Loan Apps Rise as Rates Dip Below 5 Percent

Average mortgage rates dipped below 5 percent last week, driving mortgage application volume up 11.3 percent to 723.4 from 649.7 the previous week on an adjusted basis, according to the Mortgage Bankers Association weekly survey.

On an unadjusted basis, the index increased 11.6 percent compared with the previous week and was up 5.7 percent compared with the same week a year ago.
The increase was reflected in the government purchase index (mostly FHA), which rose 10.4 percent. The overall purchase index was up 7.1 percent. The refinance share increased to 67.9 percent, up slightly from the previous week when it was at 66.9 percent.

Mortgage rates were down to the second-lowest rate in the history of the survey, with the record low being 4.89 percent for the week ending Jan. 9, 2009.

30-year fixed-rate mortgages decreased to 4.96 percent from 5.14 percent

15-year fixed-rate mortgages decreased to 4.54 percent from 4.73 percent

1-year ARMs increased to 6.21 percent

Source: Mortgage Bankers Association (03/11/2009)

Experts Weigh Rent-to-Buy Pros and Cons

The weak housing market has prompted some home sellers to offer rent-to-buy agreements to prospective buyers.

These buyers pay an up-front fee of approximately 1 percent of the sales price for the option to buy, and all the payments they make during the rental period go toward the principal.

Most rent-to-buy agreements last for two to five years; and if the occupants decide not to go through with the purchase, they lose the option fee plus the rental payments. Those that agree to purchase the home at the price specified when the agreement was signed also lose money if property prices have since fallen.

Moreover, buyers who make late rental payments often find that these do not count toward the home purchase. According to Arizona State University finance professor Anthony Sanders, “A good rule of thumb [is to] separate the rental decision from the purchase decision.”

Source: Forbes 03/02/09

What’s Next for Fannie, Freddie?

What’s to become of Fannie Mae and Freddie Mac, which are bleeding red ink as home owner defaults continue to increase?

The rising losses will force the government to decide whether to keep putting money into the firms to keep them operating or divide them into smaller businesses and remove government support.

Daniel Mudd, a former Marine, was Fannie Mae’s CEO before the government fired him and put James Lockhart, director of the Federal Housing Finance Agency, in charge. He likened the situation to the U.S. invasion of Iran. “The troops got to Falluja in a couple of weeks and seized the radio towers, but there was no plan to run the country once the shooting stopped,” he said.

Under the Obama plan, Fannie and Freddie are expected to refinance as many as 5 million underwater mortgages.

Fannie’s government-appointed CEO, Herbert Allison, said: “It’s not about maximizing returns on equity or profits. It’s really about being of use to the country during this very difficult period.”

Source: The Wall Street Journal, James R. Hagerty and Damian Paletta (02/27/2009)

30-Year Rates Inch Up This Week

Freddie Mac reports an increase in the 30-year fixed mortgage rate to 5.07 percent for the week ended Feb. 26.

Rates rose slightly, from 5.04 percent the prior week.

“Mortgage rates were little changed this week amid mixed data reports of a slowing economy,” said Frank Nothaft, Freddie Mac vice president and chief economist.

He said that lower house prices and affordable mortgage rates have yet to spur housing demand. For instance, house prices declined by 8.7 percent for the 12 months ending in December 2008 and were down 10.9 percent from their highs set ion April of 2007, according to the Federal Housing Finance Agency’s purchase-only monthly home price index.

Meanwile, existing home sales fell 4.7 percent in January to 4.05 million units, the slowest pace since July 1997, he said.

The five-year adjustable-mortgage rate rose to 5.06 from 5.04 percent over the same period, while the one-year ARM bumped up to 4.81 percent from 4.80 percent.

However, the 15-year fixed mortgage rate held steady at 4.68 percent.

Source: Freddie Mac

FHA and Conforming Loan Limits Released

The U.S. Department of Housing and Urban Development has released new FHA and conforming loan limits based on changes enacted last week as part of the massive economic stimulus bill.

Under the legislation, loan limits in high-cost areas are increased to $729,750, the same as last year. They had dropped to $625,500 this year before passage of the legislation.

In a Mortgagee Letter released yesterday on the change, HUD says the new loan limit for an area will be based on market calculations from either this year or last year, whichever is the higher of the two calculations

Given current market conditions, many areas are staying at the 2008 mortgage limit.

The loan limits can be accessed in a searchable form on HUD’s Web site.

Source: REALTOR® Magazine Online

America’s Best and Worst Housing Markets

As the housing downturn wears on, some cities are stabilizing and some
aren’t.

In Las Vegas, the weakest market in the country, prices continue to drop.

“I don’t know what those guys were drinking when they thought all this building made sense. If it does work out soon, then there’s some force out there in the universe that I’m not aware of,” Steve Cesinger, chief financial officer at Dewberry Capital, an Atlanta-based real estate investment firm.

Forbes magazine analyzed monthly declines as well as year-over-year declines in home prices. It also looked at how many months of equity homeowners have lost. With these figures in mind, it determined the 10 best and the 10 worst U.S. housing markets. Here they are::

10 Best
New York City
Washington, DC
Charlotte, N.C.
Portland, Ore
San Diego
Denver
Boston
Dallas
Los Angeles
Seattle

10 Worst
Las Vegas
Phoenix
Detroit
Minneapolis
San Francisco
Chicago
Cleveland
Atlanta
Tampa
Miami

Source: Forbes: Matt Woolsey (02/24/2005)

Second-Home Buyers Are Looking at Foreclosures

Falling prices, especially in areas plagued by foreclosures, are enticing thousands to purchase a second home.

Buying a foreclosed home, or an otherwise distressed property, is becoming particularly commonplace in Las Vegas. In January about 80 percent of residential sales in the area were foreclosures, according to the Greater Las Vegas Association of REALTORS®.

To attract buyers, the association is offering bus tours of foreclosed properties and wooing potential international buyers through global advertising.

Foreclosures are also selling well in Florida and Arizona.

Many of the buyers are people who previously wouldn’t have considered a foreclosure, says Randy Paun, sales manager for Exit Realty in Pensacola, Fla. But today’s buyers, he says, are ordinary people enticed by a bargain and willing to do what’s necessary to buy the homes and make them livable.

Source: The New York Times, Jack Duffy (02/19/2009)

Who Will be Eligible for Foreclosure Help?

With the federal government hoping to finalize details for its $75 billion foreclosure prevention program by March 4, officials are fine-tuning eligibility requirements.

So far, they are targeting borrowers who spend more than 38 percent of their earnings to make loan payments on primary residences.

The Mortgage Bankers Association wants the Obama administration to broaden the refinancing component of the initiative, noting that the threshold of 105 percent of a home’s current property value is inadequate to help home owners in battered housing markets like Arizona, California, and Florida.

Source: Washington Post, Renae Merle (02/20/09)

30-Year Rates Drop to Near 5%

Mortgage rates across the board fell this week, a welcoming sign to potential buyers and home owners looking to refinance.
The 30-year fixed-rate mortgage averaged 5.04 percent this week, a drop from last week’s 5.16 percent. Last year at this time, the 30-year rate averaged 6.04 percent, Freddie Mac reports.

Freddie Mac reported the following for other rates for the week:

• 15-year mortgage rates: averaged 4.68 percent, down from last week’s 4.81 percent. Last year at this time: 5.64 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 5.04 percent this week, a drop from last week’s 5.23 percent. Last year at this time: 5.37 percent
• 1-year ARMs: averaged 4.8 percent, down from last week’s 4.94 percent. Last year at this time: 4.98 percent

“Mortgage rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation,” says Frank Nothaft, Freddie Mac’s chief economist.

Source: Freddie Mac (02/19/09)

What’s In the Foreclosure Prevention Plan?

The Obama administration yesterday released its long-awaited plan to stem foreclosures. It’s organized into three categories:

1) Help for homeoners making their payments but at risk of default and foreclosure. Homeowners with a Fannie Mae or Freddie Mac loan would be eligible to refinance as long as their mortgage doesn’t exceed 105 percent of the home’s current market value. Currently owners need to have at least 20 percent equity. Potential impact: 4-5 million households.

2) Help for homeowners already in default and in need of loan modification. For lenders that voluntarily agree to lower a borrower’s payment so that it makes up no more than 38 percent of the borrower’s income, the government would share the cost of lowering the mortgage burden to 31 percent of income. Incentives to lenders to participate include a $1,000 payment. Borrowers can receive up to $1,000 as an incentive to stay current on their new mortgage. Still in the works is a proposed provision that would allow bankruptcy judges to require loan modification (known as a cramdown) as part of a household’s restructuring. That provision requires legislation by Congress. Estimated potential impact: 3-4 million households.

3) Doubled resources to Fannie Mae and Freddie Mac. To encourage investors to buy the secondary market companies’ mortgage-backed securities, the government explicitly backstops them to up to $400 billion, twice the current amount.

The plan does not provide help to investors or to homeowners who are in trouble with a second home, nor does it apply to homeowners whose mortgage is part of a private-label mortgage security that is not backed by Fannie Mae or Freddie Mac.

“The administration’s proposed plan, combined with provisions like the $8,000 first-time home buyer tax credit in the just-enacted American Recovery and Reinvestment Act, will help minimize foreclosures, shrink housing inventory, stabilize home values, and move the country closer to an economic recovery,” says NAR President Charles McMillan.

Source: REALTOR® Magazine Online

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