Stimulus | Mortgage Rates & Trends: Mortgage Blog

Mortgage Rates & Trends: Mortgage Blog

Delinquent Mortgages Continue to Re-Default Despite Loan Modifications
1 By Mike Battema on March 26, 2010

According to a recent report, more than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months in 2009. A joint report released by the Office of the Comptroller and Office of Thrift Supervision on Thursday said that the re-default rate of loans modified in the first quarter of 2009 was 51.5% by the end of the year. While depressed home prices and low current mortgage rates continue to make it a strong buyer’s market, many homeowners are struggling to make payments as basement-level home prices are forcing them to owe more than their homes are actually worth. The median price for an American home was $165,000 in February 2010, down a disturbing 28% from its peak in July 2006.

Approximately 24% of properties with a mortgage were underwater (meaning the value of the home has sunk below its mortgage value) in the fourth quarter 2009. According to Sam Khater, a senior economist at First American CoreLogic, modifications “clearly are not working well and it’s not a surprise. It’s pointless to rewrite these loans because they’re underwater.” In 2010, 4.5 million foreclosure filings are expected, and the Obama administration is pressuring lenders to alter loans to reduce the number of properties lost to foreclosure.

The administration’s $75 billion Home Affordable Modification Program (HAMP) has come under a lot of scrutiny, and critics such as the Special Inspector General for the Troubled Asset Relief Program argue that “the program will not be a long-term success if large amounts of borrowers simply re-default and end up facing foreclosure anyway.” In order to improve the HAMP and help reduce the number of home foreclosures, the mortgage modification program is going to be modified itself effective June 1.

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Category: Current Mortgage Rates, Mortgage Rate Trends and Analysis, Stimulus
Mortgage Modification Program to be Modified Itself
By Robert Hyder on March 26, 2010

Effective June 1, the Obama administration’s $75 billion Home Affordable Modification Program (HAMP) will be modified itself to force mortgage loan servicers to take a more proactive approach in helping struggling homeowners who are facing foreclosure. Essentially branded ineffective, the program will undergo long-desired changes designed to expand its outreach while also accelerating the process.

Mortgage servicers will be required to prescreen all borrowers who have missed at least two monthly mortgage payments to ascertain eligibility into the program. If the borrowers meet the eligibility requirements for HAMP, the mortgage servicers “must proactively solicit those borrowers” to participate. Additionally, the program will be expanded to incorporate homeowners that have already filed for bankruptcy protection. Mortgage servicers will be expected to streamline the decision process and expedite the documentation process.

At a hearing before the Committee on House Oversight and Government Reform, Herbert M. Allison, Jr. announced the amendments to the program. Allison is the Assistant Secretary for Financial Stability and Counselor to the Secretary of the Treasury. As critical opponents to HAMP, many Congressional leaders from both sides of the isle have brought into question the effectiveness of the program.

Introduced approximately one year ago, the intent behind HAMP was to reduce monthly mortgage payments for borrowers to prevent foreclosure while incentivizing mortgage servicers for each modification they perform. The program aspires to modify mortgage loans for 3 to 4 million homeowners by 2012. Permanent modifications have increased by nearly 45%, but nonetheless falls significantly short of the program’s lofty goal. The most recent Treasury report indicates that more than 170,000 permanent modifications have been completed and that number continues to rise. The upcoming changes to the program should certainly facilitate sustained growth.

Continuous complaints from a growing number of homeowners getting the runaround and being frustrated with delays caused by the servicers have triggered the overhaul of the program. Congressman Edolphus Towns (D-NY), Chairman of the committee said, “We continue to hear numerous reports of borrowers who want to participate in HAMP, but just don’t know where to begin â€¦ If they do begin, they often encounter unresponsive lenders, repeated incidents of lost paperwork and a variety of other administrative frustrations.”

Allison responded to the criticism by defending the program’s intentions and noted the changes to the program are designed to address such complaints. “The administration has made substantial progress in implementation and has seen initial signs of housing stability, but a number of critical challenges remain.”

Robert Hyder

Category: Stimulus
Bank of America to Offer Principal Reduction Plan
1 By Robert Hyder on March 24, 2010

According to an earlier report by Reuters, Bank of America is expected to announce a plan today that will forgive a portion of a borrower’s principal balance on their mortgage loan if they owe more than 120% of their home’s value. Additionally, the plan will include principal forgiveness on loans with negative amortization.

As outlined by Reuters, the program will commence in May. The program entails Bank of America offering borrowers who remain current with their monthly mortgage payments a five-year, interest-free forbearance period. The intention of the five-year, interest-free forbearance period is to provide a strategic timeline in which homeowners have an opportunity to reduce the loan-to-value (LTV) of their home back to 100%.

While the federal government’s efforts have largely been concentrated on keeping mortgage rates artificially low, Bank of America’s plan to reduce a homeowner’s principal balance is one of the first of its kind by an independent lender. Many homeowners are so deeply underwater that they are simply walking away from their mortgage obligations. By taking the initiative, Bank of America hopes to prevent the foreclosure crisis from intensifying. Regardless, many mortgage analysts are predicting the foreclosure dilemma will indeed amplify as we progress deeper into 2010, much to the chagrin of the federal government who has made little effort to thwart declining home values.

During the housing economy’s heyday when obtaining a mortgage loan was nearly as easy as ordering a pizza, borrowers were lured into accepting mortgage loans with negative amortization. Negative amortization is the gradual increase in the principal balance when the monthly mortgage payment is not enough to cover the principal balance and interest due. This feature resulted in continually increasing principal balances, leaving homeowners deeper and deeper underwater. On loans with a negative amortization feature, Bank of America intends to reduce the principal balance to as low as 95% of a home’s value. Presumably scheduled to begin in May, Bank of America must first identify the borrowers who may be eligible for the program.

Robert Hyder

Category: Stimulus
Foreclosure Prevention Program Helps Over 170,000 Homeowners
1 By Robert Hyder on March 23, 2010

To date, the Obama administration’s foreclosure prevention plan has assisted more than 170,000 homeowners receive permanent mortgage modifications. According to a recent report by the U.S. Treasury Department, an additional 91,800 permanent modifications have already been approved by servicers, and are simply awaiting acceptance by the borrowers to take effect. Furthermore, as of the end of February, more than 1 million homeowners took advantage of the Home Affordable Modification Program (HAMP) and are receiving an average savings of approximately $500 on their monthly mortgage payment. That $500 per month figure represents a median monthly decrease of 36% and a cumulative savings of more than $2.7 billion.

According to the Making Home Affordable Program Servicer Performance Report through February 2010, permanent modifications have reached almost 45% of the goal of 3-4 million modifications by 2012. The most recent Treasury report indicates the number of homeowners receiving permanent assistance has been steadily increasing. In February alone, more than 72,000 new trial modification applications were submitted. As the Obama administration continues to intensify the pressure on mortgage servicers to make a determination on homeowners whose applications are in the trial period, these figures will undoubtedly rise further.

Despite employment figures showing signs of recovery, some mortgage experts suspect more needs to be done. Applicants of the trial mortgage modifications are not guaranteed permanent assistance. A large number of homeowners have been rejected from the trial period for not meeting the program’s minimum standards. Some analysts are predicting that many of these homes will be forced to go on the market. With an additional influx of homes for sale, prices may start to decline again due to too much supply.

However, a new foreclosure alternative will soon be executed to help such homeowners. The Obama administration continues to implement new ideas to soften the blow for homeowners facing foreclosure. Those who do not qualify for mortgage modifications will soon benefit from a plan in which the federal government will pay borrowers and banks to complete short-sale transactions.

Although the federal government’s efforts have been helpful to many, it has been futile to far too many. An increase in foreclosures is expected again in 2010, so we’ll just have to wait and see what the Obama administration will do next.

Robert Hyder

Category: Stimulus
HAFA Provides Foreclosure Alternatives
By Michael Kraus on March 8, 2010

Like a stone thrown into a pond, the subprime mortgage crisis has caused ripples that have effected almost every sector of the U.S. economy. Many homeowners now owe more on their mortgage than their home is worth. As many as five million borrowers are delinquent on their mortgages. The one-two punch of declining home values and staggering unemployment has caused the foreclosure rate to skyrocket, further depressing home values and creating a vortex that threatens to suck down the inchoate economic recovery.

The Obama Administration has a plan to solve this problem. Starting in April, the government will begin the Home Affordable Foreclosure Alternatives (HAFA) program. The program will provide incentives to borrowers and lien-holders to encourage short sales and debt forgiveness so that the economy can fully recover. HAFA will allow those who cannot keep their house under the Home Affordable Refinance Program (HAMP) to more easily pursue a short sale and avoid foreclosure.

A short sale is when a house which is underwater, and generally at risk of foreclosure, is sold for less than the remaining amount on its mortgage. The lender then forgives the remaining debt and the former homeowner can start anew. Frequently this process is stymied by a second mortgage holder on a home. Rep. Barney Frank, Chairman of the House Financial Services Committee recently sent a letter to four of the largest American banks stating that “second-lien mortgages are now a principal obstacle to many modifications, and that the problem has reached a critical stage and requires immediate attention. Frank also explained that many of the second liens have no real value, as the first liens are underwater, and the chances for any return on the second lien is negligible. The majority of second lien holders are banks.

There are two main reasons banks are reluctant to write off second mortgages. The first is that writing them off en masse would be hugely detrimental to their capital and bottom line. The second is that while foreclosure eliminates the first lien on a home, the borrower may still be obligated to pay off the second mortgage debt. If the borrower is broke, banks usually do not bother to pursue the debt but they retain the option to do so.

Under HAFA, holders of second-lien mortgages would receive up to 3% of the unpaid loan balance, up to a maximum of $3,000, for giving up all claims in the event of a short sale. Additionally, the borrower would get $1500 for relocation assistance, and servicers would get $1000 to cover administrative and processing costs, and first lien holders would get $1000 for allowing $3000 in short sale proceeds to be paid to subordinate lien holders. These subordinate lien holders must agree not to pursue deficiency judgments. Borrowers would be fully released from future liability for mortgage debt.

There are several benefits to these short sales. The investors that own home loans generally get more money out of a short sale than in the case of foreclosure. Foreclosed houses are often in poor condition which hurts the value of the house as well as that of the surrounding properties. Borrowers who participate in a short sale have less damage to their credit rating than in a foreclosure and are relieved of their debt burden. Lastly communities avoid the blight of foreclosed and abandoned homes.

A solution to the foreclosure problem would be a major step in the healing of our economy and helpful to all homeowners, underwater or not. For help with all your mortgage needs contact our experts at 877-868-2503.

Category: General, Stimulus
Current Mortgage Rates Drop Back Below Percent
By Michael Kraus on March 5, 2010

Current mortgage rates fell back below 5 percent this week following promising signs for the economy. The average rate on 30-year fixed rate mortgages was 4.97 percent, eight basis points lower than the previous week.

Rates have been kept low by the Federal Reserve’s purchase of $1.25 billion worth of mortgage backed securities, which it will cease doing at the end of March. It is unclear what will happen when the Fed withdraws this support from the market. The federal government’s first home buyer tax credit also expires at the end of April. The consequence of its expiration also remains to be seen.

This news follows closely the news that the economy lost fewer jobs than expected in February. The unemployment rate stayed at 9.7 percent, while economists predicted it would rise to 9.8 percent. Stocks and oil rose in early trading on Friday after the employment news broke. There is guarded optimism that the employment picture may finally be stabilizing.

Retail sales also rose 3.7 percent in February, the biggest one-month gain since 2007. This is the third consecutive monthly retail increase. Factory orders also rose 1.7 percent in January, and durable goods purchases went up 2.6 percent. Factory orders have gone up nine out of the last ten months.

Although existing home sales dropped 7.6 percent in January, many economists believe this is due at least in part to the unusually bad weather across much of the country. Foreclosures were up in January over the previous year, and it will likely take several years for the housing market to totally recover, and that the recovery is largely predicated upon a better employment picture.

The Federal Reserve has repeatedly indicated that it will keep interest rates low in the near future to support the fledgling economic recovery, but that rates will likely increase sometime in 2010 to combat inflationary pressures.

Right now Total Mortgage Services is offering some of the best current mortgage rates in the nation, 30 year fixed rates starting at 4.5 percent, 30-year jumbo mortgage rates starting at 5.75 percent, and five-year adjustable mortgage rates starting at 3 percent.*

*Mortgage rates are volatile and may change multiple times in a day. All mortgage rates quoted as of 10AM on Friday, March 5th.

Total Mortgage Services would like to assist you with all your mortgage needs. To speak with one of our mortgage experts, call us today at 888-868-2509.

Category: Mortgage Rates, Stimulus
HARP Extended for Another Year
By Robert Hyder on March 2, 2010

In a press release published this morning, Ed DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), announced the Home Affordable Refinance Program (HARP) will be extended for an additional year. The original expiration date for the popular program was set for June 10, 2010, but has now been extended to June 30, 2011.

While mortgage analysts believe current mortgage rates will rise when the Federal Reserve completes its purchase of the $1.25 billion in mortgage-backed securities by the end of March, FHFA believes market conditions have not changed significantly enough to justify ending the program this year. According to DeMarco, “FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed â€¦ Accordingly, to support and promote market stability, and to encourage lenders and other mortgage market participants to fully adopt the HARP program, including the implementation of the October 2009 expansion of loan-to-value ratios (LTVs) to 125 percent, FHFA is authorizing the extension of HARP until June 30, 2011.”

Established in April 2009 under the Obama administration’s $75 billion Home Affordable Modification Program (HAMP), the HARP program is designed to help homeowners whose mortgage loans are owned by either Fannie Mae or Freddie Mac, and the value of their homes is less than they owe on their existing mortgage. Of the nearly one million homeowners eligible for the HARP program, it is estimated that approximately 119,000 have been afforded the benefit of the historically low current mortgage rates. Of the nearly 900,000 remaining homeowners, many are either ineligible for the program, or merely have not completed the process of enrolling.

Robert Hyder

Category: Stimulus

New Jersey Mortgage Rates and Outlook

By Michael Kraus on February 26, 2010

Like most states, New Jersey did not come out of the economic turmoil of the last three years unscathed. Despite low mortgage rates in New Jersey, overall median home values fell 12.4% across New Jersey over the last three years. Foreclosure rates rose and houses languished on the market.

The New Jersey housing market can be divided into two segments: North Jersey which includes part of the New York City Metro Area, and the central and southern portions of the state which include part of the Greater Philadelphia Metro Area.

In juxtaposition to most other parts of the country, 2009 was not a terrible year for the housing market in South/Central New Jersey. Home sales were stable, and while house prices fell, the losses were in single digits. The amount of time it took to sell a house remained approximately the same. The market actually grew slightly in the second half of the year.

In contrast, home values in Northern New Jersey took a beating, falling 5.5% in the fourth quarter of 2009 alone. The median home value is now $434,000, off more than $100,000 from 2006 peak prices. Proximity to New York City has hurt North Jersey more than other portions of the state because the run-up in home values was more exacerbated during the bubble years and the market is slower to correct. Homes on the lower end of the pricing spectrum are selling relatively quickly, suggesting that cheaper houses are now properly valued.

There are several drivers behind the improving market, among them are low current mortgage rates, government programs such as the first time home buyer tax credit, reduced home prices, and increased housing demand. It is difficult to predict what will happen in New Jersey once government support is removed from the housing market. At the very least the Federal Reserve pledged to keep interest rates low in the near term until the economy exhibits more stability. Most analysts agree that in order for a sustained recovery to occur, unemployment must decrease so that consumers feel more confident purchasing a home.

new-jersey-housing-market

Despite the challenging market New Jersey real estate remains a superb long-term investment. New Jersey real estate has been an exceptional long-term investment. Despite the set-backs of the last three years, New Jersey home values increased 6% over the last five years according to the Federal Housing Finance Agency. The median home price has risen 129% since the agency started keeping statistics in 1991. Total Mortgage Services offers some of the most competitive mortgage rates in New Jersey:

Loan Type	Rate	APR
New Jersey 30 Year Fixed Conventional Mortgage	4.5%	4.710%
New Jersey 15 Year Fixed Conventional Mortgage	4.0%	4.363%
New Jersey 30 Year Fixed FHA Mortgage	4.500%	5.422%
New Jersey 30 Year Fixed Jumbo Mortgage	5.750%	5.969%
New Jersey 15 Year Fixed Jumbo Mortgage	4.0%	4.352%
New Jersey 5/1 ARM Conforming Mortgage	3.00%	3.269%
New Jersey 5/1 ARM Jumbo Mortgage	3.625%	3.305%

* All rates shown are for 30 day rate locks. Longer locks available. The APR for conventional loan amounts is calculated using a loan amount of $417,000, 2 points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for jumbo loan amounts is calculated using a loan amount of $500,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for FHA loan amounts is calculated using a loan amount of $295,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. Some rates and fees may vary by state. All interest rates listed are for qualified applicants and are subject to mortgage approval. All rates are subject to change without notice. All rates assume a credit score of 740+ and are subject to change. Rates are quoted from Totalmortgage.com as of 3PM on Thursday, February 25, 2010.

Total Mortgage Services has been providing the New Jersey market for more than a decade. From Asbury Park to Cape May, from Bayonne to Cherry Hill, Total Mortgage provides the best combination of rates, customer service, and customized lending solutions you will see anywhere. To speak to one of our loan specialists, call 888-868-2509 today.

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Category: FHA, Fixed Rate Mortgages, Jumbo Mortgage, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Stimulus

Federal Government Considering Additional Protection for Troubled Homeowners
By Robert Hyder on February 25, 2010

The Obama administration has continually made great efforts to assist troubled homeowners during the most-recent economic downturn that particularly affected the housing market. While constantly reevaluating their efforts, the federal government is again mulling another change to the mortgage relief program that will ensure homeowners are dealt with fairly and equitably.

The Associated Press obtained a draft of the new policy from the Treasury Department. A summary of the draft outlined a number of ongoing criticisms by housing counselors concerning the treatment of homeowners who were already in the process of being considered for help. Housing counselors have pointed out numerous instances in which some lenders have actually continued with the foreclosure process with the knowledge that the homeowners were already in the midst of being evaluated for mortgage assistance. The new policy specifically targets and bans this action by lenders. Although the document obtained by the Associated Press “has not been approved and there are no immediate planned announcements on the issue,” Meg Reilly of the Treasury Department’s Public Affairs office did confirm its authenticity.

Contained within the new policy will be strict enforcement of mortgage lenders halting the foreclosure process once a borrower is enrolled in the mortgage relief program. If a homeowner is eliminated from consideration from the mortgage relief program, they will be given a 30-day period in which they can appeal the decision. During the appeal process, mortgage lenders would not be allowed to resume legal action. However, they would be permitted to arrange a foreclosure sale, but would not be permitted to carry it out until the appeal process is complete.

In addition, mortgage lenders would be obligated to review applications from borrowers who are in bankruptcy. Previously, lenders were not required to do so as it was optional for such borrowers. Under the $75 billion Home Affordable Modification Program, borrowers whose mortgage loans were owned by either Fannie Mae or Freddie Mac had an opportunity to take advantage of the historically low current mortgage rates. Unfortunately, there are still nearly one million homeowners who are either not eligible for the program or simply did not complete the process of enrolling. Of the approximately one million homeowners who are eligible, only approximately 116,000 have been able to benefit from the program.

â€“Robert Hyder

Category: Stimulus
Interest Rates to Remain Low for Foreseeable Future
By Michael Kraus on February 25, 2010

Federal Reserve Chairman Ben Bernanke made the Fed’s semiannual monetary report to congress on Wednesday. Citing continued high unemployment and the still shaky economy the Fed Chief indicated there are no plans to raise the prime rate in the near future, which means current mortgage rates should remain low.

Bernanke said that “Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures”.

Bernanke further predicted that the economic recovery would be slow, that consumer demand was growing “at a moderate pace” and that the “job market remains quite weak”.

New homes sales fell 11.2% in January, and many analysts are worried about what will happen to the housing market when the government ends the first time home buyer tax credit. Bernanke assured Congress that the Fed will continue to support the housing market by keeping interest rates low and holding onto the $1.25 trillion worth of mortgage backed securities it purchased. This support will likely continue until the economy is more stable or inflation becomes too great.

This is good news for those looking to purchase a new home or refinance their current mortgage. Although the Federal Reserve clearly intends to raise rates in the future, rate hikes do not seem probable until the economy is further along the road to recovery.

Category: Mortgage Interest Rates, Mortgage Rates, Stimulus