Mortgage rates fell for the third straight week on 30-year fixed home loans, according to Freddie Mac. This week average interest on 30-year mortgages was 4.99 percent, compared to 5.06 percent last week and 5.16 percent a year ago.
Rates on 15-year fixed loans were also lower, averaging 4.40 percent, compared to 4.45 percent last week. Adjustable-rate mortgages also fell this week, the 5/1 ARM being at 4.27% and the 1 year at 4.32. .
“Fixed mortgage rates followed bond yields lower for the third consecutive week, pushing 30-year mortgages below 5 percent once more,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Similarly, ARM rates eased along with shorter-term rates, as the federal funds futures market indicates no increase in the Federal Reserve’s target rate following its upcoming committee meeting on January 26th and 27th.
Source: Freddie Mac
Applications for mortgage loans slowed down with the summer ending. Adding to this slow down is potential first-time home-buyers wondering if they’ll be able to close fast enough receive the federal home ownership tax credit, which expires Dec. 1, 2009.
According to the Mortgage Bankers Association index, applications declined 8.6 percent last week on a seasonally adjusted basis. The index declined 18.3 percent compared with the previous week and fell 18.7 percent compared with the same week a year ago when the Labor Day holiday fell nearly a week earlier.
Mortgage interest rates were as follows:
- 30-year fixed-rate mortgages increased to 5.08 percent from 5.02 percent.
- 15-year fixed-rate mortgages decreased to 4.41 percent from 4.45 percent.
- 1-year ARMs decreased to 6.61 percent from 6.69 percent.
We might see more of a surge of home sales and loans if the lenders would loosen up their guidelines a little more. Now I’m not saying that they should go back to the lax underwriting guidelines that contributed to the housing crisis. But given the economy and the inability for the average American to place a decent down payment on their home, lenders can make getting loans a little more flexible.
Risk based: Lenders might want to take a queue from FHA, or the temporarily defunct CALHFA. Yes, they take a little more risk by lending on higher loan-to-values, but they have back it up with reasonable debt ratio guidelines and sound Fixed and Arm products. They don’t make negative amortization loans. And even with those borrowers who have lower fico scores, they compensate the risk with the appropriate rate.
A little flexibility and common sense: If a borrower is refinancing and happens to have very stable employment,excellent credit, low debts, and very low loan-to-value (30%), then let them have a interest-only loan or a 5 year ARM. But if another borrower had a BK discharge on their credit, but the debt ratio was 28%, and the loan-to-value is 90%,then that is someone who maybe could only qualify for a 30 year fully-amortized loan. If the borrowers aren’t qualifying due to the debt ratios, then maybe a 35 or 40 year loan would be the product that would fit.
Get things moving: The lenders are dealing with losses, but they can help on their end by making sound products that help borrowers with purchasing or refinancing. This could save jobs as the lenders are able to make more loans and increase volume. Taking some risks and making sure the products are sound might help to get the financial institutions moving again. 
