South Orange County Blog from Bob Phillips

More Homeowners Can Refinance as Rates Fall While Values Nudge Upward

Posted in home affordability, Home Values, Mortgage Rates, Real estate, Refinances by southorangecounty on May 23, 2010

While the demand for mortgage loans to purchase a new home has declined following the expiration of the home buyer tax credit, mortgage applications overall, increased last week as home owners looked to refinance. Mortgage rates have reached their lowest levels since March and many homeowners are looking to refinance their mortgage loans. While falling home prices have reduced the popularity of refinancing to tap into home equity, low mortgage rates have drawn the attention of borrowers looking to reduce their interest payments.

The Mortgage Bankers Association reported an increase in the number of applications for mortgage loans. The first week of May saw just under a 4 percent jump in applications from the previous week. With U.S. fixed rate mortgages hovering close to 5 percent, many homeowners jumped at the opportunity to refinance into lower mortgage rates. And with home prices starting to stabilize, the housing market is beginning to return to business as usual.

In the past few years homeowners have seen tremendous volatility in the housing market, including some of largest declines in home prices in recent memory. Falling home prices have wiped out an unprecedented amount of U.S. homeowner’s equity, shaking up the mortgage business. With home prices showing more stability, borrowers and lenders can once again be confident that once a home is refinanced its value will most likely not fall below the mortgage balance. Some borrowers have even chosen to do cash-in refinances, putting more equity into their home to qualify for lower interest rates.

Mortgage Rates Remain Incredibly Low.

Despite the Federal Reserve ending it mortgage purchasing program, mortgage rates remain low. The Mortgage Banker Association reported that they were as low as 4.96 percent for the first week of May. While above the 4.76 percent they were this time last year, the sub 5 percent rates are still historically low. Many homeowners have been waiting for rates to once again dip down and as the trend of increased mortgage loan applications indicates they are swooping in to take advantage.

In some lower price ranges, because values have nudged up over the last year, some homeowners who couldn’t refinance a year or two ago, now can – at historically low fixed rates! Look into it with your favorite loan person – I can recommend a couple of good ones.

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What’s Ahead For Mortgage Rates This Week : April 26, 2010

Posted in home affordability, mortgage rates, Real estate, Refinances, Uncategorized by southorangecounty on April 26, 2010

Federal Reserve meets Apr 27-28 2010Mortgage markets worsened last week in see-saw trading. By the time Friday’s market closed, mortgage rates were higher across the board — ARMs, fixed rates, FHA and conventional.

The biggest stories of last week were actually non-stories. 

First, the ash cloud from Iceland’s Eyjafjallajökull volcano dissipated, allowing warehouses to move inventory, airlines to move people, and businesses to move product.  In addition, Greece moved closer to securing emergency funding that will help it stave off default.

When these two issues were threats earlier in the month, mortgage bonds rallied on safe haven buying, driving rates down. As the threats lessened over the course of last week, however, mortgage bonds sold off and mortgage rates rose.

By contrast, this week features lots of stories. Economic data will be at the forefront, as will the Federal Reserve which meets for one of its 8 scheduled meetings of the year.

  • Monday : Greece is expected to announce an aid package
  • Tuesday : Case-Shiller Index reports on home values from February
  • Wednesday : Fed adjourns from its 2-day meeting
  • Thursday : Initial Unemployment Claims are released
  • Friday : GDP and consumer confidence numbers are released

Furthermore, Wall Street will have its eye on the Senate’s questioning of key Goldman Sachs employees in the wake of the SEC’s fraud charge.

In general, news that’s “good” for the U.S. economy will be bad for mortgage rates, and vice verse.  And with mortgage rates changing as quickly as they have been, rates could really rise in a hurry.

The best defense against rising mortgage rates is to execute a rate lock. If you’re nervous about rates moving higher, call your loan officer and execute your rate lock today.

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It May Be A Good Time To Look At Adjustable Rate Mortgages

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on April 19, 2010

Comparing the 30-year fixed to the 5-year ARM Apr 2009-Apr 2010

Each week, government-led Freddie Mac publishes a weekly mortgage rate survey based on data from 125 banks across the country.  According to this week’s results, the relative rate of a 5-year ARM is extremely low versus its 30-year fixed-rate cousin.

Consider this comparison:

  • In April 2009, the two products ran neck-and-neck with respect to rates
  • In April 2010, the two products are split by 0.99 percent

On a $200,000 home loan, that’s a difference of $117 per month to a mortgage payment.

Adjustable-rate mortgages aren’t suitable for everyone, but they can be a terrific fit given your individual circumstance.  For example, any one of the following scenarios could warrant a 5-year ARM:

  1. Buying a home with an intent to sell within 5 years
  2. Currently financed with a 30-year fixed mortgage with plans to sell within 5 years
  3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, homeowners with existing ARMs may want to refinance into a brand-new ARM, if only to extend the initial change date on the current note.

Before opting an ARM or a fixed, speak with your loan officer about how adjustable-rate mortgages work, and what longer-term risks may exist.  The savings may be tempting, but there’s more to consider than just the payment.

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What’s Ahead For Mortgage Rates This Week : April 19, 2010

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on April 19, 2010


Existing Home Sales Feb 2008-Feb 2010Mortgage markets improved last week for the second week in a row.  And, also for the second week in a row, rates were down on “safe haven” buying — just not for the same safe haven reasons as before.

If you’ll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.

Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the “less risky” description and as Iceland’s volcanoes shut down air traffic in Europe, mortgage bonds benefited.

That was early in the week.

Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market’s weekly close.

Conforming and FHA rates are as low as they’ve been since March.

This week, there’s not much data due until Thursday, but even Thursday’s releases won’t make a huge impact on rates.

  1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
  2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
  3. Producer Price Index : A “Cost of Living” index of business. A weak reading is expected because inflation is low.

Then, Friday, New Home Sales is released.

The bigger risk to home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days.  Keep an eye on the markets and your loan officer on speed dial.  Markets can — and do — change quickly. 

You’ll want to time your lock accordingly.

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What’s Ahead For Mortgage Rates This Week : April 12, 2010

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on April 12, 2010


Greece default concerns are lowering mortgage ratesMortgage markets improved last week to the delight of rate shoppers.

Against a sparse economic calendar, Wall Street turned its attention to geopolitics in Greece and the Eurozone.  It didn’t like what it saw. Safe haven buying buoyed mortgage bond markets last week as pricing recaptured two-thirds of its monumental losses from the week prior.

Despite last week’s surge, however, conforming and FHA mortgage rates remain near their worst levels of the year and appear poised to increase throughout the summer months.

The U.S. economy is improving. From last week:

Furthermore, continuing jobless claims were down again.

Good news for the economy is generally bad news for mortgage rates. Last week, that wasn’t the case because of Wall Street’s want for “safe” assets right now.  This includes mortgage bonds and is helping to keep consumer rates low. When the safe haven buying eases, rates should climb.

Meanwhile, this week, the calendar is back-heavy. 

There’s no real data until Wednesday’s Consumer Price Index, and then there’s a flurry of new releases through Friday’s market close including Retail Sales, Consumer Confidence and Housing Starts. 

Strength in these issues should push mortgage rates back up.

If you’re floating or shopping a loan right now, be wary of market volatility. Rates have been jumpy since April 1 and mortgage rates are changing quickly. This week, locking in before Wednesday may be your safest, near-term rate locking strategy.

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What’s Ahead For Mortgage Rates This Week : April 5, 2010

Posted in mortgage rates, Real estate, Refinances by southorangecounty on April 5, 2010

Non-Farm Payrolls Apr 2008-Mar 2010Mortgage markets performed terribly last week as losses piled up day by day.  It marked the second straight week of sell-offs.

Pricing was influenced on several fronts including better-than-expected economic data, the end of the Federal Reserve’s mortgage buyback program, and a short trading week.

Mortgage rates rose to their highest levels since late-December last week.

The data from the most anticipated story from last week — the jobs report — included a few good-for-the-economy surprises.

  1. Although payrolls fell 22,000 short of expectations in March, they were boosted by +62,000 in net revisions from January and February
  2. “Temporary Employment” — a leading jobs indicator — is up 313,000 in the last 6 months
  3. The average work-week and factory overtime both rose in March — a sign that hiring should increase soon

In general, what’s good for the economy is bad for mortgage rates and that’s one reason why rates spiked Friday. Employment is a keystone in the economic recovery and mortgage markets reacted accordingly.

This week is short on data but there’s a lot to move the markets.

For one, the Federal Reserve has called an emergency meeting to review its Discount Rate policy.  The meeting is called for today, Monday April 5, at 11:30 AM ET.  It’s unknown exactly what the meeting will cover, but if new monetary policy is made, expect that mortgage rates will be influenced.

Also worth watching this week are the technical trading patterns present in the mortgage-backed bond market.

Unlike fundamental trading in which markets move on data and projections, technical trading is how markets move based on patterns over time. The two methods co-exist on Wall Street but, occasionally, technical forces can be pronounced, leading markets to lurch up or down.  This week may be one of those times. 

Mortgage pricing is far below its 200-day moving average, resting slightly north of a key support level. If pricing worsens this week and bonds fall below the support level, mortgage rates could easily tack on quarter-percents or more per day until the market refinds its balance.

Overall, it’s a week you don’t want your rate to be floating. Sure, rates could improve, but there’s a lot more room for them to worsen.

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Get Your FHA Mortgage Application Started — Fees Increase 1/2 Percent Starting Monday, April 5, 2010

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on March 30, 2010

FHA closing costs increase by 1/2 percent April 5 2010

Starting Monday, April 5, 2010, getting an FHA mortgage will be more expensive for borrowers.

In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio. 

The changes include the following:

  1. Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
  2. A plan to reduce seller concessions from 6 percent to 3 percent
  3. An increase in minimum downpayment for FICOs 580 or lower

For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010.  That means you’ll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don’t leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.

Also worth noting is that the FHA isn’t done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums.  The FHA’s formal request, in summary:

  1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
  2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections.  Either way, it means higher costs for consumers. 

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.

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What’s Ahead For Mortgage Rates This Week : March 22, 2010

Posted in mortgage rates, Real estate, Refinances by southorangecounty on March 22, 2010

Fed Funds Rate (Feb 2007 - March 2010)Mortgage markets closed unchanged last week, but that’s not say mortgage rates were calm. Monday through Wednesday, rates improved steadily before a swift, late-week sell-off unwound the gains.

Mortgage rates have been very low for a very long time — against the expectations of most market experts.  The speed of the Thursday-Friday reversal may signal that markets are preparing for change.

One key story from last week was the Federal Open Market Committee’s scheduled Tuesday meeting. Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for “an extended period of time”. 

Kansas Fed President Thomas Hoenig was the lone dissenting vote.

For rate shoppers , take note. 

The Fed specifically mentioned that the its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010.  This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009.

When the program ends, it’s expected that markets will give back some of that 1 percent, leading to higher mortgage rates for conventional and FHA borrowers.

This week, in addition to the buyback program’s looming end-date, there’s several other potential influences on mortgage rates:

  1. The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
  2. The New Home Sales data for February is released Wednesday
  3. Consumer Confidence data hits Friday

Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.

But there’s one wildcard this week and that’s the aforementioned Kansas Fed President Hoenig’s scheduled speech Wednesday morning. Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.

His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon.

Mortgage rates remain volatile and are still relatively low. If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now. Especially with momentum shifting for the worse.

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For Clues About the Future of Mortgage Rates, Watch For Inflation

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on March 20, 2010

Inflation is bad for mortgage ratesHomes are more affordable across the nation as the housing market emerges from a slow winter season with mortgage rates still near 5 percent.

Soft housing and low rates are an excellent combination for home buyers but whereas home values rise with a gradual pace, mortgage rates change in an instant.  It’s something worth watching.

Each 0.25% increase to conventional or FHA rates adds approximately $16 per month for each $100,000 borrowed. Mortgage rate volatility can change your household budget.

If you’re trying to gauge whether rates will be rising or falling, one keyword for which to listen is “inflation”. Mortgage rates are highly responsive to inflation.

By definition, inflation is when a currency loses its value; when what used to cost $2.00 now costs $2.15. As consumers, we perceive inflation as goods becoming more expensive.  However, it’s not that goods are more expensive, per se. It’s that the dollars used to buy them are worth less.

This is a big deal to mortgage rates because mortgage bonds are denominated, bought, and sold in U.S. dollars.  As the dollar loses value to inflation, therefore, so does the value of every mortgage bond in existence. When bonds lose their value, investors don’t want them and bond prices fall.  Mortgage rates move opposite of bond prices. 

Prices down, rates up.

In today’s market, the relationship between inflation and mortgage rates is helping home buyers. The Cost of Living made its smallest annual gain in 6 years last month and the Fed has repeatedly said that inflation will stay low for some time. The combination is driving investors to buy mortgage bonds which, in turn, suppresses rates.

So long as it lasts, the cost of homeownership will remain relatively low. Combined with the expiring tax credit, the timing to buy a home may be as good as it gets.

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Loan modifications are increasingly gaining traction

Posted in Foreclosures, home affordability, Loan modifications, Real estate, Refinances by southorangecounty on March 17, 2010

Friday, March 12th, 2010, 1:01 pm    From

A year into the Home Affordable Modification Program (HAMP), servicers converted 170,207 permanent modifications through February, up from 116,297 in January, according to the US Treasury Department.

The Treasury launched HAMP in March 2009 to provide capped incentives to servicers for the modification of loans on the verge of foreclosure. To address critics that claim HAMP isn’t having the effect of reaching its target 3m to 4m borrowers, a House Committee on Oversight and Government Reform in February began an investigation of HAMP on concerns of the “effectiveness and efficiency” of the program.

According to the latest Troubled Asset Relief Program (TARP) transaction report, the 113 participating servicers under HAMP can earn a total cap of $36.9bn. The Treasury has slated $75bn for the program. Borrowers in HAMP received a median savings of $518 a month, or 36% of the payment before the modification.

More than 91,843 active trial modifications need only a borrower signature to become permanent, totaling more than 260,00 permanent modifications approved by servicers. More than 835,000 three-month trial modifications began through February. Active modifications – both trials and permanent modifications – totaled more than 1m.

Wells Fargo (WFC: 30.28 0.00%) completed 24,975 permanent modifications, leading all servicers again. Wells had 17,652 permanent modifications in January. In February, Wells had active modifications on 37% of its 379,357 HAMP-eligible loans, up from 38% in January.

Bank of America (BAC: 17.03 0.00%) provided 20,666 permanent modifications through February, the second-highest volume of all servicers and an increase from 12,761 in January. In November, BofA had 98 permanent modifications. BofA has active modifications on 24% of the more than 1m mortgages in its HAMP-eligible portfolio in February, up from 22% in January.

JPMorgan Chase (JPM: 43.24 0.00%) had the third most permanent modifications at 19,385 through February, up from 11,581 in January. In February, JPM had active modifications on 39% of the 437,323 loans in its HAMP-eligible portfolio, up from 38% in January.

CitiMortgage, a subsidiary of Citigroup (C: 4.05 0.00%), provided 15,607 permanent modifications through February, taking its place as the fourth-largest servicer in terms of volume, up from 10,929 in January when it ranked fifth. It has 52% of its 249,901 HAMP-eligible loans in active modifications.

GMAC provided 14,675 permanent modifications, dropping to the fifth highest of any servicer, from January when it was the fourth-highest with 11,494 permanent modifications. GMAC has 66,289 loans in its HAMP-eligible portfolio and started active modifications on 53% of them, the highest of any servicer and up from 50% in January.

To qualify for HAMP, a mortgage must have a current unpaid principal balance of less than $729,750 be occupied by the owner and originated prior to Jan. 1, 2009. Qualifying borrowers must be employed. More than 57% of the borrowers who received permanent modifications claimed a loss of income as the predominant reason for hardship, the same percentage in January. More than 10% claimed excessive obligation, and 2% claimed illness of the principal borrower.

Despite the increases in permanent modifications from 31,382 in November, when the Treasury began reporting that statistic, officials admit the program is not for every borrower. Seth Wheeler, senior adviser to the Treasury when speaking at the American Securitization Forum (ASF) in Washington, DC, said the Treasury is adjusting its focus away from modifications as HAMP is not always the best solution.

A new program, the Home Affordable Foreclosures Alternatives (HAFA), will provide incentives to servicers to provide short sales and deeds-in-lieu of foreclosure. HAFA launches in April 5, 2010 as lenders and officials buffer against potential fraud cases. ( End of article.)

ALL the lenders above, and most of the Country’s larger lenders are gearing up to implement the new HAFA program, mentioned above, which promises to provide improvements in short sales, in both speed to process, and in the number of short sales that become successful.

If YOU have a mortgage hardship now, or one on the horizon, NOW is a great time to seek assistance.  For more information on either a loan modification or a short sale, just give me a call, or shoot me an email.


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