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  1. 30 Year Mortgage Rates Fall to New Lows

    By on January 19, 2012

    The benchmark 30 year fixed rate mortgage fell to a new all-time low today, according to Freddie Mac’s Primary Mortgage Market Survey.  The decrease was not substantial, as the average rate on a 30 year fixed rate mortgage fell one basis point from 3.89% to 3.88%.  15 year fixed mortgages increased one basis point to 3.17%.  The average rate on a 5/1 ARM remained the same, at 2.82%, while the 1 year ARM fell two basis points to 2.74%.

    Rates have hit record lows for the last three weeks, although none of the declines have been particularly large.  The 30 year fixed mortgage has been at or below 4.00% since the beginning of November.

    The low rate environment persists despite U.S. economic data that is slowly strengthening.  The Federal Reserve has stated that it will maintain its zero interest rate policy at least through 2012, and the situation in Europe in helping to keep rates artificially low.  Although I am not optimistic that the Euro-debt situation will be resolved any time in the near future with any sort of finality, a resolution to the situation could allow rates to spike.  It appears to me that the euro situation is one of the main factors that is keeping a lid on rates right now.

    If things in Europe take a turn for the worse and the U.S. economy re-enters a recession, the Federal Reserve has signalled that it could engage in a third round of quantitative easing, which could entail mass purchases of mortgage backed securities.  QE3 would almost certainly drive rates lower, how much lower would depend upon the scale of purchases.  The possibility of QE3 depends on a lot of factors, including the U.S. employment picture, the situation in Europe, the general health of the U.S. economy, and the rate of inflation (also important is whether the Fed changes its target level of inflation from 2% to 3%).

    Mortgage rates are trending up today as treasury bonds and mortgage-backed securities sell off.

     

    Category: Mortgage Rates

  2. Congressmen Seek to Subpoena FHFA for Principal Reduction Documents

    By on January 18, 2012

    In a letter to Rep. Darrell Issa, the Chairman of the Committee on Oversight and Government Reform, Reps. Elijah Cummings and John Tierney asked Issa to subpoena the Federal Housing Finance Agency (FHFA) over documents relating to mortgage principal reductions.  The FHFA is the conservator for Fannie Mae and Freddie Mac.  The head of the FHFA, Ed DeMarco, has consistently opposed Fannie and Freddie mortgage principal writedowns.  DeMarco has opposed them on the grounds that principal reductions would cost taxpayers more money than other alternatives to foreclosure.  Cummings and Tierney seek FHFA documents and analysis of potential principal writedowns:

    “During a hearing before the Committee on November 16, 2011, the Acting Director of FHFA, Edward DeMarco, committee under oath to provide these materials to the Committee.  Despite numerous written and oral follow-up requests, however, Mr. DeMarco has failed to provide them”.

    DeMarco’s specific comment during the November hearings was:

    “We have been through the analytics of the underwater borrowers at Fannie and Freddie, and looked at the foreclosure alternative programs that are available, and we have concluded that the use of principal reduction within the context of a loan modification is not going to be the least-cost approach for the taxpayer”.

    Cummings and Tierney noted that several economists have recently advocated principal reductions as a possible alternative to foreclosure.  NY Federal Reserve President William Dudley advocated for “earned principal reduction” in a recent speech.  Further, Fed Chairman Ben Bernanke and his staff wrote a white paper that included principal reductions as a possible means of decreasing the probability of default.  They also cite similar statements from Neil Barofsky, Mark Zandi and Alan Blinder.

    There is about $700 billion worth of negative equity in the housing market.  This is one of the biggest obstacles to a housing recovery, and I am in complete agreement with Adam Levitin that any housing plan that does not address negative equity is not really a plan (Levitin is a Georgetown Professor who has testified before Congress on matters of housing, he addresses the matter of negative equity on his blog).

    If FHFA has good reasons and sound analysis for not doing principal reductions, they should come forward with that information.  Their refusal to do so makes me somewhat suspicious of the quality of their data or the quality of their argument.

    I’ll be interested to see if Issa grants the request for a subpoena.  My gut instinct tells me that it won’t be.  We shall see.

    Category: Mortgage Rates

  3. Freddie Mac Offering Up to One Year Mortgage Forbearance to Unemployed Homeowners

    By on January 9, 2012

    On Friday Freddie Mac announced that it is allowing mortgage servicers to provide unemployed borrowers with six months of mortgage forbearance without its approval, and an additional six month of forbearance with its approval.  These changes are to take effect on February 1, 2012.

    Prior to this point, Freddie Mac allowed servicers to grant three months of forbearance without approval, and six months of forbearance with approval.  According to their press release, 10 percent of delinquencies on Freddie Mac mortgage were tied to unemployment (not to cast aspersions at Freddie Mac statistics, but doesn’t common sense tell us that number should be significantly higher?).  Tracy Mooney, Senior Vice President of Single-Family Servicing and REO for Freddie Mac remarked:

    “These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies.  We believe this will put more families back on track to successful long-term homeownership”.  

    If servicers actually opt to participate in this program, it is probably a good thing for those with Freddie Mac mortgages.  It isn’t a long term fix for the housing market, but this measure will help some homeowners.  For a second, I’d like to jump back to the figure I cited above about 10 percent of delinquencies being attributable to unemployment.  If this is the case, to what are the other 90 percent of delinquencies due?

    Certainly some delinquencies could be due to strategic default.  Some others could be due to loss of income due to medical bills or divorce.  Possibly other people didn’t lose their jobs but had their pay cut.  Still, something seems very off with this statistic.  And if the statistic is true, what is being done to address the other 90 percent of delinquencies?  The mind boggles.

     

    Category: Mortgage Rates

  4. Freddie Mac Makes it Easier for Some Borrowers to Refinance

    By on January 6, 2012

    Quick update here:

    Freddie Mac has eliminated the minimum credit score requirements for borrowers with at least 20% equity in their homes, according to a news release yesterday. Previously, Freddie Mac required a minimum 620 credit score on Freddie Relief Refinances.  In order to be eligible for a Freddie Relief Refinances, your loan had to be purchased by Freddie Mac prior to May of 2009.

    I don’t know how many people this will impact, but if you have home equity but a marginal credit score, you may now be able to refinance at today’s record low rates.  I am sure there are at least a fair number of people who have built up home equity but whose credit scores were dinged as a result of job loss, medical bills, bankruptcy, or otherwise.

    Removing some of the barriers for refinancing makes sense in this case, as Freddie owns these loans already, and doesn’t really take much risk by offering a lower mortgage rate.  If it keeps some of these loans from potentially defaulting, it is a common sense move that costs very little.

    Category: Mortgage Rates

  5. 30 Year Mortgage Rates Finish the Year Close to Record Lows

    By on December 30, 2011

    Freddie Mac’s last Primary Mortgage Market Survey for 2011 was published yesterday.  The rate on the benchmark 30-year fixed rate mortgage rose for the first time in four weeks, from 3.91% to 3.95%.  Rates rose across the board, with the fifteen year fixed rate mortgage, the 5/1 ARM, and the one year ARM all increasing by a couple of basis points.

    Frank Nothaft, the VP and chief economist for Freddie Mac commented in a press release:

    “Mortgage rates ended the year hovering near historic lows in an already affordable housing market.  For instance, the seasonally-adjusted S&P/Case-Shiller® 20-City Composite home price index in October was the lowest seen since March 2003. The largest hit areas were Las Vegas with the lowest reading since January 1997 and Atlanta which was since June 1998. It’s not surprising then that over 5 percent of households in December plan to purchase a home over the next six months, the highest share since May, according to The Conference Board.”

    2011 has been a very good year for mortgage rates, which have set record lows several times over the past twelve months, despite the signs that the U.S. economy is slowly improving (usually mortgage rates improve on bad economic news and get worse with good economic news).  The spectre of economic disaster in Europe is lingering over the U.S. economy, and has served to keep rates low.  If the Chinese economy slows down, or if the situation in Europe gets worse, we could easily see the U.S. economy re-enter recession in 2012.

    If this occurs, the Federal Reserve has signaled that it may be ready to engage in a third round of quantitative easing (QE3), which could come in the guise of more purchases of mortgage-backed securities. This would drive mortgage rates even lower, with the benchmark 30-year fixed rate probably falling to somewhere around 3.5%.  This is far from fait accompli.  If the U.S. economy continues to grow, and the Europeans work out their debt issues (even temporarily, as a long term fix seems unlikely), we could see rates rise.

    It will be interesting to see what 2012 brings.

     

     

     

     

    Category: Mortgage Rates

  6. Fannie, Freddie Sued by California AG in Ongoing Mortgage Investigation

    By on December 21, 2011

    California Attorney General Kamala Harris announced that her office is suing Fannie Mae and Freddie Mac (and their federal conservator, the FHFA) for “frustrating the Attorney General’s efforts to investigate and combat crime, blight and other threats to the health and safety of Californians”.

    According to a Bloomberg article “Harris wants to know if drug dealing and prostitution occur in foreclosed homes owned by the companies, whether taxes are being paid on those houses, and whether military families have been illegally evicted by loan servicers”.  In total, there are 51 subpoenas in the suit.  Harris also wants Fannie and Freddie to identify ever home they foreclosed upon in California.  Additionally, the subpoenas will try to determine to what extent the GSEs are in compliance with state tax and securities laws.

    There is some question as to whether or not Harris has the ability to issue the subpoenas.  If they can issue the subpoenas, it means that state attorney generals have access to Fannie and Freddie information despite their Federal conservatorship, and could prompt other attorney generals to follow suit, which would likely cause an avalanche of other subpoenas.  Harris claims that since Fannie and Freddie own properties in California, they are subject to  the state’s laws.

    Harris has become more aggressive in her mortgage investigation over recent months. She withdrew from the joint 50-state mortgage settlement/”investigation” in October, and joined with Nevada Attorney General Catherine Cortez Masto to investigate mortgage abuses in December.

    Fannie and Freddie own approximately 60% of California’s mortgages.  There have been nearly 800,000 foreclosures in the state since 2007.

    Category: Mortgage Rates

  7. New Tax Agreement Could Prompt Rise in Mortgage Costs

    By on December 19, 2011

    Late last week, a piece of legislation passed the House of Representatives that could cause some mortgage fees to increase.  The bill is H.R. 3630, The Middle Class Tax Relief and Job Creation Act.  In essence, it is an extension of the payroll tax cut, and the continued cuts would be paid for by raising guarantee fees (g-fees) on Fannie Mae, Freddie Mac, and FHA loans.

    If the new legislation becomes law, Fannie, Freddie, and the FHA would have to increase g-fees by at least 10 basis points over the next two years.  This would translate to around $300 per year on a $300,000 mortgage.  Not a crippling increase, but significant nonetheless.

    Predictably, housing and mortgage lobbying groups oppose the increase in fees, while others claim that this will help encourage more private-sector lending. I thought the best take on this legislation was from Georgetown Law Professor Adam Levitin, who says that the whole deal is foolish because any stimulating effect from the payroll tax cut is negated by the increase in g-fees.

    In a normal economy, this proposal might make sense.  Of course we are not in a normal economy, and anything that hampers the housing market, even marginally, is probably not a good idea since the housing sector is dragging down the economy as a whole.

    In any case, the bill has yet to be finalized and will likely be revised before the Senate votes on it. It does seem that the increase in g-fees garnered some bipartisan support, and will likely be in the final law.

     

    Category: Mortgage Rates

  8. A Look at Freddie Mac’s Housing Predictions for 2012, and a Review of 2011 Predictions

    By on December 16, 2011

    It’s that time of year when we start seeing published predictions for the coming year.  Today I want to look at Freddie Mac’s December 2011 Economic Outlook where Freddie’s chief economist Frank Nothaft gives his predictions for the new year.  I also want to look at the 2010 report to gauge its accuracy.  It’s worth reading the new report in its entirety if you’re interested, but here is the brief look at the new predictions:

    • The U.S. economy will continue to improve, growing around 2.5 percent in 2012.
    • Unemployment will slowly drop, but will stay above 8 percent next year.
    • Mortgage rates will remain low in the first half of 2012.
    • Home sales will improve slightly, but home prices will continue to fall “with modest appreciation forestalled until 2013″.
    • Single family mortgage originations will fall in 2012, but multifamily mortgage originations will rise.
    The 2010 predictions for 2011 were:
    • Mortgage rates were predicted to stay low, with the 30-year fixed rate mortgage staying below 5%.  This was pretty much correct.  According to Freddie Mac’s weekly mortgage rates survey, the 30-year fixed rate peaked at 5.05% in February, and declined pretty steadily from that point to it’s current rate of 3.91%.
    • Home prices were predicted to slowly recover.  It was said that price indices for the U.S. would bottom out sometime in the first half of 2011, but that local markets with large amounts of REO would continue to see home value weakness.  Home prices didn’t really improve.  There are a variety of home price indices, but the widely-followed S&P/Case-Shiller Home Price Index saw its 10- and 20-city indices fall 3.3% and 3.6% annually, respectively. The declines are somewhat skewed because of large drops in certain markets, but only two cities (Washington, D.C. and Detroit) saw annual price gains.  The rate of home price declines also slowed.  So all-in-all, Freddie was a little overly optimistic here, but not totally off the mark.
    • Home affordability would remain high, translating to more home sales in 2011 than 2010.  If you want to gauge by the NAR’s Housing Affordability Index, this was correct, home affordability remained high.  The validity of the report can be criticized, but by this measure this prediction came true.  Also according to the NAR, existing home sales as of October 2011 were up 13.5% from October 2010.  All of the NAR data is being revised due to inaccuracies, and the revisions have yet to come out, but it is my understanding that the data for the past several years is flawed.  Assuming the data is all skewed the same, the increase should still hold.
    • There would be fewer mortgage originations in 2011 than in 2010, mostly owing to less refinancing.  This turned out to be fairly accurate as well.  There were less originations in 2011 than 2010, although refinancing didn’t drop as much as expected due to unexpectedly low rates.  Purchase applications pretty much held steady.
    • Lower delinquency rates in 2011 than 2010. This also held true. Much of the improvement in delinquency rate can be attributed to delinquent borrowers being foreclosed upon.
    All in all, I would have to say that Frank Nothaft and the other economists at Freddie Mac did a pretty good job with their 2011 predictions.  The prediction about home prices was not accurate, but not totally off base, and most everything else was fairly accurate.  We shall see how accurate the 2012 predictions end up being.
    Category: Mortgage Rates

  9. Benchmark 30-Year Fixed Rate Mortgage Ties All-time Lows

    By on December 15, 2011

    According to Freddie Mac’s Primary Mortgage Market Survey, the average rate on the 30-year fixed-rate mortgage fell to 3.94%, tying its all-time low, previously set in early October 2011.

    The average rate on a 15-year fixed rate mortgage fell from 3.27% to 3.21%.  5/1 adjustable rate mortgages fell from 2.93% to 2.86%, and 1 year ARMs actually rose slightly, from 2.80% to 2.81%.

    Frank Nothaft, vice president and chief economist for Freddie Mac commented:

    “Mortgage rates were at or near all-time record lows this week amid a rough environment for housing.  In its December 13th monetary policy announcement, the Federal Reserve reiterated the housing market remains depressed.  Over the first nine months of 2012, households lost almost $400 billion in property values which contributed to a $1.4 trillion reduction in overall net worth. In addition, serious delinquency rates (90 or more days delinquent plus foreclosures) on mortgage increased slightly between June 30 and September 30 of the year, breaking a six-quarter consecutive decline, according to the Mortgage Bankers Association”.  

    Continue Reading…

    Category: Mortgage Rates

  10. 30 Year Mortgages Fall Back Below 4.000%

    By on December 8, 2011

    According to Freddie Mac’s most recent Primary Mortgage Market Survey, released this morning, the average contract rate on a 30-year fixed rate mortgage fell to 3.99%, down a hair from 4.00% last week.  15-year fixed rate mortgages fell from 3.30% to 3.27%, while adjustable rate mortgages increased slightly, with 5/1 ARMs rising from 2.90% to 2.93%, while 1 year ARMs increased from 2.78% to 2.80%. Frank Nothaft, VP and chief economist for Freddie Mac commented:

    “Thirty-year fixed-rate loans have declined 0.62 percentage points from a year ago, and median sales prices on existing homes are off 4.7 percent in the year ending with October. These low rates and home prices have pushed housing affordability to record highs this year. For instance, the National Housing Affordability Index, which dates back to 1971, reached another all-time record high in October for the sixth time in 2011, according to the National Association of Realtors. Monthly principal and mortgage interest payments accounted for a mere 12.6 percent of median family incomes that month. This level of affordability likely contributed to the rise in conventional mortgage applications for home purchases over the week of December 2nd to the most in nearly a year.”

    Mortgage applications rose somewhat last week, with the MBA’s refinance index increasing 15.3% and the purchase index increasing 8.3%. It is important to realize that correlation does not equal causation, and this bump in mortgage activity is probably a result of other factors than changes in mortgage rates, which have remained in about the same range for the better part of two months.

    Total Mortgage is known for having some of the lowest mortgage rates and fastest closing times in the industry.  To find out more about our rates or products, call us today at 877-868-2503.  One of our licensed mortgage professionals may be able to help you start saving money on your home payments today.

     

     

    Category: Mortgage Rates

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