Demand For Home Purchase Loans Spikes

Mortgage applications declined 0.3% from a week earlier for the seven-day period ending Feb. 24, the Mortgage Bankers Association said.
The results were adjusted to account for the Presidents Day Holiday.
The decline in the MBA's market composite index shows mortgage applications down overall with refinancing activity falling 2.2% for the survey period.
During the same week, the seasonally adjusted purchase index grew 8.2%.
Still, activity overall slowed as the refinance share of mortgage activity fell to 77.9% from 80.1% the previous week.
"Mortgage rates remained near survey lows last week, but refinance volume fell slightly," said Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association. "According to survey participants, more than 20 percent of refinance applications were for HARP loans. The HARP share of total refinance applications has increased over the past month. Purchase application volume increased over the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010."
The average interest rate for a 30-year FRM with a conforming loan balance of $417,500 or less declined from 4.09% to 4.07%. In addition, the average contract interest rate for the 30-year, FRM with a jumbo loan balance increased from 4.32% to 4.34%.
The 30-year, FRM backed by the FHA fell from 3.87% to 3.86%........

How the Government Paid for the Payroll Tax Cut

Before the end of the year, Congress and the President agreed to extend the payroll tax cut. In that bill, there were two items of interest for those involved in real estate.

1.) The hike in the Guarantee Fees charged by the GSEs Fannie Mae and Freddie Mac.
The 10 basis point increase in the fees has translated to a .375% to .5% increase in mortgage rates for conventional loans. Many customers who started their loans a couple of months ago are being “surprised” with higher than expected rates. Heck, everything you read in the papers says rates are at historic lows and will likely stay there through 2014. Many consumers feel as if their lender is being unscrupulous. However, your lender has fallen victim to the increase in Guarantee Fees and how the secondary market is passing on the cost. What looks like possible lender greed is just a passing on of the increased expense imposed by the government. Sadly, the increased revenue isn’t even being used to help aid an ailing Fannie Mae or Freddie Mac. It is being turned over to the US Treasury to cover the temporary extension of the payroll tax cut.

2.) Permission for HUD to increase the insurance premiums they charge on FHA loans.
If you remember, HUD charges two insurance premiums – a monthly one and an up-front one that is usually added into the loan. Most recently, they reduced the up-front mortgage insurance premium (UFMIP) and dramatically raised the monthly fee (MMIP). It is widely anticipated that, maybe as soon as April, we will see a hike in the UFMIP with no adjustment to the MMIP. While this will help shore up the reserves in the insurance fund, it will simultaneously make buying a home more expensive. No one knows the effective date or amount of the increase. Buyers should look to buy before the increase in fees.
We always hear how our government officials tuck away things in their bills. In this case, while the headlines during the holidays praised Washington for preserving the payroll tax cut, they may have hurt us more in the long run.

Who Are you Working With?

I have long been a proponent of referrals when choosing whom to do business with. But even with a referral, you owe it to yourself to do some homework. In terms of a mortgage, you have always had the Better Business Bureau and local regulators (like state banking departments) that you could contact. Over the past few years, the internet search engines have become popular ways of finding information beyond a company’s or a loan officer’s website.  Two other places I strongly recommend you visit online (one for the company and one for loan officers) are:

1.) https://entp.hud.gov/sfnw/public

This is the website for HUD’s Neighborhood Watch. Neighborhood Watch is where HUD publishes a lender’s loan performance on FHA loans and how it compares to the national and local averages.
A compare ratio of 100% means “average” performance. Numbers greater than 100% are below average. And a ratio under 100% is above average. Understand that the Neighborhood Watch numbers measure the quality performance of FHA loans only. Further, be aware that HUD recently stated that lenders with compare ratios over 200% were subject to suspension from being able to participate in the FHA Program, and lenders between 150-199% were going to be scrutinized very closely and subject to audit. Be wary of “riskier” lenders.
When you go to the website, click on the “Early Warnings” tab and either research an individual lender or look for a list of lenders in an area, and then just follow the instructions. Remember, many lenders nationally have similar names, so make sure you have the right lender.

2.)  www.nmlsconsumeraccess.org

Here you can search for loan officer and company licensing status. Recognize that loan officers are individually licensed now. Those who have taken the required courses, passed the required tests and been approved by their respective state licensing authority have all that information verified on this website, along with their employment history. Loan officers who work for federally chartered institutions (like banks) have not yet been required to take the classes and pass exams and are listed on the site with their license number and their employment history.
Make sure you are dealing with a loan officer who is licensed! Ask questions if they have a lot of job changes.
There has been a cleansing in the mortgage industry over the past few years, but there are always a few bad apples in any large group. These websites may help you identify mistakes you can avoid when choosing whom you do business with.

As always, check out www.MyLenderNate.com and call me if you need assistance with your mortgage.

National Mortgage Settlement: Why is Inventory down? Where is it headed?

Last week, the Federal government and 49 state governments (Oklahoma being the exception) agreed to a $25 billion settlement regarding robo-signing and the challenges it created in the foreclosure process. We want to give a synopsis of the settlement and some perspective on what effect it will have on the housing market in 2012.

The Basics

The $25 billion in funds will be dispersed as follows:
$17 Billion National Commitment to Foreclosure Relief Efforts
The servicers collectively agree to commit a minimum of $17 billion directly to borrowers through foreclosure relief effort options, including principal reduction for qualifying borrowers, short sales, anti-blight measures, and enhanced homeowner transition programs.
$3 Billion National Commitment to Underwater Mortgage Refinancing Program
The servicers collectively agree to commit $3 billion to refinance “underwater” homes (when a homeowner owes more on a mortgage than a home’s current market value). To qualify, borrowers must be current on their mortgage payments on a mortgage owned by one of the five banks.
$5 Billion Payment to States and Federal Government
The servicers’ $4.25 billion payment to the states includes $1.5 billion for payments to borrowers who lost their home to foreclosure by one of the five servicers…$750 million of the state-federal payment will go to the federal government to resolve federal claims.
For further details on the settlement you can go to the official website.

Will the Settlement Have a Major Impact on a Housing Recovery?

Probably not. Though it is a step in the right direction, it may be too little too late. Here are some opinions on the settlement:
IHS Global Insights

 “Like many previous plans to stem foreclosures, this agreement will help at the edges. The problem is too big for it to have a large impact, however…This agreement will help the housing market move ahead in 2012 in a small way. But it is hardly a game changer.”

HSH.com

“While there is no doubt some benefit to formalizing and organizing the process of foreclosure and better monitoring of the process, the fact is that the settlement changes little.”

Capital Economics

 “While it is good that the settlement has been finalized and will offer principal reductions and refinancing schemes to borrowers, the bigger picture is that the settlement is not large enough to dramatically alter the outlook for the housing market or the wider economy.”

What about Foreclosures Moving Forward?

The settlement did bring clarity to one major issue – foreclosures. Banks have been holding off the foreclosure process on millions of homes over the last 18 months as they waited for the particulars of the settlement. They now know how they can move forward without penalty. The result will be an increase in foreclosures coming to the housing market.
Housing Wire

“It will speed up processing, and perhaps mean that foreclosures that have been waiting around since robo-signing came to light in 2010 will now gain legitimacy.”

Calculated Risk

“It does appear the number of completed foreclosures will increase following this settlement – especially in some judicial states with large backlogs – so there will probably be more REOs (lender Real Estate Owned) for sale.”

Bloomberg News

“The $25 billion settlement with banks over foreclosure abuses may result in a wave of home seizures…Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year over allegations of faulty and fraudulent paperwork used to repossess homes. With yesterday’s agreement, banks are likely to resume property seizures.”

Wells Fargo

“Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled. Many lenders have refrained from foreclosing on homes as they awaited the settlement.”

Where are Rents Headed?

People are delaying the decision to buy a home because they are not sure where prices are headed. If they buy and prices continue to soften, they feel that they will not have purchased at the optimal moment. They reason that, if they sit and wait, they can’t be hurt. This thinking assumes that a non-decision comes without consequence.
The normal retort to this thinking by people bullish on real estate is that prices may soon turn to the positive or that interest rates will start heading upward. Buy now before the cost of buying increases! Today, we want to look at this from a different angle. We want to alert our readers that their housing expense is about to increase if they continue to rent.
Currently, in Solano County and most of California, buying is less expensive than renting. Plus, purchasers can lock in their housing expense for the next thirty years by buying now. They will get a sensational price and a record low interest rate. What will happen if they continue to rent?

The Alternative to Buying

If a family continues to rent, they are looking at a housing expense which will rise with the market. Rental costs increase by 3% a year historically. But today’s rental market favors the landlord to a greater degree. Below is a graph of how rental prices have increased recently and where they are projected to go over the next few years based on a report from Marcus & Millichap.

 

Bottom Line

Hoping to save by delaying the purchase of a home may result in higher housing costs while you’re waiting, thus achieving the exact opposite result. Feel free to give Nate Pina a Call or Email and he can write you up a rent vs. buy scenario for your proposed mortgage vs your current rent payments.