Well...The Fed met on the 27th and did announce it did not have plans to expand, or extend, their mortgage bond purchase program. This means the Fed will not be a mortgage bond buyer after March 31st. You may think...big deal! Well, you would be right...it will be a BIG DEAL. The Fed has acted as a major buyer of mortgage bonds for the past 13 months. Buyer is another word for DEMAND in economic terms. If you have taken an Economics 101 class you will remember when demand goes down and supply stays the same prices will down. Price, as it relates to bonds, works inversly with interest rates. So when the bond price falls the rate goes up. So when the Fed (Demand) stops buying prices should fall and thus rates go up. This will happen over the month of March in anticipation of this move, but you can certianly expect rates on April 1st to be much higher than the 4.75%-5% rates we have come use to seeing....and that is not an April Fools joke.
Have a great weekend. Please call if you have found a house and want to talk about loan options or if you havent refinanced and you may want to do something before the rates go up.
Friday, January 29, 2010
Tuesday, January 19, 2010
Bulls and Bears fighting for control
Happy Friday to you. Mortgage bonds are enjoying a nice ride this week. Rates have improved over the week and today with ecomonic news that has been bond friendly. Currently mortgage bonds have pushed above the 25-day moving average and are doing battle at the 200-day moving average. If the Bulls can push bonds up through the day and close above this important level we may see better rates for the weeks ahead. I am not confident the Bulls will be able to close out the day strong enough to close above the 200-day moving average. If you are currently in contract to buy a house or have made application and not yet locked I would recommend you contact your broker toward the 3pm hour to see how the battle ends. If the market closes below the 200-day moving average I would recommend locking in your rate. If it does close above the 200-day moving average it may be worth waiting to see if the trend can hold next week when the market opens up again on Tuesday.
The Fed is also meeting on January 27th. In this months meeting I am sure the Fed Presidents will discuss the extention of the current Mortgage Bond Purchase Program. Many of the Fed Presidents have voiced their support to extend this program to keep rates low for a longer period than the current March 31st end date. IF the Fed can get enough presidents to vote in favor of this and get the money to make the program viable going forward we could see rates stay low further into 2010 which would be good news for home buyers and the housing sector.
The banks are all closed Monday in observance of MLK day. I hope you will take some time on Monday to read some literature from MLK and listen to his message on how we should each treat our fellow man. In that message I would also encourage you to take a moment and pray for those in Haiti dealing with the disaster that occurred there. In addition to your prayers there is a real need for funds to help people in that country. Please donate funds to www.worldconcer.org or a similar charity that is doing good work there in the wake of this tragedy.
Have a great weekend. Rob
The Fed is also meeting on January 27th. In this months meeting I am sure the Fed Presidents will discuss the extention of the current Mortgage Bond Purchase Program. Many of the Fed Presidents have voiced their support to extend this program to keep rates low for a longer period than the current March 31st end date. IF the Fed can get enough presidents to vote in favor of this and get the money to make the program viable going forward we could see rates stay low further into 2010 which would be good news for home buyers and the housing sector.
The banks are all closed Monday in observance of MLK day. I hope you will take some time on Monday to read some literature from MLK and listen to his message on how we should each treat our fellow man. In that message I would also encourage you to take a moment and pray for those in Haiti dealing with the disaster that occurred there. In addition to your prayers there is a real need for funds to help people in that country. Please donate funds to www.worldconcer.org or a similar charity that is doing good work there in the wake of this tragedy.
Have a great weekend. Rob
Monday, July 20, 2009
Changes coming July 30th to industry
2009 may be remembered as the year the economy turned around when its all said and done, but in my world I think it will be known as the year the mortgage industry was inundated with new regulations. It's been a full time job to keep up with the programs coming out as part of the housing recovery act, but on top of the lenders underwriting changes and new programs being announced there have been a number of new regulations to the mortgage industry to keep track with.
The first big change that took place this year was the Home Value Code of Conduct (HVCC) which applies to how appraisals are managed during the loan process to keep the loan originator and the appraiser apart to remove any concern of undue pressure on an appraiser. The idea is certainly a good one, but as it is with many things the unintended consequences are that buyers are paying more and the work being done is of a lower quality. The other down side is that lenders wont accept other lenders appraisals so as a broker if one bank declines a file after the appraisal is done the buyer would need to pay for a 2nd appraisal with a new lender even if the appraisal wasn't the reason the file was declined....add $500 to your long list of closing costs.
The newest changes that will roll out in a few days is set up to be a safeguard for buyers to make sure their loan officer isn't changing fees on their loan at the end of the loan process without being notified. As a broker myself who prides himself on being upfront with my costs I don't see this as being a big issue, but it could cause a delay in closing due to the waiting periods that are part of the new law. The good thing here is that buyers will know what they are going to pay for a loan several days in advance of them having to sign the loan documents so its a good thing.
I posted some basics on the new rules to my links.
The first big change that took place this year was the Home Value Code of Conduct (HVCC) which applies to how appraisals are managed during the loan process to keep the loan originator and the appraiser apart to remove any concern of undue pressure on an appraiser. The idea is certainly a good one, but as it is with many things the unintended consequences are that buyers are paying more and the work being done is of a lower quality. The other down side is that lenders wont accept other lenders appraisals so as a broker if one bank declines a file after the appraisal is done the buyer would need to pay for a 2nd appraisal with a new lender even if the appraisal wasn't the reason the file was declined....add $500 to your long list of closing costs.
The newest changes that will roll out in a few days is set up to be a safeguard for buyers to make sure their loan officer isn't changing fees on their loan at the end of the loan process without being notified. As a broker myself who prides himself on being upfront with my costs I don't see this as being a big issue, but it could cause a delay in closing due to the waiting periods that are part of the new law. The good thing here is that buyers will know what they are going to pay for a loan several days in advance of them having to sign the loan documents so its a good thing.
I posted some basics on the new rules to my links.
Friday, March 13, 2009
China...what can we expect?
As many of you know our mortgage rates are driven by mortgage bonds...primarily the Fannie Mae bonds. As in any investment the price/value is determined on many factors. Bonds have been able to remain high (rates low) due to the participation from foreign investors...mainly China and Japan. Recently China has expressed some concern about the safety of purchasing US Treasuries. China has voiced concern to the new administration about being too aggressive in its spending which will ultimately lead to inflation...and inflation is not a good thing for mortgage bonds as the inflation would erode the value of the asset.
As you can see our path to recovery is about as clear as mud. Higher spending and stimulus will lead to inflation...and inflation causes those countries and investors who fund the stimulus to shy away from our debt...thus cutting off the source of funds for the stimulus.
On a good note it does look like the financial markets are starting to stabalize and Citigroup has rose from the dead to declare they are actually profitable for the first couple months of 2009...who would have thought? Citigroup has also indicated that they dont intend to use TARP funds in the future which would lead one to believe that have sufficient capital to fund their operations going forward.
Lets hope the rally this week on the stock market and some of these other developments are an indication that things may be at their worst and there are brighter days on the horizon.
As you can see our path to recovery is about as clear as mud. Higher spending and stimulus will lead to inflation...and inflation causes those countries and investors who fund the stimulus to shy away from our debt...thus cutting off the source of funds for the stimulus.
On a good note it does look like the financial markets are starting to stabalize and Citigroup has rose from the dead to declare they are actually profitable for the first couple months of 2009...who would have thought? Citigroup has also indicated that they dont intend to use TARP funds in the future which would lead one to believe that have sufficient capital to fund their operations going forward.
Lets hope the rally this week on the stock market and some of these other developments are an indication that things may be at their worst and there are brighter days on the horizon.
Friday, February 27, 2009
Fannie Mae/FHA/Freddie Mac to raise conforming limits to 2008 limits
2009 CONFORMING LOAN LIMITS INCREASED BY
AMERICAN RECOVERY AND REINVESTMENT ACT
WASHINGTON, DC –
The American Recovery and Reinvestment Act (ARRA), which
was signed into law on Tuesday, increased the maximum conforming loan limit for
mortgages originated in 2009. The increase affects 250 counties across the United States.
For these areas, identified in the attached table, Fannie Mae and Freddie Mac loan limits
will return to their late-2008 levels, which were up to $729,750 for one-unit properties in
the continental United States. Loan limits in other areas are not changed by the
legislation.
Conforming loan limits for 2009 were originally announced in late 2008 and had been
calculated under terms set forth in the Housing and Economic Recovery Act of 2008
(HERA), passed in July. The new ARRA legislation stipulates that, for loans originated in
2009, the loan limit is to be the higher of the 2008 limits and those originally calculated
for 2009 under HERA. Where the 2008 and 2009 limits differ, the 2008 limits tend to be
higher and thus, in most cases, loan limits are reverting back to last year’s levels. For the
relatively few counties where 2009 limits actually increased (43 counties in Virginia, North
Carolina, and California), the new limits will remain at the higher level.
Notable elements of the new legislation:
1. The Director of FHFA is given the authority to increase loan limits levels for “subareas”
under provisions in ARRA. Given the implementation difficulties associated
with establishing multiple limits for any given county, FHFA’s Director currently
has no plans to use this discretion.
2. The loan limits established under ARRA apply to all loans originated in 2009. For
loans purchased in 2009 that were originated from July 1, 2007 through December
31, 2008, the same limits will apply. For loans purchased in 2009, but originated
before July 1, 2007, the limits previously announced by FHFA on November 7 ,
2009 and updated in December will apply. For example, a $700,000 mortgage
originated in 2006 would not be eligible for purchase this year, even if the
applicable local limit under ARRA is $729,750.
Several lookup tables are available at www.ofheo.gov/Regulations.aspx?Nav=128 that
provide detailed information about local area loan limits. A full county listing is provided
showing loan limits for every U.S. county and county-equivalent. Also provided is a table
showing those metropolitan areas where the new 2009 loan limits exceed the baseline
$417,000 level for one-unit properties.
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.
AMERICAN RECOVERY AND REINVESTMENT ACT
WASHINGTON, DC –
The American Recovery and Reinvestment Act (ARRA), which
was signed into law on Tuesday, increased the maximum conforming loan limit for
mortgages originated in 2009. The increase affects 250 counties across the United States.
For these areas, identified in the attached table, Fannie Mae and Freddie Mac loan limits
will return to their late-2008 levels, which were up to $729,750 for one-unit properties in
the continental United States. Loan limits in other areas are not changed by the
legislation.
Conforming loan limits for 2009 were originally announced in late 2008 and had been
calculated under terms set forth in the Housing and Economic Recovery Act of 2008
(HERA), passed in July. The new ARRA legislation stipulates that, for loans originated in
2009, the loan limit is to be the higher of the 2008 limits and those originally calculated
for 2009 under HERA. Where the 2008 and 2009 limits differ, the 2008 limits tend to be
higher and thus, in most cases, loan limits are reverting back to last year’s levels. For the
relatively few counties where 2009 limits actually increased (43 counties in Virginia, North
Carolina, and California), the new limits will remain at the higher level.
Notable elements of the new legislation:
1. The Director of FHFA is given the authority to increase loan limits levels for “subareas”
under provisions in ARRA. Given the implementation difficulties associated
with establishing multiple limits for any given county, FHFA’s Director currently
has no plans to use this discretion.
2. The loan limits established under ARRA apply to all loans originated in 2009. For
loans purchased in 2009 that were originated from July 1, 2007 through December
31, 2008, the same limits will apply. For loans purchased in 2009, but originated
before July 1, 2007, the limits previously announced by FHFA on November 7 ,
2009 and updated in December will apply. For example, a $700,000 mortgage
originated in 2006 would not be eligible for purchase this year, even if the
applicable local limit under ARRA is $729,750.
Several lookup tables are available at www.ofheo.gov/Regulations.aspx?Nav=128 that
provide detailed information about local area loan limits. A full county listing is provided
showing loan limits for every U.S. county and county-equivalent. Also provided is a table
showing those metropolitan areas where the new 2009 loan limits exceed the baseline
$417,000 level for one-unit properties.
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.
Friday, February 20, 2009
Stimulus Plan Update
Tax Credit for HomebuyersFirst-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Tax Credit Versus Tax Deduction
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!
Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.
Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.
Higher Loan Amounts
More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the FutureAnother thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.
As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Tax Credit Versus Tax Deduction
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!
Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.
Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.
Higher Loan Amounts
More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the FutureAnother thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.
As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
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