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Mortgage rates creep down toward 4%

Mortgage Rates Drop Again

Maybe the days of rock-bottom mortgage interest rates aren’t numbered, after all.

Rates dropped 0.09 percentage point this week to 4.23% for a 30-year, fixed -rate home loan, according to the latest weekly report from Freddie Mac.

Mortgage rates started the year at 4.53%, and have sunk each week in 2014, falling a total of 0.3 percentage point.

Borrowers with a 4.23% mortgage would pay $982 a month on a $200,000 balance, compared with $1,017 on a 4.53% loan.

Frank Nothaft, Freddie Mac’s chief economist, attributed the move to cooling home sales.

“Mortgage rates fell further this week following the release of weaker housing data,” he said. “The pending home sales index fell 8.7% in December to its lowest level since October 2011.”

The drop in mortgage bond purchases by the Federal Reserve, the so-called taper, that started last month, was expected to push rates gradually higher.

But worrisome economic news and a plunge in stocks has counter balanced the Fed action, according to Keith Gumbinger of HSH.com, a mortgage information company. Anxious investors have scurried to safe havens like treasury bonds and mortgage backed securities.

“Much to the benefit of mortgage shoppers, this move [to bonds] is dragging down yields and mortgage rates,” said Gumbinger. “This is a nice surprise” for people looking to purchase or refinance their homes in a rising rates environment, he said.

Rates may keep dropping, according to Gumbinger.

“The reduction in Fed support, slowing manufacturing activity here and in China, some less-than-stellar figures on consumer spending, housing, and more are causing some concern that the economy has decelerated over the last couple of months,” he said. “The economy doesn’t need to slow very much to put us back into the kind of funk we’ve been hoping to escape since the recovery began several years ago.”

SOURCE: CNN Money

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Lower Down-Payment Requirements for Jumbo Loans

Private jumbo-mortgage originations are on pace to reach the highest level since 2007, as lenders are offering low down-payment requirements to lure more borrowers, The Wall Street Journal reports.

Many small lenders, such as community banks and credit unions, say they are willing to cover jumbo loans with 5 percent to 10 percent down payments now, according to the Journal.

As home values rise, banks are experimenting with loosening up lending standards by targeting private jumbo loans as a way to increase their business share. In most parts of the country, jumbo loans are those that are $417,000 and higher; in some of the most expensive markets, jumbo loans are $625,500 or more.

But with low down-payment requirements for jumbo loans entering the arena, that means a comeback for the private mortgage insurance industry. The insurance, which protects lenders in case a borrower defaults, is charged to borrowers who usually make less than a 20 percent down payment. Private mortgage insurers are reportedly lowering their costs and increasing the size of mortgages they’ll cover to accommodate jumbo borrowers.

Mortgage Guaranty Insurance Corp. raised the maximum mortgage it will insure from $750,000 to $850,000 last month; Genworth Mortgage Insurance raised its maximum level from $625,500 to $850,000; United Guaranty recently started offering a limited program for loans up to $1 million.

The move by private lenders to increase low-down-payment jumbo loans comes as the Federal Housing Administration started reducing the amount of high-cost mortgages that it will insure in about 650 counties. As of Jan. 1, FHA loans in high-cost areas have been capped at $625,500, reduced from $729,750.

SOURCE: Realtor Magazine

Fannie Mae to raise fees – Effort to shrink presence in financial markets

Fannie Mae (FNMA) and Freddie Mac, the U.S.-owned mortgage-finance companies, will raise the fees they charge lenders to guarantee loans as part of an effort to shrink their presence in the mortgage market, the Federal Housing Finance Agency said.

For the first time, the companies also will start charging higher fees in New York, New Jersey,Connecticut and Florida, where long foreclosure timelines make it more expensive for Fannie Mae and Freddie Mac to dispose of properties they take over after borrowers default, the FHFA said yesterday. The agency is also shifting its fee structure so borrowers with poor credit will pay more.

The fee increases, typically passed on to borrowers in the form of higher interest rates, will go into effect in March and April, the agency said in a statement. Fees will rise an average of 14 basis points on typical 30-year fixed-rate mortgages, the FHFA said.

“Today’s price changes improve the relationship between g-fees and risk,” FHFA Acting Director Edward J. DeMarco said in a statement, referring to fees for the guarantees. “The new pricing continues the gradual progression toward more market-based prices, closer to the pricing one might expect to see if mortgage credit risk was borne solely by private capital.”

Fannie Mae and Freddie Mac (FMCC) purchase loans and package them into securities, guaranteeing payments of principal and interest. They currently back about 60 percent of U.S. home mortgages.

Shrinking Footprint

The move to shrink the companies’ footprint by raising prices comes as DeMarco is in his last days heading the agency after spending four years pursuing a program of gradually reducing the companies’ operations and maximizing their returns to taxpayers.

The U.S. Senate plans to vote tomorrow to confirm DeMarco’s successor, Mel Watt, a Democratic congressman from North Carolina. Watt, who has declined to discuss his views on housing policy while his nomination is pending, would have the power to reverse the increases if he disagrees with them.

The FHFA is eliminating a 25 basis-point up-front fee Fannie Mae and Freddie Mac began charging in 2008 to deal with the costs of the adverse housing market, recognizing that the market has improved. The fee will remain in the four high-cost states.

FHFA’s last guarantee-fee increase, of 10 basis points, came in November of 2012. An increase of 10 basis points would cost a borrower with a $200,000 mortgage about $4,000 over a 30-year loan term. The average guarantee fee charged by the two companies rose to 38 basis points in 2012 from 28 basis points in 2011, according to a report FHFA also released yesterday.

Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac have taken almost $187.5 billion in U.S. aid since they were placed under conservatorship in September 2008 after losses on investments in risky loans pushed them to the brink of insolvency. With the rebound in the housing market, the companies have become profitable and will have returned $185.2 billion to taxpayers by the end of 2013.

SOURCE: Bloomberg

FHA to lower mortgage limits in “High Cost Areas”

The Federal Housing Administration will be reducing the amount it’ll insure on high-cost mortgages starting in the new year.

Beginning on Jan. 1, all FHA loans will be capped in high-cost areas at $625,500, reduced from the current cap of $729,750. FHA will keep its current loan limits in place in areas where housing costs are lower than $271,050. The new loan limit for the highest cost areas will affect about 650 counties, according to the Department of Housing and Urban Development.  Blaine County will be at the $625,500 limit.

FHA insures loans for buyers with down payments as low as 3.5 percent. The agency raised its limits during the financial crisis to help more home buyers, and the program quadrupled as a result. However, it faced mounting defaults and losses.

“As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play,” says FHA Commissioner Carol Galante. “Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved.”

SOURCE: Realtor News

VIDEO: Govt shutdown shuts off some expensive mortgages

The second week of the government shutdown is giving consumers and lenders second thoughts about the housing market. Lenders last week were giving assurances that they would use “work-arounds” for tax documentation on mortgage applications, but now the future is not quite as clear.

“As the government shutdown continues, we’ll continue to evaluate the circumstances,” said Tom Goyda, a spokesman for Wells Fargo, the nation’s largest lender.

Goyda said Wells Fargo is following guidance from Fannie Mae and Freddie Mac, which does not require IRS verification unless the borrower is financing multiple properties. If that is the case, the lender can close the deal without the verification but cannot deliver it to Fannie or Freddie without the IRS documents.

Jumbo loans (mortgages with values exceeding $417,000) are getting trickier, however. Some lenders will not do them at all without tax verification from the IRS. Others are delaying the process. They will all have to verify the tax information once the government opens again, and that’s a gamble. These loans are inherently riskier because most are held on bank balance sheets.

Wells Fargo is continuing to originate jumbo loans without tax document verification from the IRS. As for the risk it is taking on in doing so, Goyda said, “I can’t really speculate on that.”

“The industry is doing what it can to make the shutdown as seamless as possible, but some lenders are more conservative about it than others,” said Matthew Graham of Mortgage News Daily.

Loans backed by government insurance from the Federal Housing Administration (FHA) and loans through the Department of Veterans Affairs (VA) are largely not affected, as their processes are mostly automated or lenders have delegated authority to close the loans.

“Bottom line here: Loans that are anywhere close to ‘vanilla’ are moving through the system more or less as normal,” Graham said.

“Vanilla,” however, does not include loans needing flood insurance through FEMA, loans for self-employed borrowers or loans requiring Social Security number verification, he said.

Hardest hit by far is the Department of Agriculture home loan program. USDA loans, which are 30-year fixed with no down payment, make up less than 5 percent of the total mortgage landscape but are a favorite among first-time buyers and builders. As the so-called exurbs expand, more borrowers are qualifying for these loans. USDA is currently closed and not processing any loans.

“Some lenders are using this to advance competitive opportunity, rather than calling for an end to this, by advertising that they can close the loans if others cannot,” wrote David Stevens, CEO of the Mortgage Bankers Association, in an email over the weekend. “This disruption is negative for housing and the consumer and will only get worse as this extends.”

Stevens circulated an online ad sent to him by Premier Nationwide Lending, which touts “Good news for most of your borrowers!” The company said it has revised its policies to allow loans to be funded without IRS tax transcripts.

It noted that its policy is “short-term” and “temporary.” John Hudson, Premier’s vice president in charge of regulatory affairs noting that USDA loans are still shut down, and that one family he’s working with is “homeless” because of the shutdown.

Uncertainty in the mortgage market could not have come at a worse time. After a robust spring and summer sales season, housing was already beginning to slow down this fall, thanks to higher mortgage rates. Now concerns about the shutdown and the potential debt crisis have potential buyers pulling back yet again.

“Our September National Housing Survey results show that the improvements in consumer housing attitudes witnessed in recent months softened ahead of the government shutdown,” said Doug Duncan, chief economist at Fannie Mae. “Americans’ awareness of policy uncertainty leading up to the Oct. 1 shutdown and the pending debt ceiling debate appears to have grown as indicated by an apparent cautionary holding pattern in overall consumer housing and personal finance sentiment.”

SOURCE: CNBC

Banks Scale Back on Crucial Step in Home Buying

Banks are reportedly losing favor of mortgage pre-approvals, which are often viewed as an important first step in the home buying process. Mortgage preapprovals are a written commitment from lenders outlining the loan amount and interest rate that home buyers qualify for.

They give buyers an indication of how much they can afford on their home purchase, as well as show sellers their commitment to purchase. But last year, only 29,912 preapprovals resulted in mortgages from the top 25 mortgage lenders — down from 101,626 in 2007, according to the Federal Financial Institutions Examinations Council.

Preapprovals accounted for 4 percent of the purchase mortgages that lenders originated last year, and preapprovals did not precede any of the mortgages issued to home buyers by 14 of the 25 largest lenders last year, according to the council.

“The popularity of preapprovals is quite low,” says Mike Lyon, vice president of mortgage operations at Quicken Loans. Quicken loans’ preapprovals are down 43 percent from 2007. Why are preapprovals losing favor, particularly as competition has been heating up in many housing markets?

Some banks say that they are holding off on the preapproval until seeing the home appraisal. Until then, they prefer a prequalification, which tells borrowers the average size of loan they can qualify for based on stated income and based on an average of mortgage rates. It’s not as formal of a commitment for a loan.

Preapproval are usually binding for two to three months. Some banks, such as Bank of America and Chase, say they are doing more pre-qualifications than pre-approvals.

Chase, for example, says it gives buyers a “conditional approval” that usually lasts 90 days, but does not provide a written commitment. Chase says it often waits to give a written commitment until after verifying borrowers’ income, employment, and the home’s appraisal.

Bank of America also says it waits to approve a buyer until a home is appraised and the borrowers’ finances are fully reviewed. Some analysts say that while preapprovals are showing signs of losing some favor, the federal data may not be a fully complete picture of how big of a decrease in prequalifications.

The federal data relies on lenders submitting data on their preapprovals, and some lenders say their preapprovals don’t meet the federal government’s formal federal definition.

Government shutdown could slow housing recovery

The fight may be in Washington, but the effects of the government shutdown will ripple through every neighborhood in America—without a fully functioning government, an already tight mortgage market may become even more prohibitive. It is exactly what the housing recovery does not need.

“This is going to be very disruptive to the mortgage industry and pretty much result in a freeze of the pipeline,” said Craig Strent, CEO of Bethesda, Md.-based Apex Home Loans. “New loans can be taken, but without IRS and Social Security number verifications, [they] will not be able to proceed to closing.”

Shut Down - Closed for BusinessAfter getting burned badly in the housing crash, most lenders now check everything on a borrower’s loan application. It has become standard to verify tax returns as a quality control measure, according to Strent. If the IRS is closed, it will not process any forms, including tax return transcripts, so the loan applications will be stalled. For government workers themselves, it’s even worse, because they will likely be unable to verify their employment on a mortgage application.

The Federal Housing Administration, which represents about 15 percent of the mortgage market, the lights will still be on, but the staff will be reduced.

This is going to be very disruptive to the mortgage industry and pretty much result in a freeze of the pipeline

“The Office of Single Family Housing will endorse new loans under current multi-year appropriation authority in order to support the health and stability of the U.S. mortgage market,” according to a post on the federal Housing and Urban Affairs’ website. Lenders with “delegated authority” will be able to go on making FHA loans. That is about 80 percent of FHA lenders. They will also be able to get FHA case numbers through the usual on-line service. The FHA will continue to collect insurance premiums from borrowers during a shutdown as well.

“The FHA program can weather a shutdown as long as it doesn’t last too long,” said Guy Cecala of Inside Mortgage Finance. “But a shutdown could also seriously impact FHA’s ability to police lenders and loan quality.”

The shutdown, if lengthy enough, could hit home mortgage refinances as well, delaying rate locks and resulting in costly extension fees.Now What?!!

“What could happen is that our customers could be put in a hold status and then subject to interest rate gyrations that are very likely to occur between the time a government shuts down and reopens,” said David Zugheri of Houston-based Envoy Mortgage.

Of course, mortgage rates could move lower if investors head to the relative safety of the bond market and drive yields down. Mortgage rates follow loosely the yield on the 10-year Treasury.

“Rates may go up this week if…Friday’s job’s report stays on the schedule,” said Matthew Graham of Mortgage News Daily. “Markets would have to defend against the possibility of a strong report reigniting October taper expectations.”

If the shutdown lasts for a few days or even a week, the immediate effects on mortgage availability will be minimal. It’s the message this whole battle has already sent that is already doing much of the damage.

“It certainly won’t help housing. Among other things, it is likely to spook would-be homebuyers,” said Cecala.

Consumer confidence is a key component of the housing recovery, and while rising home prices have helped, more uncertainty in the economy can only hurt.

“Some home-buying consumers are reluctant to buy because of the uncertainty,” said Brad Hunter, chief economist at Metrostudy. “They see the factions in Congress as ‘daring’ each other, with extremely high stakes. People are not especially comfortable making the biggest investment of their life when the government seems to be unable to solve important problems.”

SOURCE: CNBC

Bank fees rise for 15th straight year

Bank fees rose for the 15th straight year, with fees for overdrafts and out-of-network ATM usage hitting record highs, according to Bankrate.com.

The average overdraft charge rose 3 percent in 2013, to a record $32.20, Bankrate says. The average cost for using another bank’s ATM rose 2 percent, to $4.13—also a record.

Fees continue to go up, and it’s best to spend time strategizing how to avoid them

“Overdraft and out-of-network ATM fees are the low-hanging fruit in terms of raising fees,” says Greg McBride, senior financial analyst for Bankrate.com.

Overdraft fees have risen so far that a recent study by Moebs Services says that it’s cheaper to borrow $100 from a payday lender than it is to bounce a $100 check. The median price for a $100 loan from a payday lender is $18, Moebs says.

atmfeesThe fees in both cases are entirely avoidable, McBride says.

Overdraft fees were steepest in Milwaukee, where they average $34.16, and lowest in San Francisco, where they average $27.18.

Out-of-network ATM fees were highest in Denver, where they average $4.70, and lowest in Baltimore, when they average $3.59. The calculation includes the fee from the owner of the ATM and from your bank. The charge for using another bank’s ATM rose 4 percent, to $2.60, while the average fee from your bank for using another bank’s ATM fell 3 percent, to $1.53.

A few bank products became more affordable, according to the Bankrate survey of 10 banks in each of 25 large U.S. markets. The average minimum balance to offer a no-interest checking account fell 19 percent to $60.27—about where it’s been since 1998.

Good luck finding a free interest-bearing checking account: Just 3 percent were free to all customers, unchanged from 2012. But 95 percent of all the institutions surveyed would waive the fee if you kept an average balance of $5,802, down 5 percent from last year. Average monthly service fee fell 1 percent to $14.65. Average monthly service charge for a non-interest-bearing checking account: $5.54, up 1 percent from last year.

So far, fewer than 1 percent of banks charge for using a debit card.

“Fees continue to go up, and it’s best to spend time strategizing how to avoid them,” McBride says. “There’s always room for consumers to shop around.”

Banks do take notice when you leave, particularly when you take a big balance with you, McBride says. Seventy percent of consumers consider switching banks when checking account fees get too high, and those who are most likely to do so often have the highest balances.

SOURCE: CNBC

Case Shiller: Home Prices Continue To Rise

Home prices rose in July by less than two percent for the first time since March but still reached their highest level since August 2008, according to the Case Shiller Home Price Indexes released Tuesday. The 20-city index was up 1.8 percent in July – 12.4 percent in the last year — while the companion 10-city index was up 1.9 percent, 12.3 percent since July 2012.

Economists surveyed by Bloomberg had expected the 20-city index to increase 2.0 percent from June, a 12.4 percent annual improvement.

All 20 cities included in the survey improved both month to month and year to year.

The two surveys have improved month-month and year-on-year for 14 consecutive months.

The Case Shiller report came as the Federal Housing Finance Agency (FHFA) said its House Price Index rose in July at the fastest pace since March. The FHFA index tracks values for only those homes with loans eligible for purchase by Fannie Mae or Freddie Mac generally those with lower values.

The Case Shiller 20-city index rose 1.4 percent in March and then by more than 2.0 in April, May and June. The 10-city index rose 1.3 percent in March followed by three straight months of gains greater than 2.0 percent.

The 10 city index rose to 176.52, up 3.23 from June’s 173.29, June’s index itself was revised down from the originally reported 173.37. The 20-city index was up 2.90 from June’s 159.59. The June index was not revised. In August 2008, the 10-city index was 176.71 and the 20-city index was 164.65.

In July, according to the National Association of Realtors, the median price of an existing since family home dropped 0.1 percent but was up14.7 percent from a year earlier.

Even with the slower growth in July, the two indices have improved by double digits year-year for five straight months and the July year-year growth was the strongest since March 2006 for the 10-city index and since February 2006 for the 20-city index. While good news for home sellers, the continued sharp increases are likely to revive concerns of a growing housing bubble as personal income growth continues to stagnate.

Still the increase in home values, according to economic theory, should mean improved consumer spending. The “wealth effect” theory holds that consumers spend based on increase in net worth, not income. Home values accounted for about 25 percent of the increase in net worth in the first quarter, according to the latest data from the Federal Reserve.

The Case Shiller indices have gone up for eight straight months and 14 times in the last 16; each index dipped last October and November.

The month-month increases were led by Chicago, where prices rose 3.2 percent from May to July. Prices have increased more than 3.0 percent per month in Chicago for three straight months and the index there is at its highest level since August 2010.

Prices rose more than 2.0 percent in July in Las Vegas (2.8 percent), Detroit (2.7 percent), Tampa (2.3 percent), San Francisco (2.2 percent), Atlanta (2.2 percent), Los Angeles (2.1 percent and San Diego (2.0 percent).

Half of the cities which showed month-month price gains of 2.0 percent or greater were in the West; none in the Northeast.

Prices have increase for 22 consecutive months in Phoenix, 18 straight in Minneapolis and 17 straight in San Francisco and Los Angeles. The price index for Denver, according to the July report is at its highest level since the Case Shiller tracking began in January 1987.

The four cities with year-year price growth of greater than 20 percent were also in the West.

Year-year the price gains were led by Las Vegas where prices were up 27.5 percent since July 2012 and San Francisco where prices rose 24.8 percent in the last 12 months followed by Los Angeles, up 20.8 percent in the last year and San Diego which saw a 20.4 percent year-year gain.

Despite the July improvement, the 10-city index is down 22.0 percent from its June 2006 high of 226.29 and the 20-city index is off 21.3 percent from its July 2006 peak of 206.52.

SOURCE; DC News