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
Mortgage Rates Decline
According to Freddie Mac on Thursday, the 30 year fixed rate dropped from an average of 4.78% to 4.71% from last week. This is the lowest since Freddie Mac compiled data since 1971. Rates have been low all year because of the Fed’s purchase of mortgage-back securities, which in end in the Sping of 2010. This is helping to push mortgage applications which increased 2.1% during the Thanksgiving week stated the Mortgage Bankers Association. But while rates are low, there are still tight credit standards which may hinder buyers qualifying for the lowest rates. Most buyers will need 20% down, and a high credit scrore in order to qualify. But the push has helped drive more than 4 percent in purchase applications and nearly 2 percent increase in applications to refinance existing loans.
More Cash Required for an FHA loan
The Federal Housing Administration officials are proposing policy changes for FHA-insured mortgage borrowers to help the agency increase its federally mandated funding requirements. Higher credit scores and an increase in the current minimum down payment may be what buyers across America will have to have an order to qualify for and FHA loan. This proposed change is due to increasing financial issues FHA has been facing, which has increased it’s exposure and led to more delinquencies. The Obama Administration may try to propose other ways of increasing closing costs instead of increasing the minimum down payment, such as increasing mortgage insurance premimums or raising minimum credit score requirements so that the change would only effect the lower scoring borrowers. This will make it harder for some but will also reduce the risk of FHA having financial difficulites. FHA’s traditional role was to help American’s reach their dream of homeownership. The details of the change aren’t expected to be final until next month.
The National Association of Realtors’ V.P. Ron Phipps stated one of the most important ways for consumers to see a bright future in terms of the economy is for Congress to extend the $8000 home-buyers tax credit. The tax credit has already made an impact as home sales have increased an estimated 5.1 million for the year. Housing inventory has slowed down helping to stabilize house prices. Since the momentum takes awhile, there’s not a better time to build on that by the extension of the tax credit through next year.
The present tax credit is set to expire on November 30th. Those who are in contract now may not be able to take advantage of the credit and close by that time. A few other things that Philips is pushing for is to make the FHA, Fannie Mae and Freddie Mac limits permanent that were established for this year, keep the governments continued involvement in the secondary mortgage market, discuss the Home Valuation Code of Conduct’s side effects that are slowing down sales, and give incentives and uniform procedures for short-sales.
This morning the FED announced its target for the federal funds rate is in the 0 percent to 0.25 percent range.
“Information suggests that economic activity has picked up following its severe downturn,” the Fed said in a prepared statement.
“Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.”
The Fed will purchase $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. This will provide help to mortgage lending and housing markets, and slow the pace of these purchases to allow for a smoother transition.
According to an article in the LA Times, homeowners who find themselves struggling with mortgage payments whether the situation is a short sale, foreclosure, or walking away from their homes, should look at how any of these actions could impact their credit scores.
Vantage Solutions, a scoring company created by the three national credit bureaus, suggested loan modifications may increase a borrowers’ scores, while refinancing mortgages that are upside-down may not have any or very little impact. Short sales on the other hand can trigger large declines in credit scores. Homeowners with an excellent score might see a 120 to 130 point decline after a short sale. Homeowners who walk away and stop making payments can expect their credit scores to dip 140 to 150 points. Those who file bankruptcy can have an average hit of 355-365 point drop.
Consumers who contact their lender early on may have less of an impact to their credit scores. In any of the above cases, if consumers are really having troubles due to the declining market, lenders will probably take this era into consideration when granting mortgage loans.
According to Local Market Monitor on September 9th, a Real Estate forcasting service for Banks and Investors, home prices will decline about 5 % thru 2010. But after that there may be light at the end of the tunnel with price increases in several areas, according to CEO Ingo Wisner.
In the following markets home values are expected to remain level this year but increase in value next year. If you know anyone planning on moving in these areas, they are probably going to want to act soon before home prices increase.
- Baton Rouge, La.
- Buffalo-Niagara Falls, N.Y.
- Dallas-Plano-Irving, Texas
- Fort Worth-Arlington, Texas
- Houston-Sugar Land-Baytown, Texas
- Little Rock-North Little Rock-Conway, Ark.
- Omaha-Council Bluffs, Neb.-Iowa
- Pittsburgh, Pa.
- San Antonio, Texas
- Syracuse, N.Y.
Below are the 10 largest markets where prices are expected to continue to decline through 2010. It looks like the Bay Area is still going to suffer with declining prices for a bit longer.
- Fresno, Calif.
- Las Vegas-Paradise, Nev.
- Miami-Miami Beach-Kendall, Fla.
- Orlando-Kissimmee, Fla.
- Phoenix-Mesa-Scottsdale, Ariz.
- Portland-Vancouver-Beaverton, Ore.-Wash.
- San Jose-Sunnyvale-Santa Clara, Calif.
- Stockton, Calif.
- Tacoma, Wash.
- Tucson, Ariz.
If you’ve been looking for a home in the Silicon Valley lately, chances are you competing with several other potential home-buyers on the same property. Sounds almost like a few years ago during the dot.com era. But this time, instead of the higher priced properties being snatched up, it’s the lower valued properties that a drawing the attention.
It’s great that the low prices are attracting buyers, but it’s also becoming frustrating when a lot of investors are snatching up the properties with higher-priced offers and paying cash.
A lot of bank-owned or short sale homes are pulling 20 to 30 offers. Most of these homes are in the San Jose area. Homes in the more expensive areas like Los Gatos and Saratoga are not getting as much traffic, but still get multiple offers.
Even though overall prices are starting to stabilize, we are not in a normal market yet. Buyers will have to be patient. It may take 6 to 8 months to get the property your looking for. Our team was able to get a home for one buyer after the initial counter-offer, but it was the 5th or 6th property we had made an offer on. With other clients we weren’t as successful because even though we overbidded, we were passed up because of non-cash offers.
This past Tuesday The Treasury Department stated only 9 percent of eligible home owners received assistance from the Government on mortgage loan modifications and foreclosure prevention.
Two of the biggest bank giants not willing to help borrowers were Bank of America and Wells Fargo, which received federal bailout money. Bank of American modified 4 percent of eligible loans, while Wells Fargo only modified 6 percent.
Out of the larger banks that did assist with modifications were JPMorgan Chase & Co., which modified 20 percent, and Citigroup Inc. which modified 15 percent of eligible loans.
I recently answered a question about what happens when a bank is taken over by the government. This got me thinking a little bit more about the pros and cons to having that happen. Would it be a good or bad or make any difference at this point?
To sum it up bank nationalization means a bank is owned and ran by the government. This has happened in our country’s history before and we came out ok. Case in point being the S&L debacle a few decades ago. The government took over and slowly sold off the banks’ assets and then eventually there was recovery. This also happened in Sweden and France, but France may be restarting the process. Below are my thoughts about the good and the bad regarding nationalization.
The good:
- More loans being made to consumers. More flexible guidelines would exist and more borrowers would qualify….
- Current deposits remain insured thru FDIC. Since FDIC can borrow money straight from the US Treasury, they would never run out of money.
- Equity holders would be wiped out..
- Possible guarantee of all deposits at US Banks…not just the one’s who are in trouble.This would raise levels confidence with consumers where they have their money, and shareholders as well..
- Foreclosure slow down…thereby banks won’t loose as much money and home values should normalize..
The bad:
- Customer service quality impacted. There would most likely be a decrease in quality service as banks become more conservative and lose employees…
- Closure of more branches
- Loans made to meet social objectives, quantity not quality. Banks may have a more political agenda…
- US Taxpayers taking on more expense/debt
Would nationalization solve the problem of bank failures? Or will this increase the crisis?
Will smaller banks be able to compete? Should the government discontinue anymore bailout programs and let the foreclosures run its course? It’s hard to say, anyway you look at it’s still going to be a challenging road….
