My Thoughts for the Week of March 12th, 2012

Posted on March 12, 2012 by Administrator

FOMC meets tomorrow, it’ll be interesting to see how they respond to the market’s interpretation that the economy is doing better than the Fed suggests. Bearish or Bullish, what’s it going to be? Seems like everyone is ready for a little optimism and positive reinforcement. If the FOMC turns out to be a little bullish and retracts their promise to keep the FF Rate near zero thru 2014, expect to see the 10 yr note break loose upward and rates to follow. If the sentiment is more of the same, we can expect the 10 yr to stay within its tight range it’s been trading in since November. This would be ideal for mortgage rates.

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FHA announces decrease in Mortgage Insurance Premiums for certain Streamline Refi’s

Posted on March 8, 2012 by Administrator

This is great news for FHA borrowers who have been unable to participate in Streamline Refinances because the new higher annual MIP eroded any potential savings from a lower interest rate!

Tuesday, Acting Federal Housing (FHA) Commissioner Carol Galante announced significant price cuts to FHA’s Streamline Refinance Program that could benefit millions of borrowers whose mortgages are currently insured by FHA. Beginning June 11, 2012, FHA will lower its Upfront Mortgage Insurance Premium (UFMIP) to just .01 percent and reduce its annual premium to .55 percent for FHA Streamline Refinance borrowers whose loan was endorsed before May 31, 2009.

To qualify, borrowers must be current on their existing FHA-insured mortgages which were endorsed on or before May 31, 2009. Late last month, FHA also announced it will increase its upfront premiums on most other loans by 75 basis points to 1.75 percent. In addition, FHA will raise annual premiums 10 basis points and 35 basis points on mortgages higher than $625,500.
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Currently, 3.4 million households with loans endorsed on or before May 31, 2009, pay more than a five percent annual interest rate on their FHA-insured mortgages. By refinancing through this streamlined process, it’s estimated that the average qualified FHA-insured borrower will save approximately $3,000 a year or $250 per month. FHA’s new discounted prices assume no greater risk to its Mutual Mortgage Insurance (MMI) Fund and will allow many of these borrowers to refinance into a lower cost FHA-insured mortgage without requiring additional underwriting.

Benefits of the Streamline Refinance include no new appraisal, the value of the property when your loan was made will be the value used on the new loan, and no income documentation. A new credit report will be pulled and you must be current on your mortgage payments.

To read the FHA Mortgagee Letter 12-4 released by HUD, click here

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People Are Buying Homes…AND Getting Mortgages

Posted on March 7, 2012 by Administrator

Many believe that very few houses are selling and that almost no one can get a mortgage. We want to let everyone know that neither of these assumptions is true. Recently, the National Association of Realtors (NAR) released their Existing Homes Sales Report. According to the report there are, on average, 12,109 homes selling in the United States EACH and EVERY DAY! That means that approximately 12,000 houses sold yesterday, approximately 12,000 will sell today and approximately 12,000 will sell tomorrow. So the thinking that homes aren’t selling just isn’t true.

Another interesting fact in the report was that 72% of these transactions were accompanied by a mortgage. That means that approximately 8,719 people qualify for a mortgage on a daily basis in this country.

There are over 12,000 homes sold and over 8,000 mortgages granted every day. The real estate market is doing better than many believe.

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My Thoughts for the Week of March 5, 2012

Posted on March 5, 2012 by Administrator

The big data coming this week is on Friday with the February unemployment numbers. Expectations are for the unemployment rate to remain unchanged at 8.3%. Look for deviations from this to move the interest rate market. If Jan unemployment numbers are revised and the unemployment rate adjusts higher (which I think may happen) we could see rate pricing improve a little. If you’re worried about another unemployment data shocker and you’re not sure how rates will react I recommend locking ‘em up before Friday. Other than that, the 10 yr note has been trading in a pretty tight range for the last four months, hanging between 2.10% and 1.90% and mortgage rates have been pretty steady.

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The Low Down on the April 9th FHA Mortgage Insurance Increase

Posted on March 4, 2012 by Administrator

Beginning April 9, 2012, the FHA is once again raising mortgage insurance premiums (MIP) on its newly-insured borrowers throughout the country.

It’s the FHA’s fourth such increase in the last two years.

Beginning April 9, 2012, upfront mortgage insurance premiums will be higher by 75 basis points, or 0.75%; and annual mortgage insurance premiums will be higher by 10 basis points per year, or 0.10%.

For borrowers with a loan size of $200,000, the new MIP will add $1,500 in one-time loan costs, plus an on-going, annual $200 increase in total mortgage insurance premiums paid.

All new FHA loans are subject to the increase — purchases and refinances.

The FHA is increasing its mortgage insurance premiums because, as an entity, the FHA is insuring a much larger percentage of the U.S. mortgage market than ever before.

In 2006, the FHA insured 2 percent of all purchase-money mortgages. In 2011, that figure jumped to 18 percent. Unfortunately, as the FHA has insured more loans, it’s number of loans in default have climbed, too, forcing the FHA to boost its reserves.

Beginning April 9, 2012, the new FHA annual mortgage insurance premium schedule is as follows :

  • 15-year loan term, loan-to-value > 90% : 0.60% MIP per year
  • 15-year loan term, loan-to-value <= 90% : 0.35% MIP per year
  • 30-year loan term, loan-to-value > 95% : 1.25% MIP per year
  • 30-year loan term, loan-to-value <= 95% : 1.20% MIP per year
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My Thoughts for the Week of Feb 27, 2012

Posted on February 27, 2012 by Administrator

A nice start to the week with the 10 yr note yield opening down from last week, currently at 1.93%. Mortgage pricing will start off better as well. Stock indexes are starting weaker after the Dow was unable to stay above 13k last week and more negative news coming out of Europe. As stocks drop investors move into bonds driving rates a little lower on the increased demand. Keep an eye on the Dow, if it makes another crack at 13k and can stay above it we could see rates creep back up again.

Wow, as I’m preparing this, better than expected January home sales data just released has caused the Dow to surge right back up to 13k. Good news for the housing recovery and giving investors confidence outweighing the negative news coming from Europe after the Group of 20 Nations deflected requests from the European Union to boost international lending. For now the 10 yr note is holding at 1.93%.

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How does NO MIP on an FHA Purchase/Refi sound?

Posted on February 24, 2012 by Administrator

While this program may not work for everyone, there are buyers out there who should be taking advantage of this. Here’s the deal:

Purchase transactions on FHA 15 year loans where the borrower can put 10% down will have no monthly Mortgage Insurance Premium (MIP)!

This means you can utilize the more flexible underwriting guidelines of FHA loans, including that the entire down payment can be gifted from a family member, and still not have to pay any monthly MIP without needing to put 20% down.

Contact us to see if this might be a good scenario for you, or utilize one of our mortgage calculators here to see what a 15 yr payment would be.

Greenfront Mortgage
530 314-2030
info@greenfrontmortgage.com
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FHA to Raise Premiums–Especially For Jumbos

Posted on February 21, 2012 by Administrator

If you’re thinking about applying for a FHA loan or a Streamline Refi, now’s the time to start and get your new FHA case number pulled before the MIP is raised again.

The Federal Housing Administration will “soon” increase its annual premium on jumbo mortgages by 25 basis points, according to government budget documents released today. The increase means FHA loans with a principal balance above $625,500 will carry a 140-bp annual premium. On lower balance loans, FHA is raising the annual premium by 10 bps.

FHA currently charges a 1% upfront fee and a 115 bp annual premium on residential loans with loan-to-value ratio higher than 95%. “These [premium] increases will bolster FHA’s capital reserves, accelerating the point at which FHA will regain compliance with its capital reserve ratio,” according to the President’s Fiscal Year 2013 budget proposal. Some analysts claim the higher annual premium will reduce demand for FHA jumbos and push more borrowers to seek out private jumbo loans. Congress instructed FHA to increase its annual premium by 10 bps late last year when lawmakers passed a bill to extend a payroll tax reduction for two months. Source: National Mortgage News

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Weekly Update for Feb 21, 2012

Posted on February 21, 2012 by Administrator

Greece continues to be the subject of attention. Late last night it was announced that they would receive their bailout to avoid default next month. Markets didn’t seem to care too much about the info. It just goes to show that no matter how much research and forecasting you do, you can’t predict how markets will react. US interest bond rates are a little higher on the news this morning, but Mortgage Backed Securities are trading around the same range as last Friday. After two days of weakening at the end of last week, I’m hoping for a little correction and rates to improve slightly through this week. Probably why there was no change today as markets priced in the Greek bailout expectation last week.

  • Checkout our improved pricing on the 15 yr Fixed Conventional! Mortgage data from 2011 Q4 revealed that almost 50% of loans originated during the quarter were either 20 or 15 yr loans. Lower rates and purchase prices have made it easier to build equity and pay loans off quicker. Want to know what your payment would be on a 15 yr loan at 3.25%? Check out our mortgage calculator here
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Careful not to misinterpret the Fed’s Announcements

Posted on February 15, 2012 by Administrator

A few weeks back the Fed announced they plan on keeping short term interest rates low thru the end of 2014. Be careful not to misinterpret this statement!

2014, Maybe...

The other day a friend of mine who has been enjoying his LIBOR based adjustable mortgage told me he plans on milking the low adjustable rate and will refi to a fixed rate towards the end of 2014. I’ve heard others mention they too will wait till 2014 to start purchasing real estate. This is risky business my friends and not Bernanke’s intention when he stated his rate would stay low thru 2014.

There are several things you need to understand about the Fed. First off they don’t set mortgage interest rates. They control the Federal Funds Rate, or the overnight rate at which banks trade money to balance their books. This can influence mortgage and other bond yields but ultimately the market decides interest rates. Another thing, the Feds comment to keep short term rates low thru 2014 does not mean they won’t change this guidance if the economy starts to improve. Two weeks after the Fed made their comment January employment figures shocked the country with better than expected job growth, dropping the unemployment rate to 8.3%. Seems like there is a bit of disconnect between what the FOMC (Federal Open Market Committee) is seeing and what is actually going on in our economy. Don’t be surprised if they back pedal from their comments if the economy continues to improve. Suppose by this time next year the economy has shown several continuous quarters of growth, now inflation will become a concern for the Fed. How do you control inflation? Raise interest rates. Lastly, suppose the status quo continues and everything turns out the way the Fed is predicting. As we get closer to 2014 and the Fed starts making statements about their next moves post-2014, the market will immediately begin to price in this new info. Rates will rise on the expectation that rates will rise.

All we can do is hypothesize about what may or could happen. No one has a crystal ball they can look into that will predict the future. But you can hedge your bets and try to minimize your risk. Look at your current situation and weigh your options. If you think it’s a good time to buy, or a good time to lock in a low interest rate, and you’re happy with what that payment will be, then go for it! If your goal is to time the bottom, whether it’s for the lowest rate or the lowest purchase price, you will only know it was the bottom once rates and prices are higher, and you will have missed it. Be careful to gamble with your life's biggest financial transaction.

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