26. April 2010 by admin.

By JAMES R. HAGERTY

Tax credits sparked a big jump in home sales last month, as first-time buyers took advantage of low prices and interest rates.

But the longer-term housing outlook remains clouded, with a large inventory of foreclosed homes expected to hit the market later this year.

The Wall Street Journal’s latest quarterly survey of housing-market conditions in 28 major metro areas found that inventories of homes for sale, as well as the number of distressed borrowers, remain very high in many metro areas. That portends more downward pressure on prices from bank foreclosures.Though tax credits are providing a temporary boost, “we’re still in a very fragile housing market,” said Ivy Zelman, chief executive of Zelman & Associates, a research firm, who doesn’t expect a full recovery before 2013.

Sales of single-family homes and condominiums hit a seasonally adjusted annual rate of 5.35 million in March, the National Association of Realtors reported Thursday. That compares with a 5.01 million rate in February and was up 16% from the depressed March 2009 rate of 4.61 million.

The Journal survey found that Miami, Orlando and Tampa, Fla., Las Vegas, Phoenix and Atlanta have some of the highest concentrations of distressed borrowers at risk of losing their homes. Nearly 28% of homeowners with mortgages are at least 30 days late on payments in the Miami area, more than double the national average of 12.2%, according to LPS Applied Analytics. That rate stands at about 24% in Orlando and Las Vegas.

Neighborhood Market Watch

Although tax credits provide a temporary boost, the long-term outlook for the housing market remains clouded. See how five locales are faring.

Prudential Americana Group Realtors

A 3,601-square-foot home about 10 minutes from the Las Vegas Strip.

The supply of homes already on the market is well above the national average in Charlotte, N.C., Jacksonville, Fla., Nashville, Tenn., Chicago and Philadelphia. In Charlotte, where bank cutbacks have increased unemployment, there are enough homes on the market to last 17 months at the average sales pace of the past year. That compares with 15 months in Jacksonville, 13 in the Long Island suburbs of New York and 11 in the New Jersey suburbs. A market generally is considered balanced when the supply is around six months.

Among metro areas with relatively low rates of delinquent borrowers and for-sale inventories: Boston, Denver, Dallas, Houston, Minneapolis, San Francisco and Washington, D.C.

The median price for home resales in March was $170,700, up 0.4% from a year earlier, the Realtors reported. A price index produced by the Federal Housing Finance Agency in February was down 3.4% from a year earlier, the agency said. Realtors say prices for middle-class homes in the types of neighborhoods that attract investors and first-time buyers are flat or rising slightly, while higher-end home prices generally continue to fall.

Brandon Sullivan for the Wall Street Journal

Rebecca Ahlschwede in front of a home she has offered to buy in Scottsdale, Ariz. She hopes to strike a deal by April 30 to qualify for federal tax credits worth as much as $8,000.

For now, real estate agents have a compelling pitch: Prices have fallen an average of about 30% across the country since peaking in 2006; mortgage rates are near their lowest levels in four decades; and many people who sign a contract to buy a home by April 30 can qualify for federal tax credits worth up to $8,000. “Now is the time to do something,” said Bill Wilkerson, an agent at ZipRealty in Phoenix.

One of Mr. Wilkerson’s customers, Rebecca Ahlschwede, last week offered about $200,000 for a three-bedroom foreclosed home with a pool in Scottsdale, Ariz. Ms. Ahlschwede, a 31-year-old neurology technician who currently rents, said the $8,000 tax credit she hopes to receive would be “a huge bonus.”

The tax credit appears to be giving more of a boost to previously occupied homes than to new construction, as first-time buyers favor the short commutes of older neighborhoods. Ms. Zelman said the rise in sales of new homes appeared more moderate than many builders had hoped.

The rush to qualify for the credit will end after the April 30 deadline for signed contracts, though the resulting boost to completed home sales will continue to help monthly reports through June.

Those tax credits likely pulled forward sales that otherwise would have occurred later in the year. Partly as a result, “I think we’re going to have a pretty soft second half” of 2010 for housing sales, said John Burns, a real estate consultant in Irvine, Calif.

Bank efforts to work out lower loan payments for some borrowers have delayed millions of foreclosures, but those who don’t qualify are now increasingly losing their homes.

Moody’s Economy.com predicts that 1.9 million homes will be lost to foreclosures or related defaults this year and another 1.1 million in 2011. That compares with two million last year and 600,000 in normal times.

Unemployment remains high and is unlikely to improve much soon, some economists say. Mark Zandi, chief economist at Moody’s Economy.com, expects the unemployment rate to be 10.2% at year’s end, up from 9.7% in March. At the end of 2011, he sees a still hefty 8.6% rate.

Credit conditions, already tight, will get tighter in at least one respect. Around a third of home sales in recent months have been financed by loans insured by the Federal Housing Administration, which allows down payments as low as 3.5%. But now, the FHA is tightening its terms somewhat.

By early summer, the FHA plans to reduce the maximum amount a seller can contribute to the buyer’s closing costs—such as loan-origination, legal and appraisal fees—to 3% of the home price from 6%. That means buyers will have to save more to meet closing costs. Mr. Burns said a survey of builders by his firm found they expected the FHA change to eliminate as many as 15% of potential buyers.

Many economists expect rates on standard 30-year fixed-rate mortgages to rise at least moderately from the recent level of 5% to 5.25%. Mr. Zandi expects a rate of about 5.7% by year’s end.

Despite these worries, Jacelyn Botti, who heads residential sales for seven mid-Atlantic and Northeastern states for Weichert Realtors, said that home-sales contracts signed by the firm’s customers in March were up about 26% from a year earlier in that area, and April was on track for another gain of more than 20%. She said the tax credit and lower prices were driving buyers. Prices on lower-end homes are trending up in some areas, Ms. Botti said.

Newland Communities, a San Diego-based company that plans and develops communities in 14 states, says 761 homes sold in those communities in the first quarter, up 28% from a year earlier. Robert McLeod, chief executive officer of Newland, said Austin, Houston and San Diego were among the stronger markets for the company. He thinks recovering consumer confidence is helping sales. “It’s all about job growth,” Mr. McLeod said.

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19. April 2010 by admin.

Start your week with a smile, thanks to Rob Chrisman .

An elderly lady was having her 100^th birthday party when the emcee stood to speak. He said he had been at the local Hallmark store and looked for the most special birthday card available to celebrate this momentous occasion. As he looked up and down the columns of shelves he noticed the birthday cards for age 70, age 80, and then 90 and then…He finally found what he was looking for.   He proceeded to give the elderly grandma two cards for age 50 each!

Numbers can play tricks. Just ask Goldman Sachs.

The SEC claims that Goldman Sachs had marketed a packages of mortgages put together by a hedge fund that would profit if the mortgages fell in value. The mortgages did indeed fall in value with the bulk defaulting, and the SEC claims that Goldman neglected to fully disclose the role of the hedge fund in putting together the package of mortgages. So on Friday, for example, in spite of companies like Bank of America (and today Citi) having great earnings, financial stocks, and the stock market in general, fell, and rates dropped thanks to the flight to quality. Goldman Sachs misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter, per the SEC. Was it one of the last deals done by a struggling industry? Let’s hope so.

The issue is Goldman’s lack of disclosure, and once again where the rating agencies were in all of this. Analysts during the dot-com bubble recommended stocks of banking clients they actually believed were highly overvalued, and the same thing happened. Financial companies should not be allowed to mislead investors or take on leverage that can jeopardize everyone else. From 2004 through 2007 Goldman Sachs created 23 financial transactions called “Abacus”, with critics saying that the bank used the deals to off-load the risk of mostly subprime home loans and commercial mortgages to investors. There were $7.8 billion of Abacus notes but the risk passed to investors was multiples higher since the Abacus transactions were synthetic collateralized debt obligations and credit- default swaps. These swaps are used to transfer the risk of losses on debt, and securitization, used to slice the risk in a pool of assets into various new securities, and Goldman’s deals were filled with default swaps that offered payouts to Goldman Sachs if certain mortgage bonds didn’t pay as promised, in return for regular premiums from the bank.

Hedge fund Paulson & Co. (John Paulson, not Henry Paulson, and is not accused of any wrongdoing) helped pick the underlying securities and also bet the CDO would default. Paulson was proved correct, and his hedge fund eventually turned a $1 billion profit and CDO investors lost a similar amount, according to the SEC. It is the first big case, but probably not the last, that examines investment banker’s role in the subprime mortgage mess, and of course other issuers of mortgage securities, such as Deutsche Bank, Credit Suisse, etc., are caught up in the news and its implications. No matter what happens, don’t expect less financial regulation as a result.

For good news, Congress approved the Continuing Extension ACT of 2010 (H.R. 4851), which includes a temporary extension of the Federal Emergency Management Agency’s (FEMA) statutory authority to issue flood insurance policies under the National Flood Insurance Program (NFIP). The temporary amendment will expire on May 31, 2010. Many investors, such as Union Bank, Provident, and others, sent out announcements re-installing their previous flood insurance policies.

Citgroup announced earnings this morning with earnings per share of 15 cents versus a $0 expected. Revenue was $25 billion versus $21 billion anticipated. Like BofA’s, and Chase’s, these are solid results, but unfortunately overshadowed.

The FDIC closed down several more banks on Friday. Tamalpais Bank (CA) is now under Union Bank (CA). TD Bank (FL) acquired the banking operations, including all the deposits, of three Florida-based institutions: AmericanFirst Bank, First Federal Bank, and Riverside National Bank. Butler Bank (MA) has new signs on its branches saying People’s United Bank (CT). Lakeside Community Bank (MI) is now part of First Michigan Bank. Innovative Bank (CA) was maybe too innovative, and was taken over by the FDIC and a purchase and assumption agreement was signed with Center Bank (CA). City Bank (WA) is now part of Whidbey Island Bank (WA).

The Wall Street Journal reported that federal authorities are picking up the pace in a criminal investigation of Countrywide Financial Corp. and its role in the meltdown in 2007 and 2008 of the U.S. housing and finance industries. The paper didn’t offer details on what charges could emerge, but said a grand jury began hearing testimony about Countrywide last year. No criminal charges have been filed against corporate leaders in the larger federal probe.

Investor changes continue unabated. AmTrust Bank has posted an update to its guidelines which applies to its Conforming Fixed & ARMs (Standard & High Balance) product line(s). Suntrust has posted an update to its guidelines which applies to its Key Loan product line(s). GMAC has posted an update to its guidelines which applies to its Conforming Fixed & ARM product line(s). US Bank has discontinued its Second Lien 30/15 fixed product. Flagstar Correspondent has posted an update to its guidelines which applies to its FNMA Standard ARMs, FHLMC Home Possible, FNMA Fixed Rate, FHLMC Fixed Rate, and FNMA Flex 97 & Flex with Subordinate Financing product line(s).

I am sure that Flagstar has the best interests of its clients at heart. But over the span of two days Flagstar released 15 separate bulletins to clients. Fifteen.  Obviously I can’t go into details on them, but the titles of the bulletins are 60 Day Lock on Agency ARMs and Extended Lock Update, WBCD Update: Lender Name Reflected On HUD-1, 60 Day Lock on Agency ARMs and Extended Lock Update, Short Sale Agreement, RESPA Compliance - Lock Extensions & Escrow Waivers, Fannie Mae DU Refi Plus Removal of Borrowers, Two-Unit Owner-Occupied Loan Limit Updates, New Approved Appraisal Management Company: PCV Murcor, FHA - Electronic Signatures, FHA & VA - Seller Concessions & Broker Fee Policy, FHA Total Scorecard - Upfront Mortgage Insurance Premium Messaging, FHA - Updated Mortgage Calculation Worksheets & Informed Consumer’s Choice Disclosure, FHA & VA - 4506-T Transcripts, FHA - Non-Traditional Credit Overlay, FHA - Recent Mortgagee Letters, and FHA & VA - Property Flipping.

Pinnacle Capital, on its conforming product, offered lowered credit score requirements to 720 and added Rate/Term option for Radian MI on 95% loans, clarified that PUDs that are part of a subdivision are allowed on Construction to Perm, etc., and tweaked its conforming high balance guidelines so that paying off consumer debt will be considered cash-out Pinnacle also adjusted its FHA guidelines stating that “rental income can be used when a borrower is converting their Primary Residence”, unlimited CLTVs on FHA cash-out refinances when existing subordinate financing exists,  and said that investment properties are allowed on FHA Streamline Refinance transactions without an appraisal.

Bank of America’s wholesale group announced its “Wholesale Lending Standards for Quality” for brokers. “Our standards for quality are based on doing the right thing for our customers, our clients, our associates and our shareholders…the three types of standards that enable us to meet these objectives: Quality and Efficiency Standards (upholding quality loan manufacturing practices), Professional and Industry Standards (ensuring the highest levels of ethical conduct), and Responsible Lending Standards (building and maintaining our customers’ trust).” The announcement goes on to tell clients, “If you have questions about our Wholesale Lending standards for quality, please contact your Bank of America account executive.”

The Goldman news was enough to shake up the markets, and fixed-rate securities improved in price and dropped in rate. The 10-yr Treasury yield dropped to 3.78% and mortgage spreads widened out slightly, so did rates not improve quite as much. The futures market is pricing in an 83% chance that the Fed keeps rates at .25% through August - so don’t look for a change. 

The press is certainly consumed with the Goldman Sachs news, but that doesn’t mean that scheduled news comes to a halt. Things are pretty slow this week for the first few days, although we do have Leading Economic Indicators later this morning (expected to be up 1.3% for March, which would be the largest increase in nine months). On Thursday we have the Producer Price Index (PPI), Existing Home Sales, and Initial Jobless Claims. Friday we have Durable Goods, an important indicator of economic activity, and New Home Sales. Currently the yield on the 10-yr is at 3.78% and the 5-yr & mortgage prices are unchanged, maybe worse a tad. READ MORE. SEE CHARTS

Dear Tide:
I am writing to say what an excellent product you have.

I’ve used it all of my married life, as my Mom always told me it was the best.

Now that I am in my fifties I find it even better!

In fact, about a month ago, I spilled some red wine on my new white blouse. My inconsiderate and uncaring husband started to belittle me about how clumsy I was, and generally started becoming a pain in the neck. One thing led to another and somehow I ended up with his blood on my new white blouse!

I grabbed my bottle of Tide with bleach alternative, to my surprise and satisfaction, all of the stains came out!

In fact, the stains came out so well the detectives who came by yesterday told me that the DNA tests on my blouse were negative and then my attorney called and said that I was no longer considered a suspect in the disappearance of my husband.

What a relief! Going through menopause is bad enough without being a murder suspect!

I thank you, once again, for having a great product.

Well, gotta go, have to write to the Hefty bag people.

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12. April 2010 by admin.

by Rob Chrisman

Recently I saw an interesting new story headline. “Kids Make Nutritious Snacks.” (Do they taste like chicken?)

The FDIC shut down Beach First National Bank, and the branches have re-opened this morning as Bank of North Carolina. Per the press release, Beach First was heavily invested in coastal real estate development. But banks are not the only savings institutions that are shut down. Connecticut’s South End Mutual Benefit Association, which has been around since 1945, has passed a resolution to cease operation and terminate its business, and has petitioned the National Credit Union Administration (NCUA) as receiver. With a credit union, accounts are insured up to at least $250,000 by the National Credit Union Share Insurance Fund (NCUSIF) - a federal fund managed by NCUA and backed by the full faith and credit of the U.S. government.

HUD came out with a new Mortgagee Letter, stating that the FHA will accept electronic signatures on third party documents “included in the case binder for mortgage insurance endorsement in accordance with Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA), as applicable.” It is good for regular mortgages as well as HECM’s, and applies to documents that are originated and signed outside of the mortgagee’s control, such as a sales contract. Remember that the origination case binder must be maintained in either hard copy or electronic format for two years from the date of endorsement [HUD Handbook 4000.2 REV-3].

MGIC addressed short sales in response to the Home Affordable Foreclosure Alternatives (HAFA) program. In a MGIC press release, the company says that its program lowers the MI approval time for short sales down to 120 days from 6 months. The borrower must be at least 60 days delinquent on the owner-occupied property, the loss on the sale must be less than $75,000 (based on a broker price opinion (BPO) or appraisal performed within 90 days of the sale), the property must not only be sold in “as-is” condition, but the sales price must be within 90% of the home’s value after repairs, and net proceeds at closing must be at least 82% of the “as-is” value. There are other stipulations - check with MGIC for list.

Starting today, Genworth has removed FL, CA, AZ, NV & MI from its declining market list, aside from saying that cash-out refi’s are not allowed in Florida, and still not allowing condos or attached housing in that state. In a related statement, Genworth also introduced “new definitions” for retail and non-retail originations which in effect removes its existing Third Party Origination definition. “For a loan to qualify as a Retail Origination, the entity that orders the mortgage insurance coverage (the Insured) must have performed all of the following loan tasks: taking the loan application, processing the loan application, underwriting the loan application for MI eligibility, and funding & closing of the loan. Check with Genworth for other requirements, such as “loans must be funded from a warehouse line in the lender’s name or from the lender’s own funds - table-funded loans are considered Non-Retail.”

In the Great State of Texas some lenders offer Veteran Land Board loans. (http://wwwdb.glo.state.tx.us/vlb/general/interest.cfm) Military veterans can obtain below-market rates, with CitiMortgage as the master seller/servicer. One originator wrote to me about some confusion at the originator level on these loans. “Citi will not accept an appraisal from someone on their declined list - even though we have no appraiser choice on VA loans. There may be loans where we will have to get a 2nd appraisal. So can lenders obtain a copy of Citi’s declined list to share with VA and some AMC’s to avoid the obvious expense and delays of a 2nd appraisal? I was told ‘no’. I also just found out that all conventional loans being sold to BofA are now going to require a LARA, BofA’s AVM.”

Wells Fargo’s broker customers learned that when converting an appraisal from a conventional loan into an FHA loan, they had better verify that the original appraiser is HUD approved. If the appraiser was not HUD approved, a new appraisal is required. “The original conventional appraisal must have been in Wells Fargo’s name, completed by Rels Valuation and the broker is responsible for obtaining an FHA Case Number for FHA appraisals.”

Of great interest to investors in mortgages are the buyouts by Freddie and Fannie. There is one important difference between Fannie & Freddie in terms of how the 120-day delinquency status is defined for buyout eligibility. For Fannie a loan is eligible to be bought out if it stays uncured for 4 consecutive months. For example, if a borrower misses one payment, but then makes all the subsequent payments, then the loan is eligible to be bought out under Fannie Mae rules. In the case of Freddie, however, a loan can be bought out only if a loan is 120 days delinquent based on the MBA method. Traders know that, due to this difference, Fannie pools will have higher delinquency “roll rates”, and the delinquency status would increase month over month when a borrower makes trial payments that are less than the full payment. Freddie Mac investors might end up receiving a few extra months of cash flows, which is positive for Freddie Mac premium pools.

Monopolies are not dead. Once a week our garbage is picked up, usually early in the morning. (Sometimes, if I go outside, the garbage man will ask me what I am doing up at 4:30AM. Rather than embarrass myself by telling him that I write a commentary about the mortgage industry, I tell him I’m still liquored up.) In San Francisco, the cost for this service is $37 per can per week. That seemed pretty steep to one contractor, who canceled his service, had his neighbor do the same, and then took their garbage to the dump and paid $40. Word spread, and soon many neighbors were paying the guy $10 per household for him to take their garbage, saving everyone over a thousand a year. Unfortunately for free enterprise, the local garbage company and the union found out what was happening, and convinced the city to pass a law banning this type of activity. READ THE FULL STORY

Overall, few economists disagree that here in the US we’ve come off the bottom. It is odd, however, that the recovery is not being led by a rebound in housing and consumer durable spending, or by much job growth. And don’t we need job growth to create more borrowers to either refinance or to buy houses? If the economy really takes off and jobs don’t, the mortgage industry could be hit by the famous “double whammy” of higher interest rates and fewer qualified borrowers. Uh oh.

Last week we had a very limited amount of economic news, so bonds were pushed around by the auction results. When the yield on the 10-yr hit 4%, it seems to have attracted investors, so we “bounced”. Overall the auctions were received well; although there is continued nervousness about whether or not the US will see others support our deficit. Regardless, mortgage rates actually ended the week on a decent note - certainly no disaster has occurred since the Fed stopped buying MBS’s - and are following Treasury rates. Money managers, insurance companies, and pension funds are buyers of mortgages, and although there are weekly volume fluctuations, most indicators still point to a slower year in 2010 than 2009. And if production (supply) is down, and demand steady…

This week we have a little  more substantive economic news, including Wednesday’s Consumer Price Index (CPI), Retail Sales report, and Beige Book. Tomorrow we’ll see some trade balance figures. Industrial Production & Capacity Utilization and the Philly Fed survey are announced on Thursday (after Initial Jobless Claims come out). Housing Starts (”New Residential Construction”) are on for Friday. Inflation certainly appears under control and the March CPI is expected to be +.3% with the core rate only up .1% (which the Fed likes). And March’s Retail Sales figure is expected to be +1.8%, probably due to strong auto sales. Ahead of all that, the 10-yr is at 3.88% and mortgage prices are better by about .125.

A distinguished young woman on a flight from Ireland asked the priest sitting beside her, “Father, may I ask a favor?”

“Of course, child. What may I do for you?”

“Well, I bought an expensive electronic hair dryer for my mother’s birthday. It is well over the Customs limits and I’m afraid they’ll confiscate it. Is there any way you could carry it through Customs for me…under your robe, perhaps?”

“I would love to help you, dear, but I must warn you … I will not lie.”

“With your honest face, Father, no one will question you.”

Then they got to Customs, the woman let the priest go ahead of her.

The official asked, “Father, do you have anything to declare?”

“From the top of my head down to my waist, I have nothing to declare.”

The official thought this answer strange, so asked, “And what do you have to declare from your waist to the floor?”

“I have a marvelous instrument designed to be used on a woman, but which is, to date, unused.”

Roaring with laughter, the official said, “Go ahead, Father. Next!

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12. April 2010 by admin.

by Beth Paterson

It is a common belief that one must have a lot of equity in their home to qualify for a reverse mortgage. In reality, a reverse mortgage can still be done as long as there are enough proceeds from the reverse mortgage to pay off any current liens. Even if there aren’t enough reverse mortgage proceeds, a reverse mortgage can still be done as long as the borrower is able to come up with the difference.

If a senior is finding it difficult to stay current on their monthly mortgage payment and is now facing foreclosure, a reverse mortgage may be the best solution to save their home. Even if the reverse mortgage proceeds are used to pay off current liens, the senior’s disposable income improves because they will have eliminated their monthly  obligation.

For example, Wayne was struggling to make his mortgage payment of $1,200 a month, but he was able to get enough reverse mortgage proceeds to pay off his current lien. While he didn’t any have funds available after the reverse mortgage, he paid off his current lien which improved his monthly cash flow by $1,200 because he no longer had to make a mortgage payment.

When we ran the calculations for Minnesota home owners, Jerry and Dorothy the reverse mortgage proceeds were short $3,000 to pay off their current mortgage. They chose to pull some funds from their savings so they could do the reverse mortgage and eliminate their mortgage payments – a benefit and savings in the long run.

Note: HUD, who insures the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM), does not allow the difference to be from another loan or credit cards. If the funds are coming from an outside source, not from your own resources, then it must be a gift, not a loan to be repaid.

If you are over the age of 62 and having a tough time handling your monthly housing or credit card payments, a reverse mortgage may be the solution.  Once the reverse mortgage pays off one’s current lien(s) or mortgage(s), there are no more monthly payments.

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8. April 2010 by admin.

by Brian Montgomery

The latest iteration of housing assistance announced by the Obama Administration has turned up the volume on the “worthiness” argument. 

Critics see struggling borrowers being bailed out for what they believe was reckless behavior by both lenders and home buyers.   Many skeptics feel this group of borrowers did not play by the “rules,” and now everyone who did is being forced to bail them out.  Why do they get a lower interest rate for their irresponsible decisions?  Why isn’t my loan principal being reduced? 

Others ask why the government is taking on more risk by refinancing high loan balance borrowers. These are distressed homeowners who live in one of the 75 HUD specified high-cost loan limit counties.  This pool of borrowers is able to rate/term refinance up to a $729,000 loan amount. These limits were set to expire at the end of 2008 but instead were extended two years by Congress.  Most housing experts expect the loan limits to drop significantly in 2011 even though the percentage of mortgage activity at these levels is a small percentage of FHA’s entire book of business. 

And then there are those who bought their home at the worst possible time (when the market reached its apex) and are now attempting to survive in a very difficult economic landscape.  They weren’t reckless speculators or searching for a “get-rich quick” scheme (most of those were foreclosed on months ago).   More than likely they were a rental family looking for their version of the American dream.  For too many that dream is now their worst nightmare. 

These are well-reasoned concerns, but what is the alternative – mass foreclosure?  Can the nation endure a few million more foreclosures?  Of course not as that would only imperil what has been a measured and unpredictable housing recovery.

The FHA is rightfully trying to help the borrowers who can still be saved.   Assisting at-risk borrowers especially during trying economic times is one of the primary reasons FHA exists as a government entity.  It is not chasing profits or trying to push a stock price to a 52 week high—it is simply trying to do what it does best for housing.  And even though these homeowners may be deemed “risky,”  I remind you that these borrowers must still pass FHA’s underwriting process which include:

• Be current on existing mortgage
• Proof of wages
• Stable employment history
• New appraisal must be obtained. New loan to value can be no higher than 97.75%.
• Must occupy the home as their primary residence
• New Front Ratio limit is 31%. Maximum back ratio is 50%

As a kid, I can remember riding through a stretch of desolate Texas highways where one large sign ominously warned: Last Gasoline Station for 200 Miles Exit Now.  If you’re an at-risk borrower and your options are few, now is the time for you to exit – this latest effort by the FHA could be your last chance.

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8. April 2010 by admin.

by Victor Burek

 Mortgage rates put a stop to a distressing losing streak yesterday as benchmark Treasury yields finally fell and prices of mortgage backed securities managed to rally. Mortgage rates opened the day better and were able to retain their early session improvements after the Treasury Department saw strong demand for a $40 billion 3 year note auction. After that, the release of the FOMC Minutes at 2pm presented no surprises to market participants and the day ended with MBS price gains intact. While there were a few lenders repriced for the better, the

The economic calendar did not offer much in the form of “market moving” data today, there were a few other events that sparked some interest though. 

The Mortgage Bankers Association released their Weekly Mortgage Applications Index at 7am.  The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts.  The data gives economists a look into consumer demand for mortgage loans.  A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole.

Recent reports from the MBA have shown  purchase demand picking up as warm weather and the soon to expire tax credit have inspired prospective homebuyers to get serious about purchasing a home. We expect this group of borrowers to be our main source of business in the months to come. On the other hand, refinance demand has been slowly fading as man home owners have already taken advantage of  mortgage rates below 5.00%.  Today’s release extended this trend. Purchase application activity rose a modest  0.2% while refinance applications declined 16.9%. For more on this report including a discussion about the competitiveness of the mortgage industry.

If you are looking to take advantage of the Home Buyer Tax credit you better hurry.  You must be under contract by the end of this month. After you have signed a contract you have until the end of June to close on the purchase. At this point in time an extension of the homebuyer tax credit seems very unlikely, so get out there and find your new home before it’s too late!

At 1pm eastern, the Department of Treasury released the results of this week’s second Treasury auction, this time it was $21billion 10 year notes. Demand was fantastic! This is refreshing considering how poorly the Treasury auctions went two weeks ago. After the auction results were released, benchmark Treasury yields and MBS prices both rallied to their best levels of the week! THIS ALLOWED THE MAJORITY OF LENDERS TO REPRICE FOR THE BETTER!

Reports from fellow mortgage professionals indicate lender rate sheets to be improved from yesterday lowering consumer borrowing costs.  The par 30 year conventional mortgage rate mortgage is now in the  4.875% to 5.25% range for well qualified consumers.  There are  however only a few lenders offering par mortgage rates at 4.875%.   To secure a par rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including one point loan origination/discount/broker fee.  You  may elect to pay less in costs but you will have to accept a higher interest rate which is a great option for home owners not planning on keeping current home for more than 3 years. 

I continue to favor floating.  One day at a time…

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