Rising Mortgage Rates Could End Refi Boom – Get Qualfied

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Monday, June 1, 2009 10:10 AM

NEW YORK – Roger Wald recently discovered he would save $25,000 a year if he refinanced or sought a loan modification for his five-year mortgage at 4.75 percent. Wald, an auto body repairman in Sarasota, Fla., could have gotten that rate last month.

But like many homeowners, he waited for rates to fall further. Now, he’s worried he missed his chance.

Mortgage rates at some lenders spiked by as much as 1 percent on Wednesday and saw little relief on Thursday, according to mortgage brokers.

“The 4.75 percent my broker quoted two weeks ago? There’s no way I’m going to get that now,” said Wald, 49.

The fear dogging homeowners and investors alike is that April’s record lows in mortgage rates may have come and gone.

The stock market has rallied since early March on the assumption the economy will rebound later this year. Federal Reserve Chairman Ben Bernanke has been calling early signs of economic stabilization “green shoots” — and one of those shoots was a pickup in refinancing activity caused by tumbling mortgage rates.

But mortgage rates have rebounded sharply over the past few days as the nation’s growing debt raises concerns that government-backed assets could lose some of their value. It’s a trend that could slow both refinancing and home buying if it continues. Higher mortgage rates won’t necessarily derail the economy’s recovery, analysts say, but it certainly won’t help.

“If the Fed does not step in, you are going to see the ‘green shoots’ get frost bite,” said T.J. Marta, founder of financial research firm Marta on the Markets.

The average rate for a 30-year fixed mortgage is back at 4.91 percent this week, up from 4.82 percent last week, Freddie Mac said Thursday.

The 30-year fixed mortgage rate hit a record low of 4.78 percent in April thanks in large part to the Fed’s decision this year to buy as much as $1.25 trillion in mortgage securities and $300 billion in Treasury notes. So far, the Fed has bought $130.5 billion in government debt and more than $431 billion in mortgage securities.

Lower rates led to a surge in mortgage applications. Applications rose for five straight weeks between early March and early April, according to the Mortgage Bankers Association. And sales of both existing and new homes ticked higher from March to April, according to data released this week.

The Fed’s moves, however, have recently lost their effectiveness in the market. The yields on the 10-year and 30-year Treasury notes have surged to a six-month high, and are nearly where they were a year ago. That’s significant because Treasury yields, or their annual rates of return, help set mortgage rates.

Mortgage activity is already starting to decline. Mortgage applications tumbled 14 percent in the week ended May 22 from the previous week, the Mortgage Bankers Association said Wednesday. Applications to refinance a loan were down almost 19 percent.

The Fed has many tools to bring rates down again. It could increase how much it intends to spend on Treasury purchases or mortgage-backed securities. It could also decide to simply buy longer-dated Treasurys, said David Ader, government bond strategist at RBS Greenwich Capital. Recently, the Fed has been focusing on buying shorter-term government debt.

But if the Fed buys more Treasurys, some investors worry the central bank’s moves could have unintended consequences. That’s because when the Fed buys the debt that the government issues, it is essentially creating money. And that can cause inflation and weaken the value of the dollar against other major currencies.

A plunge in the dollar and high inflation might scare away foreign investors from buying U.S. debt, said Mike Larson, a real estate analyst with Weiss Research. And that would cause Treasury yields to rise eventually anyway, he said.

“The Fed is really backed into a corner,” Larson said.

It would be preferable if the 10-year Treasury yield fell back to 3 percent, from its current 3.75, said Mark Zandi, chief economist at Moody’s Economy.com. Such a pullback would help bring down mortgage rates and motivate people to refinance and buy homes.

When borrowers refinance to lower rates their monthly payments goes down so they have more free cash to spend on other things they need and want. And that’s good for businesses — consumer spending in accounts for about two-thirds of economic activity.

Dan Lawrence, Wald’s mortgage broker in Florida, said clients of his who have refinanced to a lower rate averaged between $300 and $400 in savings on their monthly mortgage payments, and almost assuredly pump some of those savings back into the economy.

“They’re going to go out dinner more. They’re going to buy shoes,” he said.

But many analysts, including Larson at Weiss Research, expect mortgage rates to head back toward 6 percent. The question, they say, is how fast.

Blogger: If you intend to buy hurry. Don’t wait for the bottom of the market to be in your rear view mirror. And if you are investing in deals then examine Foreclosures.

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Fed Reserve gets behind ‘short sales’ #realestate

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Making Home Affordable program expanded
BY INMAN NEWS, THURSDAY, MAY 14, 2009.
Inman News

The Obama administration will encourage troubled borrowers who don’t qualify for loan modifications or can’t keep up payments on a modified loan to pursue a short sale or deed their property to their lender in order to avoid foreclosure.

While the main thrust of the administration’s Making Home Affordable initiative remains loan modifications and refinancings, the program is being updated to provide incentives for borrowers and loan servicers to engage in short sales and deeds-in-lieu of foreclosure.

Borrowers — who must meet the minimum eligibility requirements for a Home Affordable modification — will receive up to $1,500 to assist with their relocation expenses when they agree to a short sale or deed-in-lieu of foreclosure. Loan servicers will earn up to $1,000 for successfully completing a short sale or deed-in-lieu.

In addition to incentives, the program establishes a standard process, minimum performance timeframes and standard documentation for short sales and deeds-in-lieu.

Loan servicers must allow borrowers at least 90 days and up to a year to market and sell their property, depending on local market conditions. The property must be listed with a licensed Realtor experienced in selling properties in the neighborhood, the Treasury Department said in a fact sheet explaining the new short-sale initiative.

“Reasonable and customary real estate commissions and selling costs” may be deducted from the sales price if they are spelled out in a short-sale agreement, the guidelines said, and loan servicers must agree not to negotiate a lower sales commission once an offer has been received.

It will be up to the loan servicer to establish both property value and the minimum acceptable net return. Loan servicers will instruct borrowers regarding the list price and any permissible price reductions. The price may be determined based on either an appraisal or one or more broker price opinions (BPOs) dated within 120 days of the short-sale agreement.

If the borrower is unable to sell his or her home within the agreed-upon time frame, loan servicers may then consider a deed-in-lieu of foreclosure, in which the borrower voluntarily transfers ownership of the property to the servicer.

A short sale or deed-in-lieu “usually provides a better outcome for borrowers, investors and communities,” the Treasury Department said, but loan servicers often pursue foreclosure instead because it’s a faster and easier process.

Another factor that can complicate a short sale is the presence of a “piggyback” second loan. Under the new initiative, the Treasury will help pay off junior lien holders, providing $1 in matching funds for every $2 paid by investors, up to $1,000.

In announcing the new short-sale and deed-in-lieu initiative, Treasury Secretary Tim Geithner and Housing Secretary Shaun Donovan provided an update on the Making Home Affordable program’s progress to date.

The Obama administration announced the program Feb. 18, saying it hoped to help 7 million to 9 million homeowners refinance or negotiate loan modifications to avoid foreclosure. On March 4, the administration published the program’s guidelines and authorized servicers to begin modifications and refinancings.

Since then, 14 participating loan servicers have extended offers on more than 55,000 trial modifications and mailed out more than 300,000 letters with information about trial modifications to borrowers, the Treasury Department said in a progress report.

To encourage lenders to make more loan modifications in markets where price declines continue, the Treasury Department announced it will make up to $10 billion in “Home Price Decline Protection” incentive payments.

The payments, to be made at the end of the first and second year of successful loan modifications, are intended to offset losses on loan modifications that don’t succeed. The payments will be linked to the rate of recent local home-price declines and the average cost of a home in that market.

Fannie Mae has received more than 233,000 eligible refinance applications through a new automated underwriting system, DU Refi Plus, and more than 51,000 of those had loan-to-value ratios of between 80 percent and 105 percent (the maximum allowed by the program). About 1,500 Home Affordable refinance loans have closed and been delivered to Freddie Mac, with substantially more expected in the next 60 days from Freddie Mac’s largest lenders, Treasury said.

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WeHo Real Estate Good News ( #weho )

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Thursday, July 31, 2008 – Real Estate By Sandy Arison, West Hollywood

This may come as a surprise, but the WeHo real estate news isn’t all bad. There is more housing inventory on the market now then there has been in a long time.

The good news for buyers is that prices continue to decline allowing for the purchase of some amazing properties that previously may have been unaffordable.

It is also interesting to see multiple bids on properties that are listed below their perceived values for the location.

I went to a few new developments this week at 1351 Havenhurst and at 1248 Laurel in West Hollywood.

The model units in both developments were beautifully done with open floor plans, state of the art appliances, top of the line fixtures, outside space and amazing architecture.

The development on Havenhurst features a landscaped public park by Katie Spitz, a nationally recognized landscape architect.

The asking price in both developments has been reduced making these new Condo/Townhouses a great deal for someone who wants to live in the lap of luxury with a great investment for the future.

There are more developments still under construction in West Hollywood. In the current housing market the buyer will have lots of choice and the opportunity to negotiate on the purchase price.

In spite of the fact that there is currently a moratorium on building in West Hollywood, developers are continuing to seek permits to build.

Carlo Capomazza, an agent at my KW office has developed a website, www.wehowego.com, which shows the locations and development status updates.

West Hollywood is a great place to live and work and continues to attract affluent buyers.

At the same time, the city must continue to be proactive in building much needed affordable housing and also consider the financial costs for residents that are being uprooted.

In the news, Congress has passed an extensive plan to relieve the devastation of the housing market by enacting legislation to help homeowners avoid foreclosure and stay in their homes.

The President has signed the bill which provides for Government backed mortgages to be made available to homeowners at risk of foreclosure at a lower cost.

The creation of a new agency will oversee Fannie Mae and Freddie Mac.

This legislation will also increase in government lending to Fannie Mae and Freddie Mac for 18 months.

In the long-term the bill provides $4 billion in block grants to communities to buy and fix up foreclosed properties.

The cap on mortgages eligible for backing by Fannie Mae and Freddie Mac will be raised to $625,500.

Read this article on the WeHO News website

 

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Federal Reserve Surprises Financial Markets

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Here we go again, with the talking heads on financial news misinterpreting the impact of the Fed‘s actions on home loan rates.

Here’s the scoop. What the Fed just announced is huge – they have committed to buy another $750B in Mortgage Backed Securities, and $300B in Treasuries.

But what does this mean and why do you care?

Their actions provide a demand for Mortgage Backed Securities, which should help keep a ceiling on home loan rates moving much higher in the foreseeable future. That’s good news, for homebuyers who are seeing the bargains out there and understanding that now is the time to act. Good news for those who are ready to refinance and fight foreclosure too.

But an important distinction – this does not mean rates may move significantly lower. Depending on exactly which coupons the Fed purchases when they go shopping for Mortgage Backed Securities, their actions may keep a lid on rates, but not push them very much lower. And based on what they’ve been buying since the beginning of this year when they started their purchasing program – that is exactly how it has played out.

Present home loan rates are within inches of historic lows. What is keeping you on the sidelines from acting now to refinance and get some dollars back into your own pocket, where they belong – or moving forward to buy the home of your dreams, while it is still on sale?

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Welcome to VRN

No matter the market, Visionary Agents will always believe that over time a home can be one of the most gratifying & practical investments you can make and among some new fundamentals in this market, you really have to make sure its affordable. By affordable we mean not only being able to meet the monthly mortgage payments & expenses, but also being able to make those payments for no fewer than ten months if you don’t have a consistent, regular income. Consider this Pre-Qualifying Calculator. First time buyers must keep in mind that in addition to your base mortgage, you’ll also have to pay property tax, home insurance and if your down-payment is less than 20%, private mortgage insurance (PMI). You also have to pay for all repairs & maintenance costs because you’re now the landlord! If you sum up all those other non-mortgage costs, your monthly bill is often 30% to 40% greater than your basic mortgage. So, if you were taking on a $1000 mortgage, then your monthly housing costs would be closer to between $1300 & $1400 a month. Although, it’s true that you’ll get a tax write-off as a homeowner; the interest on your mortgage payments is tax-deductible. That’s helpful, but not a viable solution. Use my online calculator to figure out how much you can afford (or go to www.bankrate.com) & figure out the base mortgage amount. Next add approx 30% to that amount & ask yourself if you can really bear that cost. If not, ask us to find you a less expensive home to buy. The point is to afford a home cozily, not to reach, gamble and fret. So first-time buyers must understand that paying $1000 a month in rent does not mean you can afford a $1000 a month mortgage.

REALITY CHECK: If affording a 10% down payment isn’t possible, then you probably can’t afford to buy in 2009. This is your reality and if down payments had been required of homeowners to date we wouldn’t be as deep in this mess as we are. We’re back in the times when you have to make a significant down payment to mitigate risk to your lender which signals that you are going to be a financially responsible homeowner. So, if you can’t afford to make a down payment, then you can’t afford to buy a home. Keep in mind though that there are some federal loan programs (i.e FHA) requiring down payments that are less than 5%, but if you want a traditional mortgage, lenders this year are insisting on down payments of 10%, & in many instances 20% in order for you to be offered the best possible interest rates. The days of no down payment loans are gone, & with hope never to return.

The timing to buy is good in 2009, but only if you intend to stay in your new home for at least five years. No matter the deal you get, it doesn’t make sense to buy a home today if you may move in a few years. This housing recovery is going to be a slow one, possibly years so if you buy today, prices may not go up that much over the next few years; in fact, they are likely in some areas to go way down. Also remember that with such small appreciation, if any, depending on how hard hit your area is, when you go to sell you’ll be responsible for paying an agent a sales commission of 5% – 6%, paying hidden and actual moving costs, never mind the turmoil of moving, all of which could erase any appreciation you might see over the next two or three years anyway. So, put on your seatbelt and ride this downturn out, and if you must have action short of buying a home then move towards making appreciative modifications to your existing home.

Don’t entertain the notion of buying if you have yet to accumulate at least 10% of the purchase price for your down payment. Actually, 20% is even better because it reduces Lender’s doubts. And while there are some government programs requiring smaller down payments (more below), the new reality is that most homeowners won’t qualify for a regular mortgage unless they can make a solid down payment. Potential buyers should also only buy your home with a standard 30-year, fixed-rate mortgage. No “betting” on an adjustable-rate loan in these uncertain times, that you’ll have enough equity in three or five years to refinance. It’s better business to stay with a 30-year fixed rate so you never have your payment rising. ASK ME ABOUT “Streamlined Modification Programs,” aimed at mortgages owned or guaranteed by Freddie Mac and Fannie Mae.

BRIGHT SIDE: The Housing & Economic Recovery Act (July 2008) gives a credit no higher than $7,500 for first-time buyers purchasing a home from April 9, 2008 to July 1, 2009. Individuals having income below $75,000 & married couples having income below $150,000 are eligible for this program. The credit is an interest-free loan. You claim it on your federal tax return & then repay the amount of this credit over a 15-year period.

We could go on and on. But here’s where we ask you to call us if you are ready to get serious because if you want to buy or sell, then it probably can’t wait and we are here to make it fast and easy.

Here you will find a wide variety of useful informtion and resources designed to help you buy or sell a home more effectively in LA.

We hope you feel you’ve found the right resource for all of your real estate needs. From information on the local community, to advice about finding a mortgage or preparing your home to sell, it’s all available here on our website.

Your search begins by answering the question, “What’s a home in L.A. Worth?” So, start by clicking here for your personalized MLS Market Snapshot to request a monthly report that includes the prices of similar homes that recently sold or are currently for sale in the Greater Los Angeles Metropolitan Area or CLAW/MLS area. The report reveals the values of current listings matching your dream home or current home in today’s market with detailed descriptions and photos which may be complemented with a Community Reports generation as well.

Look into our market with these complimentary tools: MLS Market Snapshot and The Community Report. Taking a look at these links helps us fulfill your vision.

Feel free to contact us and we will be happy to help you with all your real estate needs and concerns.

 

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