Mortgage lenders adjust their rates based on perceptions of risk, so unless you can show you’re a low-risk borrower, you are unlikely to qualify for a rate that matches those seen in all the advertisements or headlines.

Consumers who want to try for the lowest rates available need to consider these basic factors:

CREDIT SCORE - The ideal borrower has a FICO score of 740 or higher, that puts you in the best place for pricing.

POINTS – The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount.  To get the best rates at many banks, you may need to buy points.   Points might make sense depending on your financial situation and how long you expect to stay in a home. So ask for a zero point quote too, and compare.

PROPERTY TYPES – If you’re buying a duplex or a four-unit building, your rate will almost certainly be higher. Condominiums may also have a rate premium, especially if they are newer or your down payment is below 25 percent. Lenders charge more if you are not planning to live in the home. Commercial properties like apartment buildings have the highest rates, as they are considered riskier.

DOWN PAYMENT – Borrowers who put down at least 25 percent are more likely to obtain attractive pricing.  Lenders offer different breaks on rates if equity is higher, so you should ask what is available.

LOAN LENGTH – A lot depends on how long you plan to live in a home. If you’re likely to move in a few years, an adjustable-rate loan with a low interest rate fixed for, say, three to five years, and adjusted afterward, might work best.  Also, rates on 15-year fixed-rate loans are lower than those on the 30-year — 0.77 percentage points, on average, last year.

Borrowers may also be able to reduce their mortgage rate when they enter into a “lock-in” agreement with a lender. Lenders may offer a lower rate for a shorter lock period.  They may also agree not to change an offered interest rate for 60 days, but borrowers confident of a quick closing may be willing to accept a 45-day rate guarantee, or even a 30-day lock, in exchange for a small discount, because the transaction’s speed helps the lender reduce its risk.

Borrowers need to make sure too, that they consider the entire cost of a home, looking carefully at monthly payment calculations. About a third of homeownership costs are in addition to the mortgage — among them property taxes, insurance, maintenance and repairs.

~ ?New York Times

As part of the temporary resolution to the recent battle over the Tax Cut Extension that took place in the last weeks of December, Congress decided that mortgage borrowers should foot part of the bill. Technically, Congress increased the “Guaranty Fees” that Fannie Mae and Freddie Mac charge to lenders that securitize MBS (Mortgage-Backed-Securities) with the Agencies, but ultimately, this cost must either be absorbed by lenders, passed on to consumers, or some combination of the two.

From the official release on 12/29/11:

“On Dec. 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011. Among its provisions, this new law directs the Federal Housing Finance Agency (FHFA) to increase guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises) by no less than 10 basis points from the average guarantee fees charged by these companies in 2011 on single-family mortgage-backed securities. This requirement is effective immediately, meaning that the average guarantee fees charged in2012 need be at least 10 basis points greater than the average guarantee fees charged in 2011.”

The first official effects of these measures were seen today when BB&T distributed information to it’s brokers and correspondents regarding the impacts of the fee increase. In the announcement, BB&T explains that the 10 basis point increase in the Guaranty Fee or “G-Fee” as it’s called, equates to a pricing difference of 30-40 basis points in terms of cost/rebate or roughly 0.125% in rate.

The announcement tacitly warns that other lenders will soon follow suit by saying that BB&T is executing this change now “a few days before all their competitors do the same.” While similar announcements are indeed, to be expected, some originators in MND’s MBS Live Community have noted recent erratic behavior in lender pricing above and beyond what they’d expect for the usual holiday fluctuations. The implication is that some lenders may already be in the process of pricing these increased costs into rate sheets and could forego formal announcements and simply spread the increased costs out over a longer period.

MBS Live! community member, Victor Burek stated in live chat: “I think some other lenders have added it already. One of my most frequently used lenders is about 30bps off in price despite unchanged MBS prices. Granted, there are other factors that could be driving this, but they could also be pricing in some of the expected costs of the Tax-Cut Extension.”

Either way, mortgage borrowers end up footing the bill for the Tax Cut Extension. Despite the April 1st implementation, the letter of the new law states that the average G-Fees in 2012 must be 10 basis points higher than those in 2011. The bottom line is that rates must move higher on average and if lenders aren’t building the fee increase into their rates now, they’ll have to do so to a greater extent in the future to meet the “on average” guideline set forth by Congress.

~ Mortgage Daily News

In the last few years, Americans have experienced the most severe housing-market downturn since the Great Depression. The national homeownership rate during this period has declined from a peak of 69 percent in 2004 to 66 percent presently. Unemployment is high, income growth is stagnant and home sales are low. Indeed, in this environment, many have questioned whether the American dream of homeownership has ended.

This report utilizes data from the University of Michigan’s Survey of Consumer Attitudes to examine consumer attitudes toward homeownership before, during and after the financial crisis. In particular, it measures the extent to which the recession has changed consumer sentiment toward home buying and selling.

There are a number of principal findings:

• Despite high unemployment, slow economic growth and problems plaguing the economy, almost 80 percent of American households believe that now is a good time to buy a home.

• Positive sentiment is strong particularly among young, educated, white and Hispanic households, and is attributable to low house prices and low mortgage interest rates.

• The pattern of home-buying sentiment during the current recession looks similar to the pattern from past recessions. In fact, current positive home-buying sentiment is around its long-run average level.

• What is different about the current recession is that positive home-selling sentiment is at an historic low. Indeed, the sell-side of the market is dominated by deeply negative sentiment.

• Negative home-selling sentiment is strongly related to difficulty in finding buyers at desired sales prices, as well as the large overhang of mortgages past due or in foreclosure.

• Over the last two decades, the value of mortgage purchase originations has tracked home-selling sentiment more strongly than home-buying sentiment.

• Favorable sentiment and real activity in the housing and mortgage markets will be weighed down significantly until the overhang of troubled mortgages is cleared out.

• Over the next five quarters, positive home-buying sentiment is forecast to remain around current and long-run average levels. In contrast, positive home-selling sentiment is forecast to remain around current and historic-low levels. This suggests that selling sentiment and, hence, market activity, will remain sluggish in the near term.

~ Gary V. Engelhardt

One out of three builders are reporting losing signed sales contracts during the preceding six months because appraisals on their homes are less than the contract sales price, according to a recent nationwide survey conducted by the National Association of Home Builders (NAHB).

“The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices, killing home sales, causing more workers to lose their jobs and delaying a housing and economic recovery,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.

Too often, due to faulty appraisal practices, brand new homes with sparkling appliances and interior upgrades get compared to a distressed property that has been sitting vacant and in disrepair. The result, in many cases has been that the new house winds up getting appraised at less than the cost of construction.

That is precisely what is occurring in today’s marketplace, according to the NAHB survey, where a full 60 percent of respondents reported they were experiencing appraisals coming in below their contract sales price.

Of those reporting that they had encountered this problem, 53 percent said the appraisal amount was actually less than the cost of building the home.

“This is not only unfair and unreasonable, but it perpetuates the cycle of declining home values, drives more home owners underwater, harms local economic activity and acts as an obstacle to the recovery of the housing market,” said Nielsen.

These appraisal practices are a major contributing factor to the current acquisition, development and construction (AD&C) lending crisis that has choked off credit for home builders and threatens to prolong the current housing downturn.

Falling appraised values for land and subdivisions under development have led some financial institutions to stop lending to developers and builders, to demand additional equity and even to call performing loans.

Since Sept. 2009, NAHB has held four appraisal summits in Washington with representatives of federal banking regulators, the appraisal industry, the housing finance industry, the real estate and housing sectors and others to find solutions that will allow appraisers to develop realistic valuations based on sales that are truly comparable.

The need to give top priority to addressing the complexity of property valuations in distressed markets and impediments to the flow of appropriate information on homes between appraisers and interested parties was discussed during the most recent summit, which occurred on Oct. 19.

“Major reforms in appraisal practices and oversight are needed to ensure that appraisals accurately reflect true market values and don’t contribute to price volatility or harm aspiring home owners and move-up buyers,” said Nielsen. “We will continue to work with all stakeholders in this debate to find solutions.”

With the decline in home prices appearing to have ended or be coming to an end in most parts of the country, resolving the appraisal and credit crunch issues remain a top priority for the association.

NAHB’s latest Improving Markets Index has shown modest signs of improvement in scattered housing markets where employment is gaining and distressed properties are not as numerous.

New-home construction stands ready to serve as an engine for economic recovery. Building 100 single-family homes creates more than 300 full-time jobs and provides $8.9 million in federal, state and local tax revenues.

“Resolving inappropriate appraisal practices and restoring the flow of credit to home builders will not only help to put America back to work, it will provide badly needed tax revenues that is essential for local governments to support schools, police and firefighters in communities across the land,” said Nielsen.

~National Association of Home Builders

If you have a client looking to purchase a home that is over the conventional loan limits and doesn’t have 20% for the down payment, please have them give me a call.

I can now offer a jumbo mortgage up to $850,000 with as little as 15% down and up to $750,000 with as little as 10% down payment!!!! Both of these options are availalbe with NO MORTGAGE INSURANCE!!!! That is a savings of over $450 on a $750,000 loan amount, which means the purchasing power can increase by approximately $75,000!!!!!

A few caveats-

1- Minimum credit score of 740
2- Maximum Debt to Income of 41%
3- No first time home buyers or non-resident aliens
4- Single Family residence only

Remember, the conventional loan limits for most counties in NJ north of Mercer are now $625,500 and Mercer is $417,0000. FHA mortgages allow for higher loan amounts, however, the mortgage insurance is over 1% per year on the 30 year fixed mortgage!

Thanks again for all your support and referrals!

As a result of a previously-announced seizure by the Director of the Arizona Department of Insurance (ADI) of its primary regulated subsidiaries on Oct. 20, 2011, The PMI Group Inc. has announced that it has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. PMI intends to use the protections of the Bankruptcy Code to assess its strategic and other options for preserving stakeholder value in light of the actions taken by the ADI Director.

None of the company’s subsidiaries commenced Chapter 11 proceedings. The company will continue to operate in the ordinary course of business as “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

At the time of the actions by the ADI Director, the company was in the middle of a process to explore strategic alternatives to maximize the value of the Ccmpany to its stakeholders. This process included discussions with the ADI and policyholders with respect to the stabilization and orderly run-off of PMI Mortgage Insurance Company in a manner designed to maximize claims-paying resources and protect policyholder interests.

As part of the process to explore strategic alternatives, the company was seeking to raise additional capital from new investors in a transaction to enable PMI Mortgage Assurance Company, a wholly-owned subsidiary of MIC, to serve as a platform to write new mortgage insurance nationwide. To that end, the company and its advisors had been in discussions with potential investors in PMAC and with the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and the Federal Housing Finance Agency (FHFA), as conservator of the GSEs, with respect to the designation of PMAC as an eligible mortgage issuer by the GSEs. The company believed that the PMAC Transaction offered the prospect of significantly enhancing the value of the Company and was potentially substantially more favorable to the company’s stakeholders than the liquidation of the company’s assets. In addition, MIC believed that the PMAC Transaction had the potential of providing significant benefits to its policyholders over time because it believed that MIC’s interest in PMAC could attain substantial value and serve as an important additional resource for the payment of claims.

Without notice to PMI, on Oct. 20, 2011, the ADI Director assumed exclusive power of management and control over the company’s two principal regulated insurance subsidiaries, MIC and PMI Insurance Company, pursuant to an Interim Order Directing Full and Exclusive Control of Insurer entered in the Superior Court of the State of Arizona in and for the County of Maricopa. The Interim Order was obtained in an ex parte proceeding in respect of which the Company had no opportunity to be heard. The company believes that the ADI Director’s actions in seeking the Interim Order were inconsistent with recent informal assurances that the company had obtained from the ADI that no such action was likely in the near term and that the company had until the end of 2011 to advance the PMAC transaction. PMI filed a motion to vacate the Interim Order on Oct. 28, 2011, which was denied by the Superior Court of the State of Arizona on Nov. 22, 2011.

The ADI Director also is seeking the appointment of a receiver in respect of the Regulated Insurance Entities, and a hearing has been set for Jan. 10, 2012. Also, on Oct. 20, the ADI Director entered an order placing the company’s principal regulated reinsurance subsidiaries, PMI Reinsurance Company, PMI Mortgage Guaranty Company, and Residential Insurance Company, under supervision, and those reinsurance subsidiaries filed an appeal with respect to that order with the Arizona Department of Insurance on Nov. 18, 2011.

PMI has concluded that the Interim Order and the prospect of the appointment of a receiver in respect of MIC make it impractical for the company to pursue the PMAC Transaction at this time without bankruptcy protection. As a consequence, PMI’s Board of Directors has concluded that filing for Chapter 11 protection is in the best interest of the company’s stakeholders and is the most effective means of preserving the company’s remaining assets for the benefit of its stakeholders.
In connection with the bankruptcy filing, the company’s $685 million of senior unsecured notes and approximately $51.5 million of junior subordinated unsecured notes have become due and payable. The noteholders’ ability to seek remedies and enforce their respective rights under the indentures applicable to the notes has been stayed as a result of the bankruptcy filing. The noteholders’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.

~ National Mortgage Professional Magazine

Lender Processing Services Inc. (LPS) has announced that its LPS Applied Analytics division updated its home price index (LPS HPI) with residential sales concluded during August 2011. The LPS HPI summarizes national home prices by tracking monthly prices in over 13,500 ZIP codes. Within each ZIP code, it tracks five price levels from low to high. Home prices in August continued the downward trend begun after the market peak in June 2006. The LPS HPI average national home price has declined 28.3 percent since then. The total value of U.S. housing inventory covered by the LPS HPI stood at $10.6 trillion at the peak. As of the end of August 2011, it was $7.65 trillion. During the period of most rapid price changes, from July 31, 2007, through December, 2009, prices declined $56,000 from $282,000. The average annual decline during that time was 13.8 percent.

“Unlike many other indices, the LPS HPI tracks home prices at the date of sale on a month-by-month basis,” said Kyle Lundstedt, managing director for LPS Applied Analytics. “Our methodology allows us to detect market changes sooner than others and to provide the financial industry with the most accurately timed price information. In August sales transactions data, we saw the national average home price decline 0.9 percent, following a decline of 0.4 percent in July. This ended a series of increases during the spring of this year; a pattern that has occurred each year since 2009. In addition, the early, partial data for September sales indicates a likely further decline of approximately 1.1 percent to come. As of the end of August, the national average home price was $205,000. This is down 3.8 percent from August last year, and down 0.4 percent from Jan. 1, 2011.”

Since December 2009, prices have fallen more slowly, interrupted by brief seasonal intervals of rising prices. Since then, the LPS HPI national average home price has fallen $20,000 from $225,000. This corresponds to an average annual decline of 3.6 percent. Price changes were largely consistent across the country during August. Prices increased in only five percent of ZIP codes in the LPS HPI. Higher-priced homes had smaller declines: -0.72 percent for the top 20 percent of homes (prices above $321,000) compared to -1.0 percent for the bottom 20 percent (below $103,000).

Price changes during August for any given state were largely consistent among the states’ metropolitan statistical areas (MSAs). Average prices of all MSAs in a state declined together for 347 of the 404 MSAs covered by the LPS HPI. A slightly smaller number of MSAs, 340, were in states where all price levels for all MSAs declined together. Average prices declined for all MSAs in Louisiana and Minnesota, but not all price levels declined for all their MSAs. Other states where some price levels in some MSAs increased were Illinois, Massachusetts, Michigan and New York.

Average prices declined during August in all but three of the 26 largest MSAs in the country that both the LPS HPI and Bureau of Labor Statistics’ economic data cover: Chicago, Detroit and Minneapolis remained essentially unchanged. Changes ranged from -0.3 percent in Honolulu to -2.8 percent in Atlanta.

Since the beginning of the year, average home price declines have been in the minority for the largest 26 MSAs. Ten of the MSAs have seen declines. The largest declines have been in Atlanta (-10.5 percent) and Phoenix (-5.2 percent). The largest increases have occurred in Detroit (10.8 percent) and Pittsburgh (4.5 percent).

Over the past year, however, average home prices have not declined in only six of the largest MSAs. Prices have been largely stable in New York since August 31, 2010; they have increased in Detroit (5.3 percent), Honolulu (3.3 percent), Miami (0.6 percent) and Pittsburgh (3.2 percent).

Since the market peak, Pittsburgh is the only MSA that has seen its average home price rise.

As of the end of August, four MSAs have average home prices below what they were at the end of January 2000: Atlanta (-20.4 percent), Cleveland (-7.4 percent), Detroit (-41.6 percent), and Phoenix (-8.0 percent).

Among the MSAs that the LPS HPI covers, those with the highest price changes during August were mostly in Michigan or nearby states. ‘Highest’ is a relative term, and among the highest price changes were modest declines. Sturgis and Grand Rapids, Mich., had the greatest monthly increase of all the MSAs at 0.4 percent. Most of the MSAs with the greatest declines in price during August were in California or nearby Arizona and Nevada. There were several MSAs with large declines that are not in the Southwest. In addition to the 2.8 percent decline in Atlanta, Gainesville, Ga., had the greatest monthly decline among all MSAs covered by the LPS HPI, 3.0 percent

~ National Mortgage Professional Magazine

Genworth Financial Inc. (GNW)’s mortgage insurance business will either improve results or cease writing new coverage, according to analysts at CreditSights Inc.

The unit “faces a binary outcome,” Rob Haines and Eric Axon of CreditSights said in a note to clients today. “Either the MI business becomes more viable as recent vintage business offsets deterioration in the older vintages, or the business is placed into run-off. We believe that either outcome would improve market perception of the company’s credit profile.”

Genworth Chief Executive Officer Michael Fraizer has faced investor pressure to prevent mortgage insurance losses from draining capital at the Richmond, Virginia-based company, which also sells life and long-term care insurance. The worst U.S. housing crash in seven decades has hurt mortgage insurers, increasing claims to reimburse lenders when homeowners default and foreclosures fail to recoup costs.

The cost to protect Genworth’s debt from default for five years is more than 700 basis points, compared with less than 300 basis points in October of last year, on investors’ concerns that loses tied to home loans are putting the insurer at risk, according to the analysts.

Current credit-default swap prices “meaningfully overstate potential holding company default risk,” the analysts said.

Genworth is unlikely to make capital contributions to the mortgage insurance unit in the near-term, Haines and Axon said, citing a conversation with the insurer’s senior management. They said the unit’s future may be resolved within the next 12 months, causing spreads to tighten.

‘Very Clear’
Fraizer said in July that any additional capital support will be based on a review that includes an analysis of risk, competitors’ performance and policy changes that may affect the industry.

“We’ve made our position regarding U.S. mortgage insurance capital very clear,” said Al Orendorff, a spokesman for the company.

Highfields Capital Management LP, the hedge fund run by Jonathon Jacobson, doubled its stake in Genworth in August after Fraizer said on a conference call that he was considering separating the mortgage insurance division from the rest of the company. Jacobson had told his fund’s investors before Fraizer’s remarks that he was “fatigued” with the insurer’s management.

Genworth has fallen more than 50 percent this year in New York trading. The insurer plunged 13 percent on July 21, after it reported a surprise second-quarter loss on “worsening trends” in its mortgage insurance business. The company is scheduled to announce third-quarter results next month.

Rivals including PMI Group Inc. and Triad Guaranty Inc. were forced by regulators to stop selling new mortgage insurance after capital fell short of required levels. MGIC Investment Corp., Radian Group Inc. and American International Group Inc. (AIG) compete with Genworth guaranteeing home loans.

Credit-default swaps, which typically fall as investor confidence improves and rise as it deteriorates, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

~Bloomburg.com

Remember the bail out a few years ago? Click here for an update