Despite Positive Economic News, Rates Unchanged: the week ahead, March 12, 2012

Posted on March 12, 2012 by Bonnie Vasilion

Although there were position economic developments last week, mortgage markets were mostly unchanged.FOMC meeting this week In addition to Greece successfully reaching a deal with its private creditors, the U.S. economy turned out strong reports — most notably with respect to Non-Farm Payrolls.

In February, the U.S. economy added 227,000 new net jobs and the figures from December and January were revised higher by an additional 61,000. It marked the 16th straight month of job gains nationwide.

The Unemployment Rate held unchanged at 8.3%.

Conforming mortgage rates in Illinois remained stable last week, and mortgage rates continue to hover near all-time lows.

According to Freddie Mac, the average 30-year fixed rate mortgage nationwide is now 3.88% for Chicago mortgage applicants willing to pay 0.8 discount points and a full set of closing costs. Here in our area, most people choose the “no point” option, therefore the rate is slightly higher, closer to 4.00%.

1 discount is equal to 1 percent of your loan size.

Freddie Mac also reported the 15-year fixed rate mortgage at its lowest level in history. The average 15-year fixed rate mortgage fell to 3.13% with an accompanying 0.8 discount points. This is more a full percent lower as compared to March 2011.

This week’s big event is the Federal Open Market Committee’s second scheduled meeting of the year. Whenever the FOMC meets, mortgage rates can change in a hurry.

The FOMC is a subcommittee within the Federal Reserve, the U.S. government’s monetary-policy making group. Since 2008, the Federal Reserve has held its benchmark Fed Funds Rate near 0.000%. It’s not expected to raise that rate Tuesday. However, just because the Fed Funds Rate won’t change, that doesn’t mean mortgage rates won’t.

This is because the Fed doesn’t set mortgage rates, but it does influence them. The market will read the Fed’s post-FOMC press release Tuesday for hints of new policy or economic growth. If the statement shows more optimism for the economy than expected, mortgage rates are expected to rise. 

Conversely, if the Fed shows pessimism for the U.S. economy, rates are expected to fall.

Other economic events this week include the releases of Retail Sales, Producer Price Index, and Consumer Price Index; plus three high-profile treasury auctions.

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Mortgage Rates Starting to Rise? Week of March 5, 2012

Posted on March 5, 2012 by Bonnie Vasilion

Last week mortgage rates rose as the U.S. economy continued to show that it’s in recovery, and as Federal Reserve Chairman Ben Bernanke publicly hinted at the same.

In a congressional testimony Wednesday, Chairman Bernanke suggested that new, Fed-led stimulus may not be imminent, surprising Wall Street analysts and market traders who, for months, have expected a third round of quantitative easing from the Fed.

Bernanke’s comments sparked a sharp bond market sell-off that briefly pushed conforming and FHA mortgage rates up 0.375% in Illinois.

Other relevant data from last week included :

Also, the Pending Home Sales Index posted its highest reading since the end of the 2010 federal home buyer tax credit, suggesting a strong spring housing market.

The economy appears much improved over this time last year.

By the end of the week, mortgage rates had recovered somewhat, but still closed worse on the week. Mortgage rates are higher than their lows of the year.

According to Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate mortgage is now 3.90% nationwide with an accompanying 0.8 discount points and a full set of closing costs. Borrowers in Chicago wishing to pay no points, which is typical for our area, should expect higher rates than the Freddie Mac average.

The average 15-year mortgage rate is 3.17% with 0.8 discount points and closing costs.

This week, mortgage rates should be volatile. There aren’t many new data points set for release, but the ones on the calendar are bona fide market-movers — especially Friday’s Non-Farm Payrolls Report.

More commonly called the “jobs report”, Non-Farm Payrolls data is closely watched because of the jobs market’s close ties to the health of the economy. Businesses have added jobs through 16 straight months and are expected to show another 210,000 added in February. If the actual number of net new jobs added exceeds 210,000, expect for mortgage rates to rise.

If the number falls short, watch for rates to fall.

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Will YOU get a piece of the $ 25 Billion Housing Settlement?

Posted on February 10, 2012 by Bonnie Vasilion

The answer: Probably not . . .

 The announcement of a $ 25 billion settlement with banks over alleged foreclosure abuses is mainly just a headline win for banks and politicians.  What’s new, right?

 In a nutshell, unless your loan is owned by one of the 5 banks (NOT backed or owned by Fannie/Freddie, but actually owned by Ally, Bank of America, JP Morgan Chase, Citigroup or Wells Fargo), and unless you are close to default, this settlement won’t provide opportunities for you.

If you haven’t refinanced since Summer 2011, you probably should consider doing so, with rates at historic lows, and looking to be trending upward vs. lower.  (Upward trend based on not only  improved economic conditions, but also the fact that Fannie/Freddie are paying for the temporary payroll tax cut—yes, that sounds wrong, but it is true—and those costs are starting to be added to rates, i.e. people financing their homes are in fact paying for this tax cut.

 We continue to face challenges getting people to qualify for refinances due to lack of equity in their homes; we are hoping the when the “HARP2”  or 2nd version of “Home Affordable Refinance Program” comes out this Spring, more people will be eligible to refinance.

 Thank you in advance for your patience as I respond to inquiries during these unusually busy times, and thank you for continuing to send me your friends and family referrals.

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Yes: Mortgage rates are (once again) at an all time low

Posted on January 17, 2012 by Bonnie Vasilion

Greece still roiling U.S. mortgage marketsMortgage rates improved slighly last week as global demand for mortgage-backed bonds helped push mortgage rates to new lows.

According to Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate mortgage rate fell to 3.89% nationwide. In order to get access to 3.89% mortgage rates, Freddie Mac said, mortgage applicants should expect to pay a full set of closing costs plus 0.7 discount points. Here in Illinois, where most borrowers do not pay closing costs, the rates are slightly higher–by about .125 or 1/8th, but our costs to refnance here are signficantly less (expect to pay around $ 2,000 for everything).

1 discount point is equal to 1 percent of your loan size, so .70 would be .7%.  For example, on a $ 250,000, 1 point = $ 2,500 (this is IN ADDITION TO closing costs, which again, are around $ 2,000).  The national .70 average Freddie cited would equal $ 1,875.

Loans with “low closing costs” or “no closing costs” will be at higher rates than Freddie Mac’s published, average rate.

The biggest reason why mortgage rates fell last week is because — once more — concerns over European sovereign debt resurfaced on Wall Street. This has been an ongoing story for more than a year, and one that won’t likely end soon.

Several Eurozone nations saw their respective credit ratings downgraded last week, a move that sparked safe haven buying of U.S. mortgage bonds. France was stripped of its top credit rating. Slovakia, Italy and Austria were each downgraded, too.

Markets were also influenced by a conflict between Greece’s creditor banks and the nation-state’s government. The breakdown in talks increases the likelihood of the Eurozone’s first sovereign default.

Expect mortgage rates to follow the Eurozone story this week. Pessimism and weak data will be good for mortgage rates in Illinois and nationwide. Strength will lead mortgage rates higher.

If you’re still floating a mortgage rate or have otherwise yet to lock, mortgage rates are lower than they’ve been in history. It’s an ideal time to lock in an interest rate commitment.

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The Year Has Begun: Experts Make (conflicting) 2012 Predictions

Posted on January 4, 2012 by Bonnie Vasilion

What's next for housing in 2012We are now six days into the New Year, with no shortage of stories telling us what to expect in 2012. Housing finished 2011 with momentum and mortgage rates closed at the lowest rates of all time.

Some expect those trends to continue through the first quarter and beyond. Others expect a rapid reversal.

Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered arguments views. It’s tough to know who to believe.

For example, here are some “on-the-record” predictions for 2012 :

The issue for buyers, seller, and would-be refinancers in Chicago and nationwide is that it can be a challenge to separate a “prediction” from fact at times. 

When an argument is made on the pages of a respected newspaper or website, or is presented on CNBC or Bloomberg by a well-dressed, well-spoken industry insider, we’re inclined to believe what we read and hear.

This is human nature.

However, we must force ourselves to remember that any analysis about the future — whether it’s housing-related, mortgage-related, or something else – is based on a combination of past events and personal opinion.

Predictions are guesses about what might come next — nothing more.

For example, at the start of 2009, few people expected the 30-year fixed rate mortgage to stay below 6 percent, but it did. Then, at the start of 2010, few people expected the 30-year fixed rate mortgage to stay below 5 percent, but it did.

All we can know for certain about today’s market is that both mortgage rates and home values are low, creating favorable home-buying conditions in and around North Shore and nationwide.

At that start of last year, few people expected mortgage rates to even reach 4 percent. Just recently a few lucky people financed rates in the 3′s.

What 2012 has in store we just can’t know. Feel free to contact me to see what’s available to you and for your particular scenario.

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Rates for the week of December 19th: Not Getting Any Better Any Time Soon

Posted on December 19, 2011 by Bonnie Vasilion

Fed Funds RateSorry for the delay in writing weekly updates; as luck would have it, I was involved in a flurry of purchase activity, and wasn’t tracking rates in a way where I could communicate accurately as to what was happening.

Mortgage markets improved last week, but by a slight amount only; not enough to move conventional mortgage rates in Illinois–or anywhere–in any significant manner.

Wall Street watched as Eurozone leaders expressed little willingness to increase aid programs within the region, and as the Federal Reserve voted against new economic stimulus for the United States. The Fed Funds Rate remains near 0.000 percent and QE3 was not introduced.

Investors had expected the opposite outcome in both scenarios.

In most weeks, these stories would have led mortgage rates lower. There was, however, a fair amount of data suggesting that the U.S. economy is in recovery, and that tempered any major shifts in markets.

  • Manufacturing data proved to be strong
  • Inflation numbers are heating up
  • Jobless claims continue to drop, week-to-week

In addition, in its last meeting of the year, the Federal Reserve specifically mentioned that the economy has been “expanding moderately”.

These are all good signs for the future of the U.S. economy. Unfortunately, for mortgage rate shoppers and would-be home buyers, it may mean higher mortgage rates ahead.

Since early-November, mortgage rates have idled, moving within a range of less than 2 basis points and centered on 3.99%. According to Freddie Mac, this week’s average 30-year fixed rate mortgage fell to 3.94% which, at first glance, appears to be a “dip”.

To get access to that rate, however, requires more discount points as compared to prior weeks.

This week’s 3.94% with its accompanying 0.8 discount points is the financial equivalent of last week’s 3.99% with its accompanying 0.7 discount points. Going further, last week’s rates are actually less expensive to mortgage applicants for the first 3 years of a loan because the closing costs are so much lower.

So, given global economic conditions and the mortgage bond market’s status as a “safe market”, the failure of mortgage rates to fall suggests that this may be as low as mortgage rates get. It’s time to look at locking in.

This week is a holiday-shortened week. Markets will close early-Friday and volume is expected to be thin. Therefore, expect exaggerated movements in rates. There are 3 releases related to housing (Housing Starts, Existing Home Sales, New Home Sales) and a consumer sentiment release.  Give me a call on my new direct number at 847-720-7742 to discuss your own loan scenario.

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“HARP 2″ Guidance For Underwater Homeowners: What does it really mean?

Posted on November 16, 2011 by Bonnie Vasilion

Making Home Affordabie

Yesterday Fannie Mae and Freddie Mac unveiled lender instructions for the government’s revamped HARP program, kick-starting a potential refinance boom across Illinois and nationwide. And I put emphasis on the word “potential”.

HARP stands for Home Affordable Refinance Program. The updated program is meant to give “underwater homeowners”, or borrowers who owe more than their home is worth, an opportunity to refinance at today’s low mortgage rates.

In the two-plus years since its launch, HARP’s first iteration helped fewer than 900,000 homeowners. HARP II, by contrast, is said to hopefully reach millions.  Time will tell if this actually happens.

Lenders begin taking HARP II loan applications December 1, 2011. However, please note that these are just government GUIDELINES:  the banks and lenders are not obligated to adhere to these, and with “HARP I”, what lenders offered was less lenient than what the government guidelines suggested would be possible.

To apply for HARP, applicants must first meet 4 basic criteria :

  1. The existing mortgage must be guaranteed by Fannie Mae or by Freddie Mac
  2. The existing mortgage must have been securitized by Fannie Mae or Freddie Mac prior to June 1, 2009
  3. The mortgage payment history must be perfect going back 6 months
  4. The mortgage payment history may not include more than one 30-day late payment going back 12 months 

For HARP applicants, loan-level pricing adjustments are waived in full for loans with terms of 20 years or fewer; and maxed at 0.75 for loans with terms in excess of 20 years.

This could result in  lower mortgages rates for HARP applicants — especially those with credit scores below 740. Some applicants will find HARP mortgage rates lower than for a “traditional” conventional mortgage.

In addition, there is talk of an ”unlimited LTV” (loan-to-value) feature which only applies to fixed rate loans or 30 years or fewer. ARMs are capped at 105% loan-to-value. Again, as we saw in the past, when the old program set a maximum LTV, the lenders lowered their maxium to less than the program guideline.  So time will tell what true maximum will come of this.

Bottom line: it’s a step in the right direction. I am looking forward to seeing how this actually is implemented in the marketplace.  As always, please contact me regarding your particular loan scenario.

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Same old news for mortgage rates the week of November 14th: watching Europe

Posted on November 14, 2011 by Bonnie Vasilion

Italy influencing U.S. mortgage ratesAmid a dearth of new U.S. economic data, Eurozone developments led mortgage markets down in last week’s holiday-shortened trading week. Mortgage rates across Illinois worsened slightly, increasing week-over-week for the first time in a month.

Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with an accompanying 0.7 discount points. Discount points are loan fees, and 1 discount point is equal to 1 percent of your loan size. In Illinois, the 0 point rate was closer to 4.00%/4.125%.

Greece has dominated mortgage market headlines since February. As the nation-state aims to reign in its national spending, it has also adopted harsh austerity measures. The combination is meant to prevent future debt defaults, but global investors remain concerned that problems in Greece may spill over into other Eurozone nations.

As those concerns have grown, U.S. mortgage markets have benefited. This is because U.S. mortgage markets are backed by the U.S. government, and investors treat the U.S. mortgage market as “safe” compared to other security-types.

Safe investments are in high demand during uncertain times, often improving in price. This pattern is known as Safe Haven Buying and it’s one reason why mortgage rates tend to fall when the economy is sagging. Mortgage rates move opposite of mortgage bond prices.

This week, U.S. economic data returns, but markets will still be watching the Eurozone. Sunday, Italy changed leadership, in part, to restore market confidence in its ability to get its debt load under control. 

Expect developments in Italy to sway U.S. mortgage rates this week. In addition, rates will respond to a rash of economic data and Fed speakers :

  • Tuesday : Producer Price Index, Retail Sales, 5 Fed speakers
  • Wednesday : Consumer Price Index, Housing Price Index, 2 Fed speakers
  • Thursday : Housing Starts, Jobless Claims, 1 Fed speaker

Mortgage rates remain near all-time lows, with not much room to drop. If you’re shopping for a mortgage rates, therefore, consider locking in. As Greece and Italy show signs of moving forward, expect Safe Haven Buying to recede, and mortgage rates to rise.

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Revisions to national refinancing program announced: Don’t get your hopes up

Posted on October 24, 2011 by Bonnie Vasilion

Don’t get too excited: In summary, my take on this announcement is that it’s the extension of the current “Home Affordable Refinance Program”  (“HARP”) that isn’t currently working. 

Below is a link to the press release issued by the Feds, Federal Housing Finance Agency.  If you read it, you will notice the key sentence—the closing sentence: “Since industry participation in HARP is not mandatory, implementations schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.” 

http://www.fhfa.gov/webfiles/22721/HARP_release_102411_Final.pdf

Take this example:  The guidelines of the current HARP program state that one can borrow up to 125% of appraised value for fixed rate loans backed by Freddie and Fannie.  HOWEVER, most lenders said, “Tough; we’ll only lend up to 105%”.  Per the announcement today, the 125% restriction will be removed by Fannie/Freddie.  That means nothing, if the lenders don’t remove it .  

This article, link below, from the Wall Street Journal does a very good job explaining the current situation in lending and alluded to the implications of today’s announcement, and if you’re choosing which link to read, read this one:

 http://online.wsj.com/article/SB10001424052970204346104576638931114550132.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsTop

 I don’t want to sound too skeptical here, and I hope I am wrong about my expectations for the program, but please be wary of what you will be reading in the coming weeks. There will be a lot of “spin” coming out on the story. I will try to keep you posted on any real opportunities that arise, should they occur. Program details are expected mid November with implementation early December.

 One final note: if you are in the process of refinancing or have refinanced already, congratulations.  IF the system opens up to more people eligible to refinance, lenders are not equipped to handle increased volume, and they will raise rates to slow incoming business, or choose to make the business they have more profitable by raising rates.  Again, think “supply and demand” at play.

 



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Greece and the Jobs Report: Week of October 3, 2011 Volatile for Rates

Posted on October 3, 2011 by Bonnie Vasilion

Jobs report due this weekMortgage markets deteriorated last week as optimism for a Greek rescue package increased, and as U.S. consumers showed that, despite falling income levels, spending will not be slowed.

As reported by the government, household income dropped in August, falling 0.1 percent and marking the first monthly dip since 2009. Yet, consumer spending still rose, tacking on 0.1 percent. Consumer spending accounts for 70 percent of the U.S. economy.

In addition, last week Eurozone leaders approved a funding increase for the European “bailout fund”. The additional funding raises the probability that Greece will avoid default on its sovereign debt, and that other nations including Italy, Spain, Ireland and Portugal will avoid similar default scenarios.

The moves drew money away from mortgage markets, causing rates to rise.

Conforming mortgage rates in Illinois climbed last week, stymying would-be refinancers in search of the lowest mortgage rates in 60 years. Nationally, fixed rate mortgages were higher by as much as 0.25%.

This week, rates may continue climbing.

First, European leaders are expected to finalize the details of a Greek aid package, a move that would reverse the “safe haven” bid which has played a large role in keeping U.S. mortgage rates lows.

Second, the jobs report is due.

Economists are expecting 65,000 net new jobs in September and a slight increase in the Unemployment Rate. A deviation from either consensus expectation should cause mortgage rates to move. 

If it’s shown that more than 65,000 jobs were created last month, mortgage rates should rise on the prospect of a recovering economy. To the contrary, though, if it’s shown that fewer than 65,000 jobs were created, mortgage rates should fall.

The jobs report will be released Friday morning, 8:30 AM ET.

If you’re shopping for a mortgage right now, be aware that rates could move in either direction, but there’s a lot more room for rates to rise than to fall. The “safe” course of action is to lock a rate today.

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