Mortgage Rates March Relentlessly Higher, but Less Quickly

Market Summary

Two dominant themes characterize the week for mortgage rates: weakness and deceleration. After jumping abruptly higher at the end of January, the pace of the increases has slowed, but the regularity remains. This week now adds to a growing list of weeks that have seen borrowing costs revisit or surpass the previous week's highest levels. Best-Execution has leveled off at 3.625% for now, but the costs associated with that rate hit their highest levels since July 2012 on Wednesday.

Matthew Graham, Rates Strategist at Mortgage News Daily, says that the current rising rate environment is more complicated than it might seem. "It would be nice and perhaps comforting to mortgage rate watchers and rates Strategists alike if we could simply view recent bond market weakness as a byproduct of bullish stock market sentiment," Graham notes. "After all, we have plenty of history that generally points to Treasury and mortgage rates moving with a noticeable correlation to stock prices.

"It's tempting to lament the incessant bullishness in stocks and almost expect things to turn around soon, bringing rates back down with stock prices, but there's more than a mere stock rally guiding rates higher. Bond markets are currently undoing a lot of what they did in response in frightened anticipation of a disorderly collapse of the EU," explains Graham, referencing the unprecedented bond market rally in mid-2012.
"Throw in the ongoing adjustments to expectations of how and when the Fed will eventually curtail their bond-buying programs and you have two compelling arguments for rates to be on their current course regardless of equities markets. A stock sell-off could help rates modestly, but without that broader panic premium--from the EU or something similarly epic--even a high level of global economic weakness won't get 30yr rates back to 3.25% any time soon."

30 Year Fixed Rate Mortgage

Week in Review

Rates shown below are based on the 30 Year Fixed Rate Mortgage

Beginning Average:	3.62%
Ending Average:	3.62%
Weekly Change:	+0.00%
Yearly Change:	-0.30%

Michelle Rinaldi | Premier Homes Group at Keyes Real Estate

http://seowpb.com/business-post/michelle-rinaldi-premier-homes-group-at-keyes-real-estate/

Mortgage Rates Jump to Highest Levels of the Year

Mortgage rates surged higher at their quickest pace since late January on Wednesday eclipsing the previous highs of the year seen around the same time.  For many lenders--and for the first time since mid 2012, this takes Best-Execution for 30yr Fixed, Conventional Loans back up to 3.75%.  Some lenders remain at 3.625% and lower rates are still quite viable in certain situations.  As always, remember that what we refer to as "best-execution" can vary depending on personal preferences.  Also, it's important to remember (when we're talking about Best-Ex being at different levels between lenders) that it doesn't necessarily mean the lender with the lower best-ex is better priced than another--simply that the their adjacent rate offerings (usually .125% higher and lower) are not as efficient in terms of borrowing cost vs payment.

(What is A Best-Execution Mortgage Rate?)  

Treasury yields aren't any higher today than they have been at their worst levels of the year, but they're close.  This "closeness" is disconcerting for the mortgage rate market and the MBS (mortgage-backed-securities) that serve as its foundation.  MBS are separated by 0.5% increments with roughly a 0.5% range of many loans being "eligible" to become part of a particular security.  Recently, the Fannie Mae 3.0% Coupon (which is comprised mainly of newly originated loans of 3.25% to 3.75%) has been the king of the hill in terms of MBS market activity.  

Think of this like a "party at 3.0 and everyone's invited." As rates rise, investors grow increasingly concerned that the party currently going on at 3.0% will move to 3.5 (the next house on the block), and all of the "3.0 Party" memorabilia they ordered will no longer be cool and useful (hats, t-shirts, drink holders, you name it... they all say "3.0" on them).  So what we're seeing now is sort of like a fire sale on that 3.0 merchandise on that chance it will no longer be in fashion if the party moves to 3.5.  

The prices of the 3.0 coupon MBS crossed into a new low today, and one that they HAD BEEN doing a decent job of holding, despite recent weakness.  That sort of "breaking of the floor" can coincide with an extra bit of momentum lower in prices, especially if interest rate benchmarks like Treasuries are under pressure as well.  Bottom line, investors are as concerned as they have been about the LONG stay at the 3.0 party potentially shifting toward the 3.5 party.  Accordingly, lenders rates are as high as they've been since 3.0s began dominating the party scene.

6 Tips on Buying or Renting a Home for Extra Income

Low mortgage rates have made buying a home more affordable and turned rentals into an attractive option for investors.

 

Throughout the downturn in the housing market, average investors, sometimes pooling their money, have bought foreclosures at a sharp discount and turned them into rentals. Many homeowners also have purchased a second home and rented out their first property.

 

Although the housing market is showing signs of recovery, demand for rental housing is expected to remain strong. The national unemployment rate remains high at 7.9 percent, banks are still working through a backlog of foreclosures and tight lending requirements prevent many renters from becoming homeowners.

 

And the Fed has said it will keep its short-term interest rate, the federal funds rate, at a record low until U.S. unemployment falls below 6.5 percent, something many economists don't expect to happen until late 2015 at the earliest.

 

"In this market, at this point, it's a sweet spot," says Chris Princis, a senior executive at financial advisory firm Brook-Hollow Financial and owner of two rental properties in Chicago. "You're getting the market where it's just starting to rebound, but still at the bottom, with what's looking to be a great recovery."

 

Here are six tips on becoming a landlord or investor in rental property:

 

1. UNDERSTAND WHAT IT MEANS TO BE A LANDLORD

Residential real estate generally provides three possible ways to get a return on your investment: when it's sold, assuming it has grown in value, by collecting rent and through tax savings, such as the mortgage interest deduction.

2. BUY IN AN AREA WITH A HISTORY OF STRONG RENTAL DEMAND

Neighborhoods near universities are a good option. For homes in residential areas, proximity to schools can be a good draw for families.

Condominiums and similar properties in communities with a homeowners' association can be a great option because the association arranges for upkeep on the property.

But check the fine print on your mortgage and homeowners' association rules to make sure turning your property into a rental isn't forbidden.

3. CONSIDER A USING A MANAGEMENT FIRM

Determine whether you want to select the tenant and handle property issues or hire a company to do it. If you take on the responsibility, you are obliged to fix any problems or find professionals to do it.

4. DO THE MATH

Although prevailing rental prices will go a long way toward determining what you can charge, getting the best return on your investment starts with making sure you're going to get enough rent to, ideally, cover expenses and costs.

Princis' formula is charging 15 percent above monthly mortgage and maintenance costs. So if those costs add up to $1,000, he'll look to charge $1,150.

 

5. SCREEN TENANTS

Screen prospective tenants by asking for previous landlord references and running a credit and a criminal records check.

Experts also recommend asking for a deposit equal to one month's rent, plus extra if the tenant has pets. That will help cover any damage to the property and protect you if a tenant moves without paying rent.

Also, have a walkthrough of the unit with the tenant and ask that they sign off on the condition of the property before they move in. That will help avoid conflicts over the security deposit if there are damages once they're ready to move out.

6. GET FAMILIAR WITH LANDLORD LAWS

It's important to know your exact responsibilities under the law.

Two good resources for rental rules are the U.S. Department of Housing and Urban Development's Web site (www.hud.gov ), and The Landlord Protection Agency (www.thelpa.com ), which includes state-specific rental guidelines and standardized forms for rental agreements.

 

 

 

 

 

Obama Scorecard: Housing Recovery Strengthens

The housing market recovery continues to grow stronger, but the economy remains “fragile,” according to the Obama administration’s latest Housing Scorecard for January.

The Obama Administration’s Housing Scorecard is released monthly, providing a snapshot of the nation’s housing market.

"The housing market has clearly bottomed out nationally and is turning a corner with new home construction increasing to a level not seen since June 2008 and home prices showing strong annual gains,” says Kurt Usowski, deputy assistant secretary for economic affairs with the U.S. Department of Housing and Urban Development. “But with so many households still struggling, we have important work ahead.”

Government efforts to help struggling home owners avoid foreclosure are improving. Nearly 1.5 million homeowner assistance actions have taken place through the Making Home Affordable Program, and the Federal Housing Administration has offered more than 1.5 million loss mitigation and early delinquency interventions.

"Every foreclosure avoided has positive impacts for families, communities, and our economy,” says Tim Massad, Treasury assistant secretary for financial stability.

Also, the number of underwater borrowers continues to fall while home prices improve. Home owners who owe more on their mortgage than their home is currently worth account for 10.67 million borrowers, which is down from 10.78 million in the previous quarter, according to CoreLogic.

The inventory of existing homes for sale continues to drop, reaching a 4.4 months’ supply, according to National Association of REALTORS®’ data. In November, the supply of housing averaged 5.3 months.

Fewer homes are being sold due to limited inventories. Existing home sales fell to 411.7 million in January from 415.8 million in December.


Source: US Department of Treasury; HousingWire (Feb. 8, 2013)

Money’s not easy, but it’s less tight

Banks are slightly loosening standards for many kinds of loans, and cutting into their own profit margins to try to make more loans, especially to businesses and real estate developers, the Federal Reserve says.

The central bank’s quarterly survey of bank lending officers said most banks haven’t made it materially easier to get business loans and commercial real estate loans in the last three months. But more than half of banks said they are accepting interest rates closer to what they pay for deposits, or other sources of money they lend out, according to the survey released Monday.

The report is one of the Fed’s primary ways to assess how credit is making its way into the economy, powering both business investment and consumer spending.

Demand for car loans rose since the October report, and demand for mortgages was little changed, the Fed said. About 16 percent of banks are easing car-borrowing standards slightly, including lengthening the maximum term of loans and downpayment requirements.

“This is another sign that the economy is gaining traction,” said Andrew Wilkinson, chief economic strategist at brokerage firm Miller Tabak. “While interest rates will likely remain low for a long time, the Fed is unlikely to need to keep the pedal to the metal in terms of bond purchases as 2013 develops.”

Banks are also trimming their markups, also known as spreads, on car loans, but have not been willing to make the same concessions to credit card customers, the Fed found. Standards for new credit cards remain tight, the Fed said: Just over 90 percent of banks said their standards for approving credit cards haven’t changed since the fall.

The report shows few signs that banks are returning to the business of offering high-risk credit, as they did in the middle of the last decade.

More than 20 percent of banks said they have actually tightened standards for “subprime” residential mortgages in the last three months. For mortgage loans to consumers with good credit, credit standards are still about the same, more than 90 percent of the banks said. And just fewer than 90 percent of banks reported no change in standards for home-equity lines of credit.

Demand for many loans is picking up, the Fed said.

About a quarter of banks said they were seeing more applications for commercial loans, slightly less than the number that said they were seeing more applications for mortgages and cars.

Banks expect credit quality to improve this year in nearly all categories of loans, meaning fewer write-offs to cut into bank profits, the Fed said.

© Copyright 2013 USA TODAY, a division of Gannett Co. Inc., Tim Mullaney, USA TODAY

Homebuyers - Another Reason to ACT NOW

Upcoming FHA changes regarding Mortgage Insurance Premiums previewed below.

FHA is making more changes in the near future which will increase the cost of borrowing under the program.  One more reason to act now before the changes take effect, and while rates and prices are still so very low!

Below is the detail - In April the monthly Mortgage Insurance Premium is going up...by only about $8-9/ month per $100,000 of loan amount. A 10 basis pt increase

More significant is that in June FHA is reverting to an old rule about how long you must keep the Mortgage Insurance on your loan.

CURRENTLY  - FHA requires the loan be held for at least 5 years and that you have obtained 78%  Loan to Value in the home.

In June - if you put 10% or more down, you must hold the loan for at least 11 years and obtain the 78% Loan to Value to have the MIP removed.

In June - if you put less than 10% down, you must keep the MIP for the life of the loan.  The way the rule used to be.

If you are under contract prior to the effective dates and your case number gets assigned you can avoid these new changes. Communicate with your Shelter Mortgage Loan Officer