Mortgages & Refinancing

Mortgage Rates for 30-Year U.S. Loans Fall to Record-Low 3.89%

Mortgage Rates for 30-Year U.S. Loans Fall to Record-Low 3.89% - BusinessWeek

Rates for 30-year U.S. mortgages fell to the lowest level on record after Federal Reserve Chairman Ben S. Bernanke urged lawmakers to do more to revive housing.

The average rate for a 30-year fixed loan decreased to 3.89 percent in the week ended today, the lowest in records dating to 1971, from 3.91 percent, Freddie Mac said in a statement. The average 15-year rate dropped to 3.16 percent from 3.23 percent, according to the McLean, Virginia-based mortgage-finance company.

Mortgage rates hit record lows: Freddie Mac - Mortgages - MarketWatch

Mortgage rates hit record lows: Freddie Mac - Mortgages - MarketWatch

Mortgage rates dropped to record lows this week, with 30-year fixed-rate mortgages falling to 3.89%, its sixth week below the 4% mark, according to Freddie Mac’s weekly survey of conforming mortgage rates.

The mortgage averaged 3.91% last week and 4.71% a year ago.

Rates on 15-year fixed-rate mortgages averaged 3.16% for the week ending Jan. 12, down from 3.23% last week and 4.08% a year ago.

Adjustable-rate mortgages also dropped, with 5-year Treasury-indexed hybrid ARMs averaging 2.82%, down from 2.86% last week and 3.72% a year ago, according to the survey. One-year Treasury-indexed ARMs averaged 2.76%, down from 2.8% last week and 3.23% a year ago

Homeowners refinance at lower mortgage rates

Good article in the sacramento bee on Jan. 11 th talking about the lower mortgage rates - check the full

Excerpts: 

As 2009 opens, the "refi" chase is on in neighborhoods across the country and across the region.

This new suburban sport was launched by mortgage rates that in recent weeks have fallen to lows not seen in almost four decades, offering potential to shave millions of dollars in debt from Sacramento-area households. Thirty-year fixed rates are suddenly floating in a zone of 5 percent and below – before fees – bringing a rush of curiosity and applications, area mortgage brokers, bankers and credit unions say.

It's still not clear if lenders will be as willing to play the game as borrowers. Tightened credit rules, diminishing home values and other economic factors will have a big effect on how many actual refinancings take place.

The catalyst is Federal Reserve action to buy $600 billion in mortgage debt from government mortgage giants Freddie Mac and Fannie Mae, analysts say. The government intervention aims to make mortgage funds cheaper and more plentiful to help revive the nation's battered economy...

Yet for all the reported frenzy, it's still too early to tell if there is – or will be – a 2003-like refinance "boom," said Terry Halleck, president and chief executive of Sacramento-based The Golden 1 Credit Union.

"The past couple of weeks, applications have gone up about 300 percent from a year ago. It's huge. The real question is whether people will complete the loan or are just rate-shopping," she said.

The lack yet of a real boom is partly because many homeowners still believe rates may go lower as the economy weakens. And unlike 2003, many borrowers won't qualify for today's tightened credit rules.

"I had to jump through every hurdle on my loan," said Fernandez, who is moving back to Houston. "They're really scrutinizing people."

Other owners also lack adequate home equity to refinance. And today's lower rates only apply to loans under $474,950 in most of the region.

But so many homeowners are browsing, Halleck said, that Golden 1 is starting an application fee "to filter out the people who aren't serious."...

"The likelihood is that low mortgage rates are not a flash in the pan. They will be with us for much of 2009 as the Federal Reserve pumps money into the mortgage market over a period of time rather than all at once," said Greg McBride, a senior financial analyst at financial Web site Bankrate.com.

For households that qualify, this is the upside of the worst financial scare since the Great Depression. Many will shed thousands of dollars in long-range interest and free up personal spending money.

Fed Cuts Interest Rates

Bankrate.com took a look to determine if the Fed's moves made you a winner or a loser. Here's a look at mortgages:

Winner: ARM holder or shopper
The decision by the Federal Open Market Committee (FOMC)
to cut rates by 25 basis points could be a boon for homeowners with adjustable-rate mortgages. It could mean your rate will go down, or at least not rise as much as it would have, the next time your mortgage resets.
Keep in mind the Fed already trimmed the federal funds target rate
by 50 basis points in September. The Fed's latest decision could cause your payment to take a dip if your mortgage resets within the next few weeks or months. Prospective homeowners shopping for an ARM also should find more attractive rates.

Winner: Fixed-rate shopper
It remains to be seen whether the decision by the Fed will help people shopping for new fixed-rate mortgages. Sometimes, fixed-rate mortgages move in tandem with short-term interest rates, but other times they do not.
The Fed's rate cut will have no impact on people with existing fixed-rate mortgages unless they are considering refinancing into a new mortgage, in which case it might help.

Take action
Now is a great time to take out a mortgage. Fixed-rate mortgages remain low by historic standards, and adjustable-rate mortgages are less likely to rise significantly now that the Fed is in a rate-cutting mode.

Mortgage Rates Drop, Applications Drop

Mortgage applications dropped last week, reflecting weaker demand for home purchase loans even as interest rates fell, an industry trade group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, dipped 0.2% the week ended Feb. 2 to 630.1.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.23% in the latest week, down 0.06 percentage point from the previous week and the first drop since early January.

Interest rates were slightly below the average of 6.25% in the same week last year.

The MBA's seasonally adjusted purchase index, widely considered a timely gauge of U.S. home sales, fell 0.8% to 404.7. The index was below its year-ago level of 425.1, a fall of 4.8%

Mortgage frenzy puts homeowners at risk

WASHINGTON (MarketWatch) -- More than a year after Alan Greenspan warned of the "potential for individual disaster" from a new breed of mortgages that were helping to fuel the housing boom, federal regulators finally are trying to do something about it.

On Friday, in a jointly crafted message on so-called exotic mortgages, multiple government agencies warned banks in strong terms to make sure borrowers can pay back the full amount of what they borrow and that homeowners know that a low monthly payment today could be shockingly high later.
America's real-estate boom may be over now, but millions of homeowners who thought they were borrowing their way into wealth find themselves instead holding a ticking time bomb, a toxic mortgage with a potential payment far larger than they can afford.....

Exotic mortgages are most popular in the metropolitan areas that saw the biggest price gains from 2003 through 2005. They allowed ordinary families to bid up the prices of ordinary homes to nearly $400,000 in Miami; nearly $500,000 in Bridgeport, Conn.; $600,000 in Orange County, Calif., and more than $700,000 in San Jose and San Francisco.

See full article on mortgages at marketwatch.com

Is This How the Real Estate Boom Ends?

reprinted from abc

These prices are crazy, you think as you scan the local real estate listings. How can anyone afford to buy a house in this market?

That's a question a lot of home buyers are asking themselves these days, and a growing number are coming up with the same answer: Skip the 30-year fixed-rate mortgage and grab a riskier loan with a lower initial payment.

Interest-only, option-payment, 40-year fixed, piggy-back loan, low-doc loan: These weird mortgages come in an assortment of names and flavors, but they all have the same goal -- to help you afford an expensive home. How? More often than not by letting you put off paying down your mortgage.

A few years ago, so-called "nontraditional" mortgages were a mere sliver of the market (less than 3 percent by some estimates); a July survey by the mortgages Federal Reserve found that they now account for more than a quarter of new business at a third of the nation's largest home lenders.

That swift rise has industry observers worried.

"We're very concerned with how safe these products are," says Stu Feldstein, president of financial research firm SMR Research. "There's an awful lot of risk out there."

But who's at risk? Almost everyone. If you're a buyer, the risk is that you'll find yourself with a loan you won't be able to afford in a few years. But even if you're among the 75 percent of borrowers with a stodgy fixed-rate loan or the lucky 35 percent of homeowners with no mortgage at all, this loan lunacy could pose a danger to your home's value.

That's because experts fear that the rash of nontraditional loans has been driving up prices in many markets -- and could intensify the decline if prices soften.

"I think the creative mortgage structures have been the last puff on the real estate balloon," says Nick Buss, vice president of market research at PNC Finance. "Consumers were already stretched, and these products have stretched them just a little bit further."

Piggyback Loans

  A piggyback loan is a combination of a first and second mortgage closed at the same time. Often involving 100 percent financing, the first mortgage loan can cover 80 percent of the cost of the home with a ‘piggyback’ second mortgage valued at the remaining 20 percent.

The most common type, however, is the 80-10-10 in which the second mortgage product accounts for 10 percent of the purchase price and the borrower invests 10 percent as a down payment on the loan.

Although the second mortgage carries a higher rate than the first mortgage and extends for a shorter term, the advantage of the piggyback mortgage is that the interest expense is potentially tax-deductible while the mortgage insurance payment (typically required for loans exceeding 80 percent of the home’s value) is not.

According to a survey by the National Association of Realtors, 25 percent of all homebuyers financed 100 percent of the purchase price of their home. Forty-two percent of first-time homebuyers bought with no money down.

Private Mortgage Insurance Can be Cheaper Than Piggyback Loans

The cost of mortgage insurance (PMI) varies depending on the size of the down payment and the borrower's credit history. PMI can be expensive so the mortgage industry created a way around it:  piggyback loans. With a piggyback loan, the borrower splits the home loan in pices: a primary mortgage for 80 percent, and then a home equity loan or credit line for 20 percent minus the down payment. Structuring a loan this way eliminates the need for mortgage insurance.

A couple of years ago, when you could get a home equity line of credit at 4 percent or 5 percent, piggyback loans were almost always cheaper for the consumer. But now the average line of credit is slightly more than 8 percent, and the average home equity loan is just under 8 percent. And rates on credit lines and equity loans usually run a little higher on piggyback loans.

Bottom line: Piggyback loans have higher monthly payments than they used to have, while mortgage insurance costs the same.  Be sure and ask your lender to work out the details to see which is a better option for you.

Mortgage applications at four-year low

WASHINGTON (MarketWatch) -- Applications for mortgage loans at U.S. banks dropped by 6.7% last week to the lowest level seen on a seasonally adjusted basis since May 2002, the Mortgage Bankers Association said Wednesday.
The number of mortgage applications was down 31% compared with a year ago.
Applications for mortgages to purchase homes fell a seasonally adjusted 6.2%, hitting the lowest level since November 2003. Purchase applications are down 19% in the past year.
The MBA's purchase index is expected to decline another 20% or so, said Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Applications for refinancing loans fell 7.5% on a seasonally adjusted basis. Refinance applications are down about 47% in the past year.
The decline in purchase applications has been much steeper than the recent drop in U.S. home sales. New-home sales have sunk about 6% in the past year, while sales of existing homes are down about 7%. See full story.
The slowdown in home sales "has the potential to translate into a hard landing for the economy because the housing sector has played a major role in the current expansion," said Asha Bangalore, an economist for Northern Trust.

Continue reading "Mortgage applications at four-year low"