Mortgage Rates & Trends: Mortgage Blog

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  1. Mortgage Originations Expected to Double

    8 By Robert Hyder on March 30, 2009

    by Robert Hyder

    Over the next several months, a heavy volume of mortgage originations is expected. The reason is because of President Obama’s Homeowner Affordability and Stability Plan. This plan has prompted Fannie Mae to release their newest version of Desktop Underwriter, named DU Refi Plus. DU Refi Plus will loosen financing standards, still enabling homeowners who have lost equity in their homes to refinance and save tens of thousands of dollars over the life of their mortgage loan. DU Refi Plus alone is a fantastic start to reenergize the housing market, but coupled with historically low interest rates, many experts believe mortgage originations may double to an astonishing $3.1 trillion.

    As a result of the low interest rates and the release of DU Refi Plus, there is legitimate concern that mortgage lenders will not be able to accommodate the capacity of originations that are expected to flood their operations centers in the coming months. After cutting their workforces, lenders will certainly be hard pressed to keep up with the demand. To soften the impact, lenders may deliberately increase their mortgage interest rates to slow business.

    The anticipated increase in mortgage interest rates may only be a short-term solution. To counter the demand, mortgage lenders have been ramping up by hiring more staff. President Obama recently met with U.S banking executives in Washington to discuss the financial crisis. After the meeting, Bank of America CEO Ken Lewis told reporters that his bank has hired as many as 5,000 new employees “just to handle the capacity.”

    In addition, DU Refi Plus will assist in streamlining the underwriting process by forgoing appraisal requirements because Fannie Mae already holds the credit risk. This will enable mortgage lenders to handle more loans because their underwriters will not be forced to meticulously evaluate a good portion of the underwriting process. Private mortgage insurance (PMI) requirements will also be waived on loans that would normally require it, as long as the existing mortgages do not.

    Obama’s efforts to stem foreclosures and enable mortgage lenders to make more loans are encouraging on the housing front.

    Category: Current Mortgage Rates, Mortgage Rate Trends and Analysis, Stimulus

  2. Anticipation for DU Refi Plus Growing

    4 By Robert Hyder on March 24, 2009

    by Robert Hyder

    The heavily anticipated release date of Fannie Mae’s DU Refi Plus is a mere 11 days away. As a result of the near historic-low current mortgage interest rates, America is already in the midst of a mini refi boom. Now add DU Refi Plus into the mix, and the mortgage application rate may reach never-before-seen highs. Unfortunately, there are millions of Americans painstakingly waiting for the calendar to turn to April 4 to take advantage of these low mortgage interest rates.

    The reason these homeowners are forced to wait for the release of DU Refi Plus is because the equity in their homes has significantly decreased along with property values. The existing guidelines within the current Desktop Underwriter will not allow an LTV anywhere close to the maximum 105% DU Refi Plus has in store.

    Maybe even more impressive than the maximum LTV of 105% presented in DU Refi Plus is updated guideline concerning private mortgage insurance. DU Refi Plus will waive the need for private mortgage insurance if the LTV goes above 80% as long as the existing mortgage does not require it. With the continuous decline in property values, DU Refi Plus will help millions of homeowners that wouldn’t otherwise qualify for a refinance mortgage loan.

    Property eligibility under DU Refi Plus includes all property types, including:

    •    Co-ops
    •    Condos
    •    Manufactured Homes
    •    PUDs

    Primary residences, as well as investment properties, are eligible for 1 to 4 units under DU Refi Plus. Second homes are eligible for 1-unit properties.

    DU Refi Plus: 11 days and counting …

    Category: Current Mortgage Rates, General, What's new at Total Mortgage

  3. Mortgage Applications on the Rise Due to Low Mortgage Rates

    By Robert Hyder on March 13, 2009

    by Robert Hyder

    As mortgage interest rates continue to hover near historic lows, mortgage applications for both purchases and refinances continue to increase. When housing prices reached their peak in 2005, the housing crisis was not far behind. Increased foreclosure rates in 2006 and 2007 led to an all-out housing crisis by August 2008, prompting then Secretary of Treasury Henry Paulson to say the housing crisis is “the most significant risk to our economy.”

    Several weeks after President Obama revealed the Homeowner Affordability and Stability Plan, the nation’s strongest tactic to aid homeowners since the crisis began, coupled with near record-low mortgage rates, and the demand for mortgage applications has increased significantly. For the week ending March 6, the Mortgage Bankers Association said their seasonally adjusted index of mortgage applications increased by an astounding 11.3%, just in time for spring, the high-point of the year for home buying.

    In an effort to spur an increase in mortgage applications, Obama’s plan is intended to provide much-needed assistance for quality borrowers wishing to refinance and to stimulate the homebuying process, in addition to allieviating the foreclosure rate.
    Many experts believe the current mortgage rates are at such attractive levels that the increase in mortgage applications may continue to climb for several more months. The significance of low mortgage rates combined with the increased volume of mortgage applications is a decent indicator that the housing delema is beginning to recover.

    Category: General, Mortgage Rate Trends and Analysis, Stimulus

  4. Who Owns My Mortgage Loan?

    6 By Robert Hyder on March 11, 2009

    by Robert Hyder

    There is a substantial difference between the owner of your mortgage loan and the servicer of your mortgage loan. Finding out exactly who owns your mortgage loan can be a daunting task. Just because you make your monthly mortgage payment to a particular lender doesn’t automatically suggest they are the owner of your mortgage loan. The lender who collects your monthly payment may simply be the servicer, while the actual owner may have bought or traded for your individual mortgage loan on Wall Street.

    All is not lost, however. In order to find out who the owner of your mortgage loan is, you must first identify who is your servicer. Mortgage Electronic Registration System (MERS) is an automated system that monitors the owners of a mortgage loan and note as it is bought, sold or traded among investors. MERS also monitors who services the mortgage loans for these investors. MERS, however, will not disclose to individuals who the investor may be, but they will make available the servicer and their contact information.

    The servicer is the mortgage company that manages the routine tasks associated with your mortgage loan. Some of the duties the servicer provides include:

    Answering Borrower’s Questions
    Accounting for Principal and Interest Amounts
    Escrowing for Property Tax and Hazard Insurance Payments
    Collecting Loan Payments
    Remitting Loan Payments
    Providing Counseling for Delinquent Borrowers
    Supervising Foreclosure Processes and Property Dispositions

    To determine who is servicing your mortgage loan, you can call MERS at 888-679-6377 or visit their web site online at www.mersinc.org. Once you have this information, the servicer should then be able to let you know the identity of the owner of your mortgage loan.

    Many times, the owners of a significant number of mortgage loans are Fannie Mae and Freddie Mac. To find out if Fannie Mae or Freddie Mac is the owner of your particular mortgage loan, you can visit the following web sites:

    Fannie Mae: http://www.fanniemae.com/homepath/homeaffordable.jhtml
    Freddie Mac: https://ww3.freddiemac.com/corporate/

    If you have and FHA mortgage loan, it may be helpful to call HUD National Servicing Center at 800-CALL-FHA (225-5342) to determine who is the proud owner of your mortgage loan.

    Category: General

  5. Range Trade and Mortgage Out-performance creates Locking Opportunity

    By marckaplowitz on March 10, 2009

    Over the past few months, Fixed Income markets have remained in a state of flux as traders attempt to assess an ever-weakening economy, 20 year lows in equity prices, and massive supply from fiscal stimulus.  The net effect of these forces have held 10 year treasury yields in a relatively tight range.  The below table keys on closing 10 year yields and closing Fannie 30 yr April MBS prices.

     

    Comparison of Fannie 30 yr 4.5 April vs. 10 Year Yield
       
      13-Jan 15-Jan 20-Jan 23-Jan 28-Jan 2-Feb 5-Feb 10-Feb  
    10 Year Yield: 2.33 2.23 2.40 2.65 2.71 2.76 2.95 2.90  
    FNMA 4.5 April 101.50 101.00 100.88 100.69 100.66 100.22 100.06 100.78  
       
      13-Feb 18-Feb 23-Feb 26-Feb 3-Mar 6-Mar 9-Mar Min Max
    10 Year Yield: 2.89 2.74 2.78 2.98 2.93 2.83 2.89 2.23 2.95
    FNMA 4.5 April 100.41 100.69 100.66 100.03 100.44 100.72 100.86 100.06 101.50

     

    Over the past few weeks, MBS prices in relation to treasuries have been particularly well bid as Hedge Funds, Commercial Banks, and large servicing platforms have seen value in the sector and stepped in with full force.  Mortgages trading tighter to treasuries in conjunction with our present price levels being in the upper quartile of our trading range have created an opportunity for borrower to exploit.

    Over the past 3 weeks, the 10 yr has sold-off from 2.74% to close to 3.00%, yet mortgage prices have improved about .25 pt.  Eventually, this trade will reverse and mortgages will under-perform in relation to treasuries.  However, this recent trade creates great opportunity as current mortgage rates have trended down.  Take advantage of this opportunity as it will be short-lived.

     

    www.totalmortgage.com

    Category: Mortgage Rate Trends and Analysis

  6. The Push and Pull on Mortgage Rates…

    By marckaplowitz on March 9, 2009

    The present push and pull on mortgages is the weight of massive fiscal stimulus related treasury supply (Very inflationary) vs. treasury/Fed signaling of MBS purchases.  Aside from the Federal Government, it’s difficult for traditional MBS investors to justify buying low coupon MBS securities with the threat of built up inflation on the horizon (More interest in owning 5 & 5.5 coupons as opposed to 4 & 4.5).  Their fear is mortgage rates rise, existing borrowers have a lesser incentive to refinance, mortgages stay on their books for longer periods of time with the prospect of having to be marked down to current market (4’s trading in the 98s today will probably be trading at 90 in 4 years…market to market accounting of present day MBS value)

    In the long run, fixed mortgage rates have to rise.  However, the short run could be longer than expected.  Sharp up-tick in unemployment rate and present economy still pretty horrible

    As markets show any signs of stability, fixed rates rise, but spread between shorter end of curve and adjustable rate mortgages decline… I.e. The people refinancing into fixed agency eligible today might have an incentive to refi into mid – term arms in 12 – 16 months

    Category: Mortgage Rate Trends and Analysis

  7. Bill To Give Bankruptcy Judges More Power Passes House

    2 By Robert Hyder on March 6, 2009

    by Robert Hyder

    Yesterday, members of the House voted 234 to 191 in favor of granting bankruptcy judges additional authority to modify mortgages on primary residences. For over 30 years, judges have had this authority on almost all forms of property, including second homes and investment properties, but never before on primary residences. This major initiative would provide these judges with the power to alleviate the amount of principal owned on an existing mortgage.

    However, before the bankruptcy judges would be able exercise this newfound authority, homeowners would first have to voluntarily inquire with their current lender about modifying their mortgage payments at least 30 days prior to going to bankruptcy court. Furthermore, homeowners would have to agree to share in any profits they would acquire should they sell their home within five years of an adjustment. As the legislation stands now, if a homeowner profits from selling their home within five years of an adjustment, the lender would receive 90 percent of the profits if the home was sold in the first year after the mortgage revision, 70 percent in the second year, 50 percent in the third year, 30 percent in the fourth year, and 10 pecent in the fifth and final year. This revision is part of a much broader housing bill that is certain to face a much stiffer test in the Senate.

    Supporters of this bill seem to be very optimistic of its passing through the Senate on it’s way to the Oval Office. With the number of foreclosures continuing to climb, it is quite possible that this bill will become law as early as next week. “This is the same opportunity that owners of vacation homes, investment properties, private jets [and] luxury yachts have long enjoyed … I think it’s only fair that we offer it now to average families as well,” said Democratic Representative Zoe Lofgren of California’s 16th Congressional District.

    There are many supporters of this measure that are anticipating the prospect of a court order would motivate lenders to amend existing mortgages before they are forced to do so. However, this measure has some strong opposition, as well, stemming mainly from the mortgage industry itself, and echoed by many members of the GOP. Opponents argue that this new bill would make bankruptcy too viable of an option for homeowners, thus flooding the courts. In addition, those opposed suggested the bill would force mortgage rates skyward because lenders would have to offset the risk of current mortgages being reduced. Republican Representative Dan Lungren of California’s 3rd Congressional District said, “It is a classic example of the law of unintended consequences … When you introduce additional risk … you are going to jeopardize the accessibility and eligibility of these mortgages to everybody.” Republicans fear the bill makes bankruptcy a first choice rather than a last resort.

    Both sides of the isle agree, however, that until the foreclosure rate is back to normal, we will not see an end to the current crisis.

    Category: General, Stimulus

  8. The Tax Man Cometh: Top 10 Tax Deductions for Homeowners

    12 By Robert Hyder on March 4, 2009

    by Robert Hyder

    “The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” These wise words from Mark Twain’s couldn’t be more prudent today, well over 100 years after he penned this infamous quote.

    Without question, homeownership is an expensive endeavor. For many Americans, this undertaking is their biggest expense and most important asset. From purchasing the home to maintaining and repairing it over the years, the expenses really add up. Particularly in today’s economy, homeowners should always take advantage of the tax credits available to them.

    Below are my top 10 deductions for homeowners come tax time. Of course, homeowners should consult a financial advisor or tax professional for more information or details.

    1. Mortgage Interest:  As long your mortgage (or mortgages) does not exceed $1 million, then your mortgage interest can typically be fully deducted.

    2. Points Paid:  Whether the points were paid on a purchase or a refinance, you may be able to write them off. To deduct the points on a refinance, they must be deducted equally over the entire term of the new loan. In addition, if you have refinanced before, you can still write off the rest of those points in the year you refinanced again. The points you paid on a purchase are deductible on your income tax for that year. In addition, if the seller paid any or all of the points on your behalf, you may be able to deduct those points, as well.

    3. Real Estate and Property Taxes:  Real estate taxes are deductible only in the year they are actually paid. However, property taxes are eligible to be deducted as an expense against your income.

    4. Home Improvements:  If you’re in the market to sell your home, home improvements may increase the selling price. However, you cannot deduct the expenses associated with improving your home. The benefit of increasing your home’s value is realized in a tax credit when the capital gains tax (see #5) is assessed.

    5. Capital Gains with No Income Tax:  Once every two years, single homeowners can accept a tax-exempt profit up to $250,000, as long as they owned and occupied the home as a principal residence during any two of the last five years before they sold. For married homeowners who file joint tax returns, they can realize a tax-exempt profit up to $500,000 when they sell their primary residence.

    6. Private Mortgage Insurance (PMI):  As long as you bought or refinanced your home on or after January 1, 2007 and have an adjusted-gross income less than $100,000, you can deduct the private mortgage insurance through 2010.

    7. Home Office:  If you work from home, you may qualify for a deduction of costs associated with maintaining your work area. Direct expenses such as office supplies, paint and upkeep are deductible. In addition, a portion of indirect expenses such as phone, electricity, air conditioning and heat may be deductible, as well. This is determined by the square footage of your home office when compared to the square footage of your entire home.

    8. Energy-Efficient Improvements:  Don’t expect to get all of your money back, but tax credits are the next best thing if you spend:

    • $50 for an air-circulating fan

    • $150 for installing an energy-efficient furnace or boiler

    • $200 for installing energy-efficient windows

    • $300 for installing an energy-efficient central air conditioner, water heater or heat pump

    • $150 for installing a qualified natural gas, propane or oil furnace

    • $150 for installing a qualified natural gas, propane or hot water boiler

    9. Moving Expenses:  If you have recently relocated at least 50 miles for work, you may be able to write off the cost of the move.

    10. Vacation Homes:  As is the case with a primary residence, you can deduct some of the costs associated with owning a vacation home, as well. These deductions include the mortgage interest (see #1), points paid (see #2), and real estate taxes and property taxes (see #3).

    Category: General, Stimulus

  9. Robert Hyder

    1 By Robert Hyder on March 3, 2009

    Robert Hyder is a mortgage market analyst working in the Secondary Markets Department for Total Mortgage Services, LLC. Total Mortgage Services, LLC is an industry leading mortgage broker and lender, offering some of the lowest current mortgage rates in the country. Hyder is a mortgage and financial services expert, having worked for prominent corporations such as Citigroup and Northwestern Mutual Financial Network. Hyder’s outside interests include spending time with his wife and two children.

    Category: General

  10. AIG Losses Affecting the Housing Market

    By Robert Hyder on March 2, 2009

    by Robert Hyder

    When American International Group (AIG) posted its nearly $62 billion loss for the fourth quarter of 2008, the Dow Jones tumbled 205 points (2.9%), just over two hours into Monday’s trading session. The $62 billion fourth-quarter loss, the largest loss in United States history, is part of AIG’s reported $99 billion loss for 2008, after reporting a profit of $9.3 billion the year prior.

    At its lowest point in nearly 12 years, AIG pulled the stocks of several major banks along for the downward ride. For the third time, the federal government is revising the bailout of AIG in an effort to keep the company from collapsing, and thus contaminating the entire financial market, including the already distressed housing market.

    In exchange for cumulative preferred stock, the federal government will commit another $30 billion to the insurance giant. The Treasury Department and the Federal Reserve said, “Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high.”

    Stocks were expected to continue to fall today, on the heels of Friday’s announcement by the federal government to control as much as 36% of Citigroup’s common stock. The Citi news, in addition to a report that reflected America’s economy shrank at its swiftest pace in 26 years during the fourth quarter of 2008, it’s no wonder today’s AIG announcement has pushed the Dow to it’s lowest trading level since April 1997.

    Category: General
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