Refinance


Daily Real Estate News | Friday, September 30, 2011

 

Starting Saturday, many borrowers in pricey housing markets may find they’ll need a higher down payment or pay higher rates. The size of mortgages that the government will back in several high-priced regions is set to drop on Oct. 1, which some analysts expect will serve as another thorn to the housing market.

In 2008, Fannie Mae and Freddie Mac raised its cap on conforming loans up to $729,750 in some of the most expensive housing markets so that larger mortgages would be available to home buyers. But those caps are set to reset on Oct. 1, scaling back to a maximum of $625,500 in some areas of the country.

Housing analysts say the drop will make it more expensive and harder for some buyers to qualify for home purchases in expensive markets, particularly along the coasts.

“The down-payment issue is the most significant aspect form borrowers standpoint,” says Greg McBride, a senior financial analyst at Bankrate.com. “These changes will price some prospective borrowers out of the market.”

Source: “Big Borrowers Face Larger Down-Payments, Rates,” MarketWatch (Sept. 30, 2011) and “Big Mortgages: Harder to Get and More Expensive With Loan Caps,” CNNMoney (Sept. 30, 2011)

Read More:
On Loan Limit Drop, Middle Faces Hard Hit

House Fails to Vote on Extending Loan Limits

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Loan Applications Rise for Refinancing, Home Purchases

Daily Real Estate News | Wednesday, September 28, 2011

 

Mortgage applications increased last week, with both refinancing and home purchase demand increasing, the Mortgage Bankers Association says in its weekly report.

Applications for U.S. home mortgages increased 9.3 percent for the week ending Sept. 23, according to MBA’s seasonally adjusted index.

Refinancing applications made up the biggest part of that increase, rising 11.2 percent last week. Loan requests for home purchases increased 2.6 percent.

Meanwhile, mortgage rates continue to hover near record lows, luring home owners and buyers who can qualify for the low rates.

“Mortgage rates declined last week, at least partially in response to the Fed’s announcement that they would shift their portfolio toward longer-term Treasury securities, and that they would resume buying mortgage-backed securities,” Mike Fratantoni, MBA’s vice president of research and cconomics, said in a statement.

Source: “Mortgage Applications Rose Last Week: MBA,” Reuters (Sept. 28, 2011)

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Fed’s Latest Move May Send Rates Lower

Mortgage Rates Remain at Record Lows

Mortgage lending at lowest level since 1997

Despite near-record-low mortgage rates, a combination of factors is depressing the industry. Many people have simply decided homeownership isn’t for them.

 

  • Despite the confluence of lower home prices and rates, new mortgages are down by a third compared with 2010. Lenders will write about $1 trillion in home loans this year, the smallest total since 1997, according to the Mortgage Bankers Assn., which projects home lending will fall even lower in 2012.
Despite the confluence of lower home prices and rates, new mortgages are… (Seth Perlman, Associated Press)

 

August 06, 2011|By E. Scott Reckard, Los Angeles Times
Despite near-record-low mortgage rates and the cheapest housing prices in eight years, home lending has slipped this year to the lowest level since 1997.The laggard loan market can be explained in part by the slow economy, numerous foreclosures and the proliferation of “underwater” loans, those that exceed the value of the properties they secure.

 

But other factors are compounding the problem, including so-called refi burnout — how many times, after all, can one refinance a home? — and a wave of people who have simply decided that homeownership isn’t what it was cracked up to be.

Weary of a noisy tenant on the other side of a common wall, Bruce and Deborah Dennis sold their Arcadia duplex in April, banked a $600,000 profit and went looking for a quieter place to spend their 60s.

Bruce’s boss, a property manager, urged them to buy another home, saying they’d never again see prices and mortgage rates so low at the same time. The couple searched seriously for two months, even bidding on a home. In the end, they opted to rent a house, leery of tying up capital and taking on the headaches of ownership with the housing market so shaky.

“We thought, ‘Is buying really what we want to do?’ I have no confidence that home prices are going back up any time soon,” Bruce Dennis said.

Opt-outs like the Dennises are one reason the mortgage business, which led the way into the Great Recession, is taking so long to come out of it.

Another factor is the slowing of the refinance market. Mortgage costs are near historical lows, with lenders offering 30-year fixed-rate loans at about 4.2% to Californians seeking $400,000 mortgages, online home-loan specialist Lending Tree said Thursday.

But most of the lucky homeowners who still have equity and solid finances have already refinanced once or more and have long since locked in annual rates of less than 5%.

In 2003, as the housing boom took hold and 30-year fixed mortgage rates fell below 6%, refinancings propelled home lending to four times the current volume. And as the rate tumbled toward 5% and then smashed that barrier in 2009 for the first time since 1956, there was twice as much mortgage lending as now.

“There is a burnout phenomenon,” said Mortgage Bankers Assn. economist Michael Fratantoni. In addition, many would-be refinancers have been stopped by the declines in home prices, now back at 2003 levels, which has left them owing far more than their homes are worth.

“Borrowers who couldn’t qualify for 4.5% mortgages last year for the most part still can’t qualify this year,” Fratantoni said.

And getting the purchase market up and running again would require “significant job growth,” he said, something that has failed to materialize in the sluggish recovery that is threatening to fall back into recession.

 

 

The result of all this: Despite the confluence of lower home prices and rates, new mortgages are down by a third compared with 2010. Lenders will write about $1 trillion in home loans this year, the smallest total since 1997, according to the Mortgage Bankers Assn., which projects that home lending will fall even lower in 2012.Some say the combination of falling home prices, tight credit in the aftermath of the financial crisis and the flood of foreclosure sales has undermined the traditional view of homeownership as the engine of financial success.

“The previous assumptions that housing is a good investment, or that home prices can only go up, or that all Americans should be able to buy a home, are being seriously challenged,” Morgan Stanley housing analysts wrote last month in a study titled “A Rentership Society.”

In the middle of the last decade, when the term “ownership society” was coined, the homeownership rate was nearly 70%, the report noted. If delinquent borrowers were excluded, it said, the current rate of 66.4% today would instead be 59.7%.

For those willing to take out mortgages despite all the grim news, the prospects are improving slightly. Lenders have eased certain terms for the first time since the mortgage meltdown took hold, and some on the front lines say banks are abandoning the scrutiny bordering on suspicion with which they had come to regard potential borrowers.

“All those granular issues we were beating people up about over the last three years seem to be going away,” Laguna Niguel mortgage broker Jeff Lazerson said. “The hassles over old credit inquiries. Having to explain every entry on a bank statement.”

Spokesmen for Wells Fargo & Co. and Bank of America Corp., the largest mortgage companies, said they recently eased standards slightly for loans backed by the Federal Housing Administration, which are attractive to first-time buyers because they require relatively small down payments.

However, among younger buyers, “there’s not much feeling that they need to buy right away,” Fratantoni said. “I expect that may change over the next couple of years, but certainly for the first-time buyer there’s less near-term demand.”

Older people can be ownership-averse as well, like the Dennises, who intend to work five more years before they retire.

“To buy another house, we were going to have to come up with a chunk of change for a down payment,” Bruce Dennis said. “Then there were property taxes, and of course maintenance — that gets expensive in a hurry.

“The glories of homeownership we no longer have to face.”

scott.reckard@latimes.com

Will the S&P Downgrade Affect Interest Rates?

Daily Real Estate News | Monday, August 08, 2011

 

Standard & Poor downgraded the U.S.’s credit rating on Friday, despite Congress reaching a deal in the final hours on the debt ceiling crisis last week. And now many of your customers may be asking: What does this mean for interest rates?“The impact on your wallet of the Standard & Poor’s downgrade of the nation’s credit rating is similar to what would happen if your own credit score declined: The cost of borrowing money is likely to go up,” the Washington Post explained in the aftermath of S&P’s decision.

S&P downgraded the U.S.’s top-notch AAA credit rating for the first time in history, moving it down one notch to AA+; the rating reflects a downgrade in S&P’s confidence in the U.S. government’s ability to repay its debts over time. It’s not clear, however, whether S&P’s downgrade will instantly effect rates, analysts say.

The 10-year Treasury note is considered the basis for all other interest rates. And “the downgrade could increase the yields on those bonds, forcing the government to spend more to borrow the same amount of money,” the Washington Post article notes. “Many consumer loans, such as mortgages, are linked to the yield on Treasurys and therefore would also rise.”

Watch this video with NAR Chief Economist Lawrence Yun for more information.

While consumers who have fixed interest rate mortgages will be immune to any changes in borrowing costs, home buyers shopping for a loan or those with mortgages that fluctuate may see a rise in rates later on, some analysts say.

Mark Vitner, senior economist at Wells Fargo Securities, told the Associated Press that he doesn’t expect the downgrade to drive up interest rates instantly since the economy is still weak and borrowers aren’t competing for money and driving rates higher. However, he expects in three to five years, loan demand will be much higher and then the downgraded credit rating might cause rates to rise.

Analysts are still waiting to see if the other rating agencies, Moody’s and Fitch, follows S&P’s lead in its downgrade of the U.S. credit rating. If so, the aftermath could be much worse, analysts say.

The debt deal reached by Congress last week was expected to save the U.S. from any credit rating downgrade. However, S&P said lawmakers fell short in its deal. Congress’ deal called for $2 trillion in U.S. deficit reduction over the next 10 years; S&P had called for $4 trillion.

Source: “5 Ways the Downgrade in the U.S. Credit Rating Affects You,” The Washington Post (Aug. 8, 2011); Questions and Answers on Standard & Poor’s Downgrading of U.S. Federal Debt,” Associated Press (Aug. 6, 2011); and S&P Downgrade Will Shake Consumer and Business Confidence at a Fragile Time, Economists Say,” Associated Press (Aug. 6, 2011)

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Real Estate OK in Debt Deal But Risks Remain

This is a brief window of opportunity….and every opportunity has a “shelf life”!

 

Rates are amazing right!!!  

We are locking rates in between 4.375 and 4.5%…..on NO COST refinances and purchases…..up to loan amounts of $729,000! The jumbo conforming refi applications must be received no later than August 15th….as jumbo conforming loan limits are being reduced to $625,000 come October 1st. All loan amounts between $625,000 and $729,000 must fund by September 30th to take advantage of the conforming rates and guidelines; after which time loans that fall into that category will be considered jumbo financing. FYI, the jumbo conforming 30 year fixed rates are about 1% lower than 30 year jumbo rates. That’s a BIG difference in a monthly mortgage payment of that size loan amount.

 

 

 

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8 Common Seller Problems (and How to Resolve Them)

If you’re working in real estate, you’re bound to run into one of these problems. But if you address them early and honestly, they shouldn’t present major obstacles for your transaction.
July 2011 | By Rich Levin

Do you ever clash with sellers on price, staging, or marketing? Has someone ever asked you to lower your commission? Has a seller’s personality ever rubbed you the wrong way?

If you work in real estate—and you aren’t exclusively a buyer’s agent—then the answer to those questions is almost certainly yes. But unless you’re working with someone who’s incredibly dense and obstinate, these problems don’t have to slow down the selling process.

The Problems

Note that the problems below don’t apply just to real estate professionals. In fact, they’re even bigger issues for sellers. These cost them time, money, and aggravation, and disrupt their lives far more than their agents’.

1. Sellers can be uncooperative on price.

2. Sellers frequently believe that the way they live in the house is the way they can sell the house.

3. Sellers are often unprepared for low appraisals.

4. Most sellers aren’t negotiation experts. They may bring expectations and anxiety that make everyone’s experience more difficult.

5. Sellers can be uncooperative on commission and might even request a reduction.

6. Sellers regularly have unrealistic demands concerning showings, advertising, marketing, and communication.

7. Agents and sellers may have personality conflicts.

8. Sellers might not be aware of all the closing costs.

Solving these problems gets sellers’ homes sold faster, for more money, and with less stress.

The Universal Solution in Two Parts

Before we get into the solution, it’s important to point out that owners don’t fully understand the entire process of selling a home. These problems would occur far less or not at all if agents could give them a crash course on selling, in which the practitioners covered these issues in a frank way. If that happened, I believe that sellers would be more cooperative.

The universal solution in two parts is first to ask the seller specific questions over the phone and at the beginning of the listing presentation as the agent is establishing rapport. These include:

▪ “Have you done much research to determine the asking price or how to sell a house?”

▪ (If yes) “We’ll talk more when we get together, but what are some of the more important things you discovered?”

▪ “Why are you thinking of selling?”

▪ “Where are you going?”

▪ “Is there an ideal time frame to have the move complete?”

▪ “The tax records indicate that you bought it x years ago, is that correct?”

▪ “Have you refinanced?”

Similar to how a doctor asks patients about their health history, this process gives the sellers confidence in the thoughtfulness, thoroughness, and ability of practitioners.

The second part of the universal solution is for real estate pros to build a listing presentation that addresses each of these problems before they arise. Details on how to do that are below:

1. If they’re uncooperative on price, prepare a very thorough comparative market analysis. Show sellers all the research that you used to select the properties you chose for the final CMA. Offer your pricing recommendation, but let sellers choose — and “own” — the list price.

2. Sellers believe the way they live in their house is the way they can sell it. Ask sellers if they are planning to do any work to prepare it for the sale. If they are, use your judgment to determine whether they will follow through or not. Share examples and anecdotes of how house cleaning, reorganizing, renovations, and so forth have helped homes sell faster and for more money.

3. Describe the entire pending process, from offer acceptance to closing. As you go through this, cover other stumbling blocks and how you work to prevent or address them.

4. Go over the entire negotiating process, from interested buyers to accepted offer. Also, explain pitfalls and emotional turbulence and describe how you will be their advocate.

5. If they’re uncooperative on commission, sometimes you will simply have to walk away. When possible, build so much value into your marketing plan that sellers are reluctant to even ask you to adjust your commission.

6. Show proof that what you do works. Continuously check for agreement. If and when they challenge you, make a note and return to it after they are impressed with your entire effort.

7. When it comes to personality conflicts, make sure you’re self-aware. Determine your personality style, and your strengths and weaknesses. Learn to recognize others’ personality types, and figure out which will naturally conflict with yours. Learn strategies for adapting.

8. Get sellers’ mortgage balances. Find out what else they plan to pay off with the proceeds. Then complete a detailed net sheet. Use a conservative sale price. Inflate the numbers a bit, so you can assure them it will likely be more in their pocket.

All of these bases can be covered either in conversations with owners over the phone before making an appointment or during the listing presentation. Top practitioners have spent years interacting, building, rehearsing, presenting, adjusting, and improving. Solving these problems consistently comes out of that effort.

Housing markets

Will housing save America’s economy?

Jun 20th 2011, 14:35 by R.A. | WASHINGTON

BACK in February of 2009, Paul Krugman was worrying about an insufficient policy response to the recession and he pondered the question: if America is to muddle through with too little stimulus, then how will growth return?

[R]ecovery comes because low investment eventually produces a backlog of desired capital stock, through use, delay, and obsolescence. And eventually this leads to an investment recovery, which is self-reinforcing.

And what do we mean by use, delay, etc.? Calculated Risk had a nice piece on auto sales, which I find helps me to think about this concretely. As CR pointed out, at current rates of sale it would take 23.9 years to replace the existing vehicle stock. Obviously, that won’t happen. Even if the desired number of vehicles doesn’t rise, people will start replacing vehicles that wear out (use), rust away (decay), or just are so much worse than newer models that they’re worth replacing to get the spiffy new features (obsolescence).

He mentions automobiles, but there is another, somewhat surprising possibility—that housing will lead the way to a durable recovery. This may seem strange to suggest. An epic housing collapse following a massive housing boom helped to trigger the downturn. Residential investment has been a drag on growth for five consecutive years. And yet some writers, like Karl Smith and Calculated Risk, are hinting that a housing recovery may be on the way. Matt Yglesias hints at one reason why with this chart:

As Mr Yglesias notes, housing starts have been at an unprecedentedly low level for a strikingly long period of time. And during that period, America’s population has continued to grow. Eventually, whatever the economy is doing, Americans require new houses, new houses mean new construction, and new construction means new employment. Rising rents were one of the factors pushing core inflation higher last month, and increasing rents will soon translate into construction.

Meanwhile, there is a larger demand backlog than most people may imagine:

America doesn’t simply face a situation in which housing has failed to keep pace with the growth in population. Since the onset of recession, household growth has fallen short of population growth as families doubled- and tripled-up on housing to economise. There are now nearly 2m fewer households than one would expect given growth in population. As economic conditions improve, many individuals and families now living with others in order to save money will seek their own homes. That should spark a period of catch-up household growth, which should in turn spark a large rise in rents and new construction. A recovering construction industry would help soak up unemployed workers, continuing a virtuous cycle of recovery. After five long years, housing may finally start pulling its economic weight again, or so many Americans must hope.

 

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