October 2009

Good or Bad – The New Good Faith Estimate

What’s Ahead for Mortgage Rates This Week: October 19th

Mortgage markets worsened last week on better than expected economic data, causing mortgage rates to rise.

Last week was the third consecutive week that mortgage rates moved higher and, since touching a multi-month low in early-October, conforming mortgage rates are up by about a half-percent. 

It’s likely rates will continue to rise, too.  That’s because the same force that held rates down for so long is now the force pulling them up — expectations for the U.S. economy.

Over the last 6 months, it wasn’t clear in what direction the country was headed.  The housing sector has been gaining in strength, but the rest of the economy has been a question mark.

Last week put an end to some of those questions:

• Retail Sales posted stronger-than-expected results
• Consumer Sentiment matched September 2008 levels
• Jobless and continuing claims fell below consensus estimates

Expectations for the U.S. economy are changing on the fly.  As a result, stock markets gained last week and mortgage markets lost.

This week, rates could move higher still.  There are an unusually large number of key economic reports including on housing and inflation, plus a handful of speeches from key Federal Reserve members.

With each positive announcement, mortgage rates should rise.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

The Fed Thinks The Economy Is Improving And What It Means For Home Affordability

Mortgage rates are higher after the Federal Reserve released the internal notes of its September 22-23, 2009 meeting.

Known as the ”Fed Minutes”, the report details the conversation and cross-currents that led to the Federal Reserve’s decision to vote “unchanged” on the Fed Funds Rate after its last meeting.

The Fed Minutes are the lengthy companion to the more famous, succinct post-meeting press release.

As a comparison:

• Press Release: 383 words
• Minutes: 6934 words

The extra level of details is a big deal because Wall Street is perpetually in search of clues about what the Federal Reserve is going to do next.

In the past week, multiple Federal Reserve members hinted that the Fed Funds Rate may rise as early as April 2010.  Fed Chairman Ben Bernanke even alluded to it, too.

The minutes revealed that the economy may improve even faster than was previously expected, too.

These acknowledgements are part of the reason why mortgage rates are up. Because the Fed Funds Rate rises to accommodate a growing economy, the prospect of economic recovery is drawing money into the stock market and away from mortgage-backed bonds.

Less demand for bonds means a lower prices which, in turn, leads to higher rates.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Foreclosure Activity Remains Concentrated In Just 4 States

For the seventh consecutive month, foreclosure activity in the U.S. was dominated by a tiny subset of states.

As reported by RealtyTrac.com, more than half of September’s foreclosure-related activity occurred in just 4 states:

1. California
2. Florida
3. Nevada
4. Michigan

These states represent just 22.05 percent of the total U.S. population.

Overall, foreclosures are up 29 percent from September 2008 and, while, the data seems negative, defaults are creating some interesting buying opportunities.

Foreclosed homes often sell at a discount as compared to non-foreclosed homes. Cheap prices, low mortgage rates and willing buyers have helped to spur home sales in many U.S. markets.   In August, “distressed homes” accounted for one-third of all existing home sales.

That said, buying foreclosures isn’t for everyone.

First off, foreclosed homes are often sold “as-is” and may be in perfect condition, or may be inhabitable. If the property falls into the latter category, it’s important to get estimates for the work needed to make the home livable. Suddenly, the home may not seem like such a “steal”.

And, secondly, buying a home in foreclosure can be a 3-month process or more.  For some people, this is just too long.

Buying a home in foreclosure is fundamentally the same as buying a “regular” home – there’s a contract and a closing.  But most of the steps in between are different. 

Read the complete foreclosure report, plus take a peek at foreclosure heat maps on the RealtyTrac website.  If you like what you see, talk to your real estate agent about what to do next.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Should Joint Homeowners Have Separate Bank Accounts?

When you own a home with a spouse or partner, the issue of what’s mine, what’s yours, and what’s ours can be a divisive one.

Each household has its own money management methodology and, according to financial talk-show host Suze Orman, most leave significant room for improvement.

In this 4-minute piece aired on NBC’s The Today Show, Orman talks about co-managing finances with topics including:

• How to determine how much money goes into a “personal” spending account versus a “family” spending account
• The importance of both parties taking an active role in bill-paying
• How to manage the money when one partner doesn’t earn an income

Being aware of money is the first step towards protecting it.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

What’s Ahead for Mortgage Rates This Week: October 13th

Mortgage markets worsened last week as investors responded to a recovering global economy. 

Despite briefly touching their lowest levels since May, mortgage rates ended the week dramatically higher.

It’s the second straight week that rates soared on a Friday.

For several months, Wall Street has been in limbo; undecided whether the economy is truly showing signs of improvement. Negative news has tended to sink rates while positive news has tended to do the opposite.

Lately, investors have been in search of signals anywhere signals can be found.  Last week — sans hard-hitting economic data – those signals came from the worlds’ Central Banks.  

Shortly after Australia raised its interest rates by one-quarter percent, Fed Chairman Ben Bernanke suggested that the Fed may raise rates sooner than expected. Stock markets rallied on the news and mortgage bond markets tanked. 

When bond prices fall, rates go up.

This week, data returns. Expect more volatility.

Mortgage rates have been very low lately, but they remain jumpy. Rates change fast and if you’re not ready for them when they fall, you’ll likely miss your chance to catch the bottom.

Rate shoppers in need of a lock should remain in ready-position. As we’ve seen over the last 2 weeks, when rates start to rise, they tend to rise in a hurry.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

It’s A Good Time To Look At Adjustable-Rate Mortgages

According to the Freddie Mac weekly mortgage rate survey, the relative cost of a 5-year ARM is dropping versus its 30-year fixed-rate cousin.

During the first 5 months of 2009, the products ran neck-and-neck. Today, they’re a half-percent apart.

On a $200,000 home loan, that’s a difference of $60 per month.

Adjustable-rate mortgages aren’t for everyone, but for the right household, they can be a terrific fit.  A few scenarios that warrant consideration of a 5-year ARM include persons:

1. Buying a home with an intent to sell within 5 years
2. With a 30-year fixed mortgage and plans to sell within 5 years
3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, with homeowners with existing ARMs may want to consider taking on a new ARM, if only to extend their initial, fixed rate period.

Before choosing an ARM, make sure to speak with your Certified Mortgage Planning Sepcialist about how adjustable-rate mortgages work, and what causes them to adjust.  Although conventional ARMs are limited in how far they can adjust, it’s important to know the risks.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Simple Real Estate Definitions: Escrow Account

An escrow account is a designated savings account into which funds get deposited for a specific purpose.

With respect to real estate and home loans, escrow accounts are used to pay real estate tax bills and homeowners insurance payments.

Escrow accounts are managed and disbursed by lenders.

When a homeowner “escrows” his mortgage, along with his scheduled monthly mortgage payment, he must also send an additional payment to the lender equal to 1/12 of the home’s annual real estate tax bill plus 1/12 of the annual homeowners insurance bill.

By sending a pro rata portion of the tax and insurance bill each month, the homeowner’s escrow account will always, in theory, have enough funds to make payments in full as tax bills and insurance premiums come due.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

The FHA Is Changing Its Streamline Refinance Guidelines November 2009

Beginning November 17, 2009, the FHA will make it harder to qualify for its popular Streamline Refinance program.

Available exclusively to homeowners with existing FHA home loans, the streamline program is meant to help homeowners reduce mortgage payments as simply as possible.

As such, the program carries minimum eligibility requirements.

In fact, the FHA Streamline Refinance is more notable for what it doesn’t require from applicants.

• There’s no income verification
• There’s no asset verification
• There’s no employment verification
• There’s no appraisal required

The two biggest qualifiers, really, are that the homeowner meets a minimum credit score and that the new loan doesn’t exceed the original balance of the old loan.

The new program guidelines, however, are much stricter. 

Effective next month, among other requirements, applicants must show evidence of employment and income, plus proof of cash required at closing. 

Furthermore, homeowners can’t finance closing costs into the mortgage without a complete home appraisal.  In areas of declining value, this may render refinancing with the FHA impossible.

Therefore, if you’re a homeowner with an FHA mortgage, consider contacting your loan officer before the November 17 deadline to explore your Streamline Refinance options.  Mortgage rates are low and you never know for what you’ll qualify.

The worst thing you can do is to wait too long to find out.  Once the deadline passes, the old guidelines will be history.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

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