Mortgage Lenders Nationwide

In a recent article, Wallace Witkowski reported that the Federal Reserve said that they will begin buying mortgage loan securities backed by Fannie Mae, and Ginnie Mae in early January. The Fed said it “has selected private investment managers to act as its agents in implementing the program,” which is “separate and distinct from the U.S. Treasury’s program.”

The loan security buying will be financed through the creation of additional bank reserves, the Fed said.  Interest rates for home equity loans, credit lines and FHA loans remain at record low levels. 

The Federal Reserve moved forward forging their  plan to purchase mortgage bonds issued by Fannie Mae and Freddie Mac on Tuesday, saying it would start buying early next month and purchase up to $500bn (£345bn) by the end of June.  The aggressive tactics – the Fed had previously said it would buy this amount over “several quarters” signifies the central bank’s determination to hammer down the risk spreads on the mortgage bonds and thereby reduce mortgage interest rates.

The Fed said “the program is being established to support the mortgage and housing markets and to foster improved conditions in financial markets more generally”.  The move comes as policymakers at the central bank and in both the outgoing Bush and incoming Obama administrations look to target lower FHA mortgage rates in the hope that lowering them would halt the decline in house prices and thereby support financial asset prices.

Many Washington-based analysts think there is still a chance that Hank Paulson, the outgoing Treasury secretary, will announce plans for low-cost 4.5 % mortgages for new homebuying before leaving office, based on a plan proposed by Columbia University professors Glenn Hubbard and Chris Mayer.  Barack Obama’s incoming economic team is also looking at ways to lower mortgage rates and ensure the availability of mortgage financing. Meanwhile, regulators are considering relaxing rules on mortgage refinancing in order to make it easier for borrowers with existing mortgage loans to take advantage of lower mortgage rates.  The Fed is also focused on two other areas as it seeks to stimulate the economy – financing consumer loans and potential purchases of Treasury bonds. Read complete article written by Krishna Guha >

According to Primary Mortgage Market survey released by Freddie Mac, 30-year mortgage loans with fixed rate amortizations schedules dropped to their lowest level on record, Thursday.  FHA mortgage rates declined again, along with conforming interest rates to nearly 5% for fixed 30-year loan terms.

The nationwide average interest rate for 30-year mortgage loans featuring fixed rate on a thirty year term was 5.19% for the week ending December 18, the lowest level since Freddie Mac began the survey in 1971.  First mortgage rates were down from last week when it averaged 5.47 %.  A year ago, the average for mortgage loans was 6.14%.  Second mortgage rates still remain a few points higher than interest rates for 1^st trust deeds.  Amid the foreclosure crisis, second mortgages remain a high risk for mortgage lenders and investors.

The fifteen-year fixed-rate mortgage averaged 4.92 %, down from 5.2 % last week and 5.79 % a year ago. The fifteen-year mortgage rates have not been lower since April 1, 2004, when they averaged 4.84 %.  According to a statement by Freddie Mac chief economist, Frank Nothaft “The rate drop was driven by the Federal Reserve announcement on December 16th, when it cut the federal funds target to a record low and stated it stood ready to expand the buying of mortgage loan assets as conditions warrant.”

Five-year Treasury-indexed hybrid adjustable-rate home loans averaged 5.60% this week, which is lower than the previous week that averaged 5.82%. A year ago, the five-year ARM averaged 5.90%.  One-year Treasury-indexed ARMs averaged 4.94% this week, down from last week when it averaged 5.09%. At this time last year, the one-year ARM averaged 5.51%.

The mortgage industry and the home financing guidelines have a long way to go before the credit markets will be out of trouble, but the road to recovery may be in sight as today we witnessed historic interest rates cut that sparked financial rallies worldwide.  The Dow Jones industrials surged 360 points and broader indexes rose over 5% after the central bank said it will utilize “all available tools” to boost the financial systems of our economy. They also set its target for the interest rate at which banks lend to each other to a range of 0% to 0.25%, the lowest level on record. 

Wall Street reacted positively with markets soaring Tuesday after the Federal Reserve’s historic decision to cut key interest rates again while providing considerable support to offer mortgage relief to the battered economy. According to Mortgage Rate News, the Fed cut led to mortgage lenders across the nation to reduce home mortgage rates as low as 5% for thirty-year fixed rate mortgages for conventional loan types.

The demand for long-term government bonds rose and caused yields to reach historic lows.  The federal government made additional promises to promise to continue to buy bad credit mortgages in an effort to revive the struggling housing markets.  Mortgage Brokers Network executive, Steve Park said, “The government commitment to protect struggling borrowers with new FHA loan program opportunities like, Hope for Homeowners should help restore consumer confidence and mortgage lending.” 

According to Kelly Media Group president, Jason Cardiff, “The fact the lenders are willing to provide loan modifications to homeowners that do not qualify for traditional or FHA refinancing is simply remarkable.”  Cardiff continued, “The interest rate cut by the Fed clearly signals a monumental step by the U.S. to restore trust in our financial systems that should spur more market recovery globally.”  With Obama being nominated early in 2009, we can expect quick action from the President for predatory lending reform, government insured mortgage modifications and significant incentives for lenders who cooperate with short refinance loans, loan work-outs and additional foreclosure prevention measures.

The number of mortgage loan applications filed nationally rose last week compared with a year ago, according to a report today from the Mortgage Bankers Association. In the week ended December 5th, the trade group’s seasonally adjusted Market Composite Index – a measure of overall mortgage loan application volume – was 796.8 points. That represented a decline of 7% from the 857.7 points of the week ended November. 28th, but an increase of 99.90% from the eight-year low of the week ended November 15 and a year-over-year increase of 2.2%.

The Refinance Index dipped 0.9% last week to 3,767.3 points, after surging 203.3% Thanksgiving week and falling 2.1% the week ended Nov. 21. Mortgage refinancing was the goal of nearly three-quarters of loan applications last week – 73.7% – up from 69.1% in the week ended Nov. 28 and 49.3% in the week ended Nov. 21, the MBA said.   The share of mortgage applicants who were seeking adjustable-rate mortgage loans (ARMs) – rather than conventional fixed-rate home loans – fell to 1.1% last week from 1.4% Thanksgiving week and 3.0 % of applications filed in the week ended November 21st.  

The average contract interest rate for a thirty-year, fixed-rate mortgage dipped to 5.45% last week from the previous week’s from 5.4 %, while the contract interest rate on a fifteen-year, fixed-rate mortgage loan declined to 5.09% from the previous 5.13%. But the average contract rate on a one-year ARM rose to 6.76% from the preceding week’s 6.61% average.   Still, by historical standards, “mortgage applications for purchases remain subdued,” Anna Piretti, a senior economist at BNP Paribas in New York, told Bloomberg News. And, she added, “tighter credit standards suggest actual mortgage lending remains constrained, weighing on sales.”

The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.MortgageBankers.org.

Many mortgage service companies are beginning to refuse subordinations. When you have a second mortgage or home equity line of credit, that mortgage lender has approved a first mortgage refinance.  In the past, this used to be no big deal. However, now that values are falling and second mortgage lenders bear most of the default risk, they are refusing to subordinate to a new first mortgage even if a refinance of the first mortgage is less risky than the original mortgage!!  We are finding that very few mortgage lenders will subordinate a 2^nd mortgage if the combined loan-to-value is above 85%. I wrote about this practice earlier this year.

Mortgage lenders will likely always put a heavy weight on credit scores. It’s no secret that the low teaser rates that home loan lenders advertise typically require a fico score above 720. Let’s face it having a 719 fico is still great, but it could cost you .125 to .25 on your interest rate.  Over a thirty year term that would equate to thousands of dollars.  So any way you look at it, credit scores are still important when refinancing to save money.

MBA cites the Federal Reserve’s bailout of Fannie and Freddie for plummeting rates, with refinancing leading the way.  Mortgage loan applications increased significantly last week, a mortgage bankers’ group said Wednesday, as government bailouts led to sinking interest rates that made mortgage refinancing especially more attractive.  

According to Kelly Media Group president, Jason Cardiff, “Clearly lower mortgage rates are good for starving brokers and ultimately, low interest rates will help revive the economy.  Cardiff continued, “The important thing to note is that the Fed and the mortgage lenders are making changes, something they have not been doing enough of.”

Conforming mortgage rates have been the primary benefactor of the Federal Reserve’s influence. The average for a conforming 30-year fixed rate mortgage slipped to a weekly average of 5.57%, down considerably from an October 15 recent peak of 6.75%, and well below the 6.06% seen on the date of the announcement. As well, the 10-day string of rates below 6% represents the longest such string since February.  Read the complete article > Mortgage Loan Application Activity Surges.

Today the Treasury and the Federal Reserve are announcing a facility to finance issuance of non-mortgage asset-backed paper in order to support lending to consumers and small businesses which is vital to our economy. Issuance of ABS in these areas reached $240 billion in 2007, but credit market stresses led to a steep decline in the third quarter of 2008, and the market essentially came to a halt in October. As a result, millions of Americans cannot find affordable financing for their basic credit needs. Credit card rates are rising, making it more expensive for families to finance everyday purchases. This lack of affordable consumer credit undermines consumer spending and as a result weakens our economy.  Mortgage rates remain low, but the need for more obtainable credit has become more evident.  FHA loan programs continue to offer new opportunities for existing homeowners to refinance and new home-buyers to finance homes. 

To address this need and support the return of consumer lending, the Treasury will provided 20 billion of credit protection to the Federal Reserve in connection with its $200 billion term asset-backed securities loan facility. By providing liquidity to issuers of consumer asset-backed paper, the Federal Reserve facility will enable a broad range of institutions to step up their lending, enabling borrowers to have access to reduced cost consumer finance, military home financing and small business loans.  Read more of Paulson’s speech at Paulson Announces Mortgage Loan Programs with More Credit