FHA Limit Back to $729,500; Fannie and Freddie remain at $625,500

From Grant Norris of mortgage broker Platinum Capital:

Congress passed a bill, and President Obama signed it, that allows the FHA to back mortgages of up to $729,500, six weeks after the limit dropped to $625,500. The move makes it easier for more buyers to get low-interest FHA loans. Obviously members of Congress had trouble letting Freddie & Fannie take on any more risk given the billions in taxpayer money that have gone their way. The two agencies are politically toxic, but legislators felt pressure to re-raise the limit, so compromised by raising the FHA limit. Loans backed by Fannie Mae and Freddie Mac will continue to have a $625,500 limit. Loans that exceed the Fannie, Freddie and FHA limits move into the jumbo realm, as we know, where 30-yr mortgages carry higher interest rates and require 20% or more down. FHA programs usually allow lower down payments and are more forgiving of imperfect credit, but also carry higher fees, so more-affluent buyers tend to prefer Fannie and Freddie loans when they qualify for them. 

What's Ahead For Mortgage Rates This Week : August 22, 2011

Mortgage markets improved again last week, pushing mortgage rates in California to an all-time low; lower than the lows set last November, even.

Last week's low mortgage rate drivers are primarily European. Joining the debt concerns that have dogged Europe since March, a fresh wave of doubt has surfaced about the health of some Eurozone banks. The fears sparked a new wave of safe haven buying.

Global equities were socked last week and the Dow Jones Industrial Average fell for the 4th straight week. For home buyers , though, the timing may be perfect. As stock markets lose, bond markets gain and when bond markets gain, mortgage rates drop.

According to government-group Freddie Mac's weekly mortgage rate survey, the average 30-year fixed rate mortgage fell to 4.17% last week with 0.7 points. This is the lowest rate-and-points combination in history.

The 5-year ARM fell to 3.08 with 0.5 points.

As mortgage rates fall, though, be wary of trying to "time the market". It's impossible to know when rates have bottomed and mortgage rates tend to spike without notice. That's what happened in May 2010. And then again in November 2010. And then a third time in April 2011.

When rates rise, they could tack on 0.500% or more overnight.

This week, there is a lot that can move mortgage rates. With housing data set for Tuesday release, the Eurozone stories still unfolding, and three Treasury auctions planned, it's best to be ready for locking.

If you're floating a mortgage rate or still shopping, consider locking your rate as soon as possible. Rates trended higher to close out last week and will be riding that momentum forward. Rates are lower than they've been in history.

Take advantage of it.

Mortgage Rates Make New 2011 Lows

Mortgage rates in California plunged to new 2011 lows this week. 

According to Freddie Mac's weekly Primary Mortgage Market Survey, the national, average 30-year fixed rate mortgage fell to 4.39% this week -- the lowest 30-year fixed reading since November 18, 2010.

The 0.16 drop from last week is the largest one-week rate drop in more than 2 years, and, although the 30-year fixed remains above its all-time lows from November 2010, two other benchmark products made new records this week.

Both the 15-year fixed rate mortgage and the 5-year ARM are reporting lower than at any time in recorded history.

Freddie Mac puts those average rates at 3.54% and 3.18%, respectively.

Mortgage rates are dropping for several reasons, including :

• U.S. economic growth is slower-than-expected
• The U.S. government plans to curb its spending
• Global investors seek the safety of U.S.-backed bonds

The first two items are unfavorable for business and, as a result, stock markets have sold off all week. The Dow Jones Industrial Average posted an 8-day losing streak and Thursday it made its biggest one-day loss since 2008.

When equities lose, bonds tend to gain. This leads mortgage rates lower.

Mortgage rates also fell on "safe haven" buying; bond buys made because of their relative safety to risky assets. Mortgage bonds are considered "safe" so when economies and geopolitics are uncertain, mortgage rates improve.

Going forward, there are reasons for mortgage rates to fall again. The economy won't rebound overnight and neither will investor confidence. However, markets can be fickle and rates have been known to reverse quickly.

With rates as low as they've been history, it's an advantageous time to refinance your home loan, or purchase a new property.

5-Year ARM Falls To Historic Lows

The interest rate differential between fixed-rate and adjustable-rate mortgages continues to widen and has now reached historic levels.

There's never been a better time to lock an ARM.

According to Freddie Mac's weekly Primary Mortgage Market Survey, homeowners who lock their mortgage rate today will save 129 basis points on rate, on average, by choosing a 5-year ARM as their mortgage product as compared to a 30-year fixed rate loan.

The average 30-year fixed rate is 4.51%. The average 5-year ARM rate is 3.22%.

It's the biggest interest rate spread between fixed-rate and adjustable-rate mortgage rates in Freddie Mac's recorded history; a gap which is the result, in part, of the 5-year ARM dropping to all-time lows this week.

Rates for the 5-year ARM are even lower than during last year's historic Refi Boom.

Putting today's "spread" in action against a hypothetical $250,000 loan size, a homeowner that chooses an ARM over a fixed-rate loan would save $184.30 monthly, and would have $500 fewer closing costs.

That's a 5-year savings of $11,558 -- nearly triple what you would have saved just 2 years ago.

The main reason why today's adjustable-rate mortgages are priced so aggressively relative to comparable fixed-rate loans is that Wall Street expects the economy to drag for the next several quarters, after which it expects an acceleration. 

ARMs tend to reflect short-term expectations for the U.S. economy which is why short-term mortgage rates are dropping.  Fixed products, by contrast, take a longer view and expectations for an economic rebound are pulling fixed-rate mortgage rates up.

For now, mortgage applicants can exploit the difference -- especially those who plan to move within the next 5 years -- but adjustable-rate mortgages aren't right for everyone. ARMs carry particular risks about which you should be aware before locking.

Before you choose an ARM, therefore, talk it through with your loan officer. 

Is This The Start Of A Refi Boom? Mortgage Rates Fall For 8 Straight Weeks.

Mortgage rates are falling.

On a wave of uncertainty about Greece and its debt; and weaker-than-expected economic data at home, conforming 30-year fixed rate mortgage rates have fallen to levels not seen since December 2, 2010.

Mortgage rates have dropped 8 weeks in a row. Not even last year's Refi Boom produced an 8-week winning streak. This season's streak is historic.

The 30-year fixed rate mortgage now averages 4.49% nationally, down 42 basis points, or 0.42%, since early-April. For every $100,000 borrowed, that equates to a monthly savings of $25.24.

Adjustable-rate mortgages have shed even more, giving back 50 basis points since the streak began.

Because of low rates, it's an excellent time to buy or refinance a home relative to just a few weeks ago. Note, though, that depending on where you live, you may find your quoted interest rates to be slightly higher or lower than what Freddie Mac reports in its survey. This is because the Freddie Mac figure is a national average.

Mortgage rates and fees vary by region:

• Northeast : 4.49 with 0.6 points
• Southeast : 4.52 with 0.8 points
• North Central : 4.52 with 0.6 points
• Southeast : 4.52 with 0.6 points
• West : 4.45 with 0.8 points

You'll notice that, in the West Region, rates tend to be low and fees tend to be high; in the North Central Region, the opposite is true. You should expect California to have its own pricing norm within this region, too.

Is there a particular rate-and-fee setup that suits you best? The good news is that you can ask for it -- no matter where you live.

If having the absolute lowest mortgage rate is more important to you than having the absolute lowest fees, ask your loan officer to structure your loan in the "West" style. Or, if low costs are more your style, ask for them.

Mortgage rates appears as if they're headed lower but don't forget how quickly markets can change. Once they do, mortgage rates should spike. Exploit today's market while you still can.

Brace for Higher Rates: Fannie & Freddie Move From the Skids to the Chopping Block

Seldom does the marketplace ring a bell when mortgage rates are about to rise.  This time, there is a bell, and it's ringing quite clearly. This article from the Financial Times proves it's even audible across the pond!: White House seeks wind-down of Fannie and Freddie. -David

Mortgage Rates Return To April 2010 Levels

Mortgage rates are surging.

Over the last 7 days, conventional, 30-year fixed rate mortgage rates have jumped 24 basis points, or 0.24%, according to Freddie Mac's weekly Primary Mortgage Market Survey.

It's the largest 1-week spike in mortgage rates in recent history.

The 30-year fixed rate mortgage now averages 5.05% nationally. This is much, much higher than what we saw last November when mortgage rates were 4.17% and looked headed to the 3s.

That's not the case today. In fact, it's the opposite. 

Mortgage rates have risen quickly and fiercely this year. As of this morning, mortgage rates are higher over 9 consecutive days, marking the longest mortgage rate losing streak in the last 6 years, at least.

Note, however, that when you call your loan officer or bank, you may not be quoted the same 5.05% rate as shown by Freddie Mac. This is because Freddie Mac-reported rates are national averages. Any given mortgage rate may be higher or lower depending on its region. 

As an illustration, look how this week's rates breaks down by area:

• Northeast : 5.07 with 0.7 points
• Southeast : 4.99 with 0.9 points
• North Central : 5.09 with 0.6 points
• Southeast : 5.06 with 0.6 points
• West : 5.02 with 0.8 points

In other words, the rate-and-fee combination you'd be offered in your home town is different from what you'd be offered if you lived somewhere else. In the Southeast, rates tend to be low and fees tend to be high; in the North Central U.S., it's the opposite.

The good news is that, as a mortgage applicant, you can have your pricing whichever way you prefer. If getting the absolute lowest mortgage rate is what's most important to you, have your loan officer structure your loan as in the "Southeast Style". Or, if you prefer to have as few closing costs as possible and don't mind slightly higher rates, ask for that type of set-up instead.

Either way, consider locking your rate as soon as possible. If rates keep rising, it won't be long before they touch 6 percent.

What Wall Street Wants for Housing

From today's Heard on the Street (WSJ): Wall Street Hearts Socialized Housing. It's all about Freddie and Fannie guarantees.  "The rest is  details." - David

Understatement : Freddie Mac Says Mortgage Rates Rose Last Week

It's been a wild 30 days for home affordability.

Since the Federal Reserve's November 3 press release, in which our nation's central banker committed $600 billion to bond markets, mortgage rates have leaped, moving quicker than the news can report them.

This week is a terrific example of that.

Today, newspaper headlines in California and around the country read that mortgage rates rose 0.06% on average over the past 7 days, and that average loan fees remain unchanged at 0.8 points. The data is based on Freddie Mac's Primary Mortgage Market Survey, a weekly poll of more than 100 lenders around the country.

Unfortunately for home buyers and other local rate shoppers, the Freddie Mac figures are low. Both mortgage rates and fees rose by more than what's being reported.

Freddie Mac's data is not real-time. It's out of date for today's pricing.

According to Freddie Mac, the survey's methodology has it collecting rates from participating lenders between Monday and Wednesday, averaging the results, and then publishing that data Thursday late-morning. The problem there, as you know if you've shopped for a mortgage rate, is that mortgage rates change all day, every day.

Monday's rates are unrelated to Wednesday's rates, yet both are included and given equal weight by Freddie Mac. Some weeks, it's not a problem; rates are relative static. 

This week was not such a week.

 

Rates were jumpy Monday and Tuesday, rising and falling throughout the course of the day. Action like that is normal. But Wednesday, mortgage bonds put forth their third-worst daily showing of the year.  Rates rose by as much as 3/8 percent between the market open and close, with the bulk of the sell-off coming late in the day. In other words, after the deadline of Freddie Mac's survey.

Mortgage lenders accurately reported their rates to Freddie Mac, but they reported them before the market turn a turn for the worse.

The lesson is that mortgage rates are time-sensitive and can't be captured by a weekly, average survey. When you need to know what mortgage rates are doing right now, the best place to check is with your loan officer. Otherwise, you may just get yesterday's news.

Time To Refinance? Mortgage Rates Down 1.00 Percent Since April.

30-year fixed mortgage rates rose last week, marking the first time in a month that rates failed to fall week-to-week.

The data sources from Freddie Mac, one of the government's major mortgage securitizers and a sister entity to Fannie Mae. Each week, Freddie Mac collects mortgage rate data from more than 120 lenders nationwide and publishes the results in a report called the Primary Mortgage Market Survey.

According to this week's PMMS, the 30-year fixed rate rose 0.02% and now averages 4.21% nationally. The average accompanying cost is 0.8 points.

1 point is equal to 1 percent of the loan size.

Note, though, that these are just averages. Just as real estate markets are local, mortgage rates can be, too. As an illustration, look how this week's rates break down by region:

• Northeast : 4.22 with 0.8 points
• Southeast : 4.30 with 0.8 points
• N. Central : 4.19 with 0.8 points
• Southeast : 4.23 with 0.7 points
• West : 4.17 with 1.0 points

The rate-and-fee combination you'd get in your home state of California , in other words, is different from the rate-and-fee combination you'd get if you lived somewhere else. In the West, rates are low and fees are high; in the Southeast, it's the opposite.

The good news is that, as a rate shopper, you can have it whichever way you prefer. If getting the absolute lowest mortgage rate is worth the extra cost to you, have your loan officer structure to structure your loan as such. Or, if you prefer higher rates and lower costs, you can go that route, too.

Banks offer multiple mortgage set-ups to meet every type of budget and, with rates down 1.00% since April 8, there's good cause to call your loan officer about a mortgage refinance. See what set-up will work best for you.

Mortgage Rates Make New Lows For The 9th Week In A Row

Another week, another new low for conforming mortgage rates.  In fact, this week marks the 9th time in a row it's happened.

Mortgage rates are (again) at their lowest levels in history.

The data comes from the Freddie Mac, a government group and major loan securitizer for the U.S. mortgage market. Freddie Mac's weekly survey is among the most widely-cited reports on mortgage rates and is the data used in home affordability models, among other statistics.

The 30-year fixed rate is averaging 4.42% nationally with an accompanying cost of 0.7 points. 1 point is equal to 1 percent of the loan size.  This week's reported rate is lower by 0.02 percent from last week, and lower by 0.70 percent from one year ago.

On a region-by-region basis, though, "average" 30-year fixed mortgage rates are different.

• Northeast : 4.44 with 0.6 points
• Southeast : 4.44 with 0.8 points
• N. Central : 4.42 with 0.4 points
• Southeast : 4.46 with 0.5 points
• West : 4.35 with 0.8 points

But this isn't to say that mortgage pricing is better in, say, California as compared to Florida. Note that the West Region -- with the lowest average rate -- has the highest required points.  This is because mortgage rates and mortgage fees move in opposite directions.  The type of low-rate/high fee structure common in the West may be right for some home buyers and would-be refinancers, but may not be right for others.

What's important to remember is that, as a rate-shopper in California , it's always your choice on how your loan is structured. Banks offer multiple set-ups -- with or without points -- to meet every applicant's budget.

As mortgage rates continue to slide and touch new lows, it's an excellent opportunity to see what your lender can do for you. Low rates won't last forever.