Feds announce more help for some underwater homeowners

Posted on October 24, 2011 by George Crowe

The Federal Housing Finance Agency announced today some changes to the Home Affordable Refinance Program (HARP). Basically, the idea is to make it possible for more people with loans backed by Freddie Mac and Fannie Mae to refinance to take advantage of low interest rates. The program has been limited to those who owed up to 125% of their home’s value, but they’re removing that limit so homeowners who are substantially underwater will be able to refi into lower payments, hopefully letting more people stay in their homes.

Of course if your loan isn’t backed by Freddie Mac or Fannie Mae, if you have a jumbo loan for example, this won’t be such exciting news.

You can read the official press release here.

2010 Mortgage Roller Coaster

Posted on January 3, 2011 by Ginger Wilcox

Mortgage rates had their share of ups and downs in 2010. Loan officer Dan Green put together this 2010 Mortgage Roller Coaster video which enables you to actually jump on board and see the roller coaster first hand, along with a a great narrative explaining what was happening. Despite some bumps and a year end rise, 2010 rates ended below 5%. Dan predicts we will see rates rise in 2011. Buckle your seatbelt and enjoy.

If you are considering making a move in 2011, advance preparation is the key to surviving the roller coaster. Send me an email of what your plans are and how we can help.

“Fix” Your Loan & Cash In To Your Mortgage?

Posted on December 8, 2010 by Ginger Wilcox

The new trend in mortgages appears to be “fixing” your loan – moving from adjustable rate mortgages to fixed rate loans.

Mortgage broker Dan Green, Author of The Mortgage Reports Blog says:

Between June-September 2010, Refi Boom participants “went fixed” 19 times out of 20.

That’s an astounding percentage. For several reasons, really.

The first is that the interest rate spread between the 5-year ARM and the 30-year fixed was historically large last quarter, registering 0.81% on average. By comparison, during the 12 months prior, the spread was just 0.66%.

Relative to recent history, therefore, homeowners had a large incentive to take the ARM last quarter, but chose not to.

Here is an interesting chart from Dan:

Image Courtesy of The Mortgage Reports Blog

My  friend and fellow real estate agent in Northern Virginia wrote about it on her blog, “Getting Off the Horse Before She Bucks You.”

Heather says:

The other interesting thing from the third quarter numbers is that 33% of homeowners who refinanced brought money to the table to do a “cash-in” refinance, and effectively bought more equity in their homes. That’s the second highest “cash-in” quarter since Freddie Mac began keeping records in 1985.

So, people are actually putting money into their homes.  They are looking for stability.  And, there is seems that would show some confidence in the real estate market long term.  These actions seem to echo the new study by Trulia and RealtyTrac which found that 58% of Americans believe the real estate market will recover after 2012.

Oddly enough, the study also showed 48% of people would be willing to walk away from their homes if they were under water, up from 41% in years past.  There is less of a stigma against those who choose to walk away because it makes financial sense.

So are home buyers looking at the home buying process as more of a business decision than in the past?  Not necessarily, because their desire for certainty does not necessarily make financial sense.  Perhaps what we are seeing is damage mitigation – a cutting of losses from past mistakes with a desire to avert risks in the future.

Regardless, it looks like there is a glimmer of optimism among Americans about the future of the real estate market.

Is It Wrong To Walk Away From an Underwater Mortgage?

Posted on July 10, 2010 by George Crowe

There was an interesting article in the New York Times this week based on a study showing that a higher percentage of mortgages over $1 million is delinquent than that of smaller loans. Some of the conclusions reached may be debatable, but it got me thinking about strategic default, which our friend Wikipedia defines as “the decision by a borrower to stop making payments on a debt despite having the financial ability to make the payments”. The NYT article asserts those in higher income brackets are more likely to see strategic default as a wise business decision, while Joe Sixpack continues to make the payments on his underwater mortgage. Is that really the case? And if so, who is right?

Google “strategic default” and you’ll get almost 11,000 results, including a recent 60 Minutes segment on the topic. It’s definitely a controversial subject–some say choosing to walk away from a home when you can afford to make the payments is unethical, while others think it’s strictly business and the banks have it coming since they got us in this mess to begin with. I see both sides of the argument, though after reading a lot about the subject this week I’m leaning towards thinking maybe there’s nothing wrong with a homeowner making the same kind of business decision a bank or corporation wouldn’t hesitate to make faced with a similar situation. Back in January Roger Lowenstein argued the case for strategic default in The New York Times Magazine, and he made some pretty good points:

“Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them.”

If you buy into the argument that it was the irresponsible and greedy behavior of the banks that brought about the housing bubble and corresponding bust, then maybe it’s fair that they’re left holding the bag. It’s a tough question with no easy answer. What do you think?

Fannie Mae Loan Quality Initiative To Repull Your Credit Before Closing

Posted on June 8, 2010 by Ginger Wilcox

Fannie Mae’s new loan quality initiative will make it harder for Marin home buyers and refinancing homeowners to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage. If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

Fannie Mae hopes to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular — even after your loan is approved.

  1. Your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.
  2. Underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied or you may be subject to a new loan-level pricing adjustment. Loan level pricing adjustments are mandatory loan fees based on your credit score.
  3. Underwriters will be looking at your credit report’s Credit Inquiry section. The goal is to see if you’ve been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae is trying to improve its loan pools with the Loan Quality Initiative. Unfortunately, it’ll mean more loan denials for mortgage applicants.

If is important for homebuyers to take extra care of your credit between the time of application and the time of closing. Don’t buy new cars, don’t buy new appliances, and — most definitely — don’t open new credit cards.  Be extra safe with your credit because a mortgage application that’s supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.

Should You Refinance Your Mortgage?

Posted on May 27, 2010 by Ginger Wilcox



Because of strife in Greece, Spain and North Korea, conforming mortgage rates are back to all-time lows. They’re at levels not seen in 50 years.  For homeowners that missed the Refi Boom of November 2009, it’s a second chance.

In this well-presented, 3-minute video from NBC’s The Today Show, you’ll get tips getting low rates and choosing the best time to lock in.

Some of the topics covered include:

  • Why were the experts wrong about rates moving higher this summer?
  • How much money can you save with a 1 point drop in your interest rate?
  • Should you buy a bigger home now that rates have fallen?

The advice in the piece is matter-of-fact and centered.  There is no cheerleading and the message is honest. Mortgage rates are low and they likely won’t stay that way.  If you’ve been thinking about a refinance, talk to your loan officer as soon as possible.

If you are unable to see the refinance video in your browser, please click here.

Markets Ignore April Jobs Report- Good News For Mortgage Rates

Posted on May 7, 2010 by Ginger Wilcox

Unemployment Rate 2007-2010On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls report.

More commonly called “the jobs report”, Non-Farm Payrolls is a major market mover. The number of working Americans is directly tied to the health of the economy which, in turn, drives the stock and bond markets.

In general, when jobs numbers improve, it’s good for stocks and bad for mortgage bonds. It follows, therefore, that conforming mortgage rates in California rise because rates always move opposite of mortgage bond prices.

Conversely, when jobs numbers worsen, it tends to be bad for stocks and good for mortgage bonds.  Mortgage rates fall.

Today, markets are behaving a bit differently.

Despite 290,000 jobs created in April 2010 — nearly twice the expected amount — and a 40 percent upward revision of March’s numbers, mortgage rates are essentially unchanged.

In a normal environment, rates would be higher.  Today is not normal.

Today is a departure because, for all of the jobs report’s import to Wall Street, it’s less important to markets than what’s happening in Greece right now.

Greece is struggling to meet its debt obligations and its citizens are rioting.

Until a debt solution for Greece is made that sticks, unrest in the region will drive safe haven buying both domestically and abroad. U.S. mortgage bonds will gain on that movement because mortgage bonds are “safe”, and mortgage rates will fall.

Indeed, this is exactly what’s been happening since the start of April. Mortgage markets have been rallying for 5 weeks.

So, today’s jobs news is terrific for the economy and mortgage rates should be rising because of it.  But, they’re not. Consider taking advantage — lock in a rate.

Fannie Mae Tightens Guidelines On ARMs And Interest Only Products

Posted on May 4, 2010 by Ginger Wilcox

Fannie Mae tightens its mortgage guidelinesFor the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines.

The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.

Fannie Mae made its official announcement April 30, 2010.  The changes will roll out to home buyers and homeowners in Tiburon and everywhere else over the next 12 weeks.

The first guideline change is tied to ARMs of 5 years or less.

Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate.  For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.

The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.

The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage.  Balloon mortgages were popular early last decade.  Lately, few borrowers have chosen them, though.  Mostly because rates have been relative high as compared to a comparable 7-year ARM.

And, lastly, Fannie Mae is changing its interest only mortgages guidelines.

Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:

  1. The home must be a 1-unit property
  2. The home must be a primary residence, or vacation home
  3. The borrower’s FICO must be 720 or higher
  4. The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing.

Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.

Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market.  So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.

Federal Reserve Statement Explained (April 28, 2010)

Posted on April 27, 2010 by Ginger Wilcox

Putting the FOMC statement in plain EnglishToday, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.250 percent.

In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”.  This is a step up from the last meeting after which the Fed said jobs were “stabilizing”.

It also reiterated that business spending “has risen significantly”.

Today’s statement marks the 7th straight press release in which the Federal Reserve shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.

Threats remain to growth, however. The Fed fingered a few:

  1. Employers are reluctant to hire new workers
  2. High unemployment threatens consumer spending
  3. Consumer credit (still) remains tight

Also in its statement, the Federal Reserve re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”.  This was expected.

Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance.

Mortgage market reaction has been muted thus far. Mortgage rates in Mill Valley are unchanged post-FOMC.

The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010.  The 55-day span between meetings will be the FOMC’s longest of 2010.

New Homes Sales Strong in March, But Not As Strong As News Would Have You Believe

Posted on by Ginger Wilcox

New Home Sales Mar 2009-Mar 2010The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.

Take a look at the headlines from last Friday:

  • Sales of new homes rocketed up 27 percent in March (WaPo)
  • New-home sales rise fastest in 47 years (CNNMoney)
  • Sales of New Homes Climb by Most Since 1963 (Business Week)

None of these statements is false, per se, but each is somewhat misleading.  The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.

In February, new homes sold posted its lowest level in recorded history.

A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date.

Against both of those time periods, March 2010 fared well.

Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program.  The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.

Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.

The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low.  Along with stronger home demand, this should push home prices nationwide higher throughout the coming months.

New home sales don’t have a big impact on the local Marin real estate market but headlines and news do impact over all consumer confidence in the housing market.