Economic and Mortgage Market News

Take a look at our editorial perspective on the economy and mortgage related news as it hits the wires.  Visit our blog www.abilityblog.com. for even more in depth market info.  To get an RSS feed of our blog contact us at blogs@lendability.com.     

 

New and Improved GFE Forms

Posted January 7th, 2010 by

NEW YORK (CNNMoney.com) -- Starting Jan. 1, new rules go into effect that simplify and clarify exactly what mortgage lenders will charge for a loan.
The initiative from the Department of Housing and Urban Development (HUD)requires that a new "Good Faith Estimate" form be given to all applicants, one that makes it easier to compare true costs of loans from different lenders.
"The main purpose is to give consumers the tools to be able to compare apples to apples," said Robert Grosser of Luxury Mortgage, a New Jersey-based direct lender. "All lenders must use a specific form and disclose fees in the same spots on the same forms." (See the new form.)
Until now, borrowers might have focused on interest rates or monthly payments to compare mortgages options. But fees play a big part in total cost, said Vicki Bott, HUD's Deputy Assistant Secretary for Single Family Programs
There are generally two blocs of fees.
One covers origination charges, what the lender receives for providing you with the loan.
The second bloc consists of settlement fees, for say, title insurance or an appraisal.
If borrowers accept the offers as outlined, lenders must issue the loans under the costs listed -- with little room for surprise.
If the mortgage originator provides services in the second bloc, it must stick to the original fees within 10%. If, for example, the lender tells you the title insurance it arranges will cost $2,000, the final fee for that cannot exceed $2,200. (If you decide you're going elsewhere for title insurance, you're on your own.)
"It truly drives accountability," said Bott. "It makes the lender say, 'What I quoted is what you get.'"
The estimate is not iron clad, and can be altered if there's a material change in circumstances. If the appraisal comes in lower than expected, for example, that could affect the mortgage rate, though the lender must quickly tell the borrower, according to Bott.
The new 3-page form has lines covering all the settlement fees, such as the origination fee and points charged up-front to reduce the interest rate. It also clearly lists the initial loan amount, the term length in years, the monthly payment, the initial interest rate, and whether that interest rate can rise plus any prepayment penalties or balloon payments.
There's also a "shopping chart" on the third page in which up to four different deals can be placed side-by-side and their costs easily compared.
Say two lenders both offer a 5% loan on a $200,000 mortgage that has a monthly payment of $1,074 a month. One lender may charge $5,000 for it and another just $3,000. The new form should make it simpler for consumers to recognize the better deal.
Housing outlook 2010
"It's definitely a step in the right direction toward simpler and straightforward key information on mortgages," said Alex Pollock, an American Enterprise Institute fellow who has developed and advocated for the use of a one-page mortgage form to better help consumers understand their obligations.
He does not, however, think the new form goes far enough.
"It focuses on the question of whether this is the best deal," Pollock said. "In my opinion, it's more important to ask if I can afford this mortgage. This might be the best deal I can get but I still may not be able to afford.”
 

November home sales soar 7.4 percent

Posted December 22nd, 2009 by

WASHINGTON (AP) -- Home resales surged last month to the highest level in nearly three years, reflecting an extraordinary level of federal support that has pulled the housing market back from the worst downturn since the Great Depression.

Buyers were racing to complete their sales before the original expiration date of a tax credit for first-time buyers that was scheduled to expire Nov. 30. Last month, Congress decided to extend and expand the credit to ensure the housing market could sustain its recovery.
The Realtors estimated that about 2 million homebuyers have taken advantage of the credit so far and forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year's levels, a record jump.
Sales are now up 46 percent from the bottom in January, but down 10 percent from the peak more than four years ago.
The median sales price was $172,600, down 4.3 percent from a year earlier, and up 0.2 percent from October.
"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there."
November sales rose 7.4 percent to a seasonally adjusted annual rate of 6.54 million, from a downwardly revised pace of 6.09 million in October.
Sales had been expected to rise to an annual pace of 6.25 million, according to economists surveyed by Thomson Reuters.
The inventory of unsold homes on the market fell about 1 percent to 3.5 million. That's a healthy 6.5 month supply at the current sales pace, the lowest level in three years.
Besides the existing tax credit of up to $8,000 for first-time buyers, homeowners who have lived in their current properties for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, buyers must sign a purchase agreement by April 30.
Postponing the deadline could mean sales will drop during the winter months and recover in the spring.
"Buyers have no sense of urgency now," said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.
 

Citi Halts Foreclosures for 30 Days

Posted December 21st, 2009 by

 Citigroup is suspending foreclosure actions for about 4,000 borrowers scheduled to lose their home during the holiday season.

The New York-based bank announced Thursday that its CitiMortgage and CitiFinancial business units will haltall foreclosure sales on Citi-owned first mortgage accounts nationwide and cease evictions on REO properties already seized, effective December 18, 2009 through January 17, 2010.
Citi’s month-long foreclosure moratorium affects only those loans owned by the bank, approximately 20 percent of its $746 billion mortgage servicing and lending portfolio. The program does not apply to the other 80 percent that it services for investors.
The bank expects the national suspension will affect approximately 2,000 borrowers scheduled to have foreclosure sales and another 2,000 that were to receive foreclosure notifications in the next 30 days.
The foreclosure suspension is reminiscent of the moratoriums put in place by most lenders at about this same time last year, when the administration was laying the groundwork for its Making Home Affordable program. As many analysts warned, the moratoriums only served to delay the inevitable and foreclosure numbers soared once they were lifted, but Citi says it’s simply hoping to bring some holiday relief to its customers.
“We hope that with this suspension we can make the holidays a little less stressful for our customers who are going through a very difficult time,” said Sanjiv Das, president and CEO of CitiMortgage. “And we will continue to look for meaningful ways to assist our customers experiencing hardship.”
Citi says its multi-faceted Homeowner Assistance Program has helped approximately 715,000 homeowners avoid foreclosure and remain in their homes since the housing crisis began in 2007.
The bank says it makes “strenuous attempts” to establish contact with distressed homeowners, and does not initiate or complete a foreclosure sale on any borrower eligible for assistance where Citi owns the mortgage, the borrower is seeking to stay in the home as their primary residence, and is “working in good faith” with Citi to work out affordable mortgage payments.
 

Unemployment Up, Mortgage Rates Down.

Posted October 2nd, 2009 by

The nation's job losses accelerated in September, driving the unemployment rate to a 26-year high of 9.8% and casting a cloud over the incipient recovery, economic data showed Friday.

Nonfarm payrolls fell by a greater-than-expected 263,000 in September, the Labor Department reported. It marked the 21st consecutive month of job losses.

Since the recession began in December 2007, 7.2 million jobs have been lost and the unemployment rate has doubled

Though the outlook for the economy is bleak, it is having a positive effect on mortgage rates. We are testing the lows, once again, that we saw in April of 2009. Will this be enough, to once again spur growth in the economy by lowering the average existing mortage rate to all time lows. Stay Tuned!
 

Treasury Announces $309 Million in Recovery

Posted August 26th, 2009 by

Treasury Announces $309 Million in Recovery
Act Funds to Create Jobs, Provide Affordable Housing
WASHINGTON – As part of the Obama Administration's effort to strengthen communities and ease pressures on the housing market, the U.S. Department of the Treasury today announced $309 million in American Recovery and Reinvestment Act (Recovery Act) funding to spur the development of affordable housing units in Arizona, Connecticut, North Carolina, North Dakota, Pennsylvania, South Carolina, and Vermont.
"Today's announcement of housing funds demonstrates how the Recovery Act is putting our nation on the path to economic stability, one community at a time," said Deputy Secretary of Treasury Neal Wolin.  "This initiative will help spur construction and development, create much needed jobs, and increase the availability of affordable housing for families around the country."
Since the program launch in May 2009, the Treasury Department and the Department of Housing and Urban Development have been implementing new efforts designed to help families while providing important assistance to homebuilders.  Specifically, the Treasury Department has implemented an innovative program that will provide more than $3 billion from the Recovery Act to put people to work building quality, affordable housing for individuals and families affected by the current crisis.  The Treasury Department will work with state housing agencies to jump start the development or renovation of qualified affordable housing for families across the country.  Under this program, state housing agencies will receive funds to finance the construction of affordable housing developments. 
Today, the Treasury Department is announcing the sixth round of recipients for a total of $309 million: $34 million in Arizona; $16 million in Connecticut; $95 million for North Carolina; $3.6 million for North Dakota; $41 million in Pennsylvania; $118 million for South Carolina; and $1.4 million in Vermont.

 

Top 8 Questions to Guide Your Mortgage Search

Posted July 11th, 2009 by

1.  How long will you be living in the house?
There are different payment options that may be a better fit for your situation, depending on how long you plan to stay in your house. Answering this question will help you determine if is best to pay off points to get a lower rate, if you should take a prepayment penalty, or if you should get an adjustable-rate or fixed-rate loan. If you are considering refinancing, this question may help you figure out if you should even go through with a refinance. 
For some, it may be hard to determine the length of time they will live in a house. According to the 1998 U.S. Census data, the median number of years that homeowners remained in a house was 8.2 years. It may help to use this information as an estimate for your projected length of stay.

2. What is the cost of the loan?
With every loan application, you will receive a Good Faith Estimate, which predicts what the lender will charge you at the time of closing. The different actions a lender will charge you for include: a credit report, appraisal, discount fees, origination, preparation of documents, title insurance, and others. The amount listed under “Estimated cash at closing” predicts the dollar amount you will be charged when the loan closes; you should use this to compare different loan options.

3.  When will the savings from the loan pay off the upfront costs?
You should calculate how long it will take for your monthly savings from the new loan to make up for the upfront costs of the loan. If this length of time exceeds your expected stay in the house, then the loan is most likely not worth getting.

4. What mortgage option feels right for you?
There are many different mortgage options, you should explore all the possibilities and pick the one that feels best for you. Some people would rather pay extra points upfront to get a lower interest rate, while others prefer to have a low initial cost. Some people want a 15 or 30-year mortgage, and others would rather have an interest only five-year ARM. The option you choose must be one that you are comfortable with.

5. How long should your rate lock last?
Mortgage brokers and lenders have the best sense of the current state of the mortgage industry, and thus know the length of time needed for a loan to close. When deciding on rate lock, they will provide sound advice on how long it should last.

6. Will you be able to afford your monthly mortgage payments?
There are many costs related to owning a house; the principal and interest of your mortgage only amount to part of your monthly housing payments. In order to insure your ability to pay your mortgage, it is often recommended by experts that couples qualify for a mortgage based on only one of the spouse’s income. Additionally, it is important to allow room to build sufficient savings when calculating the mortgage payments that you can afford.

7. Can you get an ideal rate with your current credit score?
If your credit is less-than-perfect, you can qualify for a loan, but you most probably will not get lowest rate. It is important to check your credit reports before embarking on a mortgage search, as you may want to focus on raising your score first.

8. Is homeowner’s insurance available for your prospective house?
You should shop for homeowner’s insurance far in advance to the closing date of your loan. Some homeowner insurers have refused services in certain state prone to natural disasters. According to the National Association of Insurance Commissioners, homeowners in Texas are charged the most for homeowner’s insurance, followed by Florida, Oklahoma, and Louisiana. If your prospective house has a history of insurance claims, it may be difficult to find a company willing to provide you with insurance. 
 

$8,000 Home Buyer Tax Credit at a Glance

Posted June 22nd, 2009 by

The information on this page pertains to the American Recovery and Reinvestment Act of 2009.

The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit

Treasury announces $268 Million more in Recovery Act Funds

Posted June 22nd, 2009 by

As part of the Obama Administration's effort to create jobs and ease pressures on the housing market, the U.S. Department of the Treasury today announced $268 million in American Recovery and Reinvestment Act (Recovery Act) funding to spur the development of affordable housing units in Indiana, Missouri, Tennessee, and  Washington D.C.  

"Today's announcement of housing funds demonstrates how President Obama's Recovery Act is putting our nation on the path to economic stability, one community at a time," said Treasury Deputy Secretary Neal Wolin.  "This initiative will help spur construction and development, create much needed jobs, and increase the availability of affordable housing for families around the country."

The labor and housing crises in this country are deeply inter-connected. Since their peak level at the beginning of 2006, housing starts have fallen 80 percent. Houses currently under construction are at a 13-year low, down more than 60 percent from the peak in the first quarter of 2006. This collapse has led to severe job losses in the residential building and specialty trades sector related to housing, with employment down by nearly one-third -- a loss of over one million jobs.  Such losses not only indicate significant problems in the residential construction sector, but also suggest that the need for affordable housing has risen markedly during the recession. 

In response, the Department of Housing and Urban Development and the Treasury Department have been implementing new efforts designed to help homeowners while providing important assistance to homebuilders.  Specifically, Treasury has launched an innovative program that will provide more than $3 billion from the Recovery Act to put people to work building quality, affordable housing for individuals and families affected by the current crisis.

The Treasury Department will work with state housing agencies to jump start the development or renovation of qualified affordable housing for families across the country.  Under this program, after meeting certain eligibility requirements, state housing agencies will receive funding to construct affordable housing developments. 

Today, the Treasury Department is announcing the second round of recipients: $164 million in Indiana; $17 million in Missouri; $53 million in Tennessee; and $ 33.7 million in the District of Columbia.

 

Mortgage Rates Dip

Posted June 18th, 2009 by

Mortgage rates took a sharp drop in the past week, providing needed help for a housing industry that had seen a dropoff in buyers as borrowing costs have escalated.

The rate for a 30-year fixed dropped 0.21 percentage points to 5.38 percent for the week ending June 18, after reaching its highest point since late November the previous week, according to data from Freddie Mac.
 
The move had coincided with a fall in mortgage applications and fears that a housing recovery would be impeded by higher rates.

"Concerns about eventual inflation drove bond yields and mortgage rates higher in recent weeks," said Greg McBride, analyst at Bankrate.com. "That has been tempered by the reality of continued weakness in the economy."

Mortgage rates had jumped to 5.59 percent as the 10-year Treasury note yields hovered in the 5 percent range. Concerns about inflation amid a wave of government borrowing and the corresponding drop in value of cash-based assets drove investors from longer-dated US debt, sending yields higher.

That trend has eased somewhat amid a growing sense that inflation is probably not a near-term problem.

Mortgage rates, then, are likely to stay fairly range-bound until the economy shows signs of breaking out, McBride said.

"Mortgage rates bob up and down. For homeowners that are holding out for sub-5 percent rates, sorry but I think that ship has sailed," he said. "The low 5s might be the best we can hope for."

In addition to the drop in 30-year rates, the 15-year is now at 4.89 percent.

Borrowing costs should not be an impediment to those looking to buy a house, McBride said.

"Make no mistake, these rates are low and they're going to stay low," he said. "The Fed still has approximately $1 trillion in its buyback program to put to work for the balance of 2009. That will continue to keep a lid on mortgage rates."
 

Obama Unviels New Financial Regulation

Posted June 17th, 2009 by

President Obama on Wednesday will finally announce his long-anticipated plan to restructure how banks and other firms are regulated in the hope of preventing another financial collapse.

The far-reaching effort would reorder the roles of some key agencies to try to tighten government supervision of the financial sector.

Obama's plan will include a proposal to get rid of the embattled Office of Thrift Supervision and merge it with the Office of the Comptroller of the Currency, a senior administration official said Tuesday evening.

The OTS has been on the hot seat for months for its role as the overseer of American International Group (AIG, Fortune 500) and failed lenders IndyMac and Washington Mutual. The comptroller's office is a Treasury Department bureau that regulates national banks.

The plan would also expand the roles of the Federal Reserve and the Treasury Department.

Obama will call for the creation of a council of regulators chaired by the Treasury secretary to work alongside the Fed to monitor system-wide risk, the administration official said.

The Treasury would also officially keep powers it has already been wielding to approve government action aimed at saving a company that's teetering on the verge of collapse.

In addition, Obama will propose the establishment of a new watchdog agency aimed at protecting consumers from deceptive or dangerous mortgages, credit cards and other financial products.
 

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