Currently browsing June 2008 monthly archives.

Looking Back And Looking Ahead : June 30, 2008

On June 30, 2008, in Market News, by Tyler Ford | Comments

The Federal Reserve held the Fed Funds Rate at 2.000 June 25 2008Mortgage rates improved last week, marking the first time since mid-May that has happened. 

The rate drop is the result of how mortgage markets interpreted the Federal Reserve’s Wednesday press release.

In it, the Fed said:

  1. Inflation pressures should lessen soon
  2. Growth should remain steady this year
  3. The credit market is currently fragile

Separately, none of this was news to the markets.  But considering all three statements together, investors grew nervous of leaving money in the stock market — specifically in financials. 

Post-Fed announcement, there was a wave of selling that dropped the Dow Jones Industrial Average nearly 20 percent from its October 2007 high.

As stocks sold off, though, mortgage shoppers were benefiting. 

Rates ticked down in the Fed announcement’s wake because the mortgage bond market acted as a “safe haven” for traders.  More demand for mortgage-backed bonds caused rates to fall, accented by a favorable run very late in the day Friday.

This week, the momentum may continue, or it may not.  There is a lot to capture traders’ attention in this holiday-shortened, four-day work week.

The biggest data release of the week will undoubtedly be Thursday’s Unemployment Report, but there are also two Fed speakers stumping, as well as Treasury Secretary Paulson speaking about the economy.

As the week goes on, more and more traders will be leaving for the long weekend so expect rates to move with greater force as Thursday afternoon gets nearer.  And, if stocks haven’t regained favor with investors by then, expect that mortgage rates will have a good week.

What To Do When Your HELOC Is Reduced By The Bank

On June 30, 2008, in Mortgage Educational Information, by Tyler Ford | Comments

HELOCs are shrinking with real estate pricesA Home Equity Line of Credit is bank product that grants homeowners access to the equity in their home at anytime, usually using checks.

Often called a HELOC, these equity-based credit lines function very much like credit cards:

  • The rate is adjustable, tied to Prime Rate
  • There is a minimum monthly payment
  • There is a pre-set spending/credit limit

But different from credit cards is that a HELOC is “guaranteed” by real estate and with real estate values in question nationwide, many banks are exercising a little-known clause in the HELOC contract. 

With alarming frequently, banks are reducing the pre-set spending limits on their active equity lines.  Via USPS, lenders are notifying homeowner with $100,000 HELOCs that their new HELOC limit is $25,000, for example. 

And the banks aren’t being discriminate based on payment history or local real estate conditions, either — it’s happening everywhere with equal force.

The good news is that banks will accept appeals on HELOC reductions on a case-by-case basis. 

One way to appeal a HELOC reduction is:

  1. Call your lender’s Customer Service line.  Do not send an email.
  2. Politely ask why the HELOC limit was reduced.  Listen carefully to explanation.
  3. Explain why you would like your HELOC reinstated.  Acceptable reasons may include home improvement projects or improper home valuation by the lender.
  4. Be prepared to write a formal letter, if asked.  Address the issues explained in #2.

Banks will typically not reinstate a HELOC if a borrower has been delinquent on payments, or lives in a severely depressed neighborhood.  However, because lenders rely on computer models to assess risk, it’s always a good idea to ask.

Sometimes the Human Element of an appeal can work in your favor.

FHA MORTGAGE ALERT CHANGES

On June 20, 2008, in Mortgage Programs & News, by Tyler Ford | Comments

MORTGAGE ALERT!

Please note that effective with all new FHA loans (defined as new Case number assignments) on/after July 14th, HUD is implementing new “risk based premiums” on both the up-front and monthly mortgage insurance. The chart is based upon FICO scores and Loan-to-Value (LTV).

In some cases the up-front premium is actually lower and in most typical cases the monthly premium is slightly higher. As a comparison, currently the typical 3% down, 30-year loan carries an up-front premium of 1.50% and monthly premium on .50% (150/50).

Please be aware that these changes will affect both the final loan amount AND the monthly payment.

If you are working with a buyer that might be negatively affected by these changes, get them in process before July 14th!

There are other key points addressed in the FHA announcement.

 fha new guidelines

For detailed guides click on the link below.

FHA CHANGE GUIDELINES

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Guess Which 4 States Accounted For More Than 50 Percent Of May 2008 Foreclosures

On June 16, 2008, in Real Estate Information, by Tyler Ford | Comments

California, Florida, Arizona and Michigan account for more than half of the foreclosures in the U.S. in May 2008RealtyTrac released its most recent foreclosure statistics and if you only read the headlines, you think the entire country was on the verge of losing its homes.

The underlying data tells a different story, however.

More than half of the country’s foreclosure activity in May 2008 was tied to just 4 states in the union:

  1. California (28 percent)
  2. Florida (14 percent)
  3. Arizona (5 percent)
  4. Michigan (5 percent)

In other words, the majority of mortgage defaults are coming from a small minority of states.

See, between 2002 and 2006, California, Florida and Arizona were very popular with real estate speculators, many of whom over-extended themselves on real estate; and Michigan’s economy has been decimated by job losses in the auto and manufacturing industries.

In addition, these 4 states are among the nation’s most populous.  It makes sense that they are distorting the national statistics.

On a local level, the news is not so grim.  Not only did 20 states show a reduction in monthly foreclosure activity, but many more fell below the national foreclosure average.  That type of story, though, doesn’t make for good headlines, is all.

Search the full May 2008 foreclosure report for yourself on RealtyTrac’s Web site.

NOW IS A GOOD TIME TO BUY AND TAKE ADVANTAGE OF THE MANY GOOD DEALS THAT EXIST!

Looking Back And Looking Ahead : June 16, 2008

On June 16, 2008, in Market News, by Tyler Ford | Comments

The Consumer Price Index rose in May 2008, hinting that inflation pressures are building.Mortgage rates moved higher last week on lingering concerns about inflation, the fourth straight week in which rates rose.

Mortgage rates are now as high as they’ve been since October 2007.

Because inflation devalues mortgage bonds, market players are quick to unload them when signs of inflation are present.  

Last week, there were several such signs:

  1. The American Consumer is spending undettered despite economic uncertainty
  2. The Cost of Living is rising faster than expected
  3. The Federal Reserve reports that some business are passing higher costs on to consumers

Hence, the higher mortgage rates.

This week, only Tuesday registers as a “big data day” with reports on housing, productivity, and Producer Price Index — the “Business Cost of Living” report.  

There will be four members of the Federal Reserve speaking, though, and that will add some volatility to the market.  Fed Chairman Bernanke is among the speakers, addressing Congress this morning at 10:00 A.M. ET.

So, expect mortgage rates to continue to jump and dip this week, taking their cues from inflation.  More inflation means higher rates and a slowing economy should cause rates to retreat. 

(Image Courtesy: LA Times)

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Recent Comments

  • Tyler Ford: Great job Todd!
  • Tyler Ford: Seems as through the real estate market is picking up and home prices are stabilizing.
  • Gail Richards: Thanks Todd! More Great Information! Thanks for being on top of everything…your the best! Gail
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