FHA Monthly Mortgage Insurance Premium drops

January 26th is the official date for lower mortgage insurance premiums!!

This drop of .5% will help more homebuyers into their first homes.  FHA offers lower interest rates, 3.5% down payment and now the lower monthly mortgage insurance makes an FHA loan a more competitive option for home buyers.

If you are looking to purchase or even refinance an existing FHA loan, now is the time to call or email me for estimates to make sure this is right for you!  karen@landmarkprofessional.net or 503 581 8100


Be Careful of Scams

I have answered several phone calls since Obama’s new “Making Home Affordable” plans that have been introduced in regards to these two programs on refinancing and modifications. One client in particular said that he received a phone call from a company that will help him with his modification for a fee, of course.

Please be careful and wary of any one that calls you and says that they can help you modify your mortgage for a fee.  Lenders will do this for you for FREE.  It can take a while for this process to happen because lenders do not have all their parameters or employees in place yet, please be patient and don’t let anyone tell you they can do it for you more quickly.  They are just taking your money. 

A good website to check is www.financialstability.gov.  This site will be updated and lenders are working on these programs.  Please be patient.  If you need help deciphering the documentation that you need to gather or need help understanding paperwork you are given by your lender, please call me. I am happy to help and will not charge you a fee. 

This program is to help people stay in their homes not to make a “quick buck”.

Market Recap and Forecast

The purchase of U.S. Treasury bonds was slowed by successful auctions of billions of dollars in government debt last week as the Treasury Department continues to sell bonds to finance its multiple programs.

Nevertheless, with bleak economic news making the rounds and less-than-rosy corporate outlooks, the demand for Treasuries remained strong.  Investors — both private and corporate — keep coming back to the safe haven of U.S. Treasuries, because it is the one safe place to put their money.  In fact, according to a Lehman Brothers index, this year Treasuries have provided a 14.3% return on investment, while the S&P 500 is down 41%.  No wonder Treasury prices are up and yields, which move inversely to price, are down — but off record lows.

The trend continued Friday, although trading was thin.  Treasuries are attracting buyers and economists expect this to continue for six months, possibly longer.

There was more bad news on home sales in November.  In fact, it was worse than expected.  Tuesday’s existing home sales repot showed an 8.6% decline to an annualized rate of 4.49 million units — with 45% of those sales on distressed properties.  Inventories rose to 4.2 million units, representing an 11.2-month supply.  Home prices fell to a median of $181,300, putting them back at February 2004 levels.

New home sales dipped 2.9% to an annual rate of 407,000.  Surprisingly, the median sale price rose 0.9% to $220,400.  However, this report is subject to massive revisions over the next six months.

The University of Michigan/Reuters’ final survey of consumer sentiment survey rose to 60.1 from 59.1 two weeks ago.  The record plunge in inflation data was largely responsible.  Respondents also mentioned that lower gas prices made them optimistic.  In a separate report, the final revision of 3rdquarter gross national product (GDP) came in at -0.5%, in line with expectations.

Wednesday’s news wasn’t much better.  First-time jobless claims rose by 30,000 to 586,000 — the highest level since November 1982.  The four-week average, which smoothes out peaks and valleys, also rose to 558,000.  The good news was that continued claims, those collecting benefits for more than one week, dipped to 4.37 million — still unacceptably high.

Durable goods orders fell by 1% in November.  Nevertheless, that was a big improvement over October’s 8.4% decline — and it beat analysts’ predictions.  The one positive number in the report was the 4.7% increase in capital expenditures (business investments).  They had declined during the previous three months.

Personal income/spending for November was down, but the Fed’s favorite inflation indicator, the PCE, rose by only 1% over the past year.  That’s within the Fed’s 1%-2% comfort zone.  But consumer spending, which makes up two-thirds of the GDP, fell 0.6% in November versus a 0.1% decline in October.  Economists say that falling prices factored into the decline.  Personal income dipped 0.2% in November versus a 0.1% increase in October.

The big drop in mortgage rates during the week ended Dec. 19 brought out homeowners wanting to refinance.  Refinances rose 62.2%, according to the Mortgage Bankers Association, and accounted for 83% of mortgage activity.  Purchase applications were up 10.6%.

If there’s been a week in recent history with fewer reports than this one, we can’t remember it.  Most of the typical “last week of the month” reports were pushed back to last week, and “first week” reports, like the employment report for December, were moved ahead.  That leaves us the Institute of Supply Management (ISM) index on manufacturing conditions for December, which will be released Friday.

The ISM index, composed of surveys of 300 industrial companies, is used to predict future conditions in each of its nine components, including new orders, production, employment, etc.  The ISM index is a key manufacturing indicator, due to its current data.

Rates Approach Record Lows

Since the Fed announced a plan to purchase $500 billion of mortgage-backed securities on November 25, mortgage rates have moved progressively lower, and the trend continued last week. Conforming fixed-rate mortgage rates dropped to levels last seen in 2003. Weak Retail Sales data and low inflation figures released during the week also supported the move lower.

As the government strives to offset the current weakness in the economy, its actions have exerted a much stronger than usual influence on mortgage rates. Programs to purchase mortgage-backed securities and to provide capital to financial institutions have been favorable for mortgage rates, while a bill introduced in Congress last week could have the opposite effect if passed. The bill would permit bankruptcy judges to modify troubled mortgages by reducing the principal and payments. The goal would be to help prevent foreclosures, which is a worthy objective. However, opponents of the plan are concerned that investors may require higher mortgage rates to compensate for the increased risk that loan contract terms may be changed. At this point, it’s not certain when the bill will come up for a vote.

We do need a plan to help people in foreclosure but what is the best plan? That is the multi-billion dollar question for another day.

Future of Mortgage Rates?

With all the media and hype this past week that rates are going to be 4.5%, I thought that I would put my two cents worth in.

This comment made on the Today Show last week sure made the phones ring.  Rates were excellent last week at 5.125-5.25% but low and behold, that wasn’t good enough for people. “put my loan on hold, lets wait for 4.5%”  was what I heard.  Well, what if that doesn’t happen and rates end back at 6% before they decide to move forward, whose fault will it be that they didn’t get 5.125?  (Not that 6% is a bad rate but 5.125% sure sounds better.)

After digging further and doing some additional research, 4.5% would be for new purchases only not refinances, is what the comment was referring to.  This is one option that the government is tossing around. Much like the TARP, Hope for Homeowners, FHA Secure, I don’t have much faith in these programs.  These programs become so twisted and different than presented by the time they are implemented that they virtually have little or no impact.    So again, do clients decide to move forward or just hold and sit on that fence a while longer?

Rates are not reacting to the economic indicators in a normal fashion.  This year has been the year that bucks all historical trends.  Can anyone really predict what the market will do?  No, I think not.  One client said- “My mom says that rates will be good on December 16th so lock me then”  Can this really be???  What is happening on the 16th?  The adjournment of the Fed meeting?  Would that trigger a lower mortgage rate?  Not in a typical market, but then again, we aren’t in a typical market.  Maybe Mom does know best!


New Products for Veterans

flag1While many loan programs and products are shrinking on a daily basis and becoming more restrictive, the Federal Government is committed to helping our Veterans.

On October 10, 2008, President Bush signed into law, the Veterans’ Improvement Act of 2008.  With the passage of the bill, Veteran’s can now refinance their current mortgage’s and take cashout up to 100% of their homes’ value. Previously, they were limited to 90%.  This bill also increases the maximum loan amount in some areas.  The last thing that this bill does is extend the offering of the adjustable rate mortgage option for Veteran’s.  These adjustable rate programs are less risky since they have lower caps on the annual and lifetime adjustments of the loan.

A veterans’ existing loan does not have to be a VA loan to take advantage of this program.  If you purchased your home with a conventional or subprime loan, this is another option for veterans that need to refinance.

If you have any questions, please email me at karen@landmarkmortgage.com or call at 503 585 1105.