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3.8% Interest Rates, 3% Down Payments, Wow!

January 8, 2015 By Roy Hernandez Leave a Comment

In recent weeks, Fannie Mae and Freddie Mac agreed to return of mortgages with as little as a 3% down payment – but for those struggling with affordability, the good news doesn’t end here. Just recently, mortgage rates dropped to a new low for 2014 – giving agents, brokers and the clients they serve one more reason to celebrate this holiday season.

The average rate for a 30-year fixed-rate loan now stands at 3.8%, a rate not seen since May 2013, according to Freddie Mac.

The average 15-year fixed loan, which is popular among those looking to refinance, fell to 3.1%. That rate is about where the 15-year stood in October.

Rates have been falling in tandem with 10-year Treasury yields, which have also fallen to their lowest level since May 2013, noted Frank Nothaft the chief economist at Freddie Mac.

Plunging oil prices, due to a slowdown in Russia and other global economies, have been sending investors into safe havens like U.S. Treasuries, said Keith Gumbinger, vice president of mortgage information firm, HSH.com.

“This is again driving down yields and pulling mortgage rates right along with them,” he said.

Another factor weighing on rates: few people are seeking loans, said Gumbinger.

Despite the bargain rates, the Mortgage Bankers Association reported a 3.3% decline in the number of people applying for mortgages last week.

If buyers and existing homeowners seeking to refinance do strike while rates are this low, they can save a lot of money. This week’s 0.13 percentage point drop alone results in a $15 a month savings on a $200,000 mortgage balance, or $180 a year.

That’s not such a bad Christmas bonus.

FHA to lower cost of mortgage insurance

January 8, 2015 By Roy Hernandez Leave a Comment

In a move designed to bring more first-time homebuyers into the housing market, President Barack Obama said Wednesday the Federal Housing Administration (FHA), the government insurer of home loans, will lower its annual insurance premiums from 1.35 percent to 0.85 percent.

In a statement, the White House said the move was part of the president’s efforts `”to expand responsible lending to creditworthy borrowers.” The president is scheduled to talk about improvements in the housing market at a speech on Thursday in Phoenix, one of the hardest-hit markets of the housing crash.

Stocks of the nation’s home builders rose on the news Wednesday, while those of mortgage insurers fell.

“This action will make home ownership more affordable for over two million Americans in the next three years,” said Julián Castro, U.S. Department of Housing and Urban Development Secretary. “Since 2009, the Obama administration has taken bold steps to reduce risks in the mortgage market and to protect consumers. These efforts have made it possible to take this prudent measure while also ensuring FHA remains on a positive financial trajectory. By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures.”

Mortgage bankers praised the decision. “It couldn’t come at a better time,” said David Stevens, CEO of the Mortgage Bankers Association. “February is the beginning of the spring market. I think it will have a definitive impact particularly in the first-time homebuyer market.”

For the typical FHA applicant, the reduction in premiums means a savings of about $80 on their monthly payment, according to CoreLogic’s chief economist, Sam Khater. “So it’s positive news from a consumer welfare perspective, especially for first-time homebuyers, which account for the majority of FHA’s business,” he said, adding, “However, I think the marginal impact on sales will be small because potential buyers make the decision to purchase based on trigger events, such as a new job, marriage, kids, etc. Changes in affordability only impact how much home they can buy.”

The FHA had been the only low down payment product available, with a minimum 3.5 percent down, but recently Fannie Mae and Freddie Mac announced a new 3 percent down payment product that would require private mortgage insurance. The product would compete directly with the FHA and could have offered some borrowers a cheaper option if they had a good credit score.

Read MoreWeekly mortgage applications fall sharply over holidays

“We believe the cut is strategic. Our view is that FHA was at risk of losing enough market share—especially of higher-quality borrowers—to the GSE 97 percent down mortgage that it could have put at risk the ability of the FHA fund to reach its 200 basis point reserve requirement this year as it had forecast. By cutting the premium, FHA would increase its share of the market and should be back on track to meeting the reserve requirement despite the cut in revenue,” wrote Jaret Seiberg, an analyst at Guggenheim Partners.

The reduction will likely come under scrutiny by some on Capitol Hill, as the FHA is still building its capital reserves and is not yet above the mandatory 2 percent minimum. It is back in the black, after having bled cash for two years.

The FHA’s volume had soared at the beginning of the housing crash, making up for the lack of credit in the private market, but that came at a price. In order to rebuild its fund, it more than doubled its annual insurance premium and raised average credit scores. That made it harder for borrowers today to afford an FHA loan.

Lowering the premium will bring volume back to the FHA, but it will also bring back risk.

“That is clearly the tension with any lending program that encourages low down payment,” said Stevens. “But we are in a different position. We are clearly in an environment where home prices are very stable with steady growth. You don’t have the dynamics to create any type of housing bubble.”

Mortgage volume has been lagging, even with interest rates falling to near record lows. The Obama administration is clearly looking for new ways to boost homeownership, as investor activity wanes and the market is left to mortgage-dependent buyers.

“Now that we’ve made it harder for reckless buyers to buy homes that they can’t afford, let’s make it a little bit easier for qualified buyers to buy the homes that they can afford,” said Obama in an August 2013 speech, also in Phoenix. At the time he did not make mention of the FHA, which was still in the red, but instead touted refinance programs and less red tape for lenders.Obama is also expected to address the issue of putbacks at the FHA, which is when lenders are forced to buy back bad loans. The regulator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency, has already sought to clarify these rules, which have created huge costs for lenders and consequently higher costs for borrowers.

3% Down Payments are back! Good or bad idea?

December 9, 2014 By Roy Hernandez

[mortgage mortgage_term=”30″]

Fannie Mae and Freddie Mac on Monday announced details of a controversial plan to allow some first-time homeowners to obtain a mortgage while putting down just 3% of the price of the home.

The shift back toward low down payments has drawn intense criticism from an array of legislators and lending and housing experts who say the plan revives the same lax lending practices that led to the 2008 financial crisis.

In a statement, Fannie Mae said the loans that allow for 3% down payments will be held to the same eligibility requirements as other Fannie loans, including underwriting, income documentation and risk management standards.

In addition, Fannie said the loans will require mortgage insurance “or other risk sharing,” the same as Fannie loans that require a 20% down payment.

“This option alone will not solve all the challenges around access to credit. Our new 97 percent LTV offering is simply one way we are working to remove barriers for credit-worthy borrowers to get a mortgage,” Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets, said in the statement. “We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers.”

Critics of the plan aren’t as confident.

Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, said after the plan was announced earlier this year that lowering down payment standards for government-backed mortgages is “an invitation by government for industry to return to slipshod and dangerous practices that caused the mortgage meltdown in the first place and wrecked our economy.”

In the aftermath of the 2008 financial crisis, which stemmed directly from the collapse of the U.S. housing market as millions of Americans defaulted on their home loans, Fannie Mae and Freddie Mac were accused of easing credit both in an effort to promote loans under pressure from both Democratic and Republican administrations to increase home ownership, as well as to boost their own profits.

Many private lenders were accused of relaxing their lending standards for the same reasons.

In its statement Monday, Fannie included a laundry list of precautions ingrained in the new 3% down payment plan to ensure that borrowers can repay the money and that taxpayer won’t be on the hook if they can’t. For instance, Fannie will require income documentation to avoid “low-doc” or “no-doc” lending, and will require income verification, two practices that fell out of favor as the housing bubble expanded in the early 2000s.

Since the housing bubble burst, sending the U.S. into a deep recession, lenders have been enforcing far tighter credit standards, making it difficult for many first-time home buyers to scrape together a down payment and qualify for a mortgage.

Consequently, despite historically low interest rates that have brought mortgage rates to their lowest levels in decades, many consumers haven’t been able to get approved for a mortgage and the U.S. housing market has struggled to gain traction as the economic recovery slowly moves forward.

Fannie and Freddie found themselves on the verge of collapse at the height of the financial crisis and were taken over by the government in 2008 and ultimately kept afloat through a $185 billion bailout. They quasi-government agencies remain in conservatorship.

Congress has been fighting over whether to reform the existing agencies or scrap them altogether. Earlier this year, a bipartisan Senate plan to replace Fannie and Freddie as part of a broader housing-finance overhaul stalled.

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Mortgage Lenders Set to Relax Standards

December 3, 2014 By Roy Hernandez Leave a Comment

Agreement With Fannie, Freddie Potentially Paves Way for More Applicants to Qualify for Loans

Lenders also are expected to widen the scope of the types of borrowers they will accept by reducing credit-score requirements and giving greater leeway to consumers whose credit history suffered because of one-time events, such as a job loss or big medical bill.

Economists have long maintained that tight credit could be holding back the housing recovery and damping economic growth. On Tuesday, the S&P/Case-Shiller Index showed that U.S. home prices grew 4.8% in the 12 months ending in September, their slowest pace in two years.

After the financial crisis, Fannie and Freddie made banks repurchase tens of billions of dollars in loans that the companies said didn’t meet their standards. In turn, many lenders stopped making loans to all but the most pristine of borrowers.

In many cases, they required borrowers to have substantially higher credit scores and put in place other measures—so-called credit overlays—that were more stringent than what Fannie and Freddie required.

With the new agreement, “I’ve been told with absolute confidence that some lenders are lifting almost all of their overlays,” said David Stevens, president of the Mortgage Bankers Association.

Wells Fargo, the nation’s largest mortgage lender, lifted its credit-score overlay earlier this year, which the bank said was in anticipation of the agreement with Fannie and Freddie. Now it says borrowers can expect a smoother process of getting a loan with less “excessive” paperwork.

“It’s providing greater certainty for all the parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut,” said Mike Heid, president of Wells Fargo Home Mortgage.

For example, under the previous system, Mr. Heid said a borrower who had a late payment on an auto loan might have been asked to write a memo describing what happened, even if such a mistake wasn’t critical to the decision to make a loan or not. That was because Wells couldn’t be certain what would trigger a repurchase demand from Fannie or Freddie, he said.

Now, they are less likely to be required to ask for such documentation, he said, which should speed the process of securing a loan.

Jerome Lienhard, CEO of SunTrust Mortgage, said the new guidelines likely would allow the company to lift its overlays by “a pretty meaningful amount.” He said the bank is still analyzing which overlays to remove, but he is confident many will be eliminated. “This is real. This is substantive,” he said.

Before the new rules were put in place, Mason-McDuffie Mortgage Corp. in San Ramon, Calif., typically wouldn’t make a loan to a borrower with a credit score below 660, said Bill Godfrey, the company’s executive vice president of capital markets. Now, he said he believes the company will lend down to 620, the limit for loans backed by Fannie and Freddie.

“We will be able to be looser and open up the net wider,” said Mr. Godfrey.

Not all lenders are poised to relax their underwriting rules. On an earnings call a few days after the agreement was announced, U.S. Bank Chief Executive Richard Davis called it “a good sound bite” and indicated that his bank wasn’t prepared to make changes.

“Unless we are convinced that the rules are going to be permanent and there is not going to be a look back or a reach back in future times…we are simply going to stay on the sidelines in the concerns of both compliance risks and other uncertainties,” said Mr. Davis.

“You won’t see us start to expand our criteria much past what we’ve done,” said Bank of America Chief Executive Brian Moynihan at an investor conference this month.

Isaac Boltansky, an analyst at Compass Point Research & Trading, said some lenders are still too “shellshocked due to litigation and the shifting regulatory environment” to ease credit conditions soon.

Still, overall, Fannie Mae CEO Timothy J. Mayopoulos this month said lenders were “reacting positively to those developments. I do think that lenders are nonetheless concerned about other factors in the environment that we do not control.”

By JOE LIGHT, WSJ

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O.C. home prices jump more than 10% in October

November 17, 2014 By Roy Hernandez Leave a Comment

Orange County home prices showed uncharacteristic strength for an October, with double-digit gains for the first time in four months, new housing figures released Wednesday show.

The median price of an Orange County home – or the price at the midpoint of all sales – was $595,000 last month, up 10.2 percent from a year ago and up $10,000 from September’s median, CoreLogic DataQuick reported.

Typically, prices drop from September to October as part of a seasonal slowdown, rising in only nine of the past 27 years.

Last month’s price gain was the biggest price appreciation rate in the region and the only double-digit gain among six Southern California counties DataQuick tracks. And it was the highest median home price for an October since 2006.

Countywide, home sales remained well below October averages, however, with transactions falling to the slowest pace for the month in three years. DataQuick reported that 2,849 homes changed hands last month, down 4.6 percent from the same month’s sales pace last year.

The market here matched trends throughout Southern California. Regionwide, the median home price increased 6.8 percent to $410,000, while sales fell 4.4 percent to 19,271 transactions.

All six Southern California counties that DataQuick tracks showed year-over-year price gains of 6.3 percent or better, while sales dipped throughout the region.

posted by Jeff Collins, OC Register

OC Halloween Events

October 1, 2014 By Roy Hernandez Leave a Comment

Orange County
Halloween Celebrations
Halloween parties, Fall Festivals and seasonal parades!

** Due to possible last minute changes to times & locations to the events below, we encourage you to click on the link of the event holder to get the most updated information.

Aliso Viejo

Anaheim

Brea

Buena Park

Costa Mesa

Cypress

Dana Point

Fullerton

Garden Grove

Huntington Beach

Irvine

Laguna Hills

Laguna Niguel

La Habra

Lake Forest

La Palma

Los Alamitos

Newport Beach

Orange

San Juan Capistrano

Santa Ana

Stanton

Silverado / Trabuco Canyon

Tustin

Villa Park

Westminster

– Related Sections –

Costume Rentals

Halloween Party Planning

ALISO VIEJOHalloween Fair and Haunted HouseSoka University will have booths for children, haunted house for young teens, games, activities and performances for all to enjoy!

The Haunted House will be held on the first floor crypt of the SUA Recreation Center and the entrancing fee will be $5 at the doomsday door. The suggested age for this dark journey with moving monsters is 10 years old and up. Proceeds benefit the student clubs at Soka University.

LOCATION:
Soka University, Recreation Center
1 University Drive, Aliso Viejo

INFORMATION:
949.480.4000

1. Prices Will Continue to Rise

2. Mortgage Interest Rates Are Projected to Increase

3. Either Way You are Paying a Mortgage

4. It’s Time to Move On with Your Life

Bottom Line