Today's Real Estate Reality Blog

Steady Pace Of Foreclosures Slow Down Again In June 2010

313,841 foreclosure filings were made in June, according to foreclosure-tracking firm RealtyTrac. The figure represents a 3 percent drop from May and 7 percent drop from June of last year. However, foreclosure filings remain relatively high nationwide.

June marks the 16th straight month the filings topped 300,000. 1 in every 411 U.S. homes received some form of notice last month with foreclosure density varying wildly from state-to-state.

Like everything else in real estate, it seems, foreclosures are a local phenomenon.

The states with the highest foreclosures per capita were:

• Nevada : 1 foreclosure filing per 88 homes
• Florida : 1 foreclosure filing per 171 homes
• Arizona : 1 foreclosure filing per 189 homes

The states with the lowest foreclosures per capita were:

• Vermont : 1 foreclosure filing per 26,051 homes
• West Virgina : 1 foreclosure filing per 8,058 homes
• South Dakota : 1 foreclosure filing per 6,528 homes

Overall, 40 states beat the national Foreclosure Per Capita average and 10 states fell below. The sheer volume of REO, though, is creating interesting buying opportunities for first-time home buyers, move-up home buyers, and real estate investors in Crown Point Indiana.

Homes bought from banks are usually less expensive than non-foreclosure homes. This is one of the major reasons why distressed sales account for roughly 30 percent of all home resales. Less expensive, though, doesn’t always mean “cheaper”. Foreclosed homes are often sold as-is and may be defective or otherwise uninhabitable.

Making repairs to get these homes into “living condition” can be costly.

Therefore, if you’re buying a foreclosed home, make sure you know what you’re buying before you make your bid. Have a certified professional inspect the home to check for damage, and consider enlisting the help of a real estate agent to assist with negotiations and management of the contract.

The process of buying a foreclosed home is different from buying a typical resale. Make sure you do your homework. Otherwise, contact me for a referral to a great local real estate agent who can guide you through to a successful real estate transaction.

Can’t Get The Lowest Mortgage Rate? Blame Fannie Mae

Conforming mortgage rates may be posting all-time lows this week, but that doesn’t mean you’ll be eligible for them. You may have already called your mortgage loan officer and found this out the hard way.

It’s because of a federally-mandated mortgage-pricing scheme known as “loan-level pricing adjustments”.

In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk to Wall Street. It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in Valparaiso Indiana featuring any of the five traits are subject to price adjustments:

1. Credit Score (i.e. the borrower’s FICO is below 740)
2. Property Type (i.e. the subject property is a multi-unit home)
3. Occupancy (i.e. the subject property is an investment home)
4. Structure (i.e. there is a subordinate/junior lien on title)
5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.

The government’s loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email your mortgage loan officer for help with interpretation.

Your Choice, Refinance Your ARM Or Let It Adjust Lower

If your adjustable rate mortgage is due to adjust this year, don’t go rushing to replace it just yet. Your soon-to-adjust mortgage rate may actually go lower. It’s related to the math behind the ARM.

Conventional, adjustable-rate mortgages share a common life cycle:

1. There’s a “starter period” in which the interest rate remains fixed
2. There’s an initial adjustment period after the starter period called the “first adjustment”
3. There’s a subsequent annual adjustment until the loan’s term expires — usually at Year 30.

The starter period will vary from 1 to 10 years, but at the point of first adjustment, conventional ARMs become the same. A homeowner’s new, adjusted mortgage rate is determined by the sum of some constant, and a variable. The constant is most often 2.25% and the variable is most often the 12-month LIBOR.

As a formula, the math looks like this:

(Adjusted Mortgage Rates) = (12-Month LIBOR) + (2.250 Percent)

LIBOR is an acronym standing for London Interbank Offered Rate. It’s the rate at which banks borrow money from each other and, lately, LIBOR has been low. As a result, adjusting mortgage rates have been low, too.

Last year, 5-year ARMs were adjusting to 6 percent or higher. Today, they’re adjusting to 3.375%.

Based on the math, it may be wise to just let your ARM adjust this year. Or, depending on how long you plan to stay in your home, consider a refinance to a new ARM.  Starter rates on today’s adjustable rate mortgages are exceptionally low in Dyer Indiana, as are the rates for fixed rate loans.

Either way, talk to your licensed mortgage loan originator about making a plan. With mortgage rates as low as they’ve ever been in history, homeowners have some interesting options. Just don’t wait too long. LIBOR — and mortgage rates in general — are known to change quickly.

What’s Ahead for Mortgage Rates This Week: July 11th

Mortgage markets improved again last week — if only barely — throughout a holiday-shortened week devoid of “major” data and market conviction.

Up-and-down trading characterized the week which ended with Illinois mortgage rates slightly lower versus the week prior.

Mortgage rates have fallen in 4 consecutive weeks and are on an extended rally that dates back to mid-April.

This week, however, data returns and rates could reverse. Especially with inflation numbers in play.

Inflation is the enemy of mortgage rates.

Inflation is bad for mortgage rates because mortgage rates are based on the price of mortgage-backed bonds.  When inflation pressures mount, the demand for mortgage-backed bonds wanes and that pushes bond prices down which, in turn, pushed bond yields (i.e. rates) up.

There’s three pieces of inflation-related news this week.

The first inflation-related story is the Federal Reserve’s Wednesday release of the minutes from its last meeting. When the Fed adjourned June 23, it said “underlying inflation has trended lower“. There is definitely more to the conversation than what the FOMC released in its post-meeting statement. 

Markets will be looking for clues.

On Thursday, the Producer Price Index is released. The Producer Price Index is a measure of business operating costs. When PPI is increasing, it means that “doing business” is more expensive — an inflationary situation. It’s inflationary because higher business costs are often absorbed by consumers in the form of higher prices for goods and services.

A rising PPI is usually bad for mortgage rates.

And lastly, the Consumer Price Index will be released on Friday. The CPI measures the average American’s “cost of living”. Like PPI, when the Consumer Price Index is rising, mortgage rates tend to follow.

Other releases of importance this week include Retail Sales and two consumer confidence surveys.

Last week, mortgage rates again made new all-time lows. If you haven’t checked with your loan officer about the possibility of a refinance, make that call this week.  Mortgage rates can stay low for a long time, but they can’t stay low forever. Lock your rate while you can.

This Week In Tweets via @jkbarath for 2010-07-10

• @saan1911 definitely try Saigon Noodle House on US 30 and Grant for local Vietnamese food. It's yummy. #nwindiana in reply to saan1911 #
• @blm03 going to be at Lincoln Park Zoo with kids; otherwise, would meet up. Try not to worry about the kids and try to have fun. lol in reply to blm03 #
• @jonathanwthomas if it truly is the desire of your heart…yes. Once you jump, there is no turning back. BTW: Is this what I think it is? in reply to jonathanwthomas #
• TransUnion Study: Multiple Credit Relationships Lead to Fewer Delinquencies http://bit.ly/dhRjqN (Not on credit reports I've seen lately) #
• Had a great lunch with @rginvalpo at the famous @valpovelvet. Talked about @3in1fest …sounds like a great faith-based event for #nwindiana #
• Having lunch with @rgskadberg and enjoying the sun. (@ Valpo Velvet Shoppe w/ @wroemance) http://4sq.com/aCFk6N #
• HBR Tip: 3 Tips for Defending without Being Defensive http://web.hbr.org/e/?e=mt&d=070910 #li #fb #
• Meet and greet with a Keller Williams Realtor. If your around, stop by and say hi. #nwindiana (@ Uptown Cafe) http://4sq.com/5jRYFM #
• Slow down #nwindiana as State Police have several speed traps set up on 49 between #Chesterton & #Valparaiso #
• Think you've missed out on historic low home loan rates? Guess again. Indiana & Illinois residents call today b4 you lose out. 219-926-1600 #
• Good morning. Who wishes it were Friday already? #fb #
• The Decision was anti-climatic. How's Armstrong doing in the Tour de France? #lebron #
• Anything less than a three peat for the Miami Heat will be a complete and utter failure. #lebron #justsayin #
• Special ROI Networking event. Should be fun. (@ Passtimes) http://4sq.com/bxL7Zv #
• RT @JWean: Wells to Exit Consumer Finance Stores http://ow.ly/28LYk ^Wow this is big news especially with Citi doing the same (Who's next?) #
• If you've filed for Bankruptcy and want to buy a home in the future, you need to re-establish your credit with new credit. #justsayin #
• RT @JakePlanton: Got 2 approvals that are so clean…makes me nervous…this is what underwriting has done to us! (stoic celebration time) #
• Real Estate Alert: Cash is still king via @InmanNews http://bit.ly/advyvt (What's the % of cash sales in your local market?) #
• U.S. Home Prices Continue Journey Upward in June: Clear Capital http://ow.ly/28Iul (Round of applause for the Midwest.) #
• Good morning. #fb #li #
• @misterpoppet why is a la carte pricing only available on crap you didn't want to begin with? #justsayin in reply to misterpoppet #
• Just realized my family only watches 5 channels 80% of the time: Bravo, ESPN, Nick Jr, HGTV & Food Network. Can I just pay for these? #fb #
• I think Bethany from Real Housewives of NY on BravoTV is prettier after the baby than when she was single. My wife agrees. #fb #
• @VeronicaLudwig you're the one that is awesome for caring about Kim. I'm just an admirer in your long casted shadow. in reply to VeronicaLudwig #
• RT @VeronicaLudwig: Hosting live fundraiser in Chicago for my friend Kim who is battling cancer for 2nd time in 3 yrs. http://bit.ly/dq3vDb #
• RT @KCMcrew: Yet Another Dumb Reason for Not Buying a Home http://bit.ly/aiB3hq (Are renters really more happy than homeowners?) #li #
• 24 Rooms in One: The Home of the Future via @Swanepoel http://bit.ly/aZ925O #li #
• Fixing Housing Crisis: Is It Time to Scrap 30-Year Mortgage? – CNBC http://bit.ly/blT8uu (If fix means eliminate, yes. Otherwise, no!) #
• An attendee of our community First Time Home Buyer seminar from last summer just visited to say they're ready. That felt great! #
• @jpapapnp Good for you! Just remember the iPhone 4 is best used when not holding it. With that being said, I will admire from a distance. in reply to jpapapnp #
• RT @chikquintans: How the Expiring Bush Tax Cuts Affect You - Personal Finance – SmartMoney.com http://bit.ly/9HVm7b (less $$$ for you) #li #
• @jpapapnp Surprised that you're getting the iPhone 4 since you already had iOS4 on your iPhone 3GS. I'm going to wait for iPhone 4G. #
• @jpapapnp If your iPhone 4 is #michigancity it still needs to go through Hammond UPS center. Call and ask to pick it up in Hammond. in reply to jpapapnp #
• RT @MMGtweet: With no economic reports due out today, Bonds will likely take their direction from Stocks. Keep your eyes on the news. #
• @cheekiegeek The tumblr page is how I actually found you made the conversion. Once you go iPhone, you never go back. lol in reply to cheekiegeek #
• @sbonert I used #YouSendIt b4, but #DropBox is so much easier especially if you email link from iPhone. Plus, access to files on the go. ;^) in reply to sbonert #
• RT @fairoaksfarms: In honor of National Ice Cream Month, we're having an Ice Cream Special! Click here for more info -> http://bit.ly/bIywxT #
• @cheekiegeek Does this mean that you'll add a new content page to your site (www.brendacarescorner.com) for your new found love? in reply to cheekiegeek #
• @cheekiegeek Hi Brenda. I see that you recently got an iPhone. Couldn't resist or are you just gathering intelligence for BB users? #
• RT @sbonert: Just posted- My favorite and most used (mostly) free web tools – http://bit.ly/bQnjZL #free #realtor (How about @dropbox?) #
• RT @saan1911: Hey guys, help me out and for Hammond Academy for Science & Technology. we need this grant http://bit.ly/bM71vx (Just Vote) #
• Mortgage Fraud Blog – FBI Agent, Police Officers and Others Charged for Investment Scheme: http://bit.ly/dxMxOK (Who's the leader? Not LO.) #
• @jonathanwthomas Make sure to bring back Jai a tasty treat. He has never been to England. in reply to jonathanwthomas #
• That was an awesome header by the Orange Crush. Netherlands is for real. Who will they meet in the final? Germany or Spain? World Cup 2010 #
• Chicago Realtors get InstanetFax service via @InmanNews http://bit.ly/axl3K4 (Glad to see city of NAR HQ is on board) #
• Realty Check: Housing's Powerful Lobby Surges Ahead via Diana Olick http://bit.ly/cLYrpq (Powerful or not, still need jobs!) #
• RT @jonathanwthomas: Day of great meetings with many still ahead. Great things ahead for us! (Don't forget about us humble Americans) #
• "Nevermind tomorrow, TODAY is the day." – Fortune Cookie #
• Pre-Closing Horror Stories: 5 Safeguards Against Legal Entanglements via @bross @InmanNews http://bit.ly/c8YxEm (#1 is a must) #
• RT @KCMcrew: Hope is No Longer A Good Strategy http://bit.ly/cFi3Xk (Doesn't matter if you're a seller, buyer or just want to refinance.) #
• Need a little caffeine kick after a great holiday weekend. Anyone else? (@ Dunkin' Donuts) http://4sq.com/cCqjuD #
• @railcats what time is the game at the Steel Yard on the 5th? #nwindiana in reply to railcats #
• @natfinn sitting on the North side in Glenwood park with the family. Are you still back stage with Costas? #Valparaiso #nwindiana in reply to natfinn #
• Look who Jai ran into at the #Valparaiso fireworks. That's right. It's @valpovelvet and yes she's everywhere. #fb http://twitpic.com/22imx8 #
• FYI: great location to view the #Valparaiso fire works and avoid the parking lot issues at Thomas Jefferson school. #nwindiana #
• Jai is monkeying around before the fire works. #Valparaiso #nwindiana (@ Valplayso) http://4sq.com/bZW0PD #
• Last day and it's a scorcher. Not sure how long we're going to last. (@ Taste of Chicago w/ 75 others) http://4sq.com/9qw5Ez #
• Time to get our freedom on with a road trip to Chi-town. Happy 4th of July! #fb #li #

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