For over 40 years Freddie Mac has been tracking national interest rates. (Freddie Mac FHLMC is the 2nd larges secondary market purchaser of mortgage loans)
Over the past two months, the data shows new record lows for 30 year fixed rates.
The average "National" rate is 4.42 percent on 30-year loans for the week ended Aug. 19.Lsat week it was 4.44% and is the lowest ever recorded since Freddie Mac launched its survey tracking interest rates. See more charts HERE
Mortgage NewsWhat is the Velocity of Money and How Does it Impact Home Loan Rates?
According to the most recent Commerce Department report, Personal Spending and Personal Incomes were unimproved from the previous month, and the Savings Rate increased as consumers cut back on spending. While that data sheds light on the slow economic recovery, it also has implications on home loan rates. Here's why. It has to do with something called the velocity of money. Even though the government keeps pumping money into the system, nothing happens until that money is spent or lent, and passes from one hand to another or one business to another. The speed at which this money passes between parties is called the velocity of money. With the job market still very sluggish, consumers aren't spending much money these days...and businesses are still reluctant to spend moneymaking investments in their business. With the present velocity at low levels, inflation remains subdued and that's good for home loan rates. That's because rates are tied to Mortgage Bonds and inflation is the archenemy of Bonds, so low inflation is good for Bonds and rates. However, once velocity increases, the excess money in the system will cause inflation – which is bad for rates, since even the slightest scent of inflation can cause home loan rates to worsen. While we certainly want to see better economic recovery news in the near future, we have to remember that there's an inverse relationship between good economic news and Bonds and home loan rates. Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. Strong economic news, on the other hand, normally has the opposite result. Currently, home loan rates are at a historically low level, which makes now an ideal time to purchase a home or refinance before the velocity of money – and rates – change. If you or anyone you know would like to learn more about the current economic situation and how to take advantage of historically low home loan rates, please don't hesitate to call or email LoanCentral right away.
NEWS FLASH
Senate approves the new tax credit closing deadline EXTENSION mentioned earlier today (See below)
The Senate has amended a bill to give homebuyers who were under contract on a home purchase by April 30 an additional three months to close the deal and claim the federal homebuyer tax credit.
"Extending the deadline for closing from June 30 to Sept. 30 would allow lenders more time to clear a backlog of 180,000 homebuyers nationwide", said amendment sponsor Sen. Harry Reid, D-Nev.
The TAX CREDIT offered by our Federal Government for purchasing a home had 2 expiration dates – The first was April 30th which was the deadline for writing the purchase and sale agreement. This has passed, if you missed it – you missed out on a $6,000 to $8,000 tax credit – dollar for dollar credit against Federal tax owed to the IRS. (Cash back if you didn’t owe that much in taxes)
The second and upcoming deadline was June 30th where the home you purchased [prior to April 30th] must be closed. If you are currently involved in a transaction that is subject to the Tax Credit deadline of June 30th you may be aware that Congress is CONSIDERING extending that date. "A proposal in the Senate to extend the closing date for the credit passed by a vote of 60-37 around 3pm (on 6.16.10), sometime after this was originally posted. It is important to realize that this is not final.
This proposal is going to be attached to a revised Tax Extenders Bill, which will have to be passed by the Senate in order for the extension of the closing date to become law. As of this time, that has not yet happened."My recommendation at this point is to move forward with the existing June 30th deadline for the tax credit. The IRS and Federal Government rarely gives flexibility on timeframes such as this.
Yes, the Federal Reserve completed its $1.3 Trillion dollar purchases of Mortgage Back Securities, the prime stimulas that has held mortgage rates down at the lowest levels for 50 years.
The program ended March 31st - so why have rates not bounced back up to previous levels "Pre-Stimulas"?
Part of the reason is the turmoil in Europe and bankrupt countries such as Greece. This brings billions of dollars of investments into the United States where investors are looking for safety in US Treasuries.
That said, there is still much volatility in mortgage rates as seen in the LoanCentral 3 month rate history graph below. (This is updated every Friday and available on the weekly market update )
(more detailed rate graph is available here )
Now that we've seen where rates have been, where are they going? Our own panel of experts see rates in the near term as pretty steady.
Understand that interest rates can be extremely volatile and change on a daily (minute by minute) basis - please seek the advice of one of our licensed loan officers at LoanCentral for information on whether you should lock your rate or float. While information regarding interest rates and the current mortgage back securities market is available to our professionals, the decision to lock or float your rate is ultimately up to you, let us help educate you on your decision!
Many of LoanCentral's clients are saving a lot of money by taking advantage of the unusual opportunity that exists right now, and we wanted to make sure you didn't miss out.Interest rates have rallied and improved dramatically on the heels of the recent European debt concerns…and what is most important is that due to the highly unusual set of circumstances that exist in the market, those who are acting quickly are saving. In fact, Freddie Mac reported last week that rates have met either all-time lows or 2010 lows. Bottom line, they are "smokin' hot" right now – but won't be for long.Regardless of whether people want to convert their loan to a 15-Year fixed to potentially save over $100,000 in payments over the term…or drop their payment several hundred dollars a month, people are acting now!However - one thing you have to know…rates are incredibly volatile and are not likely to hold these levels. We might only have a couple of days to lock people in at the best rates they will ever see.Call quick! We would love to look into your situation and see just what we can do to put some money back in your pocket. I never thought I would see rates this low across the board - so don't miss this chance.We look forward to hearing from you!P.S. Home sales and home prices continue to improve. Monday, the NAR released information that shows strength in housing. If you are in the market to buy a home, act now before monthly payments increase as both prices and rates move higher.Or, if you are looking to refinance and could not last year because of home values…you just might be able to now. Call us!
The Fed has told us repeatedly that their massive purchasing program of Mortgage Backed Securities is just about over - and this translates to home loan rates rising in the near future.
As you can see in the chart below, the amounts of Mortgage Backed Securities the Fed is purchasing are slowly dwindling, as the program is set to wrap up by March 31st, and are clearly trying to ration out the remaining portion. Last week, the Fed purchased $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment. So about 95% of the total has already been spent and has purchased about 3 out of every 4 home loans during the past year. When such a large buyer leaves the market, it is very likely that prices will worsen.
This is very important because as the Fed has less money to last through the remaining months of the program, their ability to keep home loan rates low via their purchasing power will wane. And those who can take advantage of currently low home loan rates do not wait, as the clock on these historically low rates is ticking.
Chart: The Fed's Purchase of MBS (By Month)
Also last week, Fed Chairman Ben Bernanke provided a speech on a number of topics, perhaps the most important of these being switching the Fed's benchmark from the commonly watched and monitored Fed Funds Rate, to a new benchmark of "interest paid on excess reserves". Banks are required to keep money on reserve with the Fed and may, from time to time, have an excess in those reserves, which the Fed can pay interest on.
TAX CREDIT ENDS if you don’t buy a home by April 30th and Close by June 30th, 2010
New years and holiday fun is over and now you are pulling the paperwork together to do your Taxes before the April 15th deadline arrives. Now is the perfect time to consider an additional benefit from our US Government called the Extended and Expanded Home Buyer’s Tax Credit.
A Tax Credit is a GIFT. Well, really we pay for it but my feeling is if someone is going to get the benefit of what I’m paying for, it may as well be YOU! Understand that a tax credit is far more advantageous than a deduction. With a tax “CREDIT”, for example - if you owe $10,000 of taxes, the tax credit will basically pay for $8,000 of the tax owed leaving you to pony up for the remaining $2,000. (You may even be able to get a refund from the IRS if you owe less than $8,000 !)
First time homebuyers who qualify in 2009 and 2010 can get up to 10% of the home's purchase price as a tax credit – up to a maximum of $8,000. You don't have to pay it back (as long as you stay in your qualified home for at least 3 years). And by the way – if you qualify for the tax credit – you can use the credit for your 2009 returns, even if you have already filed. Seek advice from a qualified CPA to learn how to file an extension.
In November 2009, legislation extended a tax credit of up to $6,500 (or up 10% of the home's purchase price) to long-time residents of the same primary residence if they purchase a new main home. To qualify, eligible taxpayers must show that they lived in their previous homes for a five-consecutive-year period during the eight-year period ending on the closing date of the new home.Note that there are qualification requirements such as income limits and other restrictions that you will need to consider – but you don’t have much time to beat the April 30th deadline to buy!
Give a LoanCentral loan officer a call or email today for all the details. We can help!
The Truth About AppraisalsKnowing the Guidelines Solves the Mystery
The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules. In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value. For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal. Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating. Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed. As a loan professional, I make a point to follow the appropriate guidelines at all times. This promotes a good relationship with the lender, and helps to create easier and much smoother closings for my borrowers.
If you are wondering how the interest rate will affect your decision - check out LoanCentral's INTERACTIVE "Should I buy now" calculator!. Click and turn the dials!
IF President Obama signs the bill that Congress just passed - we will have the 1st time homebuyer tax credit extended for Purchase & Sales agreements under contract with qualified buyers before May 1st, 2010'
The bill was approved by the Senate last week by a unanimous vote of 98 - 0 oppossed! The House passed it today.
Remember that there are qualifications that must be met.
First - any home over $800,000 is not eligible even if the buyer meets the income limitations - this is new.
To be eligible for the credit - there are Income limits. Limits will be raised from $75,000 to $125,000 for individuals and from $125,000 to $225,000 for couples. So...
INCOME LIMITATIONS for receiving the new Tax Credit
The credit can be up to 10% of a home's purchase price.
The maximum credit remains at $8,000 for first-time homebuyers which is defined as someone who has NOT owned a home in the last 8 years...
The maximum credit for CURRENT homeowners is $6,500 IF they have been in their primary residence (owner occupied) for at least of the last 8 years - and they must sell their home and buy a new one to qualify.
For additional details go to www.loancentral.com/homebuyertaxcredit
The 2009 Eastside Panel Event was a huge success again this year! Our very own George Charles is the founder of the event
The Eastside Real Estate Panel event came from a vision from LoanCentral's President and CEO George Charles. A vision that while local real estate agents and lenders compete with each other - we are still a community of professionals. If we share ideas, systems and tools amongst ourselves, the public perception of the real estate professional will be elevated and our production, income and personal time with our families will benefit.
Each year we pull together the industry's top Realtors to share these ideas and systems with other local agents. This year we had nearly 300 people attend at the Westin in Bellevue with a goal of all net proceeds from the event going to Habitat for Humanity.
We did 2 panels this year, one for general real estate and a second for REO's and short sales which make up nearly 32% of all sales in the nation. We were able to get outstanding panelists for both events.
2009 Panelists along with the Founder of the Event George Charles and Director Sheryl Mullins
Our Emcee's were Brian Combs, owner and Team Leader from Keller Williams in Vancouver Washington and Kendra Todd - the youngest person to win the acclaimed TV series "The Apprentice". For more information see www.EastsideAgentPanel.com
In our conversation, she was under the impression that working with a Licensed Mortgage Broker would be more expensive than going directly to a bank... As I explained to her how the broker accesses "Wholesale" money from the same banks as their own retail branches, and that brokers are paid by the parent "Bank" just as they would pay their retail branch - it seemed to be an "Aahhaa moment" for her.
(See graphic explaining Broker vs. Banker)
The landscape of the financial markets has changed drastically over the past 12 months. An unprecedented volume of foreclosures and recent mortgage fraud have caused banks to reengineer the way they lend money. As a result lending guidelines have tightened dramatically and government regulations have radically changed the appraisal process. At times underwriting has become more of an ‘investigation’ rather than a ‘verification’ of information. As a result the advantages of working with a mortgage broker are paramount in this challenging lending environment. The consumer wants and needs choices today more than ever. As a broker we have the ability to fund loans through numerous banks. We shop rates, programs and guidelines for the consumer so they get the best financing for their needs.
Banks adjust their rates every day based on market conditions and their application volume. A client working with a single bank versus a mortgage broker can easily get CAUGHT when a bank changes their strategy or is forced to raise rates to slow volume.
As a broker, our job is to find the best program and rate for each client’s personal situation. Each bank has their niche areas of strengths and specialties. No one Bank can offer it ALL. As a broker we offer the most variety and choice!
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Could this be it? Could this be the low point for Interest rates?
According to Freddie Mac, interest rates recently dropped to all-time lows in some categories, and within a hair of all-time lows in others. We will likely never see rates at these levels again. If you missed the chance to purchase or refinance earlier this year, you just got a do-over. Don't miss out a second time!
The Federal Reserve implemented a mortgage-backed securities buying program to artificially lower rates and that program is nearing its end. The originally scheduled end date was December 31, 2009. While this deadline has been extended, the amount of purchases remains the same, which means the level of participation will wane, decreasing by half as much. It is expected that mortgage rates will soon return to levels seen before the program started, near 6.50%.
Inflation, while currently contained, is likely to show its ugly head as all the stimulus from Washington continues to pour into the system.
The end result will be increasing inflation pressure across the board, which will cause all interest rates to rise.
It is likely that interest rates at these levels will never be seen again in our lifetime. Take advantage of them today while you still can so you'll never have to look back and say
"I wish I had...."
Wall Street journal just released a study to show which Cities Will See Biggest Rebound after the recession. The following cities are reported as likely to be the hottest post-economic downturn destinations for young, brilliant, and highly mobile workers?
The Wall Street Journal surveyed and they chose cities based on economic diversity, lifestyle and their own personal prejudices.Here’s the top-10 list: 1. Washington, D.C. (tie) 1. Seattle 2. New York 3. Portland, Ore. 4. Austin, Texas 5. San Jose, Calif. 6. Denver 7. Durham, N.C. 8. Dallas 9. Chicago 10. Boston
Don't forget about our Market Update which goes out each Friday on current events and trends in the Real Estate and Lending industry.
This loan is available through SBA (Small Business Administration) and is actually a part of the Economic Recovery Act. The new loan program is called ARC (For America's Recovery Capital), is an interest-free, deferred payment loan of up to $35,000.
One of its intended uses is to help businesses get out from under ruinous debt. The important note here is that the SBA recently clarified Real Estate agents qualify for this new program.
Thus, if real estate practitioners have maxed-out business credit cards (it has to be business-related debt; personal debt won't qualify), they can pay that debt off with the far-more attractive SBA loan. SBA's two flagship loans, known as the Section 7(a) and Section 504 loans, are also open to individuals.
On the 7(a) loans, the SBA says, "To assist small businesses during the economic downturn, the American Recovery and Reinvestment Act authorizes SBA to temporarily reduce or eliminate loan fees for borrowers . . . and raises the loan guarantee from the current level to 90 percent."
Check with your local bank to see if they participate in the SBA program...
The Treasury Department has announced guidelines for a national loan modification program intended to help 3 to 4 million homeowners stay in their homes. $ 75 BILLION of our taxpayer dollars are budgeted for this in the form of a federal subsidy.
It is a voluntary program which contains financial incentives for loan servicers and lenders. Prior to this, lenders had no incentive to spend resources on a borrower's request for a loan modification. In fact - there was a DIS-Incentive because they were not paid to do the modifications - but WERE paid to do loan foreclosures.
Under the new federal program, lenders will receive a $1,000 fee for doing loan modifications - and bonuses of up to $1,000 per hear for 3 years on modifications that actually work.
QUALIFICATIONS -To QUALIFY for a loan modification, the borrower must have a loan on their PRIMARY residence which was taken out PRIOR TO January 1st, 2009. The loan must be no greater than $729,750 AND they must have suffered a hardship which has caused their housing payments to exceed 31% of the household's gross monthly income. TTotal monthly debts should not exceed 55% of the gross household income. The borrower must also demonstrate that they can actually still afford the new modified loan.
Loan modifications may include short-term reductions in interest rates to as low as 2% to drive down housing payments to the 31% - 38% range. Other tools to bring down payments will be longer amortizations and forbearance or forgivenessof a portion of their principal loan amount.
IMPORTANT if you live in WASHINGTON STATE - there are a number of individuals that are claiming to be loan modification specialists in Washington. Loan Modifications are still in their infancy and as with short sales - borrowers are frustrated by difficulties getting through to lender representatives to help them through their struggles.
In Washington State - you must be LICENSED by the DFI (Department of Financial Institutions) or be a licensed attorney to represent a borrower in loan modifications. Others who are advertising these services for a fee may be violating the statute governing distressed properties and/or be actually charged with practicing law without a license. Be sure you have a qualified individual who is licensed if you need help with a loan modification.
LoanCentral LLC 10900 NE 8th Street Suite # 110 Bellevue, Washington 98004Washington Mortgage Broker Loan Central National NMLS License # MB-70191Phone: 425-709-7900
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