Posts Tagged Mortgage loan

Interest Rates Continue at Historic Lows

Interest Rates

The chart above tracks interest rates over the past 200 years.  We are experiencing interest rates nearly as low as anytime over that period of time.  Our challenge is making those rates available for the average home purchaser.  We continue to see underwriting guidelines that penalize the home buyer with relatively solid credit, good income, and sufficient cash for a down payment.  Lenders obviously got burned during the recession but they are turning away good business.  It makes no sense.  I don’t see the housing market making a strong recovery until lenders change their lending practices.

In the meantime, those buyers who can qualify for a mortgage will get an incredible deal.  Kim and I are considering refinancing again after refinancing just last year.  I’m a firm believer in the quote “It’s not the price but the terms” and the terms are pretty good at the moment.

Thanks to Devon DeCrausaz, Branch Manager & Vice President at MegaStar Financial Corp for use of the chart.  MegaStar is one of the few lenders with common sense lending practices.

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Case-Shiller shows home prices rise again – MarketWatch

By Ruth Mantell

WASHINGTON (MarketWatch) — U.S. home prices rose in September for the sixth month, signaling that the housing market is “in the midst of a recovery,” according to the S&P/Case-Shiller home-price index released Tuesday. The S&P/Case-Shiller 20-city composite posted a 0.3% increase in September following a 0.8% gain in August. Home prices are up 3% from the prior year. “We are entering the seasonally weak part of the year. Despite the seasons, housing continues to improve,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. Among the 20 cities tracked by the index, 13 posted monthly gains in September. Tuesday’s report on home prices is the latest news on a strengthening housing market. There have also been recent gains in new construction, home-builder sentiment, and existing-home sales. However, while persistently low mortgage rates are attracting some buyers, consumers still face tight credit standards, and officials say factors such as tight lending terms will block a powerful housing recovery. Indeed, despite recent gains, prices are about 30% below peak levels in 2006, according to Case-Shiller data


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8 Signs Housing Is on the Mend


Some Americans are still jittery over the housing market, but here are eight positive signs that should quell some of their fears.

  1. Housing prices are on the rise across the country.
  2. Foreclosures have slowed. Analysts suggest that as the supply of distressed homes slows, buyers will be forced into higher-price properties too.
  3. Inventories of for-sale homes on the market are decreasing. In fact, inventories of for-sale homes have dropped 24 percent from a year ago.
  4. Mortgage rates are at ultra record level lows, for those who can qualify
  5. Housing starts rose 6.9 percent in June. Also, existing-home sales were up 4.5 percent higher in June compared to one year ago.
  6. Home building stocks are on the rise.
  7. For investors who are buying homes, rents are soaring, allowing them to cash in on their investments. Rental prices are at a 10-year high as median units rent for $710 a month.
  8. Home affordability is at record highs for the median income family, due to falling home values and super low mortgage rates. In fact, a recent study found that it is cheaper to buy a home than rent in basically ever major city in the U.S. For those who buy, you can save the cost of renting by owning the home for five years or less.

But while the signs point to a housing market on the mend, some Americans still remain hesitant. Many Americans are still underwater on their mortgage, owing more on their home than it is currently worth. Also, the economy continues to weigh on the recovery, particularly a dampening employment outlook, which analysts see as tied to housing.

Still, The Wall Street Journal concludes in a recent article that if you take into account all the positive signs lately in the housing market, “housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.”


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Why Millions of Americans Still Can’t Refinance Their Mortgage

By: Diana Olick

CNBC Real Estate Reporter

Mortgage rates hit new lows and applications to refinance fell for the third straight week. It defies logic, unless of course you operate in today’s tight mortgage market.

It’s not just about the rate anymore. Negative equity, strict underwriting and big bank backlogs are keeping many borrowers from taking advantage of these incredibly low mortgage rates.

“If history is any lesson, the only thing that can really extend refi activity in a low rate environment is a loosening of underwriting standards to bring more borrowers into the market. And that is not likely to happen anytime soon,” said Guy Cecala of Inside Mortgage Finance.

Twice this year the market did see a surge in refinancing, all due to changes in government programs.

At the beginning of the year, Fannie Mae and Freddie Mac (still under government conservatorship), expanded the Home Affordable Refinance Program for borrowers who owe more on their mortgages than their homes are worth. The limit used to be 25 percent negative equity, but in January, that limit was lifted entirely.

Then in June, the FHA changed the rules on its streamline refi program for borrowers who already have FHA loans, dropping underwriting almost entirely. While both changes sparked temporary surges, they were not enough to serve the entire market.

“We are definitely running out of borrowers to refi even with mortgages rates at record lows. Most of the activity we have seen in recent months are the same borrowers who refinanced a year or so ago, refinancing again. While programs like HARP and FHA’s Streamlined Refi can provide a temporary surge in refis, they still only account for a relatively small share of borrowers,” Cecala noted.

Government-backed mortgages (Fannie Mae, Freddie Mac, Ginnie Mae) accounted for 58 percent of the $10.179 trillion U.S. mortgage market as of the end of March, 2012, according to data compiled by Inside Mortgage Finance.

Private-label mortgage-backed securities (MBS) investors held 10 percent and banks/other financial institutions held 32 percent.  It’s that non-government, 42 percent of the market that is having the most trouble refinancing due to poor credit scores and negative equity. Lenders and investors are particularly risk-averse these days.

Thursday the Obama Administration will renew its push for a major refinancing program that would involve all loans, but it would need congressional approval. There are several proposals under consideration.

The “Responsible Homeowners Refinancing Act,” sponsored by Senators Barbara Boxer, D-Calif., and Robert Menendez, D-NJ, would expand the HARP program, extending streamlined refinancing for Fannie and Freddie borrowers and eliminating up-front fees and appraisal costs. Jaret Seiberg at Guggenheim Partners puts the odds of that passing at around 60 percent.

Seiberg is less optimistic about another bill that would allow non-agency mortgages refinance into FHA loans, regardless of negative equity. The bill would raise GSE (Fannie and Freddie) guarantee fees to offset its costs.

“MBS investors are likely in for a bumpy ride. As we believe Congress will not enact the legislation, there should not be any changes to prepayment rates. Yet the market is likely to react to every headline, which suggests significant volatility,” Seiberg wrote.

Still, the White House will hold a webcast Thursday with HUD Secretary Shaun Donovan, along with a consumer-friendly interactive refi website. This “Google+ Hangout” will be hosted by real estate website Zillow [Z  38.77    -0.10  (-0.26%)   ], and Zillow’s CEO Spencer Rascoff will join in the conversation. Donovan and Rascoff will answer consumers’ questions, knowing full well that the answer to many will be, ‘Right now you don’t qualify for a refinance.’

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30-year mortgage rate hits record low of 3.67% – Marketwatch

By Ruth Mantell

WASHINGTON (MarketWatch) – Mortgage rates hit record lows in the week ending June 7, with the 30-year fixed-rate mortgage average declining to 3.67% from 3.75% in the prior week, Freddie Mac said Thursday in its weekly report. These data go back to 1971. The rate was 4.49% a year earlier. To obtain the latest 30-year rate, payment of an average 0.7 point was required, according to Freddie, a buyer of residential mortgages. “Fixed mortgage rates reached new record lows for the sixth consecutive week as long-term Treasury bond yields declined further following downwardly revised economic growth and job creation data,” said Frank Nothaft, Freddie Mac’s chief economist. The 15-year fixed-rate mortgage also hit a record low in the most recent week, falling to 2.94% from 2.97% in the prior week. These data go back to 1991. Meanwhile, the average rate on the 5-year Treasury-indexed hybrid adjustable-rate mortgage remained at 2.84%. The 1-year Treasury-indexed ARM rose to 2.79% from 2.75%

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We Just Refinanced and are Saving Over $400/mo!

I was somewhat shocked when a few months ago Wells Fargo (they hold our 1st mortgage) called and asked if I wanted to refinance at a rate about 1% below where I was at.  They said the closing costs were minimal and an appraisal wasn’t needed.  I just needed to confirm that our employment situation hadn’t changed for Kim and I.  I asked what was the catch?  It seemed rather strange for a bank to call me and ask if I wanted to lower my interest rate on my mortgage so they would make less money.

I started thinking about it and realized they were concerned about losing my business.  I had been considering refinancing with another lender. It probably helped that we had high credit scores and no missed payments.

So we signed our name a few times and sat back while Wells Fargo did their thing.  After about 6 weeks, they said the docs were ready and we could close.

We went to the title company yesterday and lowered our monthly payments by over $400!  Yeeeee Hawwww!  Our closing costs were so low we can pay those off in about 4 months.

It is a strange world to say the least.  People wanting  new loans struggle to qualify in this lending environment but then lenders are turning around and giving away money at lower interest rates.  There is something seriously wrong with this picture.  I think I know the answer but I don’t want to get political, only celebrate that we were on the right side of this transaction.

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Housing Affordability Index Hits Record High (NAR)

Housing affordability conditions have reached the highest level since record keeping began in 1970, according to the National Association of Realtors®.

NAR’s Housing Affordability Index rose to a record high 206.1 in January, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power.

An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small downpayments, the affordability levels are relatively lower.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said this latest data underscores buyer opportunities in today’s market. “This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” he said. “For buyers who can qualify for a mortgage, now is a very good time to become a homeowner.”

NAR projects the affordability index for all of 2012 will be at an annual high, with little movement in mortgage interest rates or home prices during the year. “Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.


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The Wisdom of Walking Away From Your Mortgage – Denver Post Opinion Article, Posted 7/24/11

The question is not why homeowners are strategically defaulting. It’s why more aren’t.
By Mary Winter

In 2010, John Adams​ walked away from his Castle Rock house and its $435,000 mortgage. The 49-year-old software architect left the keys in a kitchen drawer and moved his family of five to a less expensive rental.

Another Coloradan who defaulted was a Boulder County mail carrier with three children under the age of 5. He rents now, saving $250 a month.

Both men owed more on their homes than they were worth, and they feared they would be indebted the rest of their lives.

They had much in common with 12,000 Coloradans whose homes are in foreclosure. But unlike many, they made a plan and voluntarily walked away from their mortgages. They asked their lenders for lower payments, and when their lenders refused — in part because both men still had jobs and were healthy — the men stopped payments.

Most officials condemn these so-called strategic defaulters — homeowners who technically can afford to make payments but opt not to. “Any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation,” said former Treasury Secretary Henry Paulson Jr.

But Paulson had it backwards.

Wall Street bankers, not homeowners, failed to honor their obligations. Bankers took excessive risks, designed loans to generate the greatest number of fees for themselves, pushed no-down and predatory loans on unqualified and financially illiterate customers, and paid lip service to modifications.

When housing collapsed, bankers took $175 billion in taxpayer bailouts and, to show their gratitude, promptly handed out $33 billion in performance bonuses to their executives.

The question is not why homeowners are strategically defaulting. It’s why more aren’t.

• • •

Strategic defaulters cover a spectrum.

Many are financially astute, such as the oilman who can easily afford the payments on his Vail vacation condo but makes a business decision to bail.

Others paid $400,000 for their home six years ago, but today see their neighbor’s identical house sell for $200,000. They buy it, halving their payments, and dump their old house.

“Buy and bail” is considered mortgage fraud, but it’s unclear how often charges are pursued.

Then there are the types like the mail carrier and the software architect: They borrowed too much, and when real estate tanked, they were trapped.

Defaulting used to be considered shameful. But today, when homes have lost one-third of their value, one-fifth are underwater, and 2 million are in foreclosure, choices are narrowed.

Still, the social stigma remains strong, says Brent T. White, a University of Arizona law professor who urges more upside-down homeowners to consider walking away. White believes lenders often exploit defaulters’ guilt and exaggerate its impact on their credit worthiness. A defaulter’s credit does suffer, but typically if he pays his other bills, his good credit rebounds within two years, White says.

“Homeowners should be walking away in droves,” White has said.

Lenders, with the government and media’s help, have shamed and scared these homeowners into holding on — into scraping together to pay their underwater mortgages, even when it means sacrificing their retirement security, not being able to pay or save for their children’s college education, or scrimping on the basic necessities such as clothes and food,” White told Arizona Republic website readers.

Others agree that lenders exploit borrowers’ financial naivete, and argue banks are well protected.

“Mortgages are collateralized loans. Banks agreed to take on the risk when they did the property appraisal and created the contract on the loan — which spells out what happens if the borrower doesn’t pay: the bank gets the home back, and the borrower’s credit is damaged,” says Jon Maddux, CEO of, which has helped more than 6,000 clients strategically default since 2008.

“People are not educated enough to know” that lenders aren’t doing borrowers any big favors, Maddux says. “Banks certainly have no problem foreclosing.”

Lenders don’t see it that way. Universal Lending’s Peter Lansing, past president of Colorado Mortgage Lenders Association, calls strategic default by anyone not in severe financial trouble “a scheme to screw banks.”

“You made a promise to pay, and you can pay . . . . If Americans decide they don’t have to pay debts anymore, what happens to those investors who want to loan you money? What happens to our moral compass?”

But Lansing feels sympathy for those who lose homes because of unemployment, health issues or divorce. “We [lenders] made loans under terms we should not have. We all admit that.”

• • •

John Adams’ situation was complicated. In 2007, he put $21,750 down on a $435,000 home in Castle Rock. He was also heavily invested in real estate.

When housing crashed, his three rentals needed repairs, and one went vacant. He couldn’t find buyers. Then he lost $150,000 in three real estate investment clubs, which he now describes as Ponzi schemes. “I would agree 100 percent that I was overextended,” Adams says.

His salary was $100,000, but Adams didn’t see how he could recover. His balloon payment was due in four years, “and all my retirement seed money was gone. I have three kids to raise.”

Adams went to his lender, but the bank “was very aggressive. They had no intention of working with me on a loan modification. They would pop by the house to work me over, and then give me a lecture. They told my wife they would hunt us down to the ends of the earth.”

Adams contacted, which helped him negotiate his default. Still, it took an emotional toll.

“All my life I thought anyone who defaults is a deadbeat. . . . Now I’m a deadbeat.”

Like Adams, the mail carrier is not proud of defaulting, and would talk to me only if he remained anonymous. He also is bitter about being rejected for a short sale, a modification, and the Home Affordable Modification Program on his condo, which he bought for $165,000 and was recently valued at $110,000. His $53,000-$55,000 salary was considered too high.

“The bank just would not work with us. We turned our back on the bank because the bank turned its back on us.”

• • •

Maddux says he understands consumers’ anger. “A lot of people feel conned. Economists and government leaders were all saying there is no question that a home is one of the soundest investments you could make. [But] the American Dream turned into a nightmare.”

Indeed, millions of Americans will never recover. The crisis cost middle-class Americans $7.38 trillion — as much as half their wealth tied to their homes.

In a recent Vanity Fair article, economist Joseph Stiglitz writes the richest 1 percent of Americans receive nearly a quarter of the nation’s income. The top 1 percent control 40 percent of the wealth. The middle class, in the meantime, has gotten poorer.

The housing meltdown further widened that frightening wealth gap.

The crisis had many contributors: consumers over-borrowed, regulators fell down, and two presidents rescued bankers, then failed to hold them accountable. But by far the greatest sins were Wall Street’s, and if more mortgage holders start strategically defaulting, the banking industry has only itself to blame.


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