest level since late summer.  The seasonally adjusted Purchase Index was down 8.4 percent and down 3.3 percent on an unadjusted basis.  The later number was 7.6 percent lower than during the same week in 2011.

The four week moving averages for the seasonally adjusted Market and Purchase Indices were down 0.45 percent and 3.87 percent respectively and up 0.21 percent for the Refinance Index.  Applications for refinancing made up 81.1 of the total application volume, up from 80.5 percent from the previous week and the share of adjustable-rate mortgages (ARM) decreased from 6.0 percent to 5.4 percent.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Interest rates during the week were mixed.  The average rate for a 30-year fixed-rate mortgage (FRM) with a conforming balance of $417,500 or less increased to 4.08 percent with 0.51 point from 4.05 percent with 0.44 point.  The effective rate also increased.

Thirty-year jumbo FRM, those with a beginning balance larger than $417,500, had an average rate of 4.30 percent with 0.44 point compared to 4.29 percent with 0.43 point a week earlier.  The effective rate increased as well. 

The only loan type with a lower rate than that of the previous week was the 30-year FRM backed by FHA.  FHA loan rates decreased 2 basis points to 3.87 percent with points unchanged at 0.78 and the effective rate decreased. 

The rate for the 15-year FRM was unchanged at 3.33 percent, with points increasing to 0.40 from 0.37 and the effective rate was also unchanged.     

Rates for 5/1 ARMs increased to 2.93 percent from 2.91 percent, with points increasing to 0.42 from 0.40.  The effective rate increased.

The ab

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Global Finance sat down with Martin Fridson, high-yield market specialist and global credit strategist at BNP Paribas Asset Management, in early December to get his take on US and global debt markets during one of the most volatile years in his memory.

High-yield debt in the US will continue to have a low default rate through the next 12 months, according to Martin Fridson, global credit strategist at BNP Paribas Asset Management. It now stands at around 2%, about half of its historic rate.

In addition, Fridson says, there is a dearth of high-yield issuance thanks to the cash-rich position of many sub-investment-grade corporate issuers. Companies built their war chests and pushed out maturities in the very low interest rate environment in the wake of the 2008–2009 financial crisis.

With so much cash now on balance sheet, there will be little pressure on companies to refinance in the coming year. At the same time, leveraged buyout activity—typically a huge source of issuance in the high-yield markets—has slowed dramatically.

As a result, there is relatively strong demand for issues that do come to market. Although pric

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The Chicago Board Options Exchange (CBOE) will soon permit futures trading in housing through a derivative based on the Radar Logic Composite Price.  According to information released by Radar Logic, a New York City real estate data and analytics company, this derivative will allow institutions both to hedge against downturns in housing prices and to allocate portions of their investment portfolios to housing assets without the search, transaction, and maintenance costs association with purchasing physical properties.  Or, as the background information the company released today says, “RPX futures will allow you to invest in residential real estate without having to mow the lawn.”

It is not our purpose to assist Radar Logic in its promotional campaign nor is this intended as a discussion of the appropriateness of encouraging further speculation in the housing market although that discussion could be a worthy one.  However, the “RPX Housing Market Review” released by the company last week does explain the methodology underlying calculation of the Radar Logic Composite Price and provides a context for anyone who is interested in following this new market.

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Our series about six options if you are underwater on your home has drawn a lot of comments. Some readers are wondering whether they should stay and pay or try to get out. Heres a reader question we received this week:

Dear Stuck,

I can only imagine how stressful this situation is for you, but I think you need more information before you can make a decision. You dont need to go into analysis paralysis but you do need to investigate three things in more detail:

Find out exactly what kind of places are available to rent closer to work in your price range. Dont just look onlinego and look at some places and talk to the landlords so you can get a good idea what they require in terms of first and last, security etc. Get a good feel of whether you could rent an acceptable place for what you are paying now. (And of course check out schools since that will be an important factor with a young child.) If you are in a position to buy in another year or two, consider also looking at homes to rent with an option to buy.

If you discover that youd have to pay a lot more to live closer to work, or if you cant find something acceptable in a decent school district, you may decide that its better to stay put. Or maybe youll discover that for a little more you can get a decent place and save an hour a day in commuting time. You wont know until you hit the pavement and check out whats available.

Find out if you will be on the hook for a remaining balance. If it you have a non-recourse loan, the property is the only collateral for the loan and you can likely walk away without worrying that you will be sued for a deficiency. Many purchase money mortgages in California are structured that way. If you are not sure, make an appointment to talk with a real estate attorney who can review your paperwork with you.

Find out what your tax liability may be. Meet with a tax professional (an enrolled agent or CPA) with experience in handling 1099-C and 1099-A issues to learn whether you would owe taxes on the forgiven balance if you do a short sale or walk away. You may be eligible for the Mortgage Forgiveness Debt Relief Act or the other exceptions or exclusions I outlined in my previous article on this topic. This is an important question because you dont want to be surprised with a large tax bill.

Read: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

Since you bought your home for $455,000 and owe $190,000, it sounds like youve lost quite a bit of money that you put into it. That has to be a very tough pill to swallow. It also sounds like you are worried the value can go down further. Its impossible to predict, though, how much further home values will drop or how long they will take to stabilize and then start going up again in your area. That means there is no single right or wrong answer here. Gather some more information and make the best decision you can knowing that at least youve made an informed choice to stay or leave.

CORPORATE FINANCING NEWS: MERGERS & ACQUISITIONS

By Gordon Platt

The total value of US oil and gas deals in the quarter rose by 135% from the same period a year earlier, with 46 deals totaling $48.8 billion.

“Despite a number of headwinds in the third quarter, with volatile global equity markets and commodity prices, deals in the energy sector continued, as companies sought to take advantage of opportunities in shale to gain technology know-how and diversify service offerings,” says Rick Roberge, a principal in PwC’s energy M&A practice. “Large multinational corporations are able to withstand market volatility, and we’re continuing to see them push through and get deals done, with their focus primarily in the upstream sector and shale-related plays.”

The upstream sector includes exploration, development and production of oil and gas. Downstream involves transportation, refining, petrochemicals, distribution and retail.

With private equity deals on the rise and corporations focused on energy and maximizing the value of current assets, “we expect energy to remain one of the hottest sectors for deals,” Roberge says.

The energy and power sector was the most active worldwide in the first nine months of 2011, followed by financial companies, according to Thomson Reuters. Some 17.2% of all M&A

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