With mortgage interest rates at all time historic lows….

They got lower? Yep.

While this may not be the spur that the economy needs, (with how crummy the job and unemployment reports are)… It sure is one hell of a good time to lock in 30 years of mortgage financing.  In fact, with the way lenders are now compensating mortgage brokers – it’s the best time ever.  Did you know on an FHA you can get an interest rate under 4.00% – with no points… AND a credit from the lender to cover a good half of your closing costs? Its nuts.

Contrary to the media, Lenders are loaning money. A LOT of money.  And as long as you have the three magical ingredients on your side…. Good Credit, Solid 2 years of employment, and the income to support the payments – then you can take advantage of it.

Purchases and Refinances –  Conventional, FHA and VA

Call me! Let’s take advantage of the cheap money!

Although the first time homebuyer credit eligibility for most Americans ended April 30th, there are still many benefits associated with buying real estate today!
1.) Rates are LOW! Probably the lowest we will see this year with the current Greece scare keeping a lid on rate increases.
2.) Its still a “buyers market” If you want to still get your $8,000.00 – you can! You just have to ask for it as part of the contract and call it a “seller credit” or “seller concession”. True, it isnt a rebate at tax time from the govt. But it is 8,000 credit at the close toward money you would have to come up with!
3.) FHA will still do 3.5% down and all of it can be a gift.. So, on a 300K house – you could potentially get by with only the down payment out of pocket. That only equates to 10,500 out of pocket provided the sellers credit you your closing costs at the close… 10,500 to buy a 300K house?

If you remember back when the 0% loans were so popular, consider that back then it was not commonplace for sellers to credit closing costs. So while you didnt have to put anything down, you still had to come up with that 5 – 10K expense..

Call or email me. We’ll discuss your options with no cost to you…
Take care,
Matt

Home prices began to stabilize during 2009, and homes sales showed some signs of encouragement. We expect more of the same in 2010, although there will be some additional headwinds: higher rates and expiring tax incentives will likely create a lull during the summer months. After a modestly good start to the year, home prices could actually decline in some areas by 5% to 7% once the temporary stimulus expires. In the end, however, home prices should eventually and slowly begin to firm up toward the end of the year.

The Fed will have their hands full during 2010, and a big question will be whether the Fed can retain their independence in the face of political pressure. Remember, the long-term best interests of the country often conflict with the short-term reelection interests of politicians.

It’s highly likely that the Fed will be “on hold” for rate changes during most of 2010. The Fed will have to try and play Goldilocks…and get it “just right” for the amount of time they leave interest rates at these historically low levels. Hike rates too soon, and it could derail an already fragile US economic recovery. And let’s remember that the government has literally spent Trillions to try and provide stimulus to spark that economic recovery. And the Fed will likely err on the side of keeping rates lower longer, as they certainly would not want to send the US into a double-dip recession, making all the stimulus appear to be a wasted effort. And the Fed will have an excuse to keep rates low, so long as unemployment shows no sign of improving. But there is a very big risk in keeping rates too low too long…and that is inflation.

While inflation doesn’t appear to be a present concern, it can be very difficult to control once it takes hold. And its effects can be very damaging. Inflation is the enemy of all Bonds – and if it does take center stage, the Fed will have to hike rates very aggressively to attempt to keep it at bay.

2010 is a big election year, and politicians will be doing their best to influence the Fed to keep rates low. With 36 of 100 Senate seats being contested and all members of the House facing re-election, there could be some interesting changes ahead. Currently, the Senate is made up of 58 Democrats, 40 Republicans, and 2 Independents. But, as mentioned above, 36 of those positions are up for re-election. In the House, there are 256 Democrats, 178 Republicans, and 1 vacancy…and they all face re-election. When the votes are counted, I see Democrats losing a number of seats…but probably not enough for Republicans to regain control.

Now for the big question… where will home loan rates go during 2010 and why? We’ve been forecasting rates for a long time, and this is by far the easiest call we have ever had. Rates are going higher in 2010. We do not think that the low rates seen during 2009 will be seen again. There will be more supply coming to the market in the first quarter, while the Fed’s purchases will be winding down. The overall trend for rates during this period will be higher, but as usual, this will never happen in a straight line. There will be waves and cycles moving up and down – but the trend is clearly up for rates.

Once the Fed’s Mortgage Backed Security buying program has expired at the end of March, it is likely that rates will edge higher still towards the summer. Eventually, supply will decline as origination volume slows – and mortgage rates should stabilize. But if there are hints that the Fed will be looking to hike rates, thus signaling the end of the carry trade, mortgage pricing will significantly worsen. The range for rates during 2010 is wide, with the lower end just above 5% toward the very beginning of the year. The upper end of the range could be as high as 6.5%, with rates being very volatile throughout. It is typical to see prices worsen more rapidly than they improve…but 2010 will exaggerate that characteristic, with pricing losses coming far more quickly and sharply than pricing improvements.

Final Words of Wisdom

Overall, 2010 will look better than 2009. But, good economic news is a double-edged sword, as it increases the risk of rising taxes and rates.

And finally, in today’s wired world of Internet news and social networking sites…don’t confuse data with insight. Remember data is everywhere – anyone can regurgitate economic report numbers. But trusted insight and advice is a valued commodity.

Again, this article written by Barry Habib with the Mortgage Market Guide online. The service his company provides is usually dead on when it comes to preidctions – and is a wealth of information for mortgage originators.

As of today, June 15th – rates are back to the 5.375 range after going as high as 5.625% last week..

While this was a welcome change for lenders to catch up on their underwriting turn times, it has definitely slowed down mortgage applications.

Of course a housing market recovery will greatly help the overall economy..  And I feel if we can get back into the higher 4% range and stay there for another 6 months to a year, the housing market will will finally begin to level out somewhat.  We’ll see – please read below. – Matt

05-28-09

Yesterday, Mortgage Bonds had their worst one-day performance since October.

So…what the heck happened and what’s next?

The main culprit for yesterday’s selloff…SUPPLY.  The Treasury has literally been printing money by way of Treasury auctions to pay for the massive spending.  And these hundreds of Billions of dollars of new Bond supply have to be absorbed by the market… So the additional supply literally weighs on the entire Bond market and drags prices lower – making mortgage rates higher.

Also, when you think of supply, consider all the recent refinances..  all those loans have been bundled, packaged and sold on Wall Street…and this additional supply has now started to hit the secondary market, as those closed loans are now getting turned around and sold.  This supply also must be absorbed, and while the Fed has been a buyer, they simply can’t buy enough to balance all the selling.  It’s Economics 101… Anytime supply vastly exceeds demand, prices will move lower.  And as prices move lower, yields rise – that rise in yield will attract new buyers as they get a higher return on their investment.  This is how the market finds balance – in turn it also raises our mortgage interest rates.

Many governments have made attempts to support a currency.  In other words, a country individually, or a group of countries, can join together to purchase a nations currency in an effort to “prop it up” or support it.  A historical perspective indicates that this may work as a temporary fix, but never works over the long term.  In some ways, we can draw parallels to what the Fed is attempting to do with mortgage rates.  As you know, we have been quite vocal on how a 4% mortgage rate was a myth, and it appears now that some clients who elected to hold out for that rate find themselves in a tough spot.

The question on everyone’s mind..will rates come back?  The answer is that we will probably see some improvement, but it will be difficult to see rates fight back to the levels they were at just last week.  There are both fundamental and technical reasons why a retracement back to last week’s levels would not be easy…  Fundamentally, the aforementioned supply issue still exists, with no end in sight to the amount of debt still to be issued – the printing presses are just getting started. Yes, the Fed will continue to buy Mortgage Bonds, which will help to some degree, but it’s like trying to clean up a flood with a sponge. 

The recent price declines have pushed Bonds into an “oversold” state, which means prices could be ripe for a bounce or reversal higher, yet we need to be mindful of a few things.  After a few bad days, we have fallen through several floors of support, which now become overhead resistance – so the long haul back to the mid to high 4% range may take quite some time while it battles the inflation of the summer months.

 

Matthew J. Goulart

Murphy Home Loans, Inc.

www.centralcoastmortgage.org

805.596.4455 SLO

805.773.6222 Pismo Beach

mattg@murphylends.com

DRE Lic. # 01794720

 

“Please remember, referrals to your friends & family are the best compliment I can receive.”

 

 

**Original orgin of material above taken from the Mortgage Market Guide

With the supposed elimination of the adverse market fee FNMA and Freddie Mac have been charging lenders, as well as the decline of “risk based pricing” and “Loan level price adjustments”… One would hope lenders will pass some of the savings onto consumers through mortgage brokerages within the next few months.

We’ll see… they seem to be holding their profits pretty tight, at least until confidence is renewed in the financial market. 
For now, see below! 🙂

I want to take a second to thank Allyson Nakasone for sharing this article which she received from Michael Gray, CPA’s Tax & Business Insight. Please read below:

Housing Act includes a tax surprise.

President Bush signed The Housing Assistance Act of 2008 (H.R. 3221) on July 30, 2008. The tax part of this legislation is The Housing Assistance Tax Act of 2008.

The big surprise in the tax act that isn’t being widely discussed is a cutback in the home sale exclusion. The reduction applies for home sales in tax years after 2008. Gain eligible for the $250,000 exclusion for single persons, $500,000 for married, filing joint returns, is reduced for periods of non-qualifying use after 2008. For example, if you convert a principal residence to a vacation home or a rental, the gain eligible for exclusion is reduced for the period of non-qualified use. (Temporary absences, such as for a vacation or for medical treatment, still count as qualified use.) This is a major change that many people won’t understand, and is especially important for real estate investors who convert a principal residence either to or from rental or vacation property.

For example, John Taxpayer, a single person, bought a residence on January 1, 2007. It was his principal residence until December 31, 2008. He used it as a vacation home starting January 1, 2009. John sells the house on December 31, 2010 and has a $200,000 gain. Before the change in the tax law, the entire gain would be eligible for the $250,000 exclusion, resulting in no tax. After the change in the tax law, only one-half of the gain is eligible for the exclusion, the other $100,000 is taxable as a long-term capital gain.

The Act also includes a tax credit for first-time home buyers. The credit is 10% of the purchase price of a home, up to $7,500 ($3,750 for married taxpayers filing a separate income tax return. The credit is phased out for married persons filing a joint income tax return with modified adjusted gross income from $150,000 to $170,000, and for single taxpayers with modified gross income from $75,000 to $95,000. The credit is effective for homes purchased from April 9, 2008 through June 30, 2009. The credit is actually an interest-free loan that is repaid over a 15-year period. The balance must be repaid if the home is sold before the repayment period is over. A “first-time homebuyer” is defined as a person who had no ownership interest in a principal residence during the three-year period before the new home is purchased.

 

 

Please read the following snippet below from last Thursday (AP), (edited down, of course).

 

~~~~~~~~~~~~~~~~~

NEW YORK (AP) THURSDAY 07.18.08 — Treasury prices fell sharply Thursday as several upbeat earnings reports, falling energy prices and an unexpected jump in housing starts alleviated some of investors’ concerns about the economy. The news lured investors back into stocks and away from the relative safety of government debt.

Treasurys were benefiting earlier in the week as Wall Street fell on uneasiness about the financial services sector and the broader economy.

Stocks also soared because the price of oil declined sharply for the third straight day. The Dow Jones industrials rose more than 200 points and logged the best two-day percentage gain since October 2002.

Kevin Giddis, managing director of fixed income at Morgan Keegan, said the bond market will remain choppy until stocks appear to stick with a direction; advances like the surge on Wall Street the past two sessions have often been given back quickly. Investors have jumped between both markets depending on the strength of corporate and economic news.

“This has been a wild and crazy last few days, and the focus is on the credit markets,” he said. “We’re bouncing back and forth on this safe-haven play all day long, and we will have volatility until we get a better idea about earnings, credit and the economy.”

~~~~~~~~~~~~~~~~~~~~

Unfortunately, the trend continued through Friday, leaving us with some of the highest rates we’ve seen this year.

However, as Kevin Giddis said above,

“Advances like the surge on Wall Street the past two sessions have often been given back quickly.”

And this week is chocked full of economic reports which hopefully will bring our rates back to the level we started the beginning of last week…

I will keep you posted as we move forward. J

I hope you all have a great Monday, please be sure to give me a call or send me an email if you can refer anyone who is thinking of purchasing or refinancing.

Hope to hear from you soon,

Matt

Well, Fannie Mae and Freddie Mac dont believe you.

 

 

Unless that is, you have at least 30% equity in your home.

Which unfortunately…. most of us don’t.

 

 

Many people out there have been taking advantage of the low market and qualifying by stating that their old home will be used as a rental. Once they close escrow on the new home, they stop making payments and let the bank foreclose on the old one.

 

Frankly, Fannie Mae and Freddie Mac, (FNMA & FHLMC) aren’t “buying it” anymore, (Pun totally intended). They’ve updated their guidelines; and us as mortgage brokers need to follow their new rules.

 

In summation, if a borrower is purchasing a home without selling their current residence….

Unless they have 30% equity in the property they are moving from, they will not be allowed to use any proposed rental income.

They must then qualify for both payments and have enough reserves to cover both payments for 6 months.

 

 

Converting a primary residence to an investment property (during a new purchase transaction):

Fannie Mae will continue to permit up to 75% of the rental income to be used to offset the mortgage payment in qualifying if there is documented equity of at least 30% in the existing property (derived from an appraisal, AVM, or BPO, minus outstanding liens).

The rental income must be documented with:

·         a copy of the fully executed lease agreement; and

·         the receipt of a security deposit from the tenant and deposit into the borrower’s account.

 

If the 30% equity in the property cannot be documented, rental income may not be used to offset the mortgage payment.

·         Both the current and the proposed mortgage payments must be used to qualify the borrower for the new transaction; and

·         6 months of PITI for both properties is required to be in reserves

 

These guidelines are applicable to manually underwritten loans and, except for the additional reserve requirements, must also be applied (on a manual basis) to loan casefiles underwritten with DO/DU. DO/DU will determine the level of reserves for each loan casefile.

 

All of the above guidelines go into effect August 1, 2008.

 

The Housing Crisis Is Over

	Stolen From the Wall Street Journal: http://online.wsj.com/public/us

 

DOW JONES REPRINTS By CYRIL MOULLE-BERTEAUX May 6, 2008; Page A23 The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now. How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor. Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982. Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability. The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much. Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst. Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in. The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do. In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months. The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in “months of supply” terms. That’s the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months. Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually. Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market. Many pundits claim that house prices need to fall another 30% to bring them back in line with where they’ve been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons. Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading. This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity. When the rate of house-price declines halves, there will be a wholesale shift in markets’ perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face. More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure. A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets’ perception of risk related to housing, the financial system, and the economy. We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now. Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.