Fixed Rates Reach Record-Low Averages for 6th Consecutive Week

06/07/2012 By: Esther Cho

As the employment situation continues to raise concerns, fixed rates fell even lower, slipping yet again to new record-lows, according to a survey from Freddie Mac released Thursday.

The 30-year fixed-rate mortgage averaged 3.67 percent (0.7 point) for the week ending June 7, falling from last week’s average of 3.75 percent. Last year at this time, the 30-year fixed was 4.49 percent.
The 15-year fixed rate declined even further below 3 percent to 2.94 percent (0.7 point), down from last week’s 2.97 percent. A year ago at this time, the 15-year was 3.68 percent.

“Fixed mortgage rates reached new record lows for the sixth consecutive week as long-term Treasury bond yields declined further following downwardly revised economic growth and job creation data,” said Frank Nothaft, VP and chief economist for Freddie Mac.
Nothaft cited recent reports showing gross domestic product rose only 1.9 percent in the first quarter as well as the disappointing 69,000 jobs added in May. In addition, the unemployment rate moved to 8.2 percent from 8.1 percent the month before in April.
The 5-year ARM remained unchanged from last week at 2.84 percent (0.7 point); a year ago, the 5-year ARM averaged 3.28 percent.
The 1-year ARM moved up to 2.79 percent (0.4 point), up from last week’s 2.75 percent. Last year, it averaged 2.95 percent.
Bankrate also released its survey on mortgage rates and reported record-low averages. The 30-year fixed slipped to 3.92 percent, down from last week when it averaged 3.94 percent. On the other hand, the 15-year fixed rose slightly to 3.16 percent from last week’s 3.15 percent.
The five-year fell to 2.99 percent from 3.01 percent last week.
Bankrate’s national survey uses data provided by the top 10 banks and thrifts in the top 10 market

FHA 203(k) Program Offers Way to Finance Repairs for Foreclosures

06/06/2012 By: Esther Cho 

Purchasing foreclosures also means discounts, but with the markdown is the price of repairs. According to RealtyTrac, foreclosures or REOs sold at an average discount of 27 percent compared to non-distressed properties in the first quarter of 2012. Through an FHA 203(k) loan, potential buyers who want to purchase a discounted foreclosure but don’t have cash for the repairs may find a way to receive financing.

According to HUD, the 203(k) program is the department’s main program for rehabilitating and repairing single family properties, and it’s viewed as an important tool to revitalize neighborhoods.

In order to be eligible, the property must be purchased as a primary residence or it can be for a HUD approved nonprofit. Also, the property must be a one-to four-family residence that has been completed for at least one year.
Dan Green, loan officer with Waterstone Mortgage and author of themortgagereports.com, explained the FHA 203(k) program can be used on any 1-4 unit residential property and is not limited to just HUD properties or foreclosures.
The maximum amount that can be taken out for the property is based on the value or the purchase price of the property before rehabilitation (whichever is less), plus the estimated cost of rehabilitation or 110 percent of the property after improvements, according to HUD.
A down payment is required, and the minimal amount for a down payment is 3.5 percent of the accepted bid price plus the cost of financing repairs.
Since there is more “file” to underwrite for an FHA 203(k) loan, Green said the approval process takes longer than a standard FHA mortgage.
“FHA 203k approvals take more time, but are no more difficult than any other mortgage type,” said Green. “Borrowers should expect to provide the documentation required, and should respond to loan officer requests in a timely manner.”

Freddie Mac Announces Lower Modification Interest Rate

06/04/2012 By: Tory Barringer 

Freddie Mac announced Friday that starting July 1, the GSE’s Standard Modification interest rate will come down from 5 percent to 4.625 percent.

The Standard Modification is for borrowers who do not qualify for the government’s Home Affordable Modification Program (HAMP). The modification makes payments more affordable by lowering a borrower’s principal and interest payments by at least 10 percent. The modification includes a trial period as does HAMP to ensure borrowers can maintain modified mortgage payments.
When evaluating a borrower for a Standard Modification in Workout Prospector®, users will be prompted to apply the 4.625 percent interest rate if the “Workout Decision Date” is on or after June 1.
Servicers may implement the new interest rate sooner. However, new borrower evaluations done before July do not require the new rate.
Freddie Mac may adjust the interest rate used for Standard Modifications based on market conditions.
The Freddie Mac Standard Modification is part of the Servicing Alignment Initiative, which is an effort to create consistency in how delinquent GSE loans are serviced.

Freddie Mac: 15-Year Fixed Falls Below 3%, 30-Year Fixed Hits New Low

05/31/2012 By: Esther Cho 

Following lower bond yields, the 15-year fixed fell below 3 percent, while the 30-year fixed set a new record-low as well, according to Freddie Mac’s Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage dropped to 3.75 percent (0.8 point) for the week ending May 31. Last week, it averaged 3.78 percent, and last year, it was 4.55 percent.
The 15-year fixed slid into new territory, averaging 2.97 percent (0.7 point), down from 3.04 percent. A year ago at this time, the 15-year fixed stood at 3.74 percent.

The 5-year ARM averaged 2.84 percent (0.6 point), up from last week’s average of 2.83 percent. A year ago, the 5-year ARM averaged 3.41 percent.
The 1-year ARM remained unchanged from last week at 2.75 percent (0.4 point). The previous year, it averaged 3.13 percent.
Frank Nothaft, VP and chief economist for Freddie Mac, pointed to market concerns over the Eurozone, which led to a decline in long-term Treasury bond yields, as one reason for the drop in fixed rates.
“Compared to a year ago, rates on 30-year fixed mortgage rates are almost 0.9 percentage points lower which translates into nearly $1,200 less in annual payments on a $200,000 loan,” said Nothaft.
Bankrate.com also reported record-lows for fixed rates.
The 30-year fixed dropped to a new low of 3.94 percent, down from 3.97 percent last week. The 15-year fixed averaged 3.15 percent, also a record low. Last week, it was 3.19 percent.
The 5-year ARM slipped from 3.02 percent last week to 3.01 percent this week.
Bankrate’s national weekly mortgage survey includes data from the top 10 banks and thrifts in the top 10 markets.

Demand for Foreclosures Triples for Homebuyers: Realtor.com

05/30/2012 By: Tory Barringer 

The stigma associated with foreclosure purchases has apparently faded, with interest in foreclosures nearly tripling in the past two years, according to a survey released Wednesday by Realtor.com.

The survey, conducted over 1,004 phone interviews at the beginning of May, suggested that homebuyer interest in foreclosures has jumped 159 percent since October 2009, when foreclosures made up 29 percent of all home sales. Nearly two-thirds (64.9 percent) of homebuyers surveyed said they’re likely to purchase a foreclosure, a huge increase from 25.3 percent two and a half years ago. The vast majority of buyers said they would want to live in their foreclosure purchase, with 92.1 percent looking for a home to live in and only 6.9 percent looking for foreclosure investments.
“We see a combination of factors coming into play explaining the unexpected interest in foreclosures,” said Steve Berkowitz, CEO of Realtor.com operator Move, Inc. “Reductions in supply, expectations that home prices will rise, and changing attitudes towards foreclosures are contributing to the increased, especially among owner-occupants. As lenders begin processing their distressed inventories and releasing them for sale at the local level, we look to them to move carefully and monitor conditions so recently gained home values aren’t diminished.”
Realtor.com’s survey found that 55.7 percent of Americans are concerned that the more than 1.5 million backlogged foreclosures expected for release will lower home values in their markets. Midwesterners showed the most worry, with 62.2 percent expressing concern about their markets. Concern among homeowners and non-homeowners was nearly equal-56.1 percent and 54.5 percent expressed worry, respectively. The majority of backlogged foreclosures are expected to be released in judicial states, most of which are located in the Midwest and Northeast.

While reluctance to purchase a foreclosure has declined, so too has the fear of losing a home to foreclosure. Today, 34.9 percent of Americans say they fear that they or someone they know will face foreclosure in the next year, down from 52.5 percent in March 2009. Fear of facing foreclosure is highest among people earning less than $30,000 a year and slightly higher among non-homeowners (38.6 percent) than it is among homeowners (33.6 percent).
Although worries about foreclosures have decreased, most Americans said they haven’t seen improvement in the foreclosure situation where they live. The survey found that 49 percent of Americans think the situation is about the same as it was last year, while 17.6 percent think it is worse. Foreclosures have decline by 34 percent in the past year, but only 21.3 percent of respondents said they think their market is better.
Respondents mostly said that the economy, the lenders, and the government are to blame for today’s foreclosure problems, with all three answers holding nearly equal percentages in the 22-25 percent range. The two factors that received the least blame in the survey were defaulting homeowners (10.3 percent) and Wall Street (9.4 percent). Lenders got the most blame from homeowners with $40,000 or higher annual incomes and respondents age 25-64, while Americans 65 or older and those who earned more than $50,000 a year blamed the government most. Consumers age 18-24 largely blamed the economy and defaulting homeowners for the country’s current foreclosure problems.
In order to keep the shadow inventory of foreclosures from lowering home values, the majority of Americans want lenders to offer lease-purchase programs to reduce foreclosure inventories. More than a quarter of respondents (28.3 percent) preferred the lease-purchase option over several alternatives, including slowing down sales, selling to investors, or renting them out until prices improve.
The survey also found that most prospective foreclosure buyers are holding realistic expectations about the discounts and appreciations that may come with their purchases. Most buyers expect to receive a discount between 10-30 percent, which keeps in line with today’s average discount of about 29 percent. Lower income buyers were the most realistic about their expected discounts, according to the survey results.
The majority of prospective buyers said they expect their purchases to appreciate about 2 percent a year over five years, with younger buyers (age 18-34) expressing the more realistic expectation that their purchases will appreciate about 1 percent a year. Middle income buyers anticipated a more conservative appreciation rate of less than 5 percent in five years.

Job Expectations Raise Consumer Confidence in May

05/25/2012 By: Tory Barringer 

Consumer confidence is at a level that hasn’t been seen for years, according to the results of Thomson Reuters and the University of Michigan’s Survey of Consumers for May.

Thomson Reuters and UM released the findings of the consumer survey, revealing that the consumer sentiment index improved to 79.3 percent in the month of May, an increase of 3.8 percent from April and 6.7 percent from May 2011. Consumer confidence has improved in each survey for the past nine months, but May’s level is the highest since October 2007.
While falling gas prices helped calm worried consumers and restored confidence, the survey indicated that consumers were mostly encouraged by news of favorable employment trends despite the fact that the Labor Department recently reported a jobs slowdown. The survey also showed that fewer consumers reported of hearing about job losses in May than in any other monthly survey since mid-2007. It is speculated that continued growth in consumer confidence is going to depend largely on job growth.

In the past three surveys, a majority of consumers reported an improved economy, and many more said they expected conditions will improve, if only a modest amount. Despite this optimism, 41 percent of consumers said they have faith in the government’s economic policies.
Few consumers expressed any concern about the impact of the European debt crisis on the United States’ economy.
Survey of Consumers chief economist Richard Curtin said that he expects these kinds of results to continue for a few more months.
“The upbeat consumer reports on jobs could mean that more positive numbers will soon be reported by the government, or that consumers have yet again pushed their expectations beyond the likely performance of the economy,” Curtin said. “The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made.”
Views on buying conditions for household durables (such as cars or home appliances) were also very positive, with 63% of consumers expressing a positive attitude toward new purchases. This result, the highest percentage in more than a year, was achieved with the increased availability of discounts on items. More households with incomes of $75,000 or higher-those most likely to purchase new vehicles-held a favorable view of purchasing a vehicle than last month or last year.
Yinbin Li, principal economist at IHS Global Insight, said that while the growth of consumer confidence is a positive thing, consumers aren’t out of the woods yet.
“This is a good report,” Li said. “Consumer mood is slowly coming out of the ditch. However, there are still strong headwinds facing many American households such as rising student loan debt, a poor housing market, and weak wage growth.”

Economists Analyze Positive Reports on New Home Sales

05/23/2012 By: Esther Cho 

New home sales rose 3.3 percent month-over-month in April to a seasonally adjusted annual rate of 343,000, the Commerce Department and HUD reported Wednesday. On a yearly basis, new home sales rose 9.9 percent. And, the good news did not end there. The months’ supply of inventory fell to 5.1, and while sales were down in the South, they were up in Northeast, Midwest, and West.

This report was followed by the National Association of Realtor’s existing home sales report released Tuesday, which showed the sale of existing homes rose 3.4 percent on a monthly basis and 10 percent year-over-year.
In comparison to the sale of existing homes, Paul Diggle, property economist with Capital Economics, said new home sales will still continue to lag behind the existing home sales market.

“New homes are still having to compete with discounted foreclosures and short sales,” Diggle wrote. “Moreover, we have started to hear anecdotal reports that homebuilders are running low on high-grade lots for development, which opens the possibility that starts, and thus sales, may pause temporarily if builders need to replenish land supply.”
Even though the new home sales sector is not expected to improve as quickly, there were still noteworthy signs economists pointed out for the market.
In an analysis, Patrick Newport and Michele Valverde, economists with IHS Global Insight, commented, “Not only were sales a bit higher than expected, the numbers for the prior three months were revised up. Sales for 2010 and 2011 were also revised, but only marginally. This market is unquestionably improving. Activity, though, is still less than half of normal.”
Capital Economics also noted that new homes are also being sold earlier in the construction process, with 58 percent of new homes sold in the previous three months un-started or still under construction.
“The rising share of new homes selling earlier in the construction process strikes us as
further evidence of the improvement in buyer confidence. After all, you’re unlikely to
buy a home if you expect it to be worth significantly less by the time it has been built,” Diggle wrote.
With the slight drop in inventory from 5.2 months in March to 5.1 in April, Newport and Valverde said, “Inventory may have hit or is nearing a bottom. This is good news, since re-stocking inventory to meet rising demand will give housing starts a small boost in the coming months.”
As for the future, IHS economists said they project sales to rise to 361,000 in 2012 from 307,000 in 2011, and they do not expect to see sales climb above 800,000 until 2015.