Fixed Mortgage Rates Lowest Level In Nearly 60 Years

 

So what was happening in April 1951, the last time that 30-year, fixed-rate mortgages were this low?  Harry Truman was in office — 12 presidents ago!  All in all, it took nearly 60 years for rock-bottom mortgage rates to come full circle, but here we are.

The Freddie Mac Primary Mortgage Market Survey reported the average rate for a 30-year, fixed-rate mortgage was 4.19% with an average 0.8 origination point for the week ending Oct. 14, down from last week’s average of 4.27%. A year ago the average was 4.92%. This is the lowest rate the survey has recorded since its inception in 1971. Mortgage rates were last at this level in April 1951, according to Freddie Mac. 

Rates for 15-year, FRMs are falling steeply, setting a new low for Freddie Mac. The GSE said the rate was down to 3.62% with an average origination point of 0.8. The rate for a 15-year FRM was 4.37% a year earlier.  Further, Freddie Mac commented that the September employment report held no big surprises to the financial market, allowing long-term bond yields and fixed mortgage rates to continue easing.

Bankrate reported the average rate for a 5-year, ARM fell last week to 3.62% from 3.64% previously. The one-year Treasury-indexed ARM averaged 3.43% with an average 0.7 point up slightly from 3.4%. At this time last year, the one-year ARM averaged 4.6%.

Coincidentally, Seattle-based Dupre + Scott Apartment Advisors’ latest report predicts that based on historic rents and incomes over the last 30 years, Puget Sound-area rents could climb almost 25 percent by 2015 and 50 percent by 2020.  They also discovered that while rent rates fell during the last two recessions, it wasn’t by that much.  AND, when the economy rebounded, so did rent rates.  Add historically low interest rates to low apartment construction levels forecasted for 2011 and 2012 and  we’re telling you, the time is ripe for buying!  Contact us at this Stroupe Group link and let’s talk some more.

Transparency in the Mortgage Industry

The mortgage industry is now being forced to take part in a positive new trend as we close out the new millennium’s first decade–transparency.  There’s no arguing that businesses which have modeled after this behavior have not only forced upon themselves the additional responsibility of maintaining a higher level of integrity, but have also shown to do more business.  Imagine that!  Some of the changes that are being proposed is to explain “fine print” in “plain English” so that the American home buyer can actually understand what they’re signing.  Hidden fees that pay a broker for selling a higher-cost loan are also looking at being banned.   Considering that competition may have been one of the industry’s ultimate self-inflicted causes for its own fall, competition will also likely diminish, since those that cannot make the procedural changes will be forced out of business.

The days of “creative lending” may thankfully also be a term of the past.  Those proposing new lending standards are suggesting borrowers first be offered a “plain vanilla” mortgage.  If a borrower is to be offered anything other than the likely 30-year fixed-rate mortgage (among other basic loans), people will be required to opt into them along with being warned that they are doing something unusual.

Bottom line is that lawmakers are working to prevent another mortgage crisis from happening again by making the process more understandable.  We suspect that the $8,000 tax credit will not be extended since it seems to have definitely increased buyer activity during a recession.  However, as the end of the year creeps upon us, there will be more of a need for buyers to remain educated on qualifying for a mortgage.  Here is a list of useful websites the Seattle Times put together:

Bankrate.com

http://www.bankrate.com/brm/green/mtg/mort1a.asp
Good primer on different types of mortgage borrowing.

Federal Deposit Insurance Corp.

http://www.fdic.gov/consumers/looking/
Features guidelines and tips for securing a mortgage.

Home Loan Learning Center

http://www.homeloanlearningcenter.com/MortgageBasics.htm
Discusses a range of borrowing topics, including qualifying for a mortgage and mortgage types.

Home Mortgage Calculator

http://www.home-mortgage-calculator.net/how-much-should-i-borrow.asp
Provides insights on how much to borrow for a mortgage.

Mortgage Info Center

http://mortgageinfocenter.com/tips/default.asp
Offers dozens of mortgage-borrowing tips over five pages.

Multiple Mortgages to One Borrower

Our buyer activity has picked up and we have also received more interest from investors who are looking to purchase blocks of condominiums. Therefore, we wanted to take a minute to explain some details on how multiple mortgages to one borrower works.

First off, in addition to a borrowers principal residence, a borrower may own up to nine additional properties on Fannie Mae loans if the mortgage is secured by a second home or investment. If a borrower currently owns five to ten  properties, then certain conditions must be met. Also, a borrower must not be affiliated with the builder, developer, or seller on the property.

Because owning multiple investment properties can affect the ability to repay mortgage debt if for some reason the property was to remain unrented for an extended period of time, Fannie Mae does require a borrower to be secured by investment properties that have a financial reserves.

The following guidelines must be met for investor and second home borrowers who are interested in owning five to ten financed properties:

Eligibility Requirements for Five to Ten Financed Properties

Transaction Type	Number of Units	Maximum LTV/CLTV/HCLTV	Minimum Credit Score
Second Home or Investment Property
Purchase	1 Unit	75/75/75	720
Limited Cash Out Refi	1 Unit	70/70/70	720
Investment Property
Purchase & Limited Out Refi	2-4 Unit	70/70/70	720

Additionally:

• No history of bankruptcy of foreclosure within past seven years
• No 30 day delinquencies within the past 12 months on mortgages
• Rental income must be documented with two years of tax returns, regardless of the DU condition
• Borrower must sign and IRS Form 4506 or 4506-T at application and those IRS transcripts must be obtained prior to closing the validate the accuracy of the tax returns (potential 30 to 60 day process)
• Reserve requirements must be met for the subject and all other properties currently owned
• Does not apply to Renovation or One Step loans which restricts borrower to four financed properties
• Must run through DU and then submit to underwriting for review with IRS transcripts

Reserve Requirements for Investment Properties and Second Homes

• Six months reserves are required for all investor transactions.
• When borrower owns one to four financed properties, requirements are:
  • 2 months reserves on subject property if 2nd home
  • 6 months reserves on subject property if investment property AND
  • 2 months reserves on each other financed second home or investment property

• When borrower owns five to ten financed properties, requirements are:
  • 2 months reserves on subject property if second home
  • 6 months reserves on subject property if investment property AND
  • 2 months reserves on each other financed second home or investment property

Reserves are defined as all components of the monthly housing expense. All of the following must be included when calculating the appropriate reserve requirement:

• Principal, interest, taxes, insurance
• Ground rent, special assessments or any owner’s association dues
• Any subordinate financing payments on mortgage secured by the subject property

Need additional information? Contact us.

Foreclosure Buyers Beware: Read that Fine Print!

Watch for this Clause:

Transfer taxes/Tax Stamps – Regardless of local custom or practice, the purchaser shall pay and all real estate transfer taxes due as a result of the conveyance of this property.

An agent informed us that she and her buyer had missed the clause above when the lending bank selling a foreclosed property countered with their purchase and sale agreement paperwork.  With more and more buyers moving towards the purchase of foreclosed properties, we had to make the communication for the record.  It is ultimately YOUR responsibility to read your documents thoroughly and be aware of what you’re signing!  Fortunately, the buyer in mention had a sizeable downpayment (as any foreclosure buyer must have) so they were able to increase their loan amount to cover the extra $6,200 this clause covered.  Still, that’s too much money to overlook.

Is a Fed rate cut really good news for mortgage rates?

There’s been a lot of news regarding Fed rate cuts and thought those of you who may be considering these cuts as the right time to refinance should get some additional information before calling your mortgage officer. In a recent CNBC article, Barry Habib explains how Fed rates and mortgage rates differ.

The bottom line is that it appears mortgage rates will get better if the stocks sell off and will get worse if the stocks rally. So it is not necessarily what the Fed does that affects mortgage rates, it’s how the Nasdaq and broader stock market interprets the Fed’s action that will ultimately influence the direction of mortgage rates.