HAPPY HOLIDAYS!
MORTGAGE APPLICATIONS ON THE RISE
MORTGAGE APPLICATIONS ON THE RISE
Mortgage applications increased by 2.1% for the week ended November 19th. The most notable increase was in purchase transactions, which was up 14.4%; the largest increase since May. – Mortgage Bankers Association
"The increase in purchase applications last week aligns with other incoming data suggesting that consumers are feeling somewhat more confident with their financial situation," said Michael Fratantoni, MBA's vice president of research and economics. While the increase was magnified somewhat by the comparison to the holiday week, the level of purchase applications on a seasonally adjusted basis is now at its highest level since the expiration of the homebuyer tax credit." - HousingWire
Mortgage applications for purchase transactions, although up, are greatly outweighed by refinances which accounted for almost 80% of all mortgage transactions.
HOME SALES FALL ONCE AGAIN
HOME SALES FALL ONCE AGAIN
October existing home sales showed another sign that the housing market is not yet on the mend. Existing home sales fell 2.2% from September according to the National Association of Realtors. Home sales are down nearly 26% from October of 2009.
LURKING IN THE SHADOWS
LURKING IN THE SHADOWS
Banks are managing their portfolios of homes that have seriously delinquent mortgages. Failing to foreclose on these properties prevents the properties from going vacant, and minimizes reported loses on their balance sheets. This “Shadow” inventory will come to market eventually.
“Adding the shadow inventory (estimated at 2.1 million) to the visible supply of homes on the market boosted the total housing-market supply to 6.3 million units from 6.1 million in August 2009. At the current sales rate, it would take 23 months to go through the entire visible and shadow inventory of homes -- more than three times the normal rate of six to seven months.” – cnnfn.com
“Adding the shadow inventory (estimated at 2.1 million) to the visible supply of homes on the market boosted the total housing-market supply to 6.3 million units from 6.1 million in August 2009. At the current sales rate, it would take 23 months to go through the entire visible and shadow inventory of homes -- more than three times the normal rate of six to seven months.” – cnnfn.com
The increase in housing inventory will continue to weaken home values unless demand surges.
INTEREST RATES RISE FOR FOURTH STRAIGHT WEEK
Interest rates rise for the fourth straight week despite the FED’s $600 billion bond buying spree to keep mortgage rates low. Conforming 30 year fixed mortgage rates jump from 3.875% a month ago to 4.250% to close out the month of November.
Are rates on the way up for good? Maybe. At the end of the year four of the Federal Open Market Committee’s voting members will rotate out. Three of the four new voting members that will be rotating in have been outspoken about the risk of inflation under the FED’s current monetary policy.
“The move -- known as quantitative easing -- is meant to keep interest rates low and stimulate spending, but has recently come under fire, as some economists think the plan could boost inflation, and even create asset bubbles. The backlash is so widespread, it includes not only outspoken politicians like Sarah Palin and conservative economists, but even internal Fed officials.” – cnnfn.com
Although inflation is currently nonexistence, a shift in monetary policy (i.e. the winding down of the FED purchasing bonds) could send mortgage rates soaring; and fast. If you are one of the few homeowners still able to take advantage of these historically low interest rates, you may not want to sit on the fence any longer.
THE FED’S MOVE TO PRICE FIX
INTEREST RATES RISE FOR FOURTH STRAIGHT WEEK
Interest rates rise for the fourth straight week despite the FED’s $600 billion bond buying spree to keep mortgage rates low. Conforming 30 year fixed mortgage rates jump from 3.875% a month ago to 4.250% to close out the month of November.
Are rates on the way up for good? Maybe. At the end of the year four of the Federal Open Market Committee’s voting members will rotate out. Three of the four new voting members that will be rotating in have been outspoken about the risk of inflation under the FED’s current monetary policy.
“The move -- known as quantitative easing -- is meant to keep interest rates low and stimulate spending, but has recently come under fire, as some economists think the plan could boost inflation, and even create asset bubbles. The backlash is so widespread, it includes not only outspoken politicians like Sarah Palin and conservative economists, but even internal Fed officials.” – cnnfn.com
Although inflation is currently nonexistence, a shift in monetary policy (i.e. the winding down of the FED purchasing bonds) could send mortgage rates soaring; and fast. If you are one of the few homeowners still able to take advantage of these historically low interest rates, you may not want to sit on the fence any longer.
THE FED’S MOVE TO PRICE FIX
Unless deemed illegal, the FED’s “Final Rule,” which goes into effect April 1st, 2011, will fix mortgage pricing and potentially increase rates and fees for borrowers, while decreasing consumer options. If you wanted regulation, you got it; and it will cost you dearly.
“Is the Federal Reserve Board price fixing the mortgage business in violation of law? The Fed has a rule that they are making active on April 1 where each mortgage brokerage and banker (excluding banks) set a fixed percentage that they can charge each and every customer regardless of loan amount.”
Technically, the Fed is violating many laws and even their own mission. Why are they doing this? According to Marc Savitt, President of the National Association of Independent Housing Professionals (NAIHP)*, “In my opinion the why is because they want to help the banks. Stronger banks, less time and (more) money for them. Plus, it makes them look like they’re doing their job.”
Savitt goes on to say “the fact the Federal Reserve Board doesn’t have the authority to restrict compensation, we at NAIHP knew for over a year. This has been long planned and it will make mortgages harder to come by and much more expensive.”
“NAIHP is fighting this with everything we have, including a strong grass roots network” Savitt added. ”Since we represent everyone in the real estate industry including mortgage brokers, real estate agents, appraisers, title insurance, small banks and consumers, we must make sure that mortgages are provided in a fair way to the person buying a small starter home in Missouri and a mansion in Beverly Hills.”
The solution? Savitt has met with Elizabeth Warren, talked directly with the Fed, looked for guidance from other industry professionals and has had discussions with attorneys to possibly prepare a case or an injunction to stop the Fed from implementation.
“It stinks that we as hard working small business people have to waste our time volunteering to stop the banks from doing what they did to us in the past decade all over again,” said Savitt. “You would think they would want to get their mortgage business from the (now) NMLS licensed mortgage people that have been scrutinized more than a patted-down airline passenger! But no, they keep attacking.”
Savitt continues, “They have even started trying to limit what real estate agents can charge for commissions. I wouldn’t be shocked if they wanted to try to get Congress to let them be in real estate business.” – agentgenius.com
With only four months before the FED Rule takes effect, there is not much time to defeat it. As an active member of the Arizona Association of Mortgage Professionals and the National Association of Mortgage Brokers, we are fighting to protect consumer choice. Geneva Financial, LLC thanks you for supporting your local licensed mortgage professionals.
RATE WATCH
“Is the Federal Reserve Board price fixing the mortgage business in violation of law? The Fed has a rule that they are making active on April 1 where each mortgage brokerage and banker (excluding banks) set a fixed percentage that they can charge each and every customer regardless of loan amount.”
Technically, the Fed is violating many laws and even their own mission. Why are they doing this? According to Marc Savitt, President of the National Association of Independent Housing Professionals (NAIHP)*, “In my opinion the why is because they want to help the banks. Stronger banks, less time and (more) money for them. Plus, it makes them look like they’re doing their job.”
Savitt goes on to say “the fact the Federal Reserve Board doesn’t have the authority to restrict compensation, we at NAIHP knew for over a year. This has been long planned and it will make mortgages harder to come by and much more expensive.”
“NAIHP is fighting this with everything we have, including a strong grass roots network” Savitt added. ”Since we represent everyone in the real estate industry including mortgage brokers, real estate agents, appraisers, title insurance, small banks and consumers, we must make sure that mortgages are provided in a fair way to the person buying a small starter home in Missouri and a mansion in Beverly Hills.”
The solution? Savitt has met with Elizabeth Warren, talked directly with the Fed, looked for guidance from other industry professionals and has had discussions with attorneys to possibly prepare a case or an injunction to stop the Fed from implementation.
“It stinks that we as hard working small business people have to waste our time volunteering to stop the banks from doing what they did to us in the past decade all over again,” said Savitt. “You would think they would want to get their mortgage business from the (now) NMLS licensed mortgage people that have been scrutinized more than a patted-down airline passenger! But no, they keep attacking.”
Savitt continues, “They have even started trying to limit what real estate agents can charge for commissions. I wouldn’t be shocked if they wanted to try to get Congress to let them be in real estate business.” – agentgenius.com
With only four months before the FED Rule takes effect, there is not much time to defeat it. As an active member of the Arizona Association of Mortgage Professionals and the National Association of Mortgage Brokers, we are fighting to protect consumer choice. Geneva Financial, LLC thanks you for supporting your local licensed mortgage professionals.
RATE WATCH
Mortgage Type Interest Rate APR
30 Year Fixed 4.250% 4.294%
15 Year Fixed 3.375% 3.598%
5/1 ARM 2.625% 2.975%
Interest rates as of 11/28/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.
Conventional Refinance: If you have a conventional mortgage (must be owned or guaranteed by Fannie Mae or Freddie Mac) without mortgage insurance, you may be able to refinance up to 125% of the home’s value. Owe more than 125%? With enough compensating factors (i.e. credit, assets, etc.), you may be able to get an appraisal waiver and slip into the 125% range you need to be in. Rates are slightly higher than a standard conventional loan, but with good credit, they are still quite low.
FHA Streamline Refinance: FHA streamlines do not require an appraisal. It does not matter how much you owe verses the value of the home. Anyone with a 5% interest rate or more should look into a streamline refinance. A streamline refinance allows the homeowner to lower their rate with little or no closing costs, and no appraisal. It will not solve your value issues, but it will lower your payment.
MARKET UPDATE brought to you by:
Chris Tiller, Realtor
tiller34@hotmail.com
602-561-1346
30 Year Fixed 4.250% 4.294%
15 Year Fixed 3.375% 3.598%
5/1 ARM 2.625% 2.975%
Interest rates as of 11/28/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.
Conventional Refinance: If you have a conventional mortgage (must be owned or guaranteed by Fannie Mae or Freddie Mac) without mortgage insurance, you may be able to refinance up to 125% of the home’s value. Owe more than 125%? With enough compensating factors (i.e. credit, assets, etc.), you may be able to get an appraisal waiver and slip into the 125% range you need to be in. Rates are slightly higher than a standard conventional loan, but with good credit, they are still quite low.
FHA Streamline Refinance: FHA streamlines do not require an appraisal. It does not matter how much you owe verses the value of the home. Anyone with a 5% interest rate or more should look into a streamline refinance. A streamline refinance allows the homeowner to lower their rate with little or no closing costs, and no appraisal. It will not solve your value issues, but it will lower your payment.
MARKET UPDATE brought to you by:
Chris Tiller, Realtor
tiller34@hotmail.com
602-561-1346
Chris -- when do you foresee housing prices actually rising again? IF subprime loans were given up until 2007-08 presumming they ere on a 5 year arm would it be safe to assume that foreclosures would remain strong until 2013. Then from that point we would need to sell off the oversupply we have... Are we really looking at another 5 years before home prices appreciate? or am I being to pessimistic
ReplyDeleteI’m actually more pessimistic than that and wholeheartedly agree with you (but I call it reality and economics). Remember the sub-prime, while a big deal, won’t have the largest effect. Most of these loans have, or will, reset and follow the libor interest rate. So as people’s payments adjust from their old 2006-2008 rates of 7.25% or higher their payment will actually go down as it ties to this rate which is about 5.25%. These are the people that are currently walking even though they can afford their mortgage. I call this strategic default.
ReplyDeleteThe largest impact will come from Option ARM’s. These loans were interest only for a time period, typically 5 years, and NOT tied to the libor. They signed notes with rates at the old level of 7-8%. When these adjust it’s like going to a 25 year mortgage, principal and interest and with that 7-8% rate. So you’ll see payments go up by 45% in some cases. This is when people will have no choice but to foreclose and it will no longer be an “ethical dilemma” like the sub-prime loan holders are going through. These Option ARM holders’s truly won’t be able to afford it.
Here is a link to the size and scope of this problem that has yet to hit.
http://www.youtube.com/watch?v=a3g6Yr5S7cg&feature=related
Now with all that being said you’d think once all of the Option ARM’s work their way through the system in 5 years or so we’ll get back to realistic appreciation in real estate which has averaged at about 3% historically. However, what’s the largest concern most economists have about our 5 year projections? Inflation. When this hits interest rates go up, less people can qualify for home loans, less demand in the market, lowering of home prices.
The second problem with inflation is that remember those sub-prime loans who’s payments actually went down because they are tied to the libor? As the libor adjusts with inflation so will these sub-prime mortgage payments. Meaning eventually they will be unaffordable long after the “adjustment” of the loan took place and long after the 5 year time frame many people are using. Keeping foreclosures high for much longer than 5 years.