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  1. Obama Administration May or May Not Be Pondering Vague Broad Refinance Program

    1 By on August 25, 2011

    There is an article in this morning’s New York Times by Shaila Dewan and Louise Story that suggests that the Obama adminstration may be pondering some sort of blanket refinance plan that may allow millions of homeowners to refinance their mortgages at today’s record low rates.

    The article is very short on any specifics, which makes me dubious about the entire thing (not the veracity of the article, but the willingness of the administration to take any sort of action).

    Apparently the nebulous plan may allow some unspecified number of people who have a mortgage that may or may not be owned or backed by Fannie Mae or Freddie Mac to possibly refinance.  Again, there are no specifics whatsoever in the article, so it is unclear if the new program would allow those who are delinquent or underwater to refinance their mortgages (approximately 20-25% of homeowners with mortgages owe more on their mortgage than their home is worth).  Those who have no home equity typically cannot refinance.  Many who purchased homes at the peak of the market (2006-7) are underwater, and are stuck paying rates 2-3 points higher than current rates.

    Continue Reading…

    Category: Mortgage Rates

  2. Mortgage Rates Go Whitewater Rafting, August, 12, 2011

    By on August 12, 2011

    Mortgage rates have been on a whitewater rafting trip this week, bouncing off of rocks daily, yet steadily heading lower.  But basic physics teaches us that whitewater can’t flow uphill.  Yesterday and today the roaring torrent of downward pressure for current mortgage rates has run into a barrier—reality.  As I have been warning throughout the recent stock market correction and mortgage rate swoon, the fear of an impending recession in the US, was not supported by the facts.  The facts indicate slow but actual growth in the US economy.  Therefore, whatever portion of the mortgage rate drop attributable to fear of recession is may be subject to be given up.

    But I don’t expect mortgage rates to paddle back up the river that led to the current low rates.  The crisis in Europe is real—perhaps not an imminent disaster either—but real.  Moreover, the Federal Reserve’s statement that it intends to keep the Fed Funds rate at 0% until mid-2013 has real implications for bonds and therefore mortgage rates.

    In Europe overnight France and Italy passed a ban on short-selling for the next 15 days.  The expectation is that this will calm the markets until the Tuesday summit between French President Nicholas Sarkozy and German Chancellor Angela Merkel.  Expectations are that the two leaders will propose policies to stabilize the trading in European sovereign bonds and supportive of key banks.  Some analysts have suggested that Europe is in need of their version of the US TARP program that was crucial to keeping our economy from crashing into depression.

    Continue Reading…

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

  3. Bill Would Allow Millions of Underwater Homeowners to Refinance at Lower Mortgage Rates

    6 By on July 13, 2011

    Through a Housingwire post by Jon Prior, I’ve learned of a proposal that would allow underwater homeowners who are current on their payments to refinance their mortgages at lower rates.  Underwater homeowners are those who owe more on their mortgage than their home is currently worth (this is also known as having negative equity).  More than 11 million American homeowners with mortgages are underwater according to a recent Harvard study on the housing market.

    One of the problems with being underwater is that it results in the homeowner having a high loan-to-value ratio (LTV).  Once an LTV meets a certain threshold, the borrower is precluded from refinancing because lenders typically will not underwrite high LTV loans, as they are more likely to eventually default.  As a result, these homeowners are stuck in their homes.  Many of these people purchased homes during the peak of the market when rates were significantly higher than they are today, so they are not only unable to sell their homes, but they are missing out on substantial monthly savings.

    The bill (the Helping Responsible Homeowners Act of 2011) proposed by Barbara Boxer (D-CA) would allow underwater homeowners whose loans are owned by Fannie Mae or Freddie Mac to refinance at current mortgage rates. According to the Housingwire article, more than 8 million mortgages owned or backed by Fannie or Freddie have interest rates of 6 percent or higher.  The bill would allow millions to refinance.  Sen. Boxer commented:

    “They have been so solid in their mortgage payments every month even though the value of their home is going down.  This bill would remove barriers that kept them trapped.”

    The bill was referred to the Committee on Banking, Housing, and Urban Affairs back in January.  The majority of bills do not make it out of committee, but this one carries the support of many industry groups, as well as some influential Senators and businessmen, such as Bill Gross, founder of bond giant PIMCO.  One of the drawbacks of the proposal is that mortgages with LTVs over 125 cannot be securitized, so these mortgages would have to be held in portfolio by Fannie and Freddie.

    I have no idea if this bill has a legitimate chance of becoming law.  It would be a huge boon to underwater borrowers as well as those in the mortgage industry.  I would like to see it pass, although I am not holding out a ton of hope for it.

     

     

    Category: Mortgage Rates

  4. Mortgage Applications Down Despite Lowest Rates Since Last Fall

    By on June 1, 2011

    As with every Wednesday, let’s check out the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.  The Market Composite Index, which tracks all applications, was down 4.0 percent from the week before.  The refinance index was down 5.7 percent, while the purchase index stayed at the same level from the week earlier.  This drop in activity comes despite rates that are at 2011 lows.  Said Michael Fratantoni, the MBA’s Vice President of Research and Economics:

    “Interest rates fell last week as incoming economic data was weaker than anticipated.  Despite this drop in rates, the number of refinance applications fell.  In fact, the last time mortgage rates were this low, refinance volume was more than twenty percent higher.  It is likely that many borrowers still cannot qualify to refinance given the lack of equity in their homes.”

    According to the MBA’s figures, the average rate on a 30-year fixed rate mortgage fell to 4.58 percent, down from 4.69 percent.  This is the lowest rates have been since November 2010.  Not only this, but home prices are now at post-recession lows, but all signs point to further decreases.  This (as well as difficulty qualifying for a mortgage coupled with unemployment) is likely keeping potential buyers on the sidelines as they wait for the market to bottom out.

    It is worth noting that application numbers don’t tell the whole story with regard to home sales, because cash sales (which obviously require no mortgage application) are not included.  Cash sales hit a record high of 35 percent of the market in March, a number which declined to 31 percent in April.  That this number is declining could be indicative that investors (who comprise most cash buyers) are now holding off on buying due to further price declines.  The takeaway here is that home sales are unlikely to turn around in the near future.

    Category: Mortgage Rates

  5. Refinance Applications Continue to Rise as Mortgage Rates Hover Near 2011 Lows

    By on May 25, 2011

    According to the MBA’s Weekly Mortgage Applications Survey, mortgage applications were up slightly last week, rising 1.1 percent from the week prior.  From the report:

    “The Market Composite Index, a measure of mortgage loan application volume, increased 1.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.9 percent compared with the previous week. The Refinance Index increased 0.9 percent to its highest level since December 10, 2010. The seasonally adjusted Purchase Index increased 1.5 percent from one week earlier. The unadjusted Purchase Index increased 0.8 percent compared with the previous week and was 3.1 percent higher than the same week one year ago.”

    The four week moving average for overall applications is up 5.2 percent.  The four week moving average for refinances is up 7.1 percent, while the four week moving average for purchases is up 1.2 percent.  Typically purchase activity picks up around this time of year, so such a minimal increase in purchase activity does not presage a strong summer selling season.  It is worth noting that there are record numbers of cash home buyers right now, which accounts somewhat for the weak number of purchase applications.

    These relatively weak application numbers come despite mortgage rates that are hovering near 2011 lows.  The MBA saw mortgage rates increase slightly, as the 30-year fixed rate mortgage rose from 4.60 percent to 4.69 percent, while the average rate on a 15-year fixed mortgage rose from 3.75 percent to 3.78 percent.

    Category: Mortgage Rates

  6. Nevada Legislature Proposes Short Refinance Act for Underwater Homeowners

    By on May 10, 2011

    Nevada legislators are proposing a new bill that would allow any Nevada homeowners with government-backed or sponsored mortgages to refinance their home at current mortgage rates regardless of loan-to-value ratio.  Generally speaking, lenders will not allow someone with significant negative equity to refinance their mortgages.

    Shelley Berkley, co-sponsor of the bill (House Resolution 363, the Housing Opportunity and Mortgage Equity Act), commented:

    “Under this bill, Nevada homeowners who have a mortgage through Fannie Mae, Freddie Mac, or another government-backed enterprise can reduce their monthly interest payments as a result of lower finance rates.  The savings generated can help Nevada homeowners avoid foreclosure by lowering monthly payments and the amount of debt owed on a residence.”

    According to a recent Zillow survey, 28.4 percent of single family homes with mortgages are underwater, and home values are down about 29.5 percent since the peak of the market in 2006.  The problem is far more severe in Nevada, where 65 percent of mortgaged homes are underwater, and 1 in 7 homes are vacant.  Unemployment in Nevada is at 13.2 percent, while the national rate hovers around 9 percent.

    The FHA Short Refi program, which is a federally-sponsored program that aimed to allow underwater homeowners to refinance.  Unfortunately, lenders failed to participate in the program, and only a few thousand FHA short refis have been conducted.  Now the program is in danger of being killed off due to budget cuts.

    The Las Vegas Review Journal article does not speculate on the chances that this bill has to pass.  Even if it does pass, it is unclear to me exactly how this state law would work vis a vis the federal guidelines that control GSE finances.

    Category: Mortgage Rates

  7. FHA Fee Hike Cause Mortgage Applications to Fall

    By on April 27, 2011

    Mortgage applications declined 5.6 percent last week, according to the Mortgage Bankers Association’s Weekly Applications Survey.  This follows on the heels of a 5.3 percent increase the week prior.  The swings were fueled by buyers rushing to beat an increase in FHA mortgage insurance premiums.  Says Michael Fratantoni, VP of Research and Economics for the MBA:

    “Purchase applications fell last week, driven primarily by a sharp decrease in government purchase applications as new, higher FHA premiums went into effect.  This decrease reverse a 20 percent increase in government purchase applications over a four week period, which was likely driven by borrowers attempting to beat this deadline.”

    Total mortgage application volume was down 5.6 percent (seasonally adjusted).  Refinance applications were down 0.6 percent, while purchase applications dropped 13.6 percent.  This is the lowest level since late February.  Refinance activity rose to 61.6 percent of mortgage applications, up from 58.5 percent the week before.  According to the survey, mortgage rates decreased slightly, with the average 30-year fixed rate mortgage falling from 4.83% to 4.80%.  15-year fixed rate mortgages fell to 4.03% from 4.07%.

    There’s not a lot of new information to be garnered from this report.  Applications have been trending sideways for the better part of a year now.

    Category: Mortgage Rates

  8. Mortgage Applications Rise as Buyers Rush to Beat FHA Fee Hike

    By on April 20, 2011

    According to the Mortgage Bankers Association’s latest Weekly Applications Survey, mortgage applications (for last week) were up 5.3 percent from the week before on a seasonally-adjusted basis.  Refinance applications were up 2.7 percent from the week earlier, while purchase applications were up ten percent.  The rise in applications for purchases were lead by a 17.6 percent increase in government purchase applications.  Michael Fratantoni, VP of Research and Economics for the MBA commented:

    “Purchase application volume jumped last week largely due to another sharp increase in applications for government loans.  Borrowers were likely motivated to apply for loans before the scheduled increase in FHA insurance premiums.  Refinance activity increased somewhat as rates dropped to their lowest level in a month towards the end of the week.”

    The four week moving average for purchase applications is up 2.5 percent as we move into the spring buying season, while the four week moving average for refinancing is down 5.7 percent.  Refis continue to make up a shrinking share of total mortgage origination activity, only accounting for 58.5 percent of all applications, down from 60.3 percent the week prior.

    According the the MBA’s statistics, the average rate on a 30-year fixed rate mortgage fell from 4.98 percent to 4.83 percent last week, while the 15-year fixed rate mortgage rate dropped 10 basis points to 4.07 percent.

    Despite the increase, this is not an especially strong report, as most of the gains last week were driven by the impending rise in FHA mortgage insurance.  Ideally, we would like to see a greater uptick in purchase applications as we move into the home buying season.  The housing market remains plagued by fears of diminishing home values and rising foreclosures, and I think these factors are keeping many buyers on the sidelines this summer.

    Category: Mortgage Rates

  9. Mortgage Refinance Applications Continue to Fall as Mortgage Rates Rise

    By on April 13, 2011

    Quick update:

    The Mortgage Bankers Association released their Weekly Mortgage Applications Survey this morning for the week ending April 1, 2011.  Overall mortgage applications declined 6.7% on a seasonally adjusted basis. Refinance applications were down 7.7 percent while purchase applications were down 4.7 percent.

    The four week moving average for purchases is up 0.7 percent while the four week moving average for refinances is down 5.3 percent.  Refi activity now constitutes 60.3 percent of all mortgage applications, down from 61.2 percent the week prior.  Refi activity has been trending down as mortgage rates increase.  According to the MBA, the average mortgage rate on a 30-year fixed rate mortgage rose from 4.93 percent to 4.98 percent last week.

    There’s not a lot more to say about this report.  If you check out this excellent chart from Calculated Risk, you can see that mortgage applications have more or less been trending sideways for the better part of a year after spiking due to the first time home buyer tax credit.  Everything indicates that home sales and refinancing will remain at their current moribund levels for the near term.

    Category: Mortgage Rates

  10. Mortgage Applications Increase Marginally as Spring Home Buying Season Approaches

    By on March 23, 2011

    According to a report from the Mortgage Bankers Association, mortgage applications increased 2.7 percent on a week-over-week basis during the week ending March 18, 2011.  Refinance activity was up 2.7 percent from the week prior, and purchase activity also increased 2.7 percent.  The four week moving average for purchases is up 1.0 percent, and the four week moving average for refinancing is up 3.3 percent.

    Refinancing made up about 66 percent of all mortgage activity, the same as last week, but down substantially from the fall months.  Refi activity has been diminishing steadily as mortgage rates have increased nearly 3/4 of a point since they hit their all-time low last October.  According to the MBA, the average rate on a 30-year fixed-rate mortgage was at 4.80 percent, up marginally from 4.79 percent the week before.

    Mortgage applications have essentially moved sideways for the last couple of months.  According to this chart from Calculated Risk, applications for purchases have been moving sideways for the better part of a year, and are at about the same level they were at in 1997. That we haven’t seen an increase in applications as we move into the spring doesn’t bode particularly well for the spring home buying season.

    Category: Mortgage Rates

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