November 2009

What’s Ahead for Mortgage Rates This Week: November 16th

Mortgage markets improved last week as foreign buyers of mortgage debt helped to push mortgage rates to a 4-week low.

It marked the 3rd consecutive week that rates improved, breathing extra life into this year’s ongoing Refi Boom.

Fixed-rate, conforming mortgage rates fell about 0.125 percent on the week. ARMs did about the same.

There wasn’t much data to move mortgage rates last week; investors worked mostly on momentum and trends. However, the Friday University of Michigan Consumer Sentiment survey release garnered some attention. 

After worsening in August and September, consumer sentiment fell for the third straight month in October.  Analysts worry about what it could mean to the economy.  Holiday Shopping season is here and consumer spending fuels the economy.  If households hold the purse strings tight, our nation’s budding economic recovery may stall.

In a scenario like that, employment rates won’t rebound so fast, but rate shoppers might not mind.  Slower-than-expected economic growth tends to suppress mortgage rates, helping to improve home affordability overall.

This week, data comes back into focus.

At 8:30 AM ET today, the government will release October’s Retail Sales report.  This one should be closely watched for its ability to change rates.  A weak report should drag rates down, and a strong one should push rates up.

Then, on Tuesday and Wednesday, look for PPI and CPI — two key inflation indices.  Inflation causes mortgage rates to rise so if either of these reports comes in hotter-than-expected, rates will almost certainly rise. 

And, lastly, also on Wednesday, we’ll get the Housing Starts report for October.  Don’t expect the markets to move on this one, but keep an eye on the data anyway.  Housing markets remain crucial to economic recovery.

Despite rates hovering near recent lows, remember that markets change quickly.  A rate quote from the morning is rarely valid by the afternoon and, when rates rise, rates rise fast.

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

Buying Foreclosures Isn’t For Everyone

For the eighth straight consecutive month, national foreclosure activity in the U.S. was dominated by a small set of states.

As reported by RealtyTrac.com, more than half of October’s foreclosure-related activity came from just 4 states:

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

The remaining Top 10 states in terms of total foreclosure activity included Arizona, Georgia, Texas, Ohio, New Jersey, and Maryland.

Foreclosures are up 19 percent from last October, but a deeper look at the RealtyTrac report revealed two positive developments for the housing market.

1. Foreclosure activity is down 3 percent from last month
2. Foreclosures per Household decreased in 9 of the 10 most heavily concentrated states

Furthermore, Nevada’s foreclosure pace is down 4% from last year.  This is a big deal because Nevada has long led the nation in foreclosure-related activity. Until last month, Nevada’s year-to-year foreclosure rate hadn’t fallen in more than 4 years.

It’s too soon to say that the foreclosure market is drying up, but bargains are getting harder to come by.  First-time buyers and bona fide investors alike have been snapping up property at a furious pace.

According to an industry trade group, distressed homes account for nearly one-third of home resale activity.

That said, buying foreclosures isn’t for everyone.

For one, properties are often sold as-is and may be defective.  The cost of repairs may negate “the deal” or “the steal” – depending on the cost of the home.

Secondly, closing on a foreclosed home can be a 3-month long process. This is because banks rarely process home sale paperwork as fast as a “person” would. A 3-month timeframe may not fit your schedule.

In the end, fundamentally, buying a foreclosed home is the same as buying a “regular” home – there’s a contract and a closing.  Most of the steps in the middle, however, are different. 

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

There’s still good deals in the foreclosure market, but based on October’s data, they may not last through the winter.

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

Banks Raise Mortgage Qualification Standards

Despite the economy’s improvement and prodding from Congress, banks don’t seem ready to open their purse strings just yet.

Nationally, mortgage approval standards are tightening.

The data comes from a quarterly survey the Federal Reserve sends to its member banks.  The Fed asks senior bank loan officers around the country whether “prime” residential mortgage guidelines had tightened in the last 3 months.

For the period July-September 2009:

• Roughly 1 in 4 banks said guidelines tightened
• Roughly 3 in 4 banks said guidelines were “basically unchanged”

Just one bank said its guidelines had loosened.

Combine the Fed’s survey with recent underwriting updates from the FHA and from Fannie Mae and it becomes clear that mortgage lenders are much more cautious about their loans than they were, say, 2 years ago.

Today’s borrowers face a host of hurdles including:

• Higher minimum FICO scores
• Larger downpayment requirements for purchases
• Larger equity positions for refinances
• Lower debt-to-income ratios

In other words, mortgage rates may stay low into 2010, but that won’t matter to homeowners that don’t meet minimum eligibility standards.  With each passing quarter, that list gets smaller.

Therefore, if you’re on the fence about whether now is a good time to buy a home, remember that, along with an increase in mortgage approval standards, home values are rising, too. 

Acting sooner is probably better than acting later.

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

Thank You to Our Soldiers from The Barath Group

Today is Veterans Day. We want to thank every soldier as our freedom is a direct result of men and women that fight for our country. Without them we would not have freedom. We definitely would not be facilitating home loans and most certainly would not have the life style we all enjoy.

Benchmark Mortgage: The Barath Group takes this day very serious and truly want to thank each of you that have served our country and pray for the safety of those that are serving our country today.

May God Bless OUR Military, OUR Troops and OUR Country.

5 Days Left for an FHA Streamline Refinance

Consider this a last call for FHA Streamline Refinances.  Starting next Tuesday, the popular rate-lowering program gets strict on borrowers.

There’s 5 days left.

Under the current streamline refi guidelines, FHA homeowners have minimal program eligibility requirements.

• FICO scores must be 620 or higher
• The refinance must provide a “tangible benefit”
• No mortgage lates allowed in the last 12 months

Beyond that, everything else goes, practically.  There’s no income, asset, or job verification with the current FHA Streamline program. Neither is there an appraisal requirement.  It doesn’t matter if you’re 50% underwater.

Until next week, that is. 

Beginning November 17, FHA Streamline Refinance applicants must show evidence of income and employment, plus proof of cash required to close. Furthermore, the FHA is limited loan-to-values to 97.75% for homeowners that want to “roll closing costs” into their mortgage.

In areas of declining home values, this may render refinancing impossible.

There’s more changes, too, as highlighted by the Federal Housing Commissioner. Read up for yourself, or ask a qualified mortgage professional for help.

If you’re a homeowner and you’re currently financed through the FHA, it may be prudent to explore the possibility of an FHA Streamline Refi.  Mortgage rates are low right now and FHA guidelines are loose.

Starting next week, FHA Streamlines will be a completely different beast.

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

What’s Ahead for Mortgage Rates This Week: November 9th

Mortgage markets were extremely volatile last week, carving out a wide range between Monday and Friday. 

Thankfully for rate shoppers, the overall momentum was positive.

Mortgage rates fell for the second time in as many weeks. Rates still sit higher versus their early-October lows.

For pure “news”, last week was a busy one:

• The Federal Reserve held the Fed Funds Rate near 0.000 percent
• The Unemployment Rate crossed 10 percent
• The First-Time Home Buyer Tax Credit was extended to April 2010

Combined, the 3 events reinforced the growing belief on Wall Street that the U.S. economy is in recovery, but not yet out of the woods.  This particular philosophy has been excellent for mortgage rates, helping to hold conforming 30-year fixed mortgage rates near 5.250 percent since the start of the year. 

It helped rates last week, too.  But low rates aren’t without threats. 

For one, the Fed’s vote to hold the Fed Funds Rate near 0.000 percent will eventually spark inflation concerns.  When it does, mortgage rates will rise. That won’t be this week, though.

Actually, nothing may happen this week — there’s not much data to release.  Apart from a retail report, a confidence survey and some Fed speakers, the calendar is bare.  That, and Wednesday is a federal holiday.

However, without data, markets often trade on things like geopolitics, or energy concerns, or momentum.  In other words, don’t be lulled into thinking rates won’t change this week.

At least for now, the mortgage rates look good. By the end of the week, that may not be the case.

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

Congress Expands And Extends The Home Buyer Tax Credit

Congress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday. 

The White House says the President will sign it into law today.

The up-to-$8000 tax credit’s expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program’s basic eligibility requirements remain the same:

• Buyers can’t purchase the home from a parent, spouse, or child
• Buyers can’t purchase the home from an entity in which they’re a majority owner
• Buyers can’t acquire the home by gift or inheritance
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

For one, the definition of “first-time home buyer” has been expanded to include most homeowners with at least 5 years in their current home.  “Move-up” buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don’t have to be a true first-time home buyer to claim the “first-time home buyer tax credit”.

Other eligibility changes include:

• The subject property’s sales price may not exceed $800,000
• The subject property must be a primary residence
• Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction.  This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his “normal” tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

The complete list of qualifying criteria is posted on the IRS website.  Be sure to review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

It’s 5 months away.

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

A Simple Explanation Of The Federal Reserve Statement (November 4, 2009 Edition)

The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to pick up” since the September FOMC meeting and that housing market activity has increased.

It’s the third consecutive post-FOMC statement in which the Fed speaks optimistically about the U.S. economy - a signal that the recession is likely over.

The economy isn’t without threats, however, and the Fed identified several in its announcement, including:

1. Ongoing job losses for American workers
2. Reduced fixed investment by businesses
3. Ongoing challenges for the financial markets

The overall tone remained positive, however, as inflation appears to be held in check.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market.

The Fed plans to wind down its mortgage market support over the next 5 months, reaffirming its March 2010 exit date.  For now, Fed support helps hold mortgage rates down.

The FOMC’s next scheduled meeting is December 15-16, 2009.

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

Lock Your Home Loan Rate Before 1:15 PM CST Today

The Federal Open Market Committee caps off a scheduled, 2-day meeting today in the nation’s capital, its 8th meeting of the year.

The group adjourns at 1:15 PM CST and, as is customary, will issue a press release reviewing its monetary policy and the health of the U.S. economy. 

The FOMC’s post-meeting statements are brief but comprehensive. They’re a window into the mind of the Federal Reserve and Wall Street picks apart every sentence for clues.

It’s why FOMC meetings tend to shake up the mortgage markets – for good and for bad. 

After its September 2009 meeting, the FOMC said in its press release:

1. Financial markets have improved
2. Housing activity has increased
3. Economic activity has “picked up”

Since September, the momentum has picked up.  Credit risks have reduced further, home sales are surging, and, although unemployment remains high, the Fed remains optimistic about a full economic recovery.

Today’s FOMC press release will be closely watched. If the Fed alludes to strong growth with inflation in 2010, mortgage rates should rise. Reference to slower growth should help keep rates steady.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent – the lowest it’s been in history.  However, it’s what the Fed says Wednesday that will matter more than what it does.

If you’re floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 1:15 PM CST today.

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

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