Prime mortgage demand is up
2009/05/05, 6:37 pm
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Demand for prime mortgages was up substantially in the first quarter of this year for the first time since early 2007, according to a Federal Reserve survey of loan officers released Monday.

The rise in demand comes at a time when rates are low, but about 50 percent of banks say they are tightening lending standards.

More than 65 percent of the banks tightened standards on the kinds of loans available to borrowers with blemished credit. Only two of the 53 domestic banks and 23 branches of foreign parent banks surveyed reported that they were offering adjustable-rate loans.

Banks also reported that they were tightening standards for commercial lending, credit cards, and other consumer loans.

Source: The Associated Press, Jeannine Aversa and Reuters News, Mark Felsenthal (05/04/2009)


Lowering mortgage rates may have risks
2009/04/03, 7:51 pm
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The Federal Reserve has so far spent about $250 billion on low-interest mortgages acquired from lenders by Fannie Mae and Freddie Mac.

The purchases, which could eventually top $1 trillion, are one part of the financial buyout many people understand and support. This spending has driven mortgage rates to record lows, encouraged people to buy houses, and helped many people refinance out of lousy mortgages.

It all looks good on paper, but some economists are warning others about some risks. Here are a few of their concerns:

● The Fed is creating new money to pay for this, which will eventually encourage inflation.

● When the Fed stops buying, rates will increase quickly and substantially.

● Not too many investors are interested in the low-yielding mortgages, so it is likely taxpayers will have to foot the bill.

Source: The Wall Street Journal, Peter Eavis (04/02/2009)

Drop in mortgage rates trigger race to buy and refinance
2009/03/26, 2:22 pm
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Tumbling interest rates are setting off a mortgage-refinancing scramble among homeowners and pulling undecided buyers into the market.

Loan terms for 30-year fixed-rate mortgages fell to 4.63% from 4.89% for the week ending March 20, the Mortgage Bankers Association (MBA) reported Wednesday. That’s the lowest in the history of the survey, which began in 1990.

Refinancing accounted for 78.5% of all mortgage applications last week.

Applications are up in part because of a federal refinancing program through Freddie Mac and Fannie Mae that is part of the Obama administration’s housing rescue plan.

Rates have been driven down by the Federal Reserve’s decision last week to buy up to $300 billion of long-term government bonds and $750 billion in mortgage-backed securities held by Fannie and Freddie.

The falling rates are jolting homeowners and buyers:

•Homeowners who had been waiting to refinance say they’re now getting great deals. Nancy Hemenway, 58, of Arlington, Va., is closing on a refinance in a couple of weeks.

“We were watching the rates and didn’t see how they could go much lower,” says Hemenway, executive director of a non-profit. “We thought there might be a problem because banks weren’t lending, but that didn’t happen at all. We just filled out some paperwork and faxed it.”

•Low prices on foreclosed homes are luring buyers into the market. Up to 45% of existing home sales in February were distressed properties, according to a report this week by National Association of Realtors.

Michael McCullough, a public relations specialist in Atlanta, is closing today on a 3,000-square-foot home with a large yard and four bedrooms.

“My wife and I have no business buying this large a home, but we can afford it because it was a foreclosure, and we secured a 4.6%, 30-year fixed” loan, says McCullough. “There are tons of deals out there.”

•Realtors such as Leslie McDonnell at Re/Max Suburban in Libertyville, Ill., are seeing sudden pickups in business. Enticed by low prices and rates, McDonnell has bought several properties herself this year. “We’ve definitely seen an impact. Things have gotten busier for sure,” McDonnell says. Low rates “are compelling people into action. I do feel like we’ve hit bottom.”

Overall mortgage applications last week were 20% above their year-ago level, according to the MBA.

New advertising rules for mortgage brokers
2009/03/20, 7:22 pm
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New Advertising Rules for Mortgage Brokers
The Federal Trade Commission is using its new powers, as authorized by Congress this month, to ban deceptive advertising and servicing procedures by mortgage brokers, FTC Chair Jon Leibowitz said.

New regulations on mortgage brokers are needed because “a lot of the advertising is clearly, facially deceptive” and “a lot of mortgage holders have been deceived” Leibowitz the Bloomberg news service in an interview.

Abusive and deceptive lending is “not the only reason for this problem” of foreclosures “but it is one of the reasons we are in this mess,” he added.

He promised that new regulations would be in place by year’s end.

Source: Bloomberg, James Rowley (03/20/2009)

Mortgage rates drop below 5%
2009/03/20, 7:17 pm
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Freddie Mac reports a drop in the 30-year fixed mortgage rate to 4.98 percent during the week ended March 19 from 5.03 percent the prior year, marking the lowest rate since 4.96 percent in mid-January.

Experts say rates could fall further in response to the Federal Reserve’s announcement that it will add $1.2 trillion to the economy to alleviate the credit crisis.

Source: Tulsa World (Okla.) (03/20/09)

Fed sends rates on accomodative path
2009/03/20, 4:52 pm
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Mortgage interest rates are likely to fall as a result of the Federal Reserve’s plan announced Wednesday to buy up $300 billion in Treasuries and increase purchases of mortgage-backed bonds, economists say.

The Fed’s program attempts to reduce the supply of outstanding mortgage bonds, boost the price of the remaining bonds and lower their yields. This allows banks to reduce rates for new mortgages and still make money.

Prior to this announcement the spread between 30-year fixed mortgages and 10-year Treasuries was 2.1 percent, higher than the average of 1.75 percentage points during the 10 years before the subprime mortgage collapse, according to Bloomberg’s calculations.

Putting people back to work is the next challenge facing the Obama administration. Even record low mortgage rates won’t stimulate home sales if consumers don’t have jobs. The jobless rate was 8.1 percent in February, according to the U.S. Labor Department.

Source: Bloomberg, Brian Louis (03/19/2009)

Loan Applications rise as rates dip below 5%
2009/03/11, 7:23 pm
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Average mortgage rates dipped below 5 percent last week, driving mortgage application volume up 11.3 percent to 723.4 from 649.7 the previous week on an adjusted basis, according to the Mortgage Bankers Association weekly survey.

On an unadjusted basis, the index increased 11.6 percent compared with the previous week and was up 5.7 percent compared with the same week a year ago.

The increase was reflected in the government purchase index (mostly FHA), which rose 10.4 percent. The overall purchase index was up 7.1 percent. The refinance share increased to 67.9 percent, up slightly from the previous week when it was at 66.9 percent.

Mortgage rates were down to the second-lowest rate in the history of the survey, with the record low being 4.89 percent for the week ending Jan. 9, 2009.

30-year fixed-rate mortgages decreased to 4.96 percent from 5.14 percent
15-year fixed-rate mortgages decreased to 4.54 percent from 4.73 percent
1-year ARMs increased to 6.21 percent

Source: Mortgage Bankers Association (03/11/2009)