Posts Tagged ‘housing market’

Bright days for Refinance – Seekers

Monday, May 31st, 2010

Bright days for Refinance - SeekersThe European debt crisis and the turbulent stock markets are turning out to be a ‘helping-hand’ for the American families looking for a refinance. Mortgage rates are edging to a record low. The average 30-year fixed-rate loan sank to 4.78 percent this week, the lowest this year and barely above the record of 4.71 percent set in December, last year.

Individuals looking for a refinance are queuing up in large numbers at mortgage lenders, all seeking a low rate for their refinance. Applications to refinance poured this week, reaching the highest in seven months. However, many of the refinance-seekers are holding back for even lower rates, but the only way to know the bottom is when it’s missed.

Some Analysts predict that this window of opportunity may close soon. Investors, due to uncertain environment and declining stock markets, had pounced on government securities. But, once they grow more confident about the stock market it wouldn’t take long to move out of bonds and back into stocks, which will automatically make the mortgage expensive.

Coming to the conclusion – Even though the mortgage is cheap these days, people are not opting for borrows to buy new homes. The number of loans being drawn to buy homes remained at its lowest in more than 13 years. First reason: the special tax credit for homebuyers expired last month. Another reason: after a large number of borrowers fell into defaults and foreclosures, banks needed borrowers to pay a down payment of around 3.5 percent and also to maintain a good credit rating.

The mortgage rates were to rise when the government ended the security-buying program, instead they fell because of fears that Greece would default on its debt. But, it is clear that the mortgage rates would go up once the investors start investing in stock markets, but how long would it take? Will the housing market get back on the ‘good old’ track?

Reference:

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/27/AR2010052702002.html?hpid=sec-business

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Posted in Mortgage Industry, Mortgage Loan Applications, Mortgage Refinance, housing market | 82 Comments »

Mortgage Loan Applications – ‘Accelerating’ Tips

Monday, May 24th, 2010

Heres  a short story:

Mortgage Loan Applications – ‘Accelerating’ TipsNancy works at the financial district in San Francisco. About a month ago, she was spending most of her time in the ‘Dream-House Hunt’. A perfect house, with lower interest rates and a good mortgage loan was what she was looking for.

However, the mission was ‘partially’ accomplished when she found a perfect house, well-furnished and closer to her workplace. Next, she submitted the mortgage loan application and then waited….waited…& waited. The next week, interest rates marked a spike. Another week – another peak. Now she is maxed out, another point would mean a significant increase in the monthly payment. In the end, she finds out the interest rate has gone up again.

Not only Nancy, there are lot more out there who have the same story. Why does this loan application take so long? How can we speed it up?

First of all, start to shop for a home loan instead of a home first. Getting approved for a mortgage loan before you find a home will accomplish two things: you’ll be locked on to an interest rate, which will save you from this ‘waiting-game’ mentioned above. This is also termed as ‘lock n shop’, only a small number of lenders, such as Choicefinance, Lendingtree and MFG Mortgage Rates, provide this option. Besides this, if the sellers sees that you are pre-approved, they’ll take you as a ‘serious’ buyer.

Next, make things easier for the mortgage company by providing them all the information that you know they’ll need – organized and easy-to-read. This will save them repeated calls, asking you for paperwork again and again.

Lastly, try to bug your mortgage lender to check for ‘order-status’. Mortgage lenders have thousands of applications to process, and it’s really important to make sure that yours doesn’t sit on the bottom of the stack.

Here my question is: what other ways can be used to speed up mortgage loan applications? If you have a case of your own, feel free to share it.

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Posted in Mortgage Industry, Mortgage Loan Applications, housing market | 34 Comments »

FHA Loans – ‘to the Rescue’ or ‘to be Rescued’

Monday, April 26th, 2010

FHA-insured Loans, originated during the great depression by the Federal Housing Administration and are meant to secure lenders against defaulting borrowers. Whereas, they are also an answer to borrowers who have a less than perfect (below 720) credit score or are unable to handle a 10% – 20% down payment. All these traits of FHA loans quickly made them popular especially in the 2008-2009 financial climate.

In the year 2008, FHA loans have accounted for about 46 percent of all mortgage applications – almost half of all mortgages. In addition, Federal Housing Administration guaranteed 186,000 mortgages in June, 2009, a record number in its 75-year history.

In these days, individuals highly prefer them over conventional loans, since it only requires a 3%-3.5% down payment, while conventional loans entail a 10%-20%. However, interest rates on FHA loans are a little bit higher than conventional loans.

Some analysts pointed out that borrowers with FHA-secured loans now have an average credit score of 690, compared to 630 two years ago. In spite of this, a large number of borrowers are turning up late in their payments or even defaulting. Delinquent FHA loans, those 90 days or more late, jumped 62.1% in the past year to 558,944, or 9.4% of FHA loans, as of the end of January, according to agency statistics.  The FHA, however, insists its finances are sound. Its loan portfolio actually performed better than most mortgage products, according to David Stevens, the agency’s commissioner.

FHA loans are still a better option for lower income individuals to purchase a home that they would not otherwise be able to afford. However, if the number of delinquencies increases with such a pace, it is possible that taxpayers will eventually have to bail out the agency. My question here is: How can the Federal Housing Administration work out a suitable strategy to reduce defaults and late payments, and maintain healthy equity/collateral ratios against lent money at the same time?

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Posted in FHA Loans, Mortgage Industry, housing market | 8 Comments »

Interest Rate Remedy – ‘with Side Effects’

Monday, April 5th, 2010

The drop in housing prices extends to the fourth month. After a five-month run-up in home prices starting last spring, prices have now fallen for four consecutive months – according to the S&P/Case-Shiller Home Price Index of 20 cities, a gauge of market values. In January, prices were down 0.4%, compared with December and have fallen 0.7% from a year earlier.

The government, in order to stabilize the decaying housing market, spent more than a trillion dollars buying assets and investing in mortgages securities. Whereas, the near-zero interest rate was also expected to push the housing market upwards. However, both gave out unsatisfactory results. Moreover, recent news of the government winding up its buying activities will create an adverse effect on the industry. However, there are no updates concerning a rise in interest rates.

Lower interest rates predict good progress for the economy as a whole, especially for borrowers who always hope for ‘inexpensive’ money. On the other hand, these low rates are terrible for savers, especially for retirees who want to convert their lifetime savings into lifetime income. It takes a surprisingly large amount of money to generate even a modest amount of recurring income.

People planning their retirement era are unwilling to invest in such annuities, so what do they do then? They make pensions. It gives them a fixed benefit regardless of changing interest rates, making it more valuable than the annuities.

The other side of the picture – no doubt pensions have a fixed yield, but the changing interest rate stimulates the inflation level, which in turn influences purchasing power and an individual’s average income. Low interest rates means more investments which in turn means more production and consequent demand for production. An increase of 0.79% (January 2010 – 2.63% and November 2009 – 1.84%) in inflation is clearly evident of this fact.

The conclusion – lower interest rates favor borrowers and the housing market as a whole. On the contrary, savings based earners are not getting much out of their investments. What do you suggest, what should such individuals do at this stage?  How can the government stabilize the housing market along with increasing interest rates? Is there any other tool, apart from buying assets and mortgage securities?

Reference Links:

http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=USD\

http://money.cnn.com/2010/03/30/real_estate/January_Case_Shiller/index.htm

http://money.cnn.com/2010/03/30/markets/thebuzz/index.htm

http://money.cnn.com/2010/03/29/news/economy/interest_rates.fortune/index.htm

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Posted in Mortgage Industry, housing market | 6 Comments »

Changing the Debt Paying Calculus

Monday, March 29th, 2010

The first of every month is always a day of joy, salaries are credited to accounts and plans to spend it in the most constructive manner are always a hot topic. But the reality is; we never spend on what we always hope for, there are always credit card bills, mortgages and debts to pay-off.

Since long we have set out priorities. Mortgages always come first, next come credit card payments, and why not? A roof over one’s head is much more important than losing the ability to spend more than what is in your bank account.

At the present time, people, in a bad way, are paying their credit card standings before clearing off mortgage payments. The biggest reason for this awkward customers’ credit behavior is the falling housing prices, loan-modification programs and restricted credit. Nowadays, ‘property being the largest asset ‘ is just an extinct statement.  According to the February 2009 Halifax House Price Index, property prices have fallen by 17.7% over the last 12 months and about 20% of all homeowners owe more than their house is worth.

The loan modification program has also contributed towards this reshuffling of priorities. It allows people to hold back their houses even if they miss one or two payments. While on the other hand, banks are constantly tightening their credit policies. Low credit card limits, several penalties and fear of getting a card cancellation if behind on payments has created a see-saw situation, where ‘see’ is lenient and ‘saw’ is severe.

Some experts say that this trend change may lead to a circumstance where home loans may be put to one side while people will repair their credit to start again with a new mortgage plan. What is your say? What should come first; credit card payments or mortgages? Will the US housing market continue to decline? How can the Financial Institutions modify their policies to counter these threats and stabilize the housing market?

Reference Links:

http://www.time.com/time/business/article/0,8599,1969017,00.html

http://first-time-home-buyers.suite101.com/article.cfm/falling_house_prices_set_to_continue_until_2010

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Posted in Mortgage Industry, housing market | 9 Comments »

Housing Market – Fed lifts off the ‘helping hand’

Monday, March 22nd, 2010

The recent recession initiated in the US economy ignited a trickle-down effect on all economies of the world.  The Housing market, playing the most crucial role in US economy, turned out to be a key ingredient of the slump. Since then, the United States has thrown trillions of dollars to get the housing market out of intensive care. The Government has seized two mortgage finance giants, along with giving a tax break of more than $8,000 per housing unit in order to lure buyers.

More importantly, the Fed’s buying of more than a trillion dollars mortgage related assets drove down the borrowing costs, along with feeding the ‘almost-dead’ market with fresh capital. Mortgage rates were affordable, institutions stayed liquid and probably, it kept the depression at bay.

A recent meeting of Fed’s policy committee ended up with a decision of keeping interest rates near zero, spreading a smile on investors’ faces and causing stock markets to rise.

However, bad news also followed. The Federal Reserve is ready to wrap-up the mortgage-security buying program at the end of this month. It is expected that this $1.25 trillion buying program, once ended, would send a seismic wave far and wide because it paid out huge amounts of money that were later injected into stocks. Turning off this supply would reduce the already weakened buying power to a complete flat line.

No worries; The Fed’s said that it will carry on the buying program once they felt a downward tilt.  The question that arises here is: When? Are they going to wait for the housing market to decline further, or would another depression trigger the restart? What consequences will this buying turnoff entail?

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Posted in Mortgage Industry, Press Release | 6 Comments »