Friday, May 28, 2010
Mortgage Rates Drop to the Lowest Level of the Year
12:00 pm cdt
The Daily Herald reports today that mortgage rates have fallen to the lowest level of the year as
European turmoil caused investors to pour money into the safe haven of U.S. government securities.
The average rate on a 30-year fixed rate mortgage dipped to 4.78 percent this week from 4.84 percent a week
earlier, mortgage company Freddie Mac said Thursday. It was the lowest level since early December, when rates fell to a
record low of 4.71 percent.
The average rate on a 15-year fixed-rate mortgage
fell this week to 4.21 percent-- the lowest level in nearly two decades.
over the European debt crisis have sent yields for 10-year and 30-year Treasury bonds to their lowest levels of 2010. Rates
on 30-year home loans often rise and fall in line with the 10-year note.
say the opportunity may not last. If Europe's woes subside and the U.S. economic recovery stays on track, rates are likely
to move higher. That's because traders will move their money back into riskier investments.
"Strike now," said Greg McBride, senior financial analyst at Bankrate.com. "If they move quickly
against you, it just takes money right out of your pocket."
appear to be taking notice. Applications to refinance surged this week to the highest level since October 2009, the Mortgage
Bankers Association said Wednesday.
But mortgage applications to purchase
homes fell to the lowest level since April 1997. A major reason for that drop: tax credits expired on April 30.
A campaign by the Federal Reserve to reduce borrowing costs for consumers pushed rates
down to extraordinarily low levels last year. Rates were expected to rise after the program ended this spring. Instead,
they have dipped. Fears that Greece's government would default on its debt shook world markets and boosted demand for U.S.
Freddie Mac collects mortgage rates on Monday through Wednesday
of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Rates on five-year, adjustable-rate mortgages averaged 3.97 percent, up from 3.91 percent
a week earlier. Rates on one-year, adjustable-rate mortgages fell to 3.95 percent from 4 percent. That was the lowest average
since May 2004.
The rates do not include add-on fees known as points. One
point is equal to 1 percent of the total loan amount.
The nationwide fee
for loans in Freddie Mac's survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year
loans was 0.6 of a point.
Tuesday, May 25, 2010
Mortgage Rates Fall, Not Rise
3:32 pm cdt
The Wall Street Journal reports today that mortgage rates have actually decreased to near record
lows again because of the financial turmoil in Europe. This is providing an unexpected windfall for American home buyers,
as international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels
of the year and back near 50-year lows.
The housing industry had been bracing for months
for a period of rising mortgage rates, triggered by the end of the Federal Reserve's $1.25 trillion mortgage-securities
purchase program. Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market.
Instead, many in the industry now say rates could drift as low as 4.5% this summer from
4.86% now, instead of rising to 6% as some economists projected, making for significantly lower payments for Americans buying
homes or refinancing their mortgages.
Refinance business "exploded" last week,
says Jeff Lazerson, chief executive of Mortgage Grader, a brokerage in Laguna Niguel, Calif. "It's schizophrenic. We
all had this expectation of higher interest rates and no more refinances." He says he helped a borrower lock in a 30-year
loan with a 4.25% fixed rate last week, the lowest in his 24 years in the business.
on 30-year mortgages averaged 4.84% last week, according to a survey by mortgage-insurance titan Freddie Mac. Rates were
quoted late Friday at 4.86%, the lowest since December 2009, according to a survey by financial publisher HSH Associates,
and down from a high of 5.27% for the week ended April 9. Rates on 15-year mortgages averaged 4.24% last week—the
lowest since Freddie began its survey in 1991.
Economists largely attribute the decline
in mortgage rates to the European debt crisis and new concerns about the global economy, which unleashed a massive wave
of cash into U.S. bonds from investors around the world.
This buying pushed down yields
on Treasury bonds. Because mortgage rates are closely pegged to yields on 10-year Treasury notes, which fell to 3.2% Friday,
the decline in Treasurys pulled down mortgage yields. Typically, mortgage yields remain around 1.5 percentage points above
yields on 10-year Treasury notes.
Falling mortgage rates can give a powerful lift to
the housing market. A general rule of thumb holds that every one percentage point decline in mortgage rates is the equivalent
of roughly a 10% reduction in the home price for the buyer. So, if the current rates hold, say economists, that could help
stabilize prices and allow current homeowners to sell existing homes without substantial price cuts.
It isn't clear how much home-buying the lower rates will spur. Demand had fallen in recent weeks after buyers
raced to close sales ahead of last month's expiration of an $8,000 federal tax credit for home purchases. Applications for
new-purchase loans hit a 13-year low in the week ending May 14, according to the Mortgage Bankers Association.
Borrowers do face roadblocks. Underwriting standards are their strictest in a decade, and record numbers
of borrowers are "underwater," owing more to the bank than their homes are worth. That has excluded large swaths
of borrowers from getting loans at the new lower rates.
Still, lower rates could widen
the pool of people who qualify for a mortgage, while others may find they qualify for a slightly larger loan. "They
can buy the place with the extra bedroom or the swimming pool," says Jay Brinkmann, chief economist at the Mortgage
Falling rates have encouraged some Americans to consider refinancing
their existing mortgages to save money. A one-percentage-point decline in mortgage rates can cut $250 off the monthly payment
on a $400,000 30-year fixed-rate mortgage, giving consumers cash they can use to spend.
Richard Hunsinger plans to refinance two loans on his Potomac, Md., home into a new 15-year mortgage this week with a
4.37% rate. The 55-year-old dentist is worried that interest rates will eventually rise sharply, boosting the payment on
his home-equity line of credit. His first mortgage, also a 15-year loan, currently has a fixed rate of 5.25%. And while
the rate on his $240,000 home-equity loan is just 3.25%, it has risen as high as 8% in the past.
"can't stay low forever," says Dr. Hunsinger. If they go up over the next year, "this will look like a really
By historical standards, rates are incredibly low. Until 2003,
rates on 30-year fixed-rate loans hadn't dipped below 5% since the 1960s. Rates fell to similar points throughout much of
the past year as the government was helping to hold down costs for borrowers.
half of all borrowers with 30-year conforming fixed-rate mortgages have mortgage rates of 5.75% or higher and could reduce
their rates by a full percentage point if they refinanced at current rates, according to investment bank Credit Suisse.
Many of those borrowers may have tried to refinance last year, only to find that they couldn't qualify. When
rates fell to similar lows in 2003, refinance activity hit a record $2.9 trillion, compared to $1.2 trillion last year,
according to Inside Mortgage Finance, a trade publication.
Now, more private investors
are coming into the market for loans, offering better prices for securities containing mortgages with low rates than they
were one year ago. That could lead banks and brokers to cut upfront origination fees, and borrowers who are able to refinance
could find it cheaper to do so than last year.
"I'm calling people back and saying,
'Now it's worth it,'" says Michael Menatian, a mortgage banker in West Hartford, Connecticut.
Wednesday, May 19, 2010
Evanston to use Federal Funds to Fix Up Foreclosed Homes
8:30 pm cdt
The Chicago Tribune reported today that Evanston is pairing with a developer to use federal funds
to buy foreclosed homes and fix them up for affordable housing. The full article is below:
two years, Evanston Ald. Delores Holmes has watched helplessly as dozens of homes in her northwest side ward have been abandoned
during the foreclosure crisis.
There are now more than 40 foreclosed and boarded-up homes
in the predominantly African-American neighborhoods that make up Holmes' ward, she said.
on different blocks and different streets," she said. "People at ward meetings talked about it. People have had
to move out, and there are some very sad stories."
Help has arrived in the form
of federal stimulus money — though it's unlikely to benefit directly those who lost their homes in the foreclosure
crisis. Evanston has received more than $18 million in Neighborhood Stabilization Program funds through the American Recovery
and Reinvestment Act — less than half of the $40 million the city requested — that will be used in a public-private
partnership to help address the urgent issue of blighted and foreclosed properties on the west and south sides of the city.
Besides Chicago itself, which will get $98 million, Evanston was the only area municipality to receive money
directly in this round of funding, according to the U.S. Department of Housing and Urban Development.
At least 100 vacant single-family homes, condos and two- and three-flats in Evanston's Fifth and Eighth
wards will be purchased, rehabbed and converted to affordable housing by the time the project is completed in early 2013,
said Sarah Flax, Evanston's community development block grant administrator.
going to make a major impact on the housing and other economic problems that parts of our city are dealing with," Flax
said. "It's huge."
The city is working with Northbrook-based Brinshore Developments
to identify properties that will be rehabbed, gutted or, in some cases, demolished. Flax said the work could start within
90 days and the first new affordable-housing units could be on the market before the end of the year.
"Some properties may be in very good shape and only need a little work," Flax said. "Others
we know are likely to be in very bad shape and may require a gut rehab."
the affordable-housing component of the project is a requirement of the grant and essential in ensuring that Evanston provides
housing for those in the lowest income brackets. According to federal guidelines, all the rehabbed units, rental or owned,
have to be occupied by households with incomes at or below 120 percent of the area median income, and a quarter of the total
funds must be spent on housing for households at or below 50 percent of area median income.
stabilize neighborhoods you need mixed income," Flax said.
According to the terms
of the federal grant, all properties to be rehabbed must be acquired at a price that is at least 1 percent discounted off
the current appraised value, Flax said. Some critics have said that will create unfair competition with those trying to
sell their homes on the private market.
But Jasmine Brewer, director of housing counseling
with the Winnetka-based Interfaith Housing Center of the Northern Suburbs, an advocacy group for affordable and fair housing
for the north suburbs, praised the program, with which her agency is directly involved.
it's going to be a good thing," she said. "It will help address those issues of abandoned housing and deal with
a number of things. When you look at most of these areas where there are abandoned houses, it's not helping the community
at all. The lenders are not doing anything with these properties and (the program) is going to open up housing for people
who otherwise could not afford it. Brinshore is known for doing some phenomenal affordable housing."
At least half the properties have to be leased rather than resold after the redevelopment work, and profits
from property sales will go back into the program.
Brinshore is one of the Midwest's largest
development firms in the affordable housing market, city officials said.
Its CEO, David
Brint, said the federal money should help stabilize home prices in by breathing new life into neighborhoods where there
have been a lot of foreclosures.
"We've talked to the (Evanston) aldermen at length
about which properties are there, what they know about them which ones they would like to see done and when," Brint
said. "That's a constant process."
He said Brinshore is still negotiating its
development contract with the city but said the company is usually paid a 12 percent development fee, depending on the extent
of its work for a particular project.
Another primary goal of the Neighborhood Stabilization
Program is to stimulate the economy by creating construction-related jobs. A recent informational meeting held for contractors
in Evanston attracted more than 100 people interested in learning how to bid on the various rehab projects.
"Now we have a list of interested contractors," Flax said, adding that a minimum of 25 percent
of the contracts will be awarded to minority- or woman-owned or Evanston-based businesses.
Thursday, May 13, 2010
Illinois Mortgage Defaults Hit Six-Month High
1:59 pm cdt
The Chicago Tribune reports today that Illinois mortgage defaults are at a six-month high.
Illinois homeowners received more mortgage default notices in April than in any month since October, and
more than 75 percent of those filings were in the six-county Chicago area.
property owners were notified last month that their mortgage payments were past due and foreclosure proceedings had been
initiated, RealtyTrac reported in its monthly accounting of foreclosure activity. It was the highest number of monthly default
notices in Illinois since October, when more than 12,600 such notices were filed.
Also in April, 4,754 homes were repossessed, which means banks have taken ownership of almost 20,000 foreclosed
homes in Illinois during the first four months of the year.
More than 7,000 of the
default notices sent last month involved homes in the six-county Chicago area, an increase of 23 percent from March and 26
percent from April 2009, the data showed.
The state did not follow national trends, which
showed a 9 percent decrease in overall foreclosure filings from March and a 2 percent drop from April 2009. Foreclosure
notices are sent when a mortgage falls into default, when a foreclosure auction is scheduled or when a property has been
taken back by a lender.
Beginning Thursday, two separate, no-cost "fix your mortgage"
events are scheduled in the Chicago area to assist delinquent borrowers.
Assistance Corp. of America, a nonprofit counseling agency certified by the U.S. Department of Housing and Urban Development,
will meet with homeowners seeking loan modifications from 9 a.m. to 8 p.m. through Sunday at McCormick
Separately, Chase is conducting a homeowner-assistance event through Sunday
for its customers and those of EMC Mortgage Corp. and Washington Mutual. It will be
conducted at Navy Pier's Festival Hall from 8 a.m. to 8 p.m. each day.
To see the full story, click here.