Rates to Stay at Record Levels:
On Wednesday the Federal Reserve announced that the economy is “proceeding” and will keep interest rates at record lows, near zero.
Flood Bill Extended:
Thousands of home owners can breathe a sigh of relief. The House of Representatives passed a bill to extend the authority for the National Flood Insurance Program thru Sept 30th, 2010.
“The passage of H.R. 5569 is a first step toward helping home buyers to the closing table,” said NAR President Vicki Cox Golder.
Lenders would not close loans on transactions where flood insurance was required. The coverage would now be retroactive from when the insurance program expired May 31st. Now the senate will have to review the bill.
At the same time a survey was done to CEOs of large U.S. companies. The good news….39% said they expect to increase the number of people on their payrolls in the second half of 2010.
Source: Associated Press, Alan Zibel (06/23/2010)
Fannie Mae getting tough with homeowners who just “walk away”:
Fannie Mae announced plans Wednesday to get tough with those who default when they are able to pay. Those borrowers wouldn’t be able to get another Fannie Mae mortgage for 7 years. The current wait is five years. Fannie also threatened to sue home owners who walk away from their mortgages in states where such deficiency judgments are legal.
Some critics say the company should try principal write-downs before it penalizes borrowers for choosing to walk away.
Source: CNNMoney.com, Tami Luhby (06/23/2010)
On Friday Fannie Mae announced it will require borrowers using interest-only mortgages to place at least 30% down. This requirement will ensure that buyers can qualify for their mortgage payments should the interest rate rise to the CAP rate, which wasn’t the way the mortgages had been underwritten in the past.
Fannie Mae also said that in order for them to purchase ARM’s that borrowers must qualify using either:
1. The loan’s initial interest rate plus two percentage points.
2. The cap, the maximum the interest rate can rise.
“Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long-term, while helping our lender partners offer a range of mortgage products for qualified borrowers,” says Marianne Sullivan, senior vice president of Single Family Credit Policy and Risk Management at Fannie Mae, in a prepared release.
In light of defaults from the last 2 years, this makes sense to make sure the borrowers can sustain their mortgages payment should the interest rate rise and just in case the borrowers for some reason are unable to refinance their homes. Perhaps they should think about raising the credit score for those borrowers as well.
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.
Federal House Price Index up 0.3 percent nationwide, 1.6 percent in West
U.S. home prices in July rose 0.3 percent on a seasonally adjusted basis compared with June, according to the Federal Housing Finance Agency’s (FHFA) monthly House Price Index released yesterday. For the 12 months ending in July, U.S. home prices declined 4.2 percent. The FHFA monthly index is calculated using purchase prices of houses with mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
Just the Facts
Calif. median home price - July 09: $285,480 (Source: C.A.R.)
Calif. highest median home price by C.A.R. region July 09: Santa Barbara So. Coast $885,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region July 09: High Desert $110,650 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Second Quarter 2009: 67 percent (Source: C.A.R.)
Mortgage rates – week ending 9/17/09 30-yr. fixed: 5.04% Fees/points: 0.7% 15-yr. fixed: 4.47% Fees/points: 0.6% 1-yr. adjustable: 4.58% Fees/points: 0.5% (Source: Freddie Mac)
Fannie Mae and Freddie Mac are now able to allow up to 125% loan-to-value for existing loan refinances under the Home Affordable Refinance Program. The old limit was 105% loan-to-value. This move should help out borrowers who made their payments on time but were unable to refinance and take advantage of lower rates due to declining values on their homes. In addition the loan must be Fixed and fully amortized for >15 years to a maximum of 30 years. This is for manually underwritten loans only, and Fannie Mae is determining if the desktop underwriting engine should allow loan-to-value ratios above 105%. For more information please visit www.makinghomeaffordable.gov or call 1-800-7FANNIE. For Freddie Mac visit https://www.freddiemac.com/corporate.
A few weeks ago I was mentioning how the rates consumers pay are tied to their credit scores and tips on how they can improve them. Well now in light of the recent stimulus package, both Fannie and Freddie are planning large fee increases by toughening their credit score and down-payment rules on April 1, 2009.
If a buyer is purchasing a duplex, the buyer could be charged a 1 percent add-on to their interest rate. Lenders will be if their not already factoring in these higher fees. Now buyers with down payments of less than 25 percent will be charged a three-quarter point add-on penalty, no matter how high their credit score is.
Those who would like to refinance and take cash out could be charged three points depending on the amount of equity they have.
Source: Washington Writers Group, Kenneth R. Harney (02/15/2009)
