Refinance

Top Real Estate Headlines for Week Ending: November 5th

The weekend is just a blink away. Before we get lost in our weekend affairs, let’s take a minute to review what the top real estate and mortgage healdines were this week according to the National Association of Realtors.

• Golder: Stand Up for Home Ownership
  “It’s time to tell the world that home ownership is still the heart of the American Dream,” 2010 NAR President Vicki Cox Golder told a packed ballroom of real estate practitioners in New Orleans.
• September Pending Home Sales Slip 1.8%
  Tight credit and appraisals coming in below a negotiated price continue to constrain the market, but there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures.
• Fed’s Aggressive Policy Sparks Critics
  After the Federal Reserve announced Wednesday that it intended to buy $600 billion in Treasury securities through June, critics warned of inflation and other unintended results.
• 30-Year Mortgage Rates Inch Up
  For the third straight week, 30-year mortgage rates continued their upward climb. The average 15-year rate for the week ended Nov. 4 was 3.63 percent.
• How Election Results Impact Real Estate
  Among other things, 10 of the 12 state attorneys general on the executive committee that have been heading the foreclosure probe lost their re-election bids and won’t be returning to office. What does this mean for real estate?
• Why Reverse Mortgages Are Popular
  Changes to legislation and the housing market are making this financing option attractive for home owners.
• You’re Refinancing Again?
  Owners who refinanced just a year ago might be looking to do it again while rates continue to drop.
• Housing Starts Rise in September
  The U.S. Commerce Department reports that increased spending in commercial projects helped push construction spending up.
• Consumers Put Credit Card Debt Ahead of Mortgage
  A Mortgage Bankers Association panel discussed the shifting priorities of borrowers who now believe paying down credits cards is more important than paying their home loan.
• 3 New Anti-Foreclosure Strategies
  Critics of the government’s Home Affordable Modification Program offer fresh proposals to slow foreclosures.
• Minority Home Ownership Drops Steeper
  While the overall rate of home ownership slipped just 0.7 percent year over year, a much more pronounced slide occurred among the nation’s minorities.

These were the top real estate and mortgage headlines for the week ending November 5, 2010.

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Refinance

Like It Or Not “Cash-In” Refinancing Is All The Rage

If you own a home and/or know someone who owns a home, you have most likely heard of a cash-out refinance. During the economic and housing boom in the early part of the decade, cash-out refinances were all the rage and fueled consumer spending.

Fast forward to the present and check out these recent news headlines.

• “Cash-In Refinancing Rise in Second Quarter: Tied for Third Highest Cash-In Share on Record” – Freddie Mac, July 28, 2010
• “US Borrowers Pay Down Mortgages” – Financial Times, July 28, 2010
• “More Borrowers Are Paying Down Their Mortgages: Freddie Mac” – DSNews.com, July 29, 2010
• “Cash-In Refinancing Nears Record High in Q210: Freddie Mac” – HousingWire.com, July 28, 2010

So what exactly is a ”cash-in” refinance? A “cash-in” refinance is when a borrower brings cash to closing to get the home loan they desire. Yes you heard that correct. A borrower would bring their own money to pay to get the loan they desire.

Frank Nothaft, Freddie Mac’s vice president and chief economist, gives the following statement as to the rationale behind a “cash-in” refinance.

“Interest rates on fixed-rate mortgages are at 50-year lows, making refinancing attractive if borrowers qualify, and similarly rates on savings instruments like CDs are also very low, which makes the choice of paying down mortgage principal very attractive to borrowers with extra cash reserves.”

“If you pay down your mortgage balance you save the interest you would pay on the loan, about 4.6 percent at today’s rates, over the life of the loan versus earning a percentage point or less in CDs and money markets and without the riskiness of stock market investments, which have not performed well in the past couple of years either.”

It seems to make sense unless you read the details of the Freddie Mac 2nd Quarter Cash-Out Refinance Analysis. The report actually states the following as the main causes in the decline of cash-out refinancing:

1. Reduced Home Prices
2. Tighter Underwriting Standards for Loan-To-Value Ratios
3. Negative Appreciation Rates – Declining Home Values

Freddie Mac was quick to declare that “22 percent of homeowners who refinanced their first-lien home mortgage lowered their principal balance by paying-in additional money at the closing table”.

“Cash-In” refinancing is all the rage, not because homeowners want to, but because they have to.