Article of the Day

Fixed Mortgage Rates Sink to Lowest on Record

09/29/2011 By: Carrie Bay 

Fixed mortgage rates fell to all-time record lows this week following the Federal Reserve’s announcement of “Operation Twist.”

The central bank’s new stimulus policy entails reinvesting principal payments from its holdings of GSE debt and mortgage-backed securities back into new mortgage bonds issued by Fannie Mae and Freddie Mac. The Fed also intends to purchase $400 billion more of Treasury securities by the end of June 2012.
Data released by Freddie Mac Thursday puts the average 30-year fixed-rate mortgage at 4.01 percent (0.7 point)

for the week ending September 29. That’s down from 4.09 percent last week. A year ago at this time, the 30-year rate averaged 4.32 percent.
Of the five regions surveyed in Freddie Mac’s survey, the West region recorded the lowest average rate for the 30-year fixed dipping below the 4 percent to 3.95 percent this week.
The 15-year fixed-rate averaged 3.28 percent (0.7 point) this week in the GSE’s survey, down from last week’s average of 3.29 percent. A year ago at this time, the 15-year rate was 3.75 percent.
Both the 30-year and 15-year fixed rates averaged an all-time record low in Freddie Mac’s study. Interest rates for adjustable-rate mortgages (ARMs), on the other hand, were virtually unchanged.
The 5-year ARM averaged 3.02 percent (0.6 point) this week, matching last week’s average. A year ago, the 5-year ARM was 3.52 percent.
The 1-year ARM came in at 2.83 percent (0.6 point), up one basis point from 2.82 percent last week. At this time last year, the 1-year ARM averaged 3.48 percent.
Freddie Mac’s survey averages mortgage rates from 125 lenders across the country.

Article of the Day

Wells Fargo Increases Funding for Nonprofits' Home Retention Efforts

09/28/2011 By: Carrie Bay 

Wells Fargo & Company says it will increase its commitment to credit counseling nonprofits by $5.4 million to a total of $12.4 million in 2011 – a 35 percent increase over the $9.2 million in 2010 – for national and local credit counseling agencies.

“At Wells Fargo, we share the desire of many non-profit agencies to help as many Americans as possible achieve and sustain the dream of homeownership,” said Jon R. Campbell, EVP and head of Wells Fargo’s Social Responsibility Group. “Yet public funding for credit counseling is becoming more scarce, while considerable demand remains.”
The $5.4 million in new commitments from the San Francisco-based lender this year will be provided in the form of grant money directly to nonprofit agencies and support foreclosure prevention counseling services and training.
Grants totaling $1.25 million will be awarded in $250,000 sums to each of five nonprofits including: Alliance for Stabilizing our Communities, Housing Partnership Network, National Community Reinvestment Coalition, HomeFree-USA, and National Foundation for Credit Counseling, Inc.
Another $3 million will be given to NeighborWorks America to support “train-the-trainer” scholarships for local counseling agencies to attend industry counseling standards training.
In addition, $1.2 million of the new funding will go to approved housing agencies to help extend home preservation services through face-to-face credit coun-

seling and mortgage payment assistance. Through this program, counselors can transmit the necessary documents for customers’ mortgage modifications through a Web-enabled portal.
“At a time when our country is still working through the effects of a historic downturn in the housing markets and high unemployment, Wells Fargo believes it’s critical to continue to support the work of these non-profit agencies,” said Mary Coffin, EVP of Wells Fargo Home Mortgage Servicing. “Experience has shown us that their coaching and counseling can have a dramatic impact on helping individuals and families become more successful homeowners through better management of their finances.”
On April 14, federal government officials voted to discontinue $88 million of HUD grants to housing counselors. This money enabled counseling agencies to offer their services free of charge or for a small fee.
In 2010, HUD-approved counseling agencies provided services to more than 2.1 million clients, and achieved $29 billion in measurable economic benefits on an investment of $75 million, according to HUD data cited by the National Council of La Raza.
“We applaud Wells Fargo for demonstrating their commitment to the tens of thousands of families that rely on housing counselors to help them navigate a complex housing market,” said Janet Murguía, president and CEO of the National Council of La Raza.
“Research has shown that the objective advice housing counselors offer to struggling homeowners and first-time buyers has proven results for families and lenders alike,” Murguía added.
Marc H. Morial, president and CEO of the National Urban League, also recognized Wells Fargo’s expanded commitment to credit counseling providers.
“As the dialogue and discourse continues to disproportionately center on the well being and vitality of Wall Street, Wells Fargo is to be commended for its support of evidenced-based solutions for Main Street,” Morial said. “We believe their leadership on this issue can have a catalytic effect on all sectors to do more to support counseling services throughout this period of government cut backs and economic uncertainty.”

Article of the Day

Freddie Mac: Economy Needs Fiscal Policy and Fiscal Stimulus

09/27/2011 By: Krista Franks

Even while interest rates continue to post record and near-record lows and affordability is relatively high, many consumers choose to rent rather than purchase homes.

“Financial worries among consumers are likely holding back home sales, which remain lackluster despite the most affordable home-buying market in decades,” said Freddie Mac’s Frank Nothaft, in his September 2011 Economic Outlook.
Nothaft, chief economist for the Virginia-based GSE, says a boost in job and income growth would help instill confidence in consumers and stimulate the housing market.
Federal Reserve policies have brought interest rates to their lowest levels since the 1950s, and “it has provided some assurance that it will keep the federal funds rate at its current near-zero level through at least mid-2013,” Nothaft wrote.
Freddie Mac’s Primary Mortgage Market Survey for September revealed record lows for both 30-year and 15-year single-family loans.

A combination of monetary and fiscal stimulus has the potential to bring economic growth to the new year, according to the outlook.
The Federal Open Market Committee announced a new Maturity Extension Program this month – a plan to purchase $400 billion in long-term Treasury securities and to sell the equivalent in short-term Treasury securities. The plan is intended to expand loan demand.
This fiscal policy has the potential to promote a gradual increase in economic growth, according to Nothaft, but if combined with stimulus, the effect could be greater.
Nothaft cites the proposed American Jobs Act as one fiscal stimulus that has the basic components to potentially spur some growth in the economy.
According to Macroeconomic Advisers, the act would bring about 1.3 million jobs and increase economic growth by more than 1 percent in 2012.
Unemployment would fall 0.3 percent to 0.4 percent below where it would otherwise stand, according to Macroeconomic Advisors.
Moody’s revealed a similar outlook, predicting a 1 percent to 2 percent increase in 2012 without a stimulus.
Freddie Mac expects unemployment to remain at 9.1 percent for the rest of this year and then drop slightly over 2012, ending the upcoming year at 8.7 percent.
The GSE expects GDP to increase throughout the remainder of the year, ending 2011 at 2.0 percent, and then jumping to 2.7 percent in the first quarter of 2012.

Article of the Day

Short Sale Delays Drive First-Time Buyers From Market: Survey

09/26/2011 By: Carrie Bay

Processing delays have taken their toll on first-time homebuyer interest in short sales, according to the latest HousingPulse Tracking Survey released by Campbell Surveys and Inside Mortgage Finance Monday.

First-time homebuyers were a part of 39.7 percent of the short sale transactions completed in August, the HousingPulse survey found. That tally marks a three-month slide in the share of short sales that went to first-time buyers, and is the lowest percentage for this buyer segment ever recorded by the survey.
The first-time homebuyer share of short sales hit a peak of 54.1 percent of all short sale transactions in November 2009, just before the originally-scheduled expiration of the federal homebuyer tax credit, according to Campbell Surveys.
Short sale transactions have garnered a reputation for being problematic for buyers and sellers alike, with typical approval times of several months after a homebuyer first submits an offer.
Campbell Surveys has found that factors slowing down short sale approvals include lost paperwork, coordination with multiple investors, slow appraisals, and mortgage servicer understaffing.
With average time-on-market for short sales stalled at 16.6 weeks – with the majority of that time spent waiting

for approval of the transaction – short sale transactions are becoming less popular with first-time homebuyers, according to the polling firm
Still, for some first-time homebuyers, average short sale prices of 27 percent less than non-distressed properties compensated for the wait time, Campbell Surveys said.
Short sales are just one type of distressed property, with foreclosed REO homes also a significant component of today’s housing market.
In August, the HousingPulse survey found that short sales accounted for 17.1 percent of the home purchase market, with damaged REO and move-in ready REO accounting for 13.2 percent and 15.6 percent, respectively.
Real estate agents responding to the August survey indicated that homebuyers frustrated with short sale delays are resorting to placing offers on multiple properties, with the intention of closing on only one. This practice can further bog down the short sale approval process.
The state of California is a hotbed of short sale activity, with these sales accounting for 31 percent of home purchases in the month of August, according to the HousingPulse survey.
“Short sales buyers/investors were generally looking at several properties and if one already had first and second approval, buyers would move towards the property that had a better chance of closing sooner. They would get tired of waiting on the short sale process,” commented one California agent.
“I feel that selling agents are telling the buyers it’s okay to write multiple offers because they can walk away with no risk, especially on short sales,” reported another agent.
The HousingPulse Tracking Survey from Campbell Surveys and Inside Mortgage Finance polls approximately 2,500 real estate agents nationwide each month to assess market trends surrounding homes sales and mortgage lending.

Article of the Day

Home Prices Continue Four-Month Run of Gains in FHFA Study

By: Carrie Bay

Home prices in the U.S. rose 0.8 percent between June and July, marking the fourth consecutive monthly increase, the Federal Housing Finance Agency (FHFA) said Thursday.




The agency’s House Price Index (HPI) has been trending upward since April of this year. That string of gains is coming off a streak of declines that was three times as long. Prior to April, FHFA’s HPI had been on a slippery downward slope for 12 straight months, going back to May 2010.

The federal agency’s index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac.
Looking at the 12 months ending in July, U.S. homes lost 3.3 percent of their value, according to FHFA’s assessment.
The July index reading is 18.4 percent below its April 2007 peak and roughly the same as the March 2004 index level.
Among the nine census regions, the biggest monthly gain was seen in the West North Central division – which includes the Dakotas, Minnesota, Nebraska, Iowa, Kansas, and Missouri. There, home prices rose 3.6 percent between June and July.
The South Atlantic division – Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, and Florida – saw the biggest decline for the month, down 0.4 percent.
The West North Central division was the only region to experience a price increase over the last 12 months, posting an annual gain of 0.2 percent.

Why NOW is an Incredible time to purchase a home

We've all heard the doom and gloom predictions from the media about the current housing market.  Don't let that scare you!  Good news doesn't sell - sensational bad news is much more exciting. 

This is the way I see it: (and I'm in this business every day)

We haven't seen interest rates this low in decades, if ever.  Home prices are comparable to prices from the pre-boom era.(Early 2000's and earlier)  We don't know if house prices are going to dip any farther but if you are looking at your home as a long term investment - a place you are going to live for the next 5 -10 yrs, the situation is very favorable.  Interest rates are not going to stay this low forever - and if you think a half point or a point difference isn't a big deal, think again. 

Even if house prices dip lower in the next year or two, if interest rates go up, your monthly payment could actually be higher than what you would be paying with todays prices and rates.  And remember, your loan term is usually 30 yrs.  So you would be paying that extra interest every month for 30 years.  That adds up. 

Plus, in the meantime, you would still be paying rent every month.

This is a sample of current interest rates offered by a lender that I frequently work with:

 Rate__       APR        Monthly P&I

15 yr fix:     3.625%_3.978%_ _ $733.44

30 yr fix:     4.250%_4.379%___$514.14

FHA 30:       4.000%_4.142%_ _  $491.94

The payments represent a $100,000 loan, including Principal (loan payment) and Interest.  So, wow!  

Another shocker - You don't have to buy a foreclosure or a short sale to get a great deal.  Traditional sales, many of which are move in ready, are competing with foreclosures and short sales.  This competition is bringing the prices of traditional homes down.  The traditional sellers don't have a choice in the matter - because appraisers are using foreclosures as comparables when they determine the value of the home.  So even if the traditional seller had a buyer willing to pay a much higher price for a move in ready home, it is possible that the appraisal could come in lower than the offer price, because of foreclosure comparables. Then the buyer's lender would not approve the financing and the buyer and seller would have to re-negotiate the price.

Another factor - Rental vacancies are rapidly decreasing.  NAR ( National Association of Realtors) forecasts that vacancies will decline by almost 1% in the multi-family market over the next year.  Remember the law of supply and demand?  When supply goes down, demand goes up - and so do rental rates.  In many cases, it is actually cheaper on a monthly basis to own a home than it is to rent.  Plus some of that payment is going towards your principal, lowering  your loan balance and giving you equity.  Your rent payment?  You'll never get any of that back. 

So, instead of listening to the news and burying your head in the sand - think about the actual cost of renting versus home ownership - you might just be surprised.

And if you do decide to call a Realtor, call me. :)