Archive for the ‘Rates’ Category

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Which Way Will Mortgage Rates Go?

Thursday, March 11th, 2010

Rates have  been staying low since spring of 2009 thanks primarily to the intervention by the Federal Reserve. Rate predictions are as simple as weather predictions in my home town, Chicago. It does seem reasonable to suggest that rates will go up when the Feds wrap up their program of purchasing MBS (Mortgage Backed Securities) on March 31st. If you would like a rate quote for your next mortgage, contact David Wolsky at 520-529-7515 or david@davidwolsky.com.

Here’s an excerpt of an article on March 11th from BankRate.com. Keep in mind that rate surveys are reflecting the rates of the previous week and there are ebbs and flows to the market causing rate fluctuations.

Rates Fall to Lowest Point of this Young Year

The Fed is in the final three weeks of a mortgage-buying initiative that began more than a year ago. In all, the Fed plans to buy $1.25 trillion in mortgage-backed securities. The central bank is down to the last $30 billion or so of these purchases. Afterward, it will be up to investors to buy mortgages and keep home loans available. 

For a while, the consensus among bankers and economists was this: Mortgage rates would rise roughly half a percentage point after the Fed’s withdrawal. That consensus of an expectation of higher rates has transformed into uncertainty.

“Are we going to see a half-point blip? I don’t know. Maybe. Possibly. Probably. I don’t know,” says Dick Lepre, senior loan consultant for Residential Pacific Mortgage. If the Fed’s withdrawal means that rates are going to rise, why haven’t rates gone up already?

Even members of the Fed are asking that question, which implies that they are uncertain about the direction of mortgage rates, too. Brian Sack, executive vice president of the New York Fed, said in a speech Monday that the central bank has been tapering its purchases of mortgage-backed securities. “However, even as the pace of our purchases has slowed, longer-term interest rates have remained low,” Sack said, and the gap between mortgage rates and Treasury yields has remained narrow.

Click here to read the full article: http://www.bankrate.com/finance/mortgages/rates-fall-again-to-new-low.aspx

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Walk Away From Mortgage When It Makes No Sense

Thursday, December 3rd, 2009

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What is behind the fast rise of interest rates?

Monday, June 8th, 2009

 Monday, June 8, 2009 was another brutal day for the bond market. Bonds have been selling and yields have been climbing since May 21st. We have seen 30 year fixed rate mortgages go up about .75% in rate from 4.75% to 5.5%! There are many reasons, opinions and theories explaining the sudden rise in mortgage rates. Here is some “expert” analysis:

According to Robert Lenzner for Forbes, The bear market ended March 9th and the end of the worst recession since the 1930s or the mid 1970s is plainly in sight. The yield curve – the difference between short-term and long-term securities – usually widens in advance of an economic recovery, and it has done so. Housing, the genesis of the crisis, is showing signs of improvement and even amelioration. Pending sales were up 6.7% in April, even if prices are still in the tank.

“There are two legs to that story, both of them bad. As yields on the 10-year go higher, the more attractive that investment would be to equity investors, so there is an asset allocation argument to be made,” said Art Hogan, chief market strategist at Jefferies & Co. “And, the Fed would like to keep yields lower, or at a favorable rate to help the recovery,” said Hogan.

“Rising interest rates will probably begin putting modest valuation pressure on the equity market as the yield on the 10-year Treasury note moves above 4%,” wrote Fred Dickson, chief market strategist, Davidson Companies, in a research note.

“Mortgage rates are heading higher as measured by Bankrate’s 30 year mortgage which rose to 5.45%. Rates are up 45 basis points in the last two weeks as Treasury rates have spiked higher. The recent rise in mortgage rates will probably dampen home sales and will certainly threaten stability in the consumer and household sector,” said Dan Greenhaus, an analyst at Miller Tabak Equity Strategy Group.

Federal Reserve Chairman Ben Bernanke, on June 3rd, “In recent weeks, yields on longer-term Treasury securities and fixed-rate mortgages have risen,” he told Congress. “These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings.” 

 Here is this week’s forecast from the Mortgage Success Systems, LLC:

 “Bonds have traded lower recently, causing home loan rates to move higher. The reasons are many, but certainly due in part to all the extra Bond supply in the market. The Treasury has to have some way to pay for all the massive government stimulus plans, so Treasury auctions have been increasing dramatically – but the added supply is driving prices lower, with home loan rates moving higher. I will be watching closely to see if this trend continues.”

My observations… The bond market is way oversold and we should see a reversal soon as all of the impact from mortgage refinancing works its way through the system. There is a tremendous supply which is not keeping up with demand. Once all of the excess paper from the refinance boom is bought, the appetite for more supply will be there and yields will lower although more prognostications do not have rates as low as we have seen in recent months. Higher mortgage rates have had their impact on new mortgage applications. According to the Mortgage Bankers Association, refinance applications have dropped 24.1% to its lowest level since February 6. Purchase applications rose 4.3%. It appears that buyers are sensing prices leveling off and rates starting to climb. First time buyers want to take advantage of the $8000 tax credit before it runs out on November 30. The economy is showing signs of improvement. The stock market is up 37% since March! If you are interested in applying for a mortgage, call me, David Wolsky at 520-977-3300 during regular business hours. I have been origination mortgage since 1994 in Tucson, AZ.

 

For more infomation on the subject of T-Bills, read The Bond War – Why Paul Krugman and Niall Ferguson are hammering each other about T-Bill interest rates written by Daniel Gross and posted on www.slate.com. Article URL: http://www.slate.com/id/2219769/

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Low Mortgage Rates: Now or Never?!

Monday, June 1st, 2009

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Bonds took another beating today as investors shunned safe haven instruments in exchange for riskier investments. Mortgage Bonds did trade briefly higher at the open but fell off a cliff after news from China that manufacturing in that country was at a 3 month high signaling that the global recession may be coming to an end.

In the past week we have seen the average mortgage rate jump a half point higher! 5.25% is certainly a great low rate, but 4.75% was available only a few days ago. Bond yields are surging because the economy is showing signs of improvement such as the June 1st report showing manufacturing shrank as at a slower pace and construction spending rose. Let’s hold off on the champagne for now because manufacturing shrank, but not as much as expected. Another reason that bond traders are getting jittery is because of the fear of inflation. Bonds have fixed rates and their value erodes with inflation. Conversely to stocks, bond yields increase whenever bonds are sold and yields lower when bought. According to Nobel Prize winning economist, Paul Krugman in his May 28th column The Big Inflation Scare, the threat of inflation is unfounded in the current economic environment. Krugman points out the lack of inflation right now. Prices are down from a year ago and deflation has more potential than inflation (as I write this blog on June 1st, 2009). Krugman also indicates that even though the Fed is printing money and buying debt, there still isn’t a precedent for inflation as banks have been repaying the Fed. Plus the banks are sitting on reserves rather than lending out their money. Is the economy roaring back? Hardly! Maybe the eyes of the financial markets. Those guys read the tea leaves differently than the rank and file. I still see economic issues from my vantage point on the front lines of the housing market. Credit is still tight, property values are groping to level off and now rates are increasing. The job market is still lousy and the wave of layoffs continues to build.

As for the mortgage market, today’s Wall Street Journal suggests that low rates may be disappearing fast. The article goes on to suggest that the rise in interest could be ominous for the housing market at such a precarious time for our economy. The low rates and tax credits for first time home buyers has stimulated the housing market but higher rates could throw a wrench into the recovery. When rates go down signifcantly, refinancing your home could save hundreds of dollars a year. Will the lower rates come back? It’s hard to say. We saw some significant swing in bond yields last week. It could go down, just as fast as it went up so strap on your seat belts. It is likely that we will see rates settle down in the weeks to come, but it would be unlikely for them to reach the 4.75% we saw last week. Stay tuned and visit my site, www.livingintucson.com for timely commentaries on the mortgage market. Call David Wolsky at 520-977-3300 or email me at david@davidwolsky.com for all of your Tucson mortgage needs.

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Mortgage Bond Yields Soar

Wednesday, May 27th, 2009

Mortgage bonds have seen steep sell-offs for the past four days which will impact the housing recovery and slow down the pace of refinances! We have had multiple rate increases since last week. The sell-off will put added pressure on an overloaded system to close loans before rate locks expire. As I write this update on May 27th (around 11:00 A.M.), mortgage bonds have dropped over 350 basis points since May 20th. The bonds are at the levels we saw in March when the Federal Reserve announced their strategy to purchase mortgage bonds and push rates lower which ignited a mortgage bond rally dropping bond yields. Let’s see if the Fed will try to calm the markets by purchasing more bonds and stopping the bleeding. Eventually, the bond market will find a floor of support and bounce back. Keep in mind, rates are still near historic lows and the conditions for buying a home are still excellent. I am only trying to point out the drastic selling of mortgage bonds within the last week.

Here’s an article from Bloomberg by Jody Sheen:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aw90LMfkBOeU&refer=home

If you are interested in buying or refinancing a home, contact David Wolsky (that’s me!) at 520-977-3300 for all your mortgage needs in Tucson, Arizona. I am licensed throughout the state.

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What’s up with mortgage rates?

Monday, May 11th, 2009

 

The Arizona Daily Star published a good article last week by Adrian Sainz about mortgage rates that you can access by clicking here:

Puzzled by mortgage rates? Here’s Q & A help

According to the May 7th Freddie Mac survey the national average for 30 year fixed rate conventional mortgages is 4.84% with .7% in points. Wow!! Great rates!! Why is my quote higher or lower? Well…rates are not one size fits all. They are tiered based on your loan-to-value ratio (LTV) and your credit score. If you are purchasing a home and have a 10% down payment and a 680 FICO score, your rate will be slightly higher than a buyer with a 25% down payment with a 740 score. If you are refinancing your home and your LTV is over 70% and your score is under 740, you will likely be quoted a higher rate or higher points.

Fannie Mae (FNMA) and Freddie Mac have changed the rate or point structure significantly in the past eighteen months for borrowers with lower credit scores and higher LTV ratios. At the same time, credit guidelines have also tightened. Another recent change in mortgage rates is points! In the past fifteen years, lenders paid premiums or rebates to the originator in lieu of the borrower paying points to get a mortgage with low rates and fees. This year, the rebates are smaller and lenders are charging borrowers points. Here in Tucson at Sunstreet Mortgage, LLC, we have not seen as many zero point refinances or no cost refinances of conventional loans. One reason for this dynamic is because borrowers were refinancing the loans frequently and the lenders were not getting their money’s worth for the larger rebates. One positive aspect of the current rate and fee environment is the costs seem to pay for themselves within three years in most cases due to the historically low rates we are currently experiencing.

I would be happy to personally answer any mortgage related questions and concerns that you may have. I can be reached by calling me — David Wolsky – at 520-977-3300. I offer conventional, FHA and VA mortgages. I have fifteen years of experience originating mortgages. In fact, rates were double in 1994 than the current rates.

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Making Home Affordable: Progam Details

Friday, April 3rd, 2009

Useful websites:

Are you eligible to refinance or modify your loan?
www.makinghomeaffordable.gov
Does Fanne Mae or Freddie Mac own your loan?

www.fanniemae.com
www.freddiemac.com

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Making Homes Affordable Program: April 2009

Thursday, April 2nd, 2009

 Making Homes Affordable Program

The Obama Administration unveiled the final details of its “Making Home Affordable Program,” which is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future.

One of the initiatives in this program is aimed at helping responsible homeowners “refinance” their loans to take advantage of historically low interest rates. Here are some common Questions and Answers about the Refinancing Initiative in the program.

REFINANCING INITIATIVE

Who is eligible?

You may be eligible if:

  • You own and currently occupy a one- to four-unit home.
  • Your mortgage is owned or controlled by Fannie Mae or Freddie Mac.
  • You are current on your mortgage payments.
  • The amount you owe on your first mortgage is about the same or slightly less than the current value of your house.
  • And, you have a stable income sufficient to support the new mortgage payments.

How do I know if my loan is owned or controlled by Fannie Mae or Freddie Mac?

Simply call or email me. I’ll help you determine if your mortgage is backed by Fannie Mae or Freddie Mac.

I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?

Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less, you may qualify. The current value of your property will be determined after you apply to refinance.

If I am delinquent on my mortgage, do I still qualify for the Refinance Initiative?

No. But the good news is, you may qualify for the Modification Initiative. Contact me to discuss your situation and review your options.

I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for the Refinance Initiative.

Will refinancing lower my payments?

That depends. If your interest rate is much higher than the current market rate, you would likely see an immediate reduction in your payment amount.

However, if you are paying interest only on your mortgage, you may not see your payment go down. BUT… you will be able to avoid future mortgage payment increases and may save a great deal over the life of the loan.

What are the terms of the refinance and what will the interest rate be?

All loans refinanced under the plan will have a 30- or 15- year term with a fixed interest rate.

The interest rate will be based on market rates at the time of the refinance. Currently, interest rates are at historical lows, which makes this a good time to examine your refinancing options.

Will refinancing reduce the amount that I owe on my loan?

No. Refinancing will not reduce the principal amount you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

Can I get cash out to pay other debts?

No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.

How do I apply for the Refinance Initiative?

Call or email me today to discuss your specific situation and to examine your options. If this plan is right for you, we can begin working on your refinance immediately.

As part of the discussion, we may need to look at the following information:

  • Recent pay stubs to help determine your gross (before tax) household income.
  • Your most recent income tax return.
  • Information about any second mortgage on your house.
  • Account balances and minimum monthly payments due on all of your credit cards.
  • Account balances and monthly payments on all other debts, such as student loans and car loans.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call 520.977.3300 or email me at david@davidwolsky.com to set up an appointment.

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FICO Scores: How to improve your credit

Tuesday, March 31st, 2009

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With mortgage rates at record lows and credit so tight, it is imperative to have high credit scores to assure the best possible terms for loans. Up until recently, having a 700 FICO score assured you of the lowest rates when borrowing. That paradigm has now changed. 740 is the new 700. The median credit score is 723. FICO scores range from 3o0 to 850. Fannie Mae and Freddie Mac now charge a “delivery fee” for loans with credit scores below 740 that translates to a higher rate or higher points for those borrowers depending on the loan-to-value ratio (LTV). Your rate will be better when you refinance with more equity in your home and if you are purchasing, your rate is better if the your down payment is bigger, especially if your FICO scores are 740 or higher. Conversely, your rate goes up if your scores are low and your LTV is high.

If you need to raise your scores, be patient because it takes time, effort and money! There is no quick fix. Let’s examine the anatomy of a credit score. There are five key criteria that goes into scoring borrowers.

  1. 35% — punctuality of payment history (only includes payments later than 30 days past due) and derogatory credit such as bankruptcies, foreclosures, collection accounts and judgements 
  2. 30% — the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
  3. 15% — length of credit history
  4. 10% — types of credit used such as installment, revolving and consumer financing 
  5. 10% — recent inquiries for credit and/or amount of credit obtained recently

You are entitled to obtain a copy of your credit report every year. The only place to go is the website www.annualcreditreport.com. This website was set up by Trans Union, Equifax and Experian. The report is free. If you want to get your FICO score, there is a modest fee.  

Here are some tips to improve your scores. Make sure you pay your bills on time! I know it sounds simple, but a late payment on a credit card can decrease your credit score significantly. If your credit report has a late payment, time will heal the wound. Every month from the most recent late payment will continue to improve the score as long as there aren’t any subsequent late payments. If you feel that you have a legitimate dispute with a creditor, you can write a letter to the three credit bureaus to challenge the information. Yes, ALL THREE BUREAUS. A good resource for further information is the Federal Trade Commission. Click here to go to their website. It is full of useful information. 

You can also hire a credit repair company to outsource the task. An initial consultation usually runs about $250 and then expect a monthly fee of $75. It takes about six to twelve months, but your scores will improve by 50 to 100 points. You will recoup the fees through lower interest rates on your car loans, home loans and credit cards. Please make sure that you work with a reputable company. Feel free to contact me for a referral!

Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years once it is paid. If you are having trouble making ends meet, contact your creditors and set up payment plans. This won’t improve your score immediately, but if you can begin to manage your credit and pay on time, your score will eventually improve.

As for the amount of debt compared to the available limit, try your best to keep the balance below 50% of the limit.  Even if you pay down your balance, there may still be complications because banks have been lowering credit card limits lately because credit is so tight. If you pay off a balance, I recommend that you keep the acount open with a zero balance. If you keep switching to new credit cards, you may compromise your score because of the length of time that you have credit accounts. Of course, if you are new to credit, there is not much you can do about the length of time for credit. Time will take care of it. Don’t open a number of new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower score.

Home loans or credit cards are higher up the credit food chain than revolving debt from finance companies, furniture stores or consumer electronics stores. Beware of come ons like 90 days — same as cash! Too many consumer finance credit accounts will hurt your score.

Lastly, don’t apply for lots of credit accounts at the same time. Space out your credit requests over several months. There is a must readcalled Do You Make These 38 Mistakes with Your Credit? How increasing your credit scores will improve your lifestyle.

To see how much your scores will increase click here.

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Monday musings: tidbits from the mortgage industry.

Monday, March 23rd, 2009
Conventional loans go up to $417,000 for a single family residence in most states. Loan amounts are higher in certain counties around the country were the median price of a home is higher. Most of these conventional mortgages are bought by Fannie Mae and Freddie Mac. The Fed took over these agencies a few months ago. The Fed announced last week that they will be buying $750,000 of mortgage bonds and $300,000 of long term treasury debt to keep rates low. The markets have been responding nicely and the rates are low!
I recently read that jumbo loans (over $417,000) will see some lower rates soon. Yeah!! These loans were also securitized and sold on Wall Street, but the appetite for jumbos has been non-existent for months thanks to the craziness in the financial markets.  There have been a few companies with lower rates on jumbos and now more lenders will be offering better terms for these loan too. That should make more affluent borrowers happy!

 
Another big move today was made by the Fed….my they have been busy lately! The finally have a plan in place to clear out the toxic assets from the financial sector. It’s a public-private plan that would have private investors and the Treasury put in equal amounts of money that would then be backed by a loan guarantee from the Federal Deposit Insurance Corp. to buy loans and mortgage-backed securities from the banks. Both the taxpayers and the private investors would gain from any profits if the assets eventually gain value. The taxpayer would take most of the downside risk. There has already been interest into the plan by private sector companies such as Pimco. Stocks went through the roof today with the Dow gaining almost 500!

Personally, I share the same bailout fatigue that most Americans feel, but I wonder if the price of doing nothing is far greater. What is it that we do not know?

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