What’s Ahead For Mortgage Rates This Week : August 30, 2010

What’s Ahead For Mortgage Rates This Week : August 30, 2010


Existing Home Supply (July 2009 - July 2010)Mortgage markets improved last week despite a major mortgage bond sell-off Friday afternoon. Prior to the jump, conforming mortgage rates had cut new, all-time lows by Thursday, only to lose up to 0.250 percent on the last day of the week.

Meanwhile, the same type of news that drove rates lower Monday through Thursday also contributed to rates rising Friday — revised projections for the U.S. economy.

Early in the week, “bad” news piled on which, in turn, lowered expectations for the economy and pushed mortgage rates down:

* Existing Home Sales dropped 27% from June
* Single-Family New Home Sales dropped 12% from June
* Purchases of “big ticket” items plunged

Then, on Friday, two events revised the market’s expectations back higher:

* Q2 GDP was revised lower, but not as low as had been expected
* Fed Chairman Ben Bernanke said the economy will keep expanding through the end of the year and into 2011

When Chairman Bernanke talks, markets listen. His comments about the U.S. economy helped fuel that late-Friday surge in mortgage rates last week.

This week, the momentum could continue — depending on the data.

There’s a lot for markets to digest this week including key inflation figures from the government; home value data from Case-Shiller; Fed Minutes from the Federal Reserve; and, the always-important jobs report due Friday.

Since April, mortgage rates have been on a downward trajectory and that may continue this week. Or, it may not. If you own a home and haven’t talked to your loan officer about a refinance, now is as good a time as any — rates are at historic lows and could rebound at any time.

Last June, mortgage rates rose 1.125% in 10 days. Under the right circumstances, it could happen again.

Home Affordability Rankings For 225 Metropolitan Statistical Areas

Home Affordability Rankings For 225 Metropolitan Statistical Areas

Home Affordability - Top and Bottom 5 markets 2010 Q2

With home prices holding firm and mortgage rates still dropping, home affordability is reaching new heights.

According to the quarterly Home Opportunity Index as published by the National Association of Home Builders, more than 72 percent of all new and existing homes sold between April-June 2010 were affordable to families earning the national median income.

It’s a slightly higher reading as compared to last quarter, and the second highest reading in the survey’s history.

As with all aspects of real estate, however, home affordability varies by locale.

For example, 97.2% of homes sold in Syracuse were affordable for families making the area’s median income, earning the New York city its first “Most Affordable Major City” designation. Indianapolis was the first quarter winner.

On the opposite end of the spectrum, the “Least Affordable Major City” title went to the New York-White Plains, NY-Wayne, NJ area for the 9th consecutive quarter. Just 19.9% of homes are affordable to families earning the local median income, down 1 percent from last quarter.

The rankings for all 225 metro areas are viewable on the NAHB website but regardless of where you live, buying a home is as affordable as it’s ever been in history. Furthermore, because home values are in recovery and mortgage rates may rise, the market is ripe for those in the market to buy a home.

All things equal, buying a home may never be this inexpensive again. If you were planning to purchase later this year, you may want to move up your time frame.

What’s Ahead For Mortgage Rates This Week : August 23, 2010

Mortgage markets stalled last week in back-and-forth trading as Wall Street grappled with weak housing data, falling builder confidence, and worsening jobs numbers nationwide.

Because markets were volatile, rate shopping was challenging.

Conforming mortgage rates did managed to make a new all-time low last Thursday but quickly gave up those gains. Most of Friday afternoon was spent in the red and, as a result, for the second straight week, mortgage rates failed to fall overall.

But, although last week’s action puts a damper on this summer’s mortgage rate rally, the Refi Boom is still going strong.

According to Freddie Mac, as compared to April 8 when mortgage rates touched their recent high-point, pricing is hugely improved across 3 popular loan products.

30-year fixed : Then, 5.21%; Now, 4.42%
15-year fixed : Then, 4.52%; Now, 3.90%
5-year ARM : Then, 4.25%; Now, 3.56%
As an example of potential savings, a homeowner with a $250,000 30-year fixed rate mortgage would save $96 per month at today’s rates as compared to April’s.

Over the life of a loan, that’s a savings of $34,560.

This week, it’s unlikely that the Refi Boom will meet its end, but that doesn’t mean you should wait for rates to fall further. Mortgage rates tend to change quickly and without notice, and should rates rise, you may find that you’ve missed the market bottom.

If today’s rates appeal to your finances and budget, consider locking something in and moving forward.

Higher (And Lower) FHA Mortgage Insurance Premiums Start October 4, 2010

FHA mortgage insurance premiums ready to change for the second time this year, the FHA is modifying mortgage insurance.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:

* Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
* Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners, this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”. The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different. Most people procuring an FHA loan are not choosing between the MIP costs, but are taking the loan because they are putting less than 10% and/or their credit score is low, as low as 620 and/or they have other qualifying specifics that FHA will be okay with and other programs will not. While the loans will be less expensive to procure, they will cost more to carry each month, and therefore more difficult to qualify for.

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.

If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email me for help and advice.

NOTE : The FHA originally announced an implementation date of September 7. It was subsequently amended to October 4, 2010.

What’s Ahead For Mortgage Rates This Week

Retail Sales (August 2008 - July 2010)Mortgage markets worsened last week, putting a pause on the mortgage rate rally that dates to mid-April. Mortgage rates rose across ct last week and home affordability suffered.

The Refi Boom remains in full effect, but rates are not as dazzling as they were a week ago.

It’s somewhat strange that mortgage rates rose last week given the heavy dose of negative-bending news.

* The Federal Reserve noted that the economy “has slowed“
* New unemployment claims rose to a 6-month high
* Retail sales — excluding auto sales — rose less than expected

Mortgage rates often to fall on such news, but last week, they rose. The biggest reason was weak demand on a new 30-year bond issuance from the government. In turn, that weakness spilled over into mortgage bonds, which pushed rates up.

This week, mortgage rates could rise or fall — it depends on how new data influences market sentiment.

* Monday : Home builder confidence survey
* Tuesday : Housing Starts and Building Permits; Producer Price Index
* Thursday : Jobless claims; 2 Fed members make speeches

Keep a close eye on the housing-related data early in the week. It’s widely believed that housing will lead the economy forward so a rebound in home builder confidence, or a jump in building permits, for example, should push rates even higher. Weakness

In the meanwhile, if you haven’t called or contacted me regarding a refinance, consider reaching out this week. Rates are lower than they’ve ever been in history and more people are getting financing than the news would have you believe. You can’t know until you ask so make that call today.

The Client Who Just Didn’t Listen

Imagine that!! Well we just closed a loan that was a classic case of Murphy’s-law coupled with simple non-compliance by our client, but despite these obstacles the closing took place this week. This is a true story and the purpose is to let all you readers know what NOT to do when applying for a mortgage, going through the mortgage process and buying a home.

It all started with a home going up for sale and my client offering full price. A bidding war ensued and my client eventually bought the house $50,000 over asking price.

The client was buying it together with their parents. The client made a minimal amount and the bulk of the income was from the non-occupying co borrower. It was a simple straightforward file. The down payment was coming from a HELOC, the income was supported by w-2 and pay-stubs and all the #’s worked.

We began processing the file. This was February 2010. We asked for the 2009 w-2 and 2008 tax returns. We got the 2008 w-2, no tax returns and no 2009 w-2. Meanwhile we did the appraisal.

Finally the 2009 w-2 is faxed in. it showed $49,000 while the previous year showed $96,000!! His paystubs showed a weekly salary that would eventually total to $100,000. What happened? He told us that he took a sabbatical? Problem is, he wasn’t a Professor!!

Part of a mortgage file entails numerous verifications and re-verifications of employment. Well my processor called the job to verbally verify that he still works there, and the probability of continued employment and we were floored. Everything fell into place. This is how the conversation went:

Meridian Processor: Hello, I am calling from Meridian Mortgage and I would like t speak with someone who can verify employment for Mr._________.
Receptionist: I can do that.
Meridian Processor: Great, What is his current position?
Receptionist: Manager
Meridian Processor: Fine. What is his probability of continued employment?
Receptionist: What do you mean, of course, he is the BOSS!! He owns this company!!

Well that explained everything, but we had a major problem. If you are self employed and your income is reduces, we can only use the lesser amount with a GREAT and I mean a GREAT explanation as to why this happened and that the income will not continue to slide.

When I asked the client, why he never told me he was self employed and why he tried to hide the information by not providing me with tax returns, he said “someone once told him that for a mortgage, you never tell anyone that you are self employed”. Bad advice! In 2010, you cannot hide that information, we do pull a 4506T, transcripts of tax returns that would clue us in!!

The whole file was a series of bumps and valleys. The icing on the cake was a day before the closing, the client was supposed to prove that he withdrew his money from the Home Equity Line of Credit and deposit it in his checking account for the closing. When he gave us his bank statement printout, there wee numerous smaller deposits (ex. Supposed to withdraw $80,000 instead there were 5 deposits between $15,000 and $20,000 each) It turns out he borrowed the money from a friend because he thought it would be easier for us to close because he wouldn’t have additional debt. This basically just delayed the closing for another week while we worked out this issue.

Anyway they closed and now we are busy as ever closing loans. The lesson is, you must trust and be honest with your mortgage professional. A seasoned mortgage professional will guide you and work out the kinks in your mortgage and you will have a smoother closing !!

Now with rates in the low 4 percent range, we are handling loads of refinances and purchases. Find out about the 0 cost refinance!!

Home Values Within 12.5 Percent Of April 2007 Peak, Nationwide

According the Federal Home Finance Agency’s Home Price Index, home values are now off just 12.5 percent from their April 2007 peak nationwide. This, after a half-percent monthly increase in prices in May, on average.

Given the state of the market since April 2007, the Home Price Index results are a positive for both the housing market and the economy, but we have to remember that May’s half-point increase is an average, and not specific to a particular area.

In contrast to “national markets”, the real estate markets in which you and I live are decidedly local. It’s a major difference and the distinction renders the Home Price Index somewhat less important.

After all, the HPI doesn’t account for housing activity in individual neighborhoods like Bedstuy , nor does it track value across cities like Monsey. Instead, it summarizes data in giant chunks of geography.

A quick look at the HPI regional data proves the point. Of the HPI’s 9 tracked regions, only one was within one-tenth of one percent of the national, half-point average. The others varied by as much 1.3 percent.

As a sample:

* Mountain Region : + 1.7 percent
* New England : + 0.2 percent
* South Atlantic : +1.0 percent

And this is on a regional basis. The HPI’s applicability to state, city and neighborhood markets is even less appropriate.

Real estate values cannot be captured in a national survey. For home buyers and seller, what matters is the economics of a block, on a street, in a neighborhood. That type of granularity can’t be tracked in a report like the Home Price Index.

The best place to get that data is from a local real estate agent that knows the market well.

A Simple Explanation Of The Federal Reserve Statement (August 10, 2010 Edition)

Putting the FOMC statement in plain EnglishToday, in its first meeting in 6 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged.

The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since June, the pace of economic recovery “has slowed”. Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.

Today’s statement shows less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be “more modest in the near-term” than its previous expectations.

Weaknesses aside, the Fed highlighted strengths in the economy, too:

1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.

There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates in ct are unchanged this afternoon.

The FOMC’s next meeting is scheduled for September 21, 2010.

What Does It Mean To Escrow Taxes And Insurance?

The fiscal responsibility of a homeowner — extends beyond the mortgage’s basic principal and interest repayments. Homeowners are also responsible for the real estate taxes on the home and its insurance premiums, too.

Failure to pay taxes can lead to foreclosure, and failure to insure is breach of your mortgage contract.

As a homeowner, you have a choice about how you manage your real estate tax and insurance bills. You can choose to pay them from your own bank account when the bills come due, or you can choose to pay 1/12 of the annual bill to your mortgage servicer each month, and then let your servicer pay the bills on your behalf when they come due.

Not surprisingly, servicer's prefer the latter method — it reduces two major lender risks:

1. That the home’s real estate taxes go delinquent and are sold to a third-party
2. That the home endures catastrophic damage during a lapse of insurance coverage

In theory, when the servicer is paying the bills, the home’s taxes are always current and the home’s insurance is always paid. This method of managing taxes and insurance is commonly called “escrowing”.

To calculate a home’s monthly escrow payment is simple. Just take the sum of the annual real estate tax bills and insurance bill, then divide it by 12 months in the year.

As a example, a $4,000 annual tax bill with a $800 insurance policy = $4,800 annually = $400 paid into escrow monthly. These monies are collected as part of the regular mortgage payment along with the mortgage’s scheduled principal + interest payment.

Homeowners choosing to escrow tend to get the lowest rate, lowest fee loans. This is because lenders often charge a premium to “waive escrow” (i.e. pay their own taxes and insurance). Escrow waiver fees vary between banks, but can range up to half-percent of the amount borrowed. The larger the loan, the stiffer the penalty in dollar terms.

Choosing to waive escrow can also raise your mortgage rate by up to 0.250 percent.

If you’re unsure whether escrowing is right for you, Call me and we will discuss it. There’s good reason to go either route depending on your profile.

What’s Ahead For Mortgage Rates This Week : August 2, 2010

Mortgage markets improved last week, pushing mortgage rates lower for the 6th time in seven weeks.

Since April, rates in have been on a downward path, spurring refinances in most markets and sparking the start of a Refi Boom.

Last week, 3 key stories played a role in falling rates:

1. Demand was strong for U.S. government debt
2. Emerging concerns of a Japan-style deflation in the U.S.
3. Personal Spending since late-2007 was shown to be less than previously thought

Of the three, it’s the measured drop in Personal Spending for which rate shoppers and home buyers in Brooklyn should watch. Drops in spending slow down the economy which, in turn, tends to pull mortgage rates lower.

Long-term, deflation could be a drag on rates, too. For now, though, it’s just a conversation among academics and economists.

This week, mortgage rates could move up or down — a lot hinges on the results on July’s Non-Farm Payrolls report.

More commonly called “the jobs report”, Non-Farm Payrolls hits the wires Friday at 8:30 AM ET. Markets are expecting a 75,000 net loss of jobs last month. If the actual number is higher, mortgage rates should rise. If the actual number is lower, mortgage rates should fall.

With the jobs numbers not due until Friday morning, expect choppy trading through Thursday’s market close. There’s a handful of economic data set for release including Personal Consumption Expenditures (Tuesday), Pending Home Sales (Tuesday) and Jobless Claims (Thursday). Each has the potential to move mortgage rates.

The Refi Boom is ongoing but when it ends, it will end in a hurry. If you’ve been thinking about a refinance, contact your loan officer about your options sooner rather than later.