03 Feb 10 FHA Credit Improving
The FHA home loans originated last year went towards borrowers with better credit scores than in previous years. These borrowers migrated to FHA when the subprime market disappeared. The average credit score of an FHA borrower is now 690, up from 630 only two years ago, agency officials said.
The agency banned 268 FHA lenders from making FHA mortgage loans last year, more than double the total terminated in the previous eight years. The FHA suspended six other firms. Among them were some of the largest FHA mortgage lenders –Taylor, Bean & Whitaker and Lend America, both of which shut their doors soon thereafter. Consumers taking out FHA mortgage loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10% instead of the usual 3.5% down-payment. Read the original article from the FHALoanBlog, > Better Credit FHA Loans Performing Well
27 Jan 10 Mortgage Loan Applications Decreased 11% Last Week
According to Bloomberg, the number of mortgage loan applications in the U.S. dropped last week for the first time in a month, led by a slump in home refinancing. The Mortgage Bankers Association’s index of home loan applications fell 11% to 513 in the week ended Jan. 22 from 575.9 a week earlier. The group’s refinancing gauge decreased 15%, while the purchase gauge fell 3.3%.
Mortgage refinance applications dropped significantly over the period. The mortgage bankers group’s home refinance gauge decreased to 2,260.4 from 2663.8 the prior week. The purchase index fell to 215.6 from 223 the prior week. The group’s refinancing index often turns volatile near year-end, making it difficult to determine the underlying trend. The measure plunged 38% in the last three weeks of 2009 then rose 35% in the first two weeks of January. FHA and VA loan applications followed the trend as well.
| Nationwide Mortgage Loans announces discounted mortgage refinancing for all 50 states! | FHA on board with 1st Time Home Buyers Tax Credit. See more on FHA Loans. |
The looming end of the government’s first-time homebuyer tax credit in November caused sales to slump at the end of last year. According to Russell Price, a senior economist at Ameriprise Financial Inc, “We’re seeing some stabilization in the housing market.” Price continued, “The spring selling season should be fairly positive, especially if we do start to see some positive employment growth and mortgage rates remain fairly low.”
29 Dec 09 Updated Good Faith Estimate for Mortgage Lending
After talking about changing home finance disclosures for the last decade, HUD is finally updating and revising the Good Faith Estimate in the RESPA loan disclosures. They also re-released “Shopping for Your FHA loan: HUD’s Settlement Cost Booklet.” A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages, addresses the standardized Good Faith Estimate (GFE) and HUD-1 settlement statement forms that lenders must start using on Jan. 1, 2010. HUD estimates that borrowers may benefit financially by saving $700 in lending costs and fees per mortgage loan on average as a result of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA).
Here is the location of the .pdf of the booklet that you can save or print out for your reference. http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement Booklet December 15 REVISED.pdf
16 Dec 09 Lend America Banned from FHA Mortgage Lending
According to a recent article from National Mortgage News, mortgage company, Lend America was banned from FHA mortgage lending on Monday. Apparently, the company was refinancing certain customers without paying off their prior existing lien. According to veteran mortgage banking attorney Robert Lotstein, who has clients that did business with Long Island-based Lend America, said this has created a situation where customers received a new loan from the mortgage lender but without their existing lien being paid off.
14 Dec 09 HUD Says FHA Guidelines Changing in 2010
FHA mortgage products have helped support the housing sector for decades, but over the last few years FHA home loans has significantly supported borrowers for home buying and mortgage refinancing. HUD has plans for revising FHA guidelines. Below are at least several revisions HUD is making with FHA loan programs.
1. Upping the minimum required down payment. HUD is looking at whether increasing the required minimum down payment from 3.5% to 5% will help stabilize FHA loan defaults. If home buyers have more “money invested,” HUD officials wonder, will they be less likely to default on their mortgages?
2. Changing mortgage insurance premiums. HUD officials are considering whether changing the way FHA mortgage insurance premiums are structured will keep more buyers from becoming delinquent. Should there be an extra fee up front? Should the amount paid over time change for maximum stabilization?
3. Raising the minimum credit score required for an FHA loan. While credit scores have been lousy at predicting what happens to people with good credit who lose their jobs, they have been more accurate in identifying risky behavior. At the height of the housing boom, FHA approved loans to borrowers with credit scores below 500. Discussions underway wonder whether the minimum acceptable credit score should be 620 or higher.
4. Dialing back how much money sellers can give FHA home buyers. Right now, sellers can give buyers up to 6% to help cover closing costs and fees. Experts recommend reducing that to 3%.
5. Requiring FHA lenders to have more cash on hand. Like borrowers, lenders need to have more “skin in the game.” Right now, lenders need only have $250,000 in cash to cover fraud-related loan originations, but HUD officials want to see that amount rise to $2.5 million. That will reduce the number of lenders that can offer FHA loans, and hopefully cut down on mortgage fraud.
6. Eliminating abusive lenders. HUD is asking Congress for more power to prevent abusive lenders from making FHA loans. According to HUD Secretary Shaun Donovan’s testimony before the House Financial Services Subcommittee on Oversight and Investigations, lenders will be required to “indemnify the FHA fund for their own failures to meet FHA requirements” and will be held accountable nationally for any improper activities. Donovan said that HUD “will also develop a Lender Scorecard that will summarize the performance of lenders who do business with the FHA. This scorecard will be posted on (the department’s) Web site to ensure transparency and accountability for lenders, borrowers and the market.”
HUD officials say the quality of the FHA loan portfolio has improved over the course of 2009. The typical borrower’s debt-to-income ratio has declined, meaning the mortgage payment is a smaller portion of the borrower’s monthly income. While HUD officials are pleased to see borrowers with a stronger personal finance balance sheet, there are two big concerns. First, the number of borrowers who are delinquent in paying their mortgages is growing. If those borrowers don’t figure out a way to make up their missing payments and start paying their mortgage on time, more homes will fall into foreclosure, further depressing housing prices.
The second concern is rising unemployment. “If unemployment continues to track at high levels and goes to 11 or 12%, that’s a real struggle,” the senior HUD official said. “The big risk is a stagnant, slow recovery that keeps unemployment rates high because there is no loss mitigation technique for that. In other words, if homeowners lose their jobs and can’t find replacements that pay enough to cover their monthly expenses, the FHA’s capital reserves fund sinking into the red will be the least of the government’s problems.
08 Dec 09 FHA Mortgage Insurance Premiums Rising
FHA unexpectedly delayed the release of a much-anticipated audit of its capital reserves in November. Of course, the mortgage lending industry feared the worst that the government’s FHA mortgage insurance fund was negative. After the audit was released showing a thin $3.6 billion cash cushion with promises from FHA to keep the fund solvent, a new worry emerged revealing the government could move to raise the FHA mortgage insurance premium it charges borrowers, increasing closing costs for millions of potential customers. At a press conference unveiling the audit, housing secretary Shaun Donovan confirmed that FHA is weighing its options, including a possible hike in the upfront MIP. Mr. Donovan would not rule it out entirely but also said that it was not imminent.
Currently, FHA mortgage lenders charge a borrower roughly 165 basis points at the closing table plus 50 basis points monthly. The points are often financed and the borrower cannot recoup the premium. The 50 bps are part of the monthly payment and can be adjusted up or down, depending on the FHA’s needs and concerns. Today, FHA mortgage loans account for between 25% and 30% of all new originations and have become the program of last resort for homebuyers with both poor credit and low or no down-payments. “If they (FHA) need to raise cash I would rather see them raise the monthly rather than the upfront MIP,” said one mortgage executive following the issue. But Jim Pair, president of the National Association of Mortgage Brokers, wasn’t thrilled with the idea of raising the MIP unless FHA really needs to. “An increase at this time would be detrimental to the housing market,” Mr. Pair told Origination News. The audit found that the Mutual Mortgage Insurance fund actually has $30.7 billion in cash on a total book-of-business approaching $700 billion but $27.1 billion of that amount has been set aside to cover anticipated losses on FHA mortgages, leaving it with a cash cushion of just $3.6 billion.
The new study believes the MMI will stay in the black unless the housing recession deepens significantly. If that happens, the fund would have a negative capital ratio of 0.46%. But if the mortgage market suffers what FHA calls a “downward interest rate shock” the fund could go negative by as much as 2.33%. The actuarial study (audit) of FHA was done by IFE Group of Rockville, Md. Mr. Donovan said the release of its findings were delayed because HUD wanted the firm to conduct “more extreme” stress modeling on the reserve fund. “We felt some of the loss scenarios were not as bad as we expected,” said the HUD secretary.
Commenting on IFE’s findings, Howard Glaser, a former HUD attorney who is now a lobbyist, said FHA is not immune from the laws of economics. “Facing the equivalent of a 500-year flood in the housing market, and having stepped into the void left by reckless lenders who pillaged the mortgage system, FHA now finds itself tight on capital.” To many mortgage bankers, the FHA loan program is the only game in town, and without it originations to cash strapped and low-income borrowers would seize up.
17 Nov 09 Mortgage Rates Decline
Mortgage refinance rates moved down a bit last week. Freddie Mac announced that for the week ending November 5, thirty-year fixed rates averaged 4.98%, down from 5.03% the week before. In response to the rate reductions, FHA refinance activity rose slightly as homeowners made moves to lock in their mortgages to a fixed rate to maximize the affordability.
The average for fifteen-year fixed mortgage rates dropped to 4.40%. Adjustable rate mortgages were also lower with the average for one-year adjustable rates declining to 4.47% and five-year adjustable rates dropping to 4.35%. A year ago 30-year fixed rates were at 6.20%. “Rates fell back this week pulling interest rates on 30-year fixed loans under 5 percent,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Lower FHA mortgage rates should help homeowners reduce their monthly loan payments and feed the ongoing recovery in the housing sector.
The Federal Housing Finance Agency reported that Freddie Mac and Fannie Mae have financed more than 3.5 million refinance loans during the first nine months of 2009. Freddie Mac estimates that borrowers who redid their conventional loan during the third quarter reduced their rate by a median of 1.1 percentage points, which will save these borrowers an aggregate of $3 billion in payments over the next year.
03 Nov 09 Home Mortgage Rates Climb 3 Weeks in a Row
Home mortgage rates for 30-year home loans rose to 5.03 % this week, the third consecutive weekly increase. The average home loan rates rose from 5% a week earlier, mortgage giant Freddie Mac said last week. The last time the average was higher was the week of September 24th, when rates averaged 5.04%. The average rate on a 15-year, fixed-rate mortgage loans rose to 4.46% from 4.4 % last week, Freddie Mac said. Home mortgage rates on five-year, adjustable-rate home loans averaged 4.42%, up from last week’s 4.4%. Mortgage rates on one-year, adjustable-rate mortgages rose to 4.57% from 4.54%.
Home buyers can reduce their payments and mortgage rates by buying points, which amount to 1 % of the loan total. The average for home loans in Freddie Mac’s survey was 0.7 points for 30-year home mortgages and 0.6 points for 15-year, five-year and one-year loans. “It’s still a very low rate by longer-term historical standards,” said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio. “It’s still very supportive of the housing market and recovery.”
The Federal Reserve last year pledged to buy bonds backed by home loans in order to encourage lower mortgage rates. It increased the size of that program to $1.25 trillion in March. The bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae brought down yields on mortgage-backed securities and allowed lenders to reduce rates on new loans while still selling the securities backed by them at a profit. The plan helped drive mortgage rates to a record low of 4.78 % twice in April. The central bank’s purchasing program is scheduled to end in the first quarter next year, the Federal Open Market Committee said in a statement September 23rd.
Rising borrowing costs and uncertainty over whether Congress will extend a government tax credit for first-time home buyers may have contributed to a drop in mortgage applications last week. The Mortgage Bankers Association’s index of applications to purchase a home or refinance fell 12%, and sales of new homes declined in September, the Commerce Department said Wednesday.
According to the Mortgage Bankers Association, home loan applications dipped 5.2% in the week ended October 23rd and mortgage refinancing volumes declined 16%. New-home purchases in September dropped 3% to a 402,000 annual pace, lower than even the most pessimistic economist’s forecast. It was the first month-to-month decline in sales since March.
09 Sep 09 New FHA Requirements for Condominiums
HUD announced new FHA rules for condos with ineligible properties include condotels, timeshares, houseboat projects, multi-dwelling unit condominiums, and all projects not deemed to be used primarily as residential. Project approval is no longer required for FHA. FHA streamline refinance loans for HUD Real Estate Owned sales.
See the HUD revised FHA loan standards for condo properties:
ü FHA will allow a minimum owner occupancy amount equal to 50% of the number of presold units.
ü No more than 15% of the total units can be in arrears of their condominium association fee payment.
ü Projects consisting of four or more units will have no more than 30% of the total units encumbered with FHA insurance
See the original article> New FHA Condo Guidelines Could Limit Mortgage Refinancing online.
26 Aug 09 US Mortgage Rates Remain Low
Mortgage interest rates fell in the latest week to their lowest levels since the end of May, following a drop in Treasury yields on concerns over the pace of economic recovery, Freddie Mac said on Thursday. In a recent article, mortgage executive, Scott Deal reported that “The Fed and US government were doing everything in their efforts to ensure American consumers had access to low mortgage rates.
FHA mortgage rates remianed at 5.25% for thirty year home mortgages and jumbo mortgage loans continued to see higher interest rates as the insurance companies continue to voice concerns over delinquencies and loan modifications plans.
The average 30-year fixed home loan rate fell to 5.12 percent from 5.29 percent in the prior week. The 30-year rate was 6.47 percent a year ago. 15-year mortgage loans averaged 4.56 percent, down from 4.68 percent in the previous week and 6.00 percent a year earlier.
17 Aug 09 Mortgage Delinquency Rate Climbs to All Time High
The delinquency rate on U.S. home loans reached an all-time high in the second quarter. However the pace of growth for the mortgage delinquency rate slowed and some industry analysts see this as a possible sign the mortgage crisis may be beginning to turn the corner. Data provided by credit reporting agency Trans Union shows the ratio of mortgage holders who are 60 days or more behind on their payments increased for the 10th straight quarter, to 5.81% nationwide for the three months ended June 30. That’s up 65%, from 3.53%, in the 2008 second quarter. Delinquency of 60 days is considered a forecasting sign to foreclosure, because of the difficulty homeowners would have coming up with two back payments to bring themselves current.
While the delinquency rate hit a new high, however, the increase from the 1st quarter to the 2nd was 11.3%. In the two prior quarters, the delinquency rate spiked almost 16%. That slowdown may be a good sign, said FJ Guarrera, vice president of Trans Union’s financial services division. “We have reason to be cautiously optimistic,” he said. While there’s no way to know exactly why the pace of growth is slowing, Guarrera said, it appears that loan modification programs aimed at helping distressed homeowners from both the FHA mortgage and conventional lenders are beginning to help. In addition, he said, consumers are being more careful with their spending. Read the original article written by EILEEN AJ CONNELLY >
Tags: FHA mortgage, foreclosure, home loans, loan modification programs, mortgage crisis, Mortgage Delinquency, Trans Union
10 Aug 09 Mortgage Brokers Ailing from TBW Wholesale Closing
The impact on Taylor Bean and Whitaker closing their wholesale division has been tramatic for mortgage brokers across the country. Many mortgage companies used TBW for all their FHA home loans and this will hurt them. The loss of Taylor, Bean and Whitaker as a wholesale lender is a major blow to U.S. mortgage brokers who say it means loan applicants who were in process at the wholesaler will need to purchase new appraisals and potentially sit through new waiting periods. Taylor Bean disclosed Tuesday that it lost its FHA approval and that its Ginnie Mae servicing portfolio was seized. Read the original article posted on Lenders Nationwide>
Taylor Bean and Whitaker Closing Hurts Mortgage Brokers.
Tags: FHA approval, FHA home loans, mortgage brokers, Taylor Bean and Whitaker
07 Aug 09 FHA Having Trouble Insuring Reverse Mortgages
The increase in FHA funding authority means the government is following the marketplace. FHA mortgages now represent some 35% of all new financing, up from about 5% just a few years ago when the program was crowded out of the marketplace by bad credit loans. It would be counterproductive to restrict the program when FHA loans enjoy great public confidence, especially FHA loans for borrowers with poor credit. In this economy we need home buyers, reason enough to encourage people to enter the marketplace.
Reverse Mortgages: what HUD calls home equity conversion mortgages (HECMs) — those reverse mortgage loans remain attractive for many senior borrowers, but have become troublesome for HUD to insure because of falling home values. While HUD asked Congress for $800 million to subsidize the reverse mortgage program this year, Congress in this bill is saying forget it. Instead of more money, the bill requires HUD “to ensure that the program operates at a net zero subsidy rate.” Given that reverse mortgage are amazingly risky to insure in a slow market what can HUD do to meet the net zero requirement? It can cut back on the number of reverse mortgages it’s willing to insure, it can reduce the maximum amount it will cover, or both. The bottom line: If you want an FHA-insured reverse home loan it might be best to get one before October 1st, the start of the new fiscal year. Read the rest of the article at FHA Loan Pros.
Tags: bad credit loans, FHA, FHA loans, FHA mortgages, FHA-insured, HUD, reverse home loan, reverse mortgages
02 Jul 09 Trend Upward for Mortgage Rates
The average rate on a 15-year fixed mortgage dropped to 4.81 % from 4.93 % the prior week. The rate on a one-year adjustable mortgage loans decreased to 6.52 % last week from 6.54 %, according to the mortgage bankers. Home loan rates tracked by McLean, Virginia-based mortgage buyer Freddie Mac climbed along with Treasury yields through late May and early June on investor concern that a greater supply of government debt being sold to fund federal spending would fuel inflation.
This year the Federal Reserve purchases of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae brought down the yields on those securities, allowing lenders to reduce rates on new home loans and still sell them at a profit. Still, rising foreclosures that sell at discounted prices are flooding the market and depressing home values, according to Lawrence Yun, chief economist of the Chicago-based Realtors’ group. This year the number of foreclosures may rise to 2.5 million, the highest on record, Yun said.
Tags: Fannie Mae, Freddie Mac, mortgage bonds, mortgage loans, mortgage rates, new home loans
30 Jun 09 Top Court Allows NY State Home Lending Probe
A recent Reuters’ article revealed a divided U.S. Supreme Court ruled on Monday that the New York attorney general’s office can investigate whether national banks and mortgage lenders discriminated against minorities seeking mortgage loans. The justices overturned part of a ruling by a U.S. appeals court that blocked state Attorney General Andrew Cuomo from investigating or enforcing the fair lending laws against national banks because they are subject instead to what has been viewed as less stringent federal regulation.
In a 5-4 ruling, Justice Antonin Scalia, one of the Court’s more conservative members, joined the four most liberal justices in allowing Cuomo to bring lawsuits, though he could not at the same time issue subpoenas. The ruling struck down a regulation by the Office of the Comptroller of the Currency that essentially preempted states from enforcing their own fair lending laws, even when federal law appeared inadequate to protect consumers. Scalia said it would be “bizarre” for states to be blocked from enforcing valid, non-preempted laws against national banks, such that “the bark remains, but the bite does not.” Cuomo, in a statement, called the ruling “a huge win for consumers across the nation,” saying it reaffirms the role of state attorneys general “in protecting consumers from illegal and improper home loan practices by our country’s biggest and most powerful banks.”
The Clearing House Association LLC, a group of big banks supporting the OCC rule, was “disappointed that the principle of uniformity in national bank enforcement has been breached,” according to a spokesman. Comptroller of the Currency John Dugan said he was disappointed but his agency would work with the states to ensure fair access to financial services and consumer protections. “ Everyone benefits from clarification of the law,” Dugan said in a statement.
Cuomo was trying to revive a probe begun in 2005 by his predecessor, Eliot Spitzer, into possible racial discrimination in FHA mortgage lending. Spitzer sent letters of inquiry to mortgage providers including Citigroup Inc, HSBC Holdings Plc, JPMorgan Chase & Co and Wells Fargo & Co in response to data he said appeared to show a significantly higher percentage of high-interest home mortgage loans issued to black and Hispanic borrowers than to white borrowers. Two lower federal courts ruled against Cuomo, whose appeal won support from the other 49 states and Washington, D.C. Cuomo contended that the economic crisis, due in large part to reckless subprime mortgage lending, has shown the need for more regulatory oversight and consumer protection.
Spitzer told Reuters by telephone that his office was driven to pursue the case because of concerns about disparate lending practices and concerns that subprime debt was becoming pervasive. “Obviously, it’s a little late to forestall the cataclysm that emerged when the subprime debt fuse finally exploded,” Spitzer said. “As we look forward, this is a good thing for states to be able to ask the questions and get the information from nationally chartered banks as well as state chartered banks.”
The ruling is a “serious loss for the banking industry,” and also gives attorneys general a “bully pulpit.” said James Cox, a securities law professor at Duke University. “Even without subpoena power they can still hold press conferences and take steps to swing public opinion.” Groups representing real estate agents, state bank officials, and consumer and civil rights organizations supported Cuomo’s appeal.
Monday’s ruling “is a victory for taxpayers, who have suffered enormously as a result of abusive business practices in all types of mortgage lending,” said Michael Calhoun, president of the Center for Responsible Lending. The Supreme Court last addressed a similar issue in 2007, when it ruled that states cannot regulate the mortgage-lending subsidiaries of banks regulated by the Comptroller’s office, which is part of the U.S. Treasury Department. The case is Cuomo v. Clearing House Association LLC, No. 08-453. (Additional reporting by Elinor Comlay, Jonathan Stempel and Joseph Giannone in New York and Karey Wutkowski in Washington, D.C.; Editing by Gerald E. McCormick and Tim Dobbyn) Read the original James Vicini article >
Tags: FHA mortgage, home loan, mortgage lending., mortgage loans, nationally chartered banks, NY State Home Lending Probe, OCC rule, state chartered banks, subprime mortgage lending
23 Jun 09 Thirty Year Mortgage Rates Continue to Rise
Mortgage interest rates on U.S. 30-year fixed-rate mortgages rose to 5.57 % a few days after hovering around 5.47% earlier in the week. According to Zillow Mortgage the rate are down sharply from the previous week when mortgage rates were reported nationally with an average of 5.76% on home loans that were fixed for thirty years.
Conventional and FHA mortgage rates have remained historically low in 2009 and most industry insiders believe that interest rates will maintain low levels for the remainder of the year and into 2010 before climbing with the forecasted inflation. The higher mortgage rates reflect a rise in yields on U.S. government bonds, which are linked to the mortgage market. The mortgage rate, however, is sharply higher than the roughly 5.00% level seen at the end of May and at the beginning of this year, Zillow said.
Home loan refinancing activity has dropped precipitously in recent weeks. A move higher in FHA mortgage rates should further dampen demand. According to Lawrence J. White, professor of economics at New York University’s Stern School of Business, “Higher mortgage rates are certainly an impediment to a U.S. housing market recovery, but other factors are also suppressing demand. “People are worried about the overall economy, how secure their jobs are as well as their overall financial status,” he said. “So, while higher mortgage rates matter, they are not the sole driver of housing demand,” he said.
The applications for mortgage refinance loans dropped as expected, but loan modification requests rose significantly as bad credit mortgages are beginning to reset to the higher adjustable interest rates that have homeowners around the nation fighting to keep their home from foreclosure. The battered U.S. housing market, which is in the midst of its worst downturn since the Great Depression, is both the source of and a major casualty of the credit crisis. A setback for the market could hamper a turnaround of the U.S. economy.
Tags: bad creditmortgages, FHA mortgage rates, home loans, loan modification, mortgage rates, mortgage refinance loans, thirty year mortgage rates
01 Jun 09 Mortgage Rates Spike
A significant rise in mortgage rates is threatening to undermine the already shaky real estate market and toss sand into the gears of the Government’s plans to rescue the economy. Beginning last fall, the Federal Reserve rolled out a series of initiatives–such as the purchase of Fannie Mae and Freddie Mac mortgage-backed securities and long-term treasury bonds–that worked to drive mortgage rates down to all-time lows. Federal officials hoped that by pushing the cost of purchasing a home artificially lower, they could lure more buyers into the market to gobble up the massive supply of unsold homes. Meanwhile, lower mortgage rates could also enable scores of homeowners to lower their monthly payments by refinancing. That, in turn, would free up cash to be pumped back into the economy. For some time, the mortgage market acted accordingly, with rates of less than 5 percent triggering a flood of refinancing applications. But last week, rates surged, a development that could create all sorts of headaches for federal officials, consumers, and the economy as a whole.
Here are five things you need to know about the surge in FHA mortgage rates:
1. The jump: Thirty-year fixed mortgage rates had been holding in the 5 percent range since mid March, averaging 5.03 percent on Tuesday, May 26. But rates jumped in the following days, hitting an average of 5.44 percent on Thursday, May 28. By midday Monday, rates had fallen back a bit, to 5.36 percent, according to HSH.com.
2. Key Factors: Fixed mortgage rates have been pushed higher by a surge in 10-year Treasury note yields, which climbed to 3.67 percent on June 1 from 2.68 percent on April 1, according to Bloomberg news. (Fixed mortgage rates typically track the yields on 10-year Treasury notes.) A number of factors have worked to increase Treasury yields. Nascent optimism about the economy has made ultra-safe investments like Treasuries less appealing. “If you look at the broad aggregate of economic data, it’s not great but it’s better on balance,” says Keith Gumbinger of HSH.com. “So the Treasury market especially is going to be moving away from those emergency and panic modes we’ve been in now for 6 months.” In addition, concerns about deflation are giving way to worries about inflation, he says. However, the bulk of the pressure is coming from concerns about the massive amount of government debt needed to finance the Obama administration’s huge bailout and stimulus programs that encouraged lenders to offer loan modification plans to qualified borrowers..
3. Home purchase impact: It’s important to remember that thirty-year, fixed rate for bad credit mortgage loans of 5.36%, 5.5% are still incredibly low by historic standards. Still, higher rates have the potential to force home prices lower to compensate for the higher purchasing costs. “If [the higher rates are] in place for a while it could have the effect of putting some additional pressure on home prices,” Gumbinger says.
4. Mortgage refinancing impact: But the impact on the mortgage refinancing market could be more significant. Rates in the 5.5% range would evaporate roughly 65% of home refinancing demand because the higher rates don’t offer enough savings to make the transaction worthwhile for many consumers, says Mark Hanson, a managing director who handles real estate and finance research at the Field Check Group. “Why would you want to pay $5,000 to close a loan when you are saving $20 or $30 a month,” he says. “It’s just not enough.” Even more concerning, many consumers have already filled out mortgage applications without locking in their mortgage rates because they expected rates to drift lower before closing. The recent spike in FHA mortgage rates, however, has made many of these yet-to-be-closed, non-locked loans unsalvageable without a sharp drop in rates. “Of all the applications in, 60 to 70% are [not locked],” Hanson says. “Out of those, 75% are dead.”
5. Federal response: Given how aggressively the federal government has moved to bring mortgage rates lower, it’s possible that Uncle Sam will step in to the market again. “I expect some sort of intervention,” Hanson says. Federal intervention could take any number of forms, including plans to beef up its already expansive mortgage-backed security or Treasury bond purchase program.
6. Rate outlook: Gumbinger says the recent spike reflects uncertainty about the broader economy. “We are at the portion of the economic game where you are going to get this kind of fits and starts arrangement,” he says. “Things are rosy one minute, and then somebody is going to catch wind or something and we could run the other way.” He says rates may revisit the 5 percent range in the coming months. “And if we do, know that that may be temporary as well,” he says. “If you really want a 5% number or a high 4% number on your mortgage, you need to be prepared in this market to take advantage of it.
Tags: bad credit mortgage loans, FHA mortgage rates, loans, mortgage rates, mortgage refinancing
22 May 09 30-Year Mortgage Rates Creep Up
According to CNN Money, mortgage loan rates were mixed this week, with the average 30-year ticking higher, according to a report released Thursday. FHA rates remain low as new homebuyers are reconsidering their renting options as people know the mortgage rates won’t be this low forever. With the tax deductibility incentives, many Americans renting are finally seeing some advantages to becoming a homeowner and making a mortgage payment.
The average thirty-year fixed mortgage rate jumped to 5.24%, up from 5.21% the previous week, according to Bank Rate’s weekly national survey. Even with the increase, mortgage rates remain at historic lows, the report said. Mortgage interest rates have plunged since late October, when thirty-year fixed home mortgage rates averaged 6.77%.
“The economy remains very weak, and those concerns are balancing out the worries investors have about the amount of government debt issuance,” the report said, because mortgage rates are closely tied to long-term Treasurys.
Six months ago, the average 30-year fixed home loan rate was 6.33%, meaning a $200,000 loan would have carried a monthly payment of $1,241.86. With the average rate now at 5.24%, the monthly payment for the same size loan would be $1,103.17, meaning homeowners who refinance now would save $138 per month.
The average fifteen-year fixed rate mortgage fell to 4.74% from 4.76% the week prior.
The average jumbo mortgage rates for a 30-year fixed rate fell to 6.37%. FHA mortgage rates rose slightly to 5.125% for the weekly average.
Adjustable rate mortgage loans were also mixed, the report said, with the average 1-year ARM falling to 4.94% while the 5-year ARM increased to 4.96%
Tags: FHA, jumbo mortgage rates, mortgage rates
18 May 09 Low Mortgage Rates Continue
Mortgage rates were lowered slightly today for conventional and fixed rate FHA mortgage loans. Mortgage interest rates continued their trend with 30-year fixed rate home loans being reported under 5%.
Average mortgage rates on 7/1 conforming adjustable rate mortgages is now at 4.84 % down from 4.95 %. The average rate on 7/1 jumbo ARMs is at 6.14 % from 6.17%. Average rates on 5/1 conforming ARMs is now under 4.50% at 4.39%, a big drop from 4.52%. Average interest rates for jumbo 5/1 ARMs is 5.38 % down from 5.43%. Conforming 1-year ARMs averaged 4.82% down from 4.88%. Average jumbo mortgage rates for 1-year ARMs is now at 5.74% up from 5.70%.
Interest only adjustable rate home mortgages were also down this past week. The average rate on 5/1 conforming interest only ARMs is now under 4.50 % at 4.45 %. Average rates on Jumbo interest only 5/1 ARMs are still a lot higher at 5.70 %. Average rates on 3/1 interest only conforming loans is at 4.81% down from 4.92%. Jumbo 3/1 interest only loans now average 5.64% down from 5.70%.
Watch the Analysis and discussion reported by Bloomberg News with Mahesh Swaminathan of Credit Suisse talking about the mortgage interest rates, home loans, loan modifications and mortgage market in general.
Tags: 30-year fixed rate, adjustable rate mortgages, Conforming 1-year ARMs, conventional, FHA mortgage, jumbo mortgage rates, mortgage interest rates, mortgage rates
13 Apr 09 HUD Warns FHA Lenders in Mortgagee Letter
The Dept. of Housing and Urban Development recently released an important FHA Mortgagee Letter that is important for all mortgage brokers, lenders and finance companies that would like to continue originating FHA loans in their future. In an effort to protect the public trust and the FHA Insurance Fund, HUD has vowed to ensure that mortgagees are accountable for their home loan origination practices. FHA expects each mortgagee to exercise the same level of care in originating, underwriting and servicing an insured FHA mortgage as it would for a loan in which the mortgagee would be entirely dependent on the property as security to protect its investment.
When a mortgagee fails to comply with HUD’s policies and procedures, HUD will take the appropriate action. For example, FHA mortgage brokers or lending companies that materially violate FHA program statutes, regulations and handbook requirements may be referred to the Mortgagee Review Board for appropriate sanctions, which may include termination of mortgagee approval. For a mortgage broker in 2009, losing a FHA license would be like a barber have their scissors revoked. It seems that brokers may start following the rules.
Read the original finance article from Jason Cardiff tips online > HUD Updates FHA Mortgage Letter and Cracks Down on Lenders. For more questions, you can go online to HUD.gov or for additional FHA resources, please call 1-800-CALL-FHA.
Tags: FHA, HUD, lenders, mortgage brokers, Mortgagee Letter
