The index reached the lowest reading since March 2003, during the U.S. invasion of Iraq, and the second-lowest since October 1993. So far, the index has dropped 47 points since the August 2007 financial turmoil.

Both the present conditions and expectations components saw double-digit declines, with the former posting the largest drop since October 2001. The measure of expectations for the next six months slumped to 47.9, the lowest reading since December 1973.  Declining stock markets, rising energy prices, falling house prices and credit market concerns likely weighed on confidence. 

Consumers’ assessment of current labor market conditions deteriorated sharply. The share of consumers finding jobs plentiful fell 2.7 percentage points to 18.8 percent, the lowest level since November 2004. The share finding jobs hard to get rose 1.7 percentage points to 25.1 percent. 

Despite the drop in confidence, plans to buy homes edged up, likely helped by increased affordability as a result of declining interest rates and home prices. Plans to buy autos and appliances tumbled, however.

The Consumer Confidence Index, which is based on survey results of more than 5,000 households, is highly regarded by the financial markets and the Federal Reserve as a gauge of future consumption spending. Sustained declines in confidence, especially in the expectations component, signal a potential slowing consumption spending growth ahead.

A separate report from Standard and Poor’s suggests that consumer spending growth could be at risk as home prices continued to deteriorate in January. Declining home prices reduce home equity and household wealth, inducing households to save more and moderate spending.

The S&P/Case-Shiller Home Price Index tracks repeat sales of the same single-family house over time. It is therefore a better indicator of home price trend than average or median home prices, which can be distorted by the mix of sales of low- and high-priced homes. The 10-metro area composite index was down 11.4 percent in January from a year ago, the largest decline since the series’ inception in 1987. The broader 20-metro area composite index showed a year-over-year drop of 10.7 percent, the sharpest decline in the history of the broader index since its inception in 2000.

Nineteen of 20 metro areas reported year-over-year home price drops, with only Charlotte, N.C., showing a small gain of 1.8 percent. Las Vegas and Miami both posted the largest year-over-year decline of 19.3 percent, followed by Phoenix’s 18.2 percentdrop.

Price declines for metro areas have accelerated over time. In January, 16 of the 20 metro areas reported record year-over-year home price declines, compared with 13 in December. The 20 selected metro areas do not well represent the overall picture of the nation’s housing market, however, with seven of the total coming from the four states experiencing the most significant home price drops in the nation: California, Florida, Michigan and Nevada. The metro areas for these states account for more than half the rate of the decline. The Case-Shiller index for the nation is only available on the quarterly basis.

Another home price measure using the repeat sales transaction methodology is available from the Office of Federal Housing Enterprise Oversight, which uses mortgage data from Fannie Mae and Freddie Mac. The overall house price index (including refinancing transactions) is released quarterly but the purchase-only index (excluding refi transactions, making it more compatible to the Case-Shiller index) is released monthly. 

OFHEO also released January home price data yesterday, showing that the purchase-only home price index declined 3.0 percent from January 2007, accelerating from a 1.6 percent year-over-year decline in December. Since peaking in April 2007, the monthly purchase-only index has declined 4.1 percent. The OFHEO monthly purchase index confirms the accelerating trend of home price declines seen in other measures of existing home prices, including the national Case-Shiller home price index and the National Association of Realtors’ median home price.

Treasury yields declined on reports of declining consumer confidence and accelerating home price declines. The 10-year yield fell seven basis points and stayed around 4.49 percent by mid-Tuesday afternoon.

(Orawin Velz is senior director of economic forecasting with the Mortgage Bankers Association. She can be reached at ovelz@mortgagebankers.org.)
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The Market Composite Index increased to 965.9, an increase of 48.1 percent on a seasonally adjusted basis from 652.0 one week earlier. On an unadjusted basis, the Index increased by 46.1 percent compared with the previous week and was up by 41.1 percent compared with the same week one year earlier. The four-week moving average for the seasonally adjusted Market Index is up 11.3 percent to 743.6 from 668.4. 

The seasonally adjusted Refinance Index increased by 82.2 percent to 4255.2 from 2335.2 the previous week. The four-week moving average rose by 18.3 percent to 2901.9 from 2452.8. The refinance share of mortgage activity increased to 62.0 percent of total applications from 49.7 percent the previous week.

The seasonally adjusted Purchase Index increased 10.6 percent to 403.7 from 365.0 one week earlier. The Conventional Purchase Index increased 10.7 percent while the Government Purchase Index (largely FHA) increased 10.1 percent. On an unadjusted basis, the Purchase Index increased 10.4 percent to 449.2 from 406.9 the previous week. The four-week moving average is up 3.1 percent to 375.2 from 363.8.

“The Federal Reserve acted last week to bring some stability to the mortgage-backed securities market and we saw an immediate impact with a drop in mortgage rates, said Jay Brinkmann, MBA’s vice president of research and economics. “With a drop in the 30-year fixed rate of at least a quarter of a point, we saw a sharp increase in refinance applications, but applications for home purchases also increased over where they have been the last few weeks, although still below where they were this time last year.”

The seasonally adjusted Conventional Index increased 54.3 percent to 1310.4 from 849.0 the previous week; the seasonally adjusted Government Index increased 21.1 percent to 391.7 from 323.5 the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.74 percent from 5.98 percent, with points increasing to 1.13 from 0.90 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.23 percent from 5.24 percent, with points increasing to 1.15 from 0.97 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year adjustable-rate mortgages increased to 7.02 percent from 6.99 percent, with points increasing to 1.71 from 1.64 (including the origination fee) for 80 percent LTV loans. The ARM share of activity decreased to 3.8 percent from 7.9 percent of total applications from the previous week.

The survey covers 50 percent of all U.S. retail residential mortgage originations and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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The Path to Diversity program provides educational scholarships from CampusMBA—the education arm of the Mortgage Bankers Association—that offer employees from culturally diverse backgrounds the ability to advance their professional growth and career development. 

Several times each year, CampusMBA awards Path to Diversity scholarships to top candidates, based on essays and letters of recommendation, as decided by its Scholarship Award Task Force. Scholars receive a $2,000 voucher to use toward CampusMBA courses and products. The voucher can be used for residential or commercial programs delivered via distance learning or instructor-led training.

To learn more about the application process, go to http://www.mortgagebankers.org/pathtodiversity/index.html.

For specific information about qualification requirements, go to http://www.mortgagebankers.org/pathtodiversity/empschol/qualify.htm.

Support your staff in professional development by encouraging employees to apply for a Path to Diversity Scholarship today.
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To register, visit http://store.mortgagebankers.org/ProductDetail.aspx?product_code=M2801292%2fREGIS. You can also download the registration form at www.mortgagebankers.org/files/conferences/pdf/M2801292_registrationform.pdf. The conference web site is at http://events.mortgagebankers.org/npc2008/default.html and has up-to-date conference information, including a detailed conference itinerary, registration and travel information. Early registration deadline is April 2.

Please note:  It is important that you reserve your room for MBA's National Policy Conference as soon as possible as the Vatican has announced that Pope Benedict XVI will be in Washington, D.C. at the same time as the National Policy Conference. MBA anticipates that available hotel rooms will become scarce; and the Washington Court Hotel is already sold out.

For additional information, call (800) 793-6222, Monday-Friday between 9:00 a.m. and 5:00 p.m. ET.

FHA Central is convenient for you and your business. Popular one-day classroom-based courses take place throughout the year at different locations across the United States. LIVE Online Workshops and Guided Web-based Courses leverage the value of interactive instructor-led learning at the comfort of your desk (or even on the road). FHA Central also offers publications and print-based courses that can be studied and completed at your own pace.

Visit CampusMBA FHA Central to learn more: www.campusmba.org/AllLearningProducts/FHACentral.htm?WT.mc_id=FHANL022708.

For your staff: most FHA Central programs can be offered at your location or online for your employees at your convenience. Visit www.campusmba.org or call (800) 348-8653 for more information about bringing FHA Central to your staff.

DE (Direct Endorsement): Several FHA Central programs, including FHA Fundamentals Workshop, FHA Underwriting & Operations Workshop and the FHA Fundamentals Guided Web-based Course, provide complete information on all origination, processing and underwriting requirements unique to FHA loans. Lenders across the country use these courses as part of a certification program for their processors and underwriters who are looking to become DE (Direct Endorsement) Underwriters.

Upcoming FHA Central Programs include:

• Senior FHA Bimonthly LIVE Online Conference, March 27. For more information, visit http://www.campusmba.org/products/default.aspx?product_code=E2801716K/REGIS&wt.mc_id=FHANL022808.

FHA Central Classroom-based Courses
FHA Fundamentals Workshop:
• April 10 in Chicago http://www.campusmba.org/products/default.aspx?product_code=E2801618C/REGIS&wt.mc_id=FHANL022808;

• May 1 in Miramar, Fla. http://www.campusmba.org/products/default.aspx?product_code=E2801618D/REGIS&wt.mc_id=FHANL022808, and

• July 16 in San Diego http://www.campusmba.org/products/default.aspx?product_code=E2801618E/REGIS&wt.mc_id=FHANL022808.

FHA Underwriting & Operations Workshop:

• April 11 in Chicago http://www.campusmba.org/products/default.aspx?product_code=E2801620C/REGIS&wt.mc_id=FHANL022808;

• May 2 in Miramar, Fla. http://www.campusmba.org/products/default.aspx?product_code=E2801620D/REGIS&wt.mc_id=FHANL022808; and

• July 17 in San Diego http://www.campusmba.org/products/default.aspx?product_code=E2801620E/REGIS&wt.mc_id=FHANL022808.

Special Bundled Pricing: Attend both FHA Fundamentals and FHA Underwriting & Operations Workshops in the same location and save on registration fees.
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“There is a lot of intelligent data out there,” said Judy Margrett, president of The Turning Point, Sedona, Ariz. “Data is just data unless it’s brought together to allow for intelligent decisioning. With available data, companies can designate factors such as licensing requirements in personalized communication without a salesperson’s interactions."

Margrett said  communicating and building relationships is critical. "It requires companies to consider who has the intelligence and ability internally to maximize potential," she said. "Lenders and brokers are forced to look into smarter technology solutions that integrate data in ways that are driven by decisions before you acquire a list and just write to everyone.”
 
“The mortgage industry is primitive in the way it approaches the marketing side of business,” said Stephen Margrett, CEO of The Turning Point. “Marketing has often been left to chance. Marketing technology has a long way to go and some of the efficiencies technology has can help deliver it.”

The Turning Point is currently working on systems that seek to provide efficiencies in marketing—considerably important in a tighter lending environment with lower volumes, especially in loan originations. “We are trying to provoke a reevaluation of how companies do their marketing because that is how they get their business,” Stephen Margrett said.

Mark Attaway, vice president and CIO of LSI, Santa Ana, Calif., emphasized the importance of transparency in data. “There are many service-oriented architectures out there,” he said. “There are also lots of services out there that allow transacting across web services, building strong data services that can be used for making better decisions.”

Attaway advocated better data exchange at point of sale, referring to technology’s ability to better evaluate when making decisions. “Lender data exchange is critical and this kind of information can better evaluate decisions,” he said. “Keeping creativity is good but make sure technology keeps in it in check. It takes information—good information—to determine whether transactions are bad or good.”

“People look at data differently now,” said Daniel Sogorka, president of Real EC Technologies, Santa Ana, Calif. “You need to get electronic and once you go electronic, you get data. What’s the use of data if it’s stored in a folder and someone has to go through it to look something up? The availability of data allows for access to historical transactions and transactions in real-time provide data exchange. It allows lenders to see what other lenders are doing too. None of that is possible if you don’t have that data electronically. Capturing more data at point of sale is critical to make decisions."

Judy Margrett stressed technology’s importance as it relates to speed-to-market factors and capitalizing on its ability to target customers in a timely fashion. “Technology is coming screaming to bear,” she said. “In marketing automation, with digital signatures, logos, photos and licenses in a complex database, you can get something out fast. You need to consider compliance and legal factors in marketing as well. Having everything and everyone on board allows to you produce something in two minutes and send it out on everyone’s behalf.”

She cited last month’s wave of refinances in the short period when interest rates were low. Volumes soared but lenders had to be on top of their marketing efforts to target borrowers. If they weren’t efficient, then they missed the tiny window of opportunity, Margrett said. “You couldn’t do what you wrote to them about in the first place if you were not efficient."

Randy Schmidt, president of Data-Vision Inc., Mishawaka, Ind., pushed for increased consumer education and information, talking about consumers and their ability to acquire information and do business online, rapidly. “Consumers won’t wait and they want peace of mind that they can get information when they want it. Education and communication is what will keep them going. It’s online everything today. Making contact points online is critical and providing customer satisfaction ties directly into that.”`

“The industry needs to consider the next generation of home buyers and help them deal with homeownership for the next 30 years,” said John Brunson, chief operating officer of Just Price, Pasadena, Calif. “To increase sales, technology has to serve the next generation.”

Brunson stressed the importance of the ability to implement technology at the point of sale. “Technology moved so fast and billions were invested while there was no calculation of what could be lost,” he said. “All the golden eggs were often put into the baskets of people waiting for their $5,000 profits. What was lost was a lot of money that was invested because there was no control at point of sale.”

Schmidt said technology can help people make good decisions or even bad decisions—merely expediting the process. “Technology helps anyone get to wherever they are trying to go, but faster,” he said. “Regulators and even lenders themselves have to look at their own practices.”

“You can’t cut corners anymore,” Sogorka said. “Lenders still want to be efficient but it requires finding the right places. From a vendor perspective, it’s about the risk stuff right now. What technology can do is identify processes that can be sped up, allowing better and necessary focus on due diligence areas. Data allows benefits on the operation, risk and marketing side. It originally allowed lenders to leverage all these areas quickly. Now we are saying to not look and process everything so quickly. It’s more about looking at data for many more reasons."
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