DreamTeam-Jo Cel Perez & Hector Gamez

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.

First-time Homebuyers

• Tax credit up to $8,000
• Deadline extended until April 30, 2010. Plus, if a contract is signed before May 1, 2010 there will be 60 days to close on the home.
• Buyers that have not owned a home in the last 3 years.
• Purchases in 2010 can be claimed on 2009 tax return.
• Income limits increased to $125,000 on a single return and $225,000 on a joint return, up from $75,000 & $150,000.

Step-up Buyers

• Tax credit up to $6,500
• Purchases between December 1, 2009 and May 1, 2010. The same opportunity to close within 60 days applies.
• Buyers that have owned the same home for 5 consecutive of the last 8 years.
• Purchases in 2010 can be claimed on 2009 tax return.

Income limits are also $125,000 on a single return and $225,000 on a joint return. 

According to the Mortgage Bankers Association, the number of Mortgage applications recieved fell last week, falling 12.3 percent compared to last week.

Most of the decline was in refinances, which fell 16.2 percent and the purchase index declined 4.8 percent. Except for 15-year rates, mortgage rates were down slightly:

• 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent.
• 15-year fixed-rate mortgages increased to 4.53 percent from 4.51 percent.
• 1-year ARMs decreased to 6.79 percent from 6.86 percent.

The U.S. Department of Housing & Urban Development stated this week that they will provide $60 million dollars in counseling and training grants to help families become first time home-buyers and to help them keep their homes after they are homeowners.

The organizations that provide housing counseling services help people become or remain homeowners or find rental housing, and assist homeless persons in finding the transitional housing they need to move toward a permanent place to live.  Potential homeowners will have assistance with evaluating how ready they are for a home purchase, helping them through the home-buying process, and helping to understand down payment and financing.

For more information please visit HUD’s website.

Making the current FHA loan limits permanent would ensure liquidity in the housing market and make mortgages more affordable for qualified buyers at a time when the market is showing signs of a fragile recovery, the NATIONAL ASSOCIATION OF REALTORS® testified to the House Subcommittee on Housing and Community Opportunity today.

Current FHA loan limits are as high as $729,750 in high cost areas, and are set to expire at the end of the year and revert to lower amounts, greatly hindering the housing recovery process.

“NAR strongly supports making FHA loan limits permanent,” said Boyd Campbell, an NAR spokesperson and managing partner-associate broker of Century 21 in Lanham, Md. He urged the subcommittee to quickly consider legislation that would do that—H.R. 2483, introduced by committee members U.S. Reps. Brad Sherman (D-Calif.) and Gary Miller (R-Calif.).

“FHA is more important than ever to homebuyers in the present market. In the wake of the collapsing private mortgage market, FHA has played a critical role in removing inventory from the market and stabilizing home prices,” he said. Present FHA housing market share is approaching 25 percent, significantly up from 3 percent two years ago.

NAR said that FHA has performed remarkably well through the housing crisis, compared to Fannie and Freddie, because FHA has never strayed from the sound underwriting and appropriate appraisals that have traditionally backed up their loans.

FHA is taking timely steps to protect taxpayers: implementing credit policy changes to enhance risk management; hiring a chief risk officer for the first time in the agency’s history; and shifting responsibility for mortgage brokers away from taxpayers to the lenders who use mortgage brokers.

Such changes would help give consumers more affordable choices when purchasing a home, would help strengthen our communities, and would reduce inventory and stabilize home prices, Campbell said.

In addition to the above enhancements, NAR recommended that FHA make these specific changes to condominium purchases:

• Eliminate the owner-occupancy requirement, or at least amend rules so all bank-owned properties are not counted in the occupancy ratio;
• Increase or temporarily suspend the 30 percent limit on total units in a condominium project that may have an FHA mortgage;
• Reduce or eliminate the requirement that at least 50 percent of the units in the condominium be sold prior to FHA’s endorsement; and
• Reconsider the elimination of the Spot Loan Approval Process, which allows certain borrowers to use FHA to purchase a condominium in a project that is not FHA approved.

Source: NAR

Here’s a bit of good news from the Mortgage Bankers Association. They have reported that last week there was a slight increase in the amount of mortgage applications received by 11%. According to the report, application submitted for refinancing has gone up to 15%, while loan applications for home purchases has gone up to 6.7%. Now despite all of this good news, rising unemployment and the continued global economic issues, will more than likely keep the housing industry on a slow rebound.