Record Low FHA Mortgage Rates
October 21, 2011
First time home buyers are hit hard when looking to purchase a home with the down payment being one of the hardest financial burdens. Home prices may have decreased over the last three years; home prices are still high when you look throughout history. First time home buyers are normally asked to put up a down payment of 20% of the purchase price of the home. This burden can take years for the average person to save, thus their dream home is put on hold.
For those that have been renting for a long time and have a good credit history, alternatives are available that can help you purchase your dream home. The FHA offers mortgages to those with good FICO scores with only a down payment of 3.5%. On the other hand, FHA mortgage insurance premiums may cause FHA mortgages to cost more than traditional mortgages but it does provide the opportunity for those that cannot be approved for traditional loans.
The last two weeks, mortgage rates are holding steady at record lows, of course, there is no way to tell just how long the rates will stay low. The FHA is offering a 30 year fixed FHA mortgage to borrowers that qualify at a rate of 3.750% with an APR of 5.092%.
For those that have a FHA mortgage and are paying a higher rate that is now being offers may be able to refinance via the FHA streamline refinance program. In the majority of cases, this will require a new appraisal but does make the process easier.
Remember mortgage rates are ever changing. The rates quoted in this article were accurate on September 21, 2011.
Composite Index of Mortgage Application Increased
June 24, 2011
The seasonally adjusted Composite Index of Mortgage Application increased 13% for the week that ended on June 10 as reported by the Mortgage Bankers Association. Refinancing applications rose 16.5 percent while purchase volume increased 4.5 percent.
The combined construction of new single-family homes and apartments in the month of May increased 3.5 percent to a seasonally adjusted annual rate of 560,000 units. Single-family starts rose 3.7 percent. Multifamily starts increased 2.9 percent. Applications for new building permits, which are used as an indicator of future activity, increased 8.7 percent to an annual rate of 612,000 units.
Monthly housing market index as reported by the National Association of Home Builders/Wells Fargo dropped three points in the month of June to 13. Any index reading below 50 specifies negative sentiment about the housing market.
Retail sales dropped 0.2 percent to $387.1 billion in the month of May after seeing a 0.3% rise in the month of April. On a year-over-year basis, retail sales increased 7.7 percent.
Total business inventories increased 0.8 percent in the month of April to $1.49 trillion, which is up 10.6 percent from what was seen a year ago. Total business sales rose 0.1 percent to $1.18 trillion in the month of April, up 11 percent from what was seen a year ago.
Consumer prices increased 0.2 percent in May, after seeing a 0.4 percent rise in the month of April. For the year, seasonally adjusted consumer prices are up 3.4 percent.
Industrial production at the nation’s factories, mines, and utilities increased 0.1 percent in the month of May. When compared to a year ago, industrial production is up 3.4 percent. Capacity utilization was 76.7 percent in the month of May.
First claims for unemployment benefits decreased by 16,000 to 414,000 for the week that ended on June 11. Continuing claims for the week that ended on June 4 dropped by 21,000 to 3.68 million.
Upcoming reports
June 21 – existing home sales
June 23 – new home sales
Changes from the FHA
April 14, 2011
As of April 18, 2011, the Federal Housing Administration is increasing mortgage insurance premiums on FHA home loans with the deadline being applied to the FHA case assignment date.
This increase could cost home buyers more money every month on their total monthly mortgage payment. If you as a real estate agent have home buyers that are close to buying, you should advise them to buy now prior to the new mortgage insurance premium taking effect. Home buyers must have an active loan application for the target property before April 18, 2011.
HUD Temporary Extends Flipping Waiver
In an effort to increase access to FHA mortgages and permit the fast resale of foreclosed properties, HUD declared a temporary waiver of the 90-day flipping restriction until December 31, of 2011.
This waiver is subject to specific conditions and eligible mortgages must meet these conditions in order to take advantage of the waiver. The entire text of the waiver extension, which does include conditions of the waiver as well as limits are available on the HUD website.
A Look at the Markets
April 4, 2011
The economic news was reflected stronger as rates were up quite a bit. Freddie Mac reported that the week that ended on February 1 the 30 year fixed rates were on average 5.05 percent, which is up from 4.81 percent for the week prior. The average for a 15 year fixed rose to 4.29 percent. Adjustables were also up with one-year adjustables average rising to 3.35 percent and five-year adjustables increasing to 3.92 percent. Last year at this time 30 year fixed rates were seen at 4.97 percent.
Frank Nothaft, vice president and chief economist for Freddie Mac stated, “Long-term bond yields jumped on positive economic data reports, which placed upward pressure on rates of home loans this week. For all of 2010, nonfarm productivity rose 3.6 percent, the most since 2002, while January’s unemployment rate unexpectedly fell from 9.4 percent to 9.0 percent. Moreover, the service industry expanded in January at the fastest pace since August 2005. As a result, rates on a 30-year fixed-rate loans rose to the highest level since the last week in April 2010.”
These rates do not include points and fees and are only provided to use as references for trends. These rates should not be used for any type of comparison purposes.
Indices For Adjustable Rate Mortgages as updated on February 11, 2011
Index February 10 January
6-month Treasury Security 0.18% 0.18%
1-year Treasury Security 0.29% 0.27%
3-year Treasury Security 1.19% 1.03%
5-year Treasury Security 2.18% 1.99%
10-year Treasury Security 3.58% 3.39%
12-month LIBOR 0.782% (Jan)
12-month MTA 0.312% (Jan)
11th District Cost of Funds 1.508% (Dec)
Prime Rate 3.250%
Fannie Mae, Freddie Mac, and Ginnie Mae
February 18, 2011
In 1938, President Franklin Roosevelt’s New Deal created the Federal National Mortgage Association known as Fannie Mae as a federal agency during the Great Depression. The purpose of Fannie Mae was to bring stability, affordability, and stability to the United States housing and mortgage markets. In 1968, Fannie Mae was converted by Congress to a publicly held corporation that would balance the federal budget.
Fannie Mae dominated the secondary market and lowered housing costs. To compete against Fannie Mae’s dominance, Congress chartered the Federal Home Loan Mortgage Corporation known as Freddie Mac in 1970 as a public corporation.
Both of these corporations have close to the same Congressional charters, regulatory structures and mandates. Both buy mortgages from lenders and package them into mortgage-backed securities that are then sold to investors with a guarantee against default. This generates a secondary market, which allows mortgage lenders to use the freed-up funds to make more home loans.
In 1968, Congress established the Government National Mortgage Association known as Ginnie Mae. Ginnie Mae unlike Fannie Mae and Freddie Mac does not buy loans, but only guarantees investors the payment of the principal and interest on mortgage-backed securities that are federally insured loans with the emphasis on VA and FHA loans.
Fannie Mae and Freddie Mac both were rescued in September of 2008 from economic failure and then placed them into conservatorship with the Federal Housing Finance Agency (FHFA). A few members of Congress had called for the elimination of both Fannie and Freddie slowly and to leave mortgage finance with the private sector. A report from the Treasury Department on the future of Fannie Mae and Freddie Mac will be presented to Congress in February of 2011.
FHA Home Loan Modification – Lenders Hesitant To Proceed
January 7, 2011
Loan modification lenders are thankful and even have praised FHA’s home foreclosure prevention efforts. On the other hand, most lenders are expressing reluctance for implementing the FHA loan modification program bearing in mind the loss it could cause to the investors in the case of appreciation of home prices for the near future. Lenders are instead pondering optional refinance loan workouts. This has caused struggling homeowners to seek professional services online so they could secure home refinance options that accommodate to their financial interests.
Several homeowners have taken advantage of the Obama home loan modification program, which allowed them to save their homes from a possible foreclosure as well as save them several dollars each month.
The Home Affordable Modification Program or Making Home Affordable Program does require lending companies to participate in the process of home mortgage refinance in exchange for incentives offered by the federal government through a $75 billion stimulus package. The majority of refinance mortgage creditors have commended the FHA’s foreclosure prevention scheme and articulated their appreciation to the Federal Housing Authority or FHA, however they are doubtful about carrying on with the program.
The Obama administration announced, to help stop the downslide of the realty bubble, the federal loan modification program that would receive backing of the FHA began on October 1 to help homeowners faced with financial hardships or for those that are upside down on their mortgage loans to refinance their homes. In order to be eligible for the home refinance program, homeowners must meet certain parameters, which would be found on the government loan modification website. At a congressional hearing in Washington, lenders stated their reservations concerning the home refinance plan and showed less enthusiasm to carry on with the proposed federal plan.
Not long ago, the Obama housing stimulus plan was amended and under the new tenets of the 2010 federal loan modification program, participation in the program for lenders is only voluntary. The stimulus plan requires home loan refinance lenders to reduce the amount of the loan balance to 90% of the current market value of the home. All new loans will be backed by the FHA and are planned to receive 5% of the new loan balance as a payment from the lender. This is the feature that is causing problems and concerns with lenders that are showing the drawbacks associated with the Hope for Homeowners plan.
As per the new amendment in the FHA home loan modification program, the lenders are worried that investors in the loans may take a loss with the principal balance on a refinance loan amount is written down. The main reason is that if home prices recover in the future, creditors will not be able to make up the loss. This is the major concern for future home appreciation values that have investors looking for optional loan workouts like making homeowners monthly payments more affordable by reducing interest rates on refinance loans instead of writing down the principal of the loan. What this means is that lender could only use the federal home refinance program as a last resort with an idea to maximize profits for their investors.
What does this mean for troubled homeowners? All this does is provide the need for professional service guidance online whenever they are looking to apply for a loan modification for their upside mortgage loan. This may help them in securing an attorney backed loan modification so their interests are protected. On the other hand, it is recommended to use the reputable service providers such as Refinanceitt. This can help them to receive affordable home refinance loans that meet their needs.
FHA Financing May Be Lost By Some Condo Owners
December 30, 2010
Some condo owners may have problems with their ability to sell or refinance their condos if they condo projects missed a key deadline for recertification.
Several condominium homeowners all across the US may not even know that their ability to refinance or sell their condos could be in jeopardy due a rolling series of federal government deadlines.
Around the middle of December, around 2.200 condominium projects missed an eligibility deadline that involves refinancings or sales using Federal Housing Administration-insured mortgages. This deadline was first set by FHA for approval or recertification of these projects, however, the agency agreed to extend the eligibility for the majority of them around 23,000 projects into next year, with a series or rolling expiration dates. A group of 2,200 condo projects received extensions only until the end of December.
Lenders and condo experts may be cut off from an increasingly vital source of mortgage money unsuspectingly due to this. In markets where FHA accounts for seventy-five percent or more of 1st time home purchases, condo sellers may be handicapped. The area of the US with heavy concentrations of condominiums may see depressed sale prices such as in California, Florida, New England, Washington, D.C., and the urban Midwest.
Jon Eberhardt, president of Condo Approvals LLC, a national consulting firm based in Torrance, stated, “This is a travesty” and went on to say, “You’ve got thousands of people out there with no idea” that FHA financing could evaporate for them in the near future.
Steve Stamets, a loan officer with Union Mortgage Group in Rockville, Md., with several condo clients, stated, “This is going to be a big problem,” and went on to say, “I expect you will have frantic sellers pushing management companies” to get their condo buildings approved.
The eligibility issues dates to November of 2009 when FHA published the new rules on the types of condo projects that were acceptable for mortgages and refinancings. The rules were the outgrowth of a review that found the FHA had approved thousands of projects over the previous two decades but possessed insufficient current data on their underlying homeowners associations’ budgets, insurance coverage, legal documents, delinquencies on condo fee payments, renter-to-owner ratios, the amount of commercial space and a variety of other characteristics that could affect a project’s financial stability.
Mortgage Applications Rose
November 26, 2010
The week that ended on November 6 saw retail sales increased 1.3 percent as reported by the ICSC-Goldman Sachs index making a year-over-year basis increase of 3.4 percent which is the best reading seen since August.
Inventories from wholesalers rose 1.5 percent in September after an increase in August of 1.2 percent. The sales at the wholesale level increased 0.4 percent in the month of September after a 0.5 increase in the month of August. Economists had believed inventories would increase 0.7 percent for the month of September.
The seasonally adjusted composite index of mortgage applications as reported by the Mortgage Bankers Association for the week that ended on November 5 increased 5.8 percent, while refinancing applications rose 6 percent and purchase volume rose 5.5 percent.
A 5.3 percent decline in the trade deficit to $44 billion was seen in the month of September. Economists had believed the trade deficit would have fallen to $45 billion. Exports increased 0.3 percent to $154.1 billion while imports declined 1 percent to $198.1 billion.
The Reuters/University of Michigan consumer sentiment index for the preliminary reading for November increased to 69.3 after seeing 67.7 in the month of October. During the economic expansion, which ended in the month of December 2007, the index averaged 88.9.
Import prices increased 0.9 percent in the month of October, after a 0.3 percent decline in the month of September. The increase was due to a 3.3 percent increase in petroleum prices, making the year-over-year basis showing import prices are up 3.6 percent. Export prices increased 0.8 percent in October.
First claims for unemployment benefits decreased by 24,000 to 435,000 for the week that ended on November 6. Continuing claims for the week that ended on October 30 declined by 86,000 to 4.3 million, which is the lowest level seen since the recovery started.
Economic Calendar reports to look forward to include:
November 15 – retail sales
November 16 – housing market index
November 17 – housing starts
FHA Mortgage Insurance Changes
October 16, 2010
As of October 4, 2010 the upfront and monthly mortgage insurance will be different. If buyers have a tight debt ratio they may be in trouble. At this time the monthly mortgage insurance is .55 percent but after October 4, this percentage will increase to .9 percent. If the case number is pulled prior to the effective date the current monthly mortgage insurance amount can be used, if not the higher insurance rate will apply.
With FHA raising their monthly mortgage insurance RD loans are the best loans in the industry as they have no monthly mortgage insurance and can provide 100 percent financing and purchase their dream home with under $500 out of pocket in Owasso, Glenpool, Broken Arrow, Bixby, Catoosa, and Claremore.
Less Mortgages Loans in Default
September 18, 2010
As reported by the Mortgage Bankers Association less mortgage borrowers are behind on their loan payments.
The overall delinquency rate in the United States decreased to 9.85 percent in the second quarter of 2010, which is down from the 10.06 percent seen in the first quarter.
The good news is that the percentage of severely delinquent loans, which are ones, that are ninety days or more late or ones that have been repossessed by lending companies also decreased in the second to 9.11 percent from 9.54 percent three months earlier.
Jay Brinkmann, chief economist at Mortgage Bankers Association explained the drop in the loans that are 90 days or more behind was the biggest drop ever recorded he states, “That shows we’re making headway.”
He stated there are three reasons for the improvement seen which includes:
Less loans are going into the default process
The homebuyer’s tax credit that increased the demand for homes created many pre-foreclosure sales, which removes the attached default loans from the stats
The government and lender mortgage modifications “cured” a few payment issues.
This may look good, but there is still one problem looming which is first time delinquencies increased after four quarters of decline. This stat increased to 3.51 percent for the second quarter from 3.45 percent in the first quarter. Brinkmann stated this reversal shows the weakness in the overall economy as well as the housing market.
Brinkmann stated, “It’s a question of jobs,” and went on to say, “It takes a paycheck to make a mortgage payment.”
Highlighting the trend is the foreclosure trend amid borrowers with conventional loans, such as 30-year, fixed rate mortgages. These accounted for nearly 36 percent of foreclosure starts during the second quarter. In addition, these safe loans usually do not get into trouble unless there is a loss employment or income.
California, Florida, Arizona and Nevada were the four worst hit states and are accounting for close to 60 percent still of the delinquencies seen nationwide, even though the numbers in California decreased quite a bit this year. California foreclosure starts made up close to 20 percent of the nation’s total at the end of 2009. This figure decreased to 14.7 percent in the second quarter of 2010.
One other positive trend is the slow downturn in the number of borrowers who own more than their home is worth.
CoreLogic reported that the rate of borrowers owing more than the home is worth decreased to 23 percent in the second quarter of 2010 from 24 percent in the first quarter.
When borrowers fall into this bracket, it increases the chance that they will lose the homes. Brinkmann explained that is one of the triggers to foreclosure. For those that have positive equity, this can be used as cash to pay bills, which does include their mortgage payment. If the cash reserves are not there, they are unable to pay their bills due to a drop in income, which leads to foreclosure.
Mortgage Bankers Association discovered that negative equity is worst in five states, which includes Nevada at 68 percent, Arizona at 50 percent, Florida at 46 percent, Michigan at 38 percent and California at 33 percent.