From the desk of:
Rich Storey
Mortgage Advisor
615.260.8028
Credited to: www.WashingtonPost.com
30-Year Loan Rates at 37-Year Low
By Alan ZibelAssociated Press Saturday, December 20, 2008; Page F04
Rates on 30-year, fixed mortgages dropped this week to their lowest levels in at least 37 years as the Federal Reserve pledged to pour money into the mortgage market to spur the moribund U.S. housing sector.
Freddie Mac reported Thursday that average rates on 30-year, fixed-rate mortgages dropped to 5.19 percent from the year's previous low of 5.47 percent, set last week.
The rate is the lowest since Freddie Mac's weekly mortgage rate survey began, in April 1971.
Mortgage rates started falling after the Federal Reserve launched a sweeping effort in late November to aid the U.S. housing market by buying up to $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Other gauges of rates also showed them falling through the week.
It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage because only borrowers with stellar credit can qualify.
"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "Unfortunately, it's not an equal-opportunity party."
Faced with a surge in defaults, Freddie Mac and its sibling company, Fannie Mae, are stepping up efforts to prevent foreclosures.
The federal agency that regulates the two companies anticipates that they will modify about 75,000 troubled loans next year, up from about 60,000 this year. The program applies only to borrowers who have missed three months of payments, have not filed for bankruptcy and still live in their homes.
Most of the increase is expected to result from a mass loan-modification program for loans owned by Fannie Mae or Freddie Mac that was launched this week. Loan servicing companies, which collect mortgage payments for Fannie and Freddie, are expected to send out thousands of letters to eligible borrowers in the coming weeks.
Borrowers who are current on their mortgages can take advantage of lower interest rates and refinance to save money.
The average rate on 15-year, fixed-rate mortgages dropped to 4.92 percent from 5.2 percent last week, Freddie Mac said.
Rates on five-year, adjustable-rate mortgages fell to 5.6 percent from 5.82 percent. Rates on one-year, adjustable-rate mortgages dropped to 4.94 percent from 5.09 percent.
The rates do not include add-on fees known as points. The nationwide average fee for 30-year and 15-year mortgages was 0.7 point last week. Fees on five-year, adjustable-rate mortgages averaged 0.6 point, while fees on one-year adjustable-rate mortgages averaged 0.5 point.
The Federal Reserve, aiming to free up lending and jolt the economy, on Tuesday cut the federal funds rate from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.
Monday, December 22, 2008
Wednesday, December 17, 2008
Can Mortgage Rates Fall Further???
From the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
Credited to: The Tennessean
Mortgage rates are down, but can they fall further?
Mortgage rates have been on the decline, but speculation is rife that rates are headed still lower. I spoke Friday with Scott Ractliffe, president of the Tennessee Mortgage Bankers Association, about whether now is the right time to refinance or consider a home loan.
Where are rates now?
The 30-year fixed rate is in the low 5s, probably in the 5.25 range. … Two weeks ago, it was 6 to 61/8.
What's bringing them down?
The primary cause was when (the federal government) decided to buy mortgage-backed securities directly. The more buyers there are for mortgage-backed securities, that drives prices up and inversely drives the yield down. Anytime a lot of people are buying mortgage-backed securities and bonds, mortgage rates go down. … If they're not buying stocks and they're going to invest in something, and if investment dollars are flowing towards bonds, then they're also flowing towards mortgages.
We've been hearing a lot about rates perhaps dropping to 4.5 percent. Why?
One reason would be partly political. In order for the overall economy to start to rebound, home prices have got to stabilize, foreclosures have to get under control in terms of numbers, and a very low mortgage rate would help with both of those things. There's a lot of talk on Capitol Hill of what can they do. There's really no target level … but they all realize — we all realize — that rates in the mid-4s would create a lot of activity.
There are no specifics of what that might look like. It could be only for purchase money. It could be only certain income brackets. Which is why I warn people, if they're thinking about refinancing, not necessarily to wait.
Another reason is if you're looking at mortgages historically, rates average a 1½ percent spread over Treasury yields. … Today it's about 2½, so you should have a rate of 4½. Mortgage rates are still artificially high on that basis.
That would be a reason to wait, wouldn't it?
That's true, but that spread has been 2 to 2½ percent for months. I guess the question is when will those spreads come back to normal, and when they come back to normal, whether yields will go up or rates will come down. It's kind of a gamble either way.
What's your prediction?
It looks like we do have a little farther to fall, but I guess how far is anybody's guess. So much of it depends on the economy overall. As long as the economy, like retail sales, corporate profits and so forth, are staying really, really low, we're looking at the possibility of mortgage rates continuing to drop.
Once we see some signs of strengthening, money will start to be pulled out of the safe havens they're in now. … They (rates) could rise quickly when they come back up.
Rich Storey
Mortgage Advisor
615-260-8028
Credited to: The Tennessean
Mortgage rates are down, but can they fall further?
Mortgage rates have been on the decline, but speculation is rife that rates are headed still lower. I spoke Friday with Scott Ractliffe, president of the Tennessee Mortgage Bankers Association, about whether now is the right time to refinance or consider a home loan.
Where are rates now?
The 30-year fixed rate is in the low 5s, probably in the 5.25 range. … Two weeks ago, it was 6 to 61/8.
What's bringing them down?
The primary cause was when (the federal government) decided to buy mortgage-backed securities directly. The more buyers there are for mortgage-backed securities, that drives prices up and inversely drives the yield down. Anytime a lot of people are buying mortgage-backed securities and bonds, mortgage rates go down. … If they're not buying stocks and they're going to invest in something, and if investment dollars are flowing towards bonds, then they're also flowing towards mortgages.
We've been hearing a lot about rates perhaps dropping to 4.5 percent. Why?
One reason would be partly political. In order for the overall economy to start to rebound, home prices have got to stabilize, foreclosures have to get under control in terms of numbers, and a very low mortgage rate would help with both of those things. There's a lot of talk on Capitol Hill of what can they do. There's really no target level … but they all realize — we all realize — that rates in the mid-4s would create a lot of activity.
There are no specifics of what that might look like. It could be only for purchase money. It could be only certain income brackets. Which is why I warn people, if they're thinking about refinancing, not necessarily to wait.
Another reason is if you're looking at mortgages historically, rates average a 1½ percent spread over Treasury yields. … Today it's about 2½, so you should have a rate of 4½. Mortgage rates are still artificially high on that basis.
That would be a reason to wait, wouldn't it?
That's true, but that spread has been 2 to 2½ percent for months. I guess the question is when will those spreads come back to normal, and when they come back to normal, whether yields will go up or rates will come down. It's kind of a gamble either way.
What's your prediction?
It looks like we do have a little farther to fall, but I guess how far is anybody's guess. So much of it depends on the economy overall. As long as the economy, like retail sales, corporate profits and so forth, are staying really, really low, we're looking at the possibility of mortgage rates continuing to drop.
Once we see some signs of strengthening, money will start to be pulled out of the safe havens they're in now. … They (rates) could rise quickly when they come back up.
Monday, December 8, 2008
Time to refi??
From the desk of:
Rich Storey
Mortgage Advisor
615-260.8028
Credited to: www.CNNMoney.com
Mortgage applications more than double
Bankers' group cites Fed's bailout of Fannie and Freddie for plummeting rates, with refinancing leading the way.
NEW YORK (CNNMoney.com) -- Mortgage applications more than doubled last week, a mortgage bankers' group said Wednesday, as government bailouts led to sinking interest rates that made refinancing especially more attractive.
In the weekly report, the Market Composite Index - the association's measure of mortgage loan application volume - surged 112.1% on a seasonally adjusted basis from the week earlier.
On an unadjusted basis, the index increased 51.4% from the previous week; it was down 21.9% from a year earlier, the report said. Results included an adjustment to account for the Thanksgiving holiday.
Rates plummeted following the Fed's announcement that it would buy debt and mortgage-backed securities from mortgage finance companies Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), according to Orawin Velz, associate vice president of economic forecasting, in a statement.
"Many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound," Velz said.
The Mortgage Bankers Association said 30-year fixed-rate mortgages fell to 5.47% this week. That's was down from 5.99% last week.
Rates on 15-year fixed-rate mortgages fell to 5.13% from 5.78%, the report said. The rate on a one-year adjustable-rate mortgage declined to 6.61% from 6.87%.
Refinancing
While the application statistics were high, "this is more a refinance story than a purchase story," said Mike Larson, real estate and interest rate analyst at Weiss Research.
The report's Refinance Index increased 203.3% to 3802.8 from the previous week, and the seasonally adjusted Purchase Index increased 37.4%.
"While purchasing a home is a big commitment, refinancing is often a no-brainer," Larson said. "You may be less inclined to go buy a house in this weak economy. Refinancing will go forward if the gains can hold."
In the short-term, the Fed "did manage to get quite a bit of bang for their buck," Larson said. "Most things they've done so far have improved some credit spreads slightly, but you didn't see the effect on Main Street. Now, these are big numbers - the biggest we've ever seen."
Today's rates are lower because lenders' standards are tighter, Larson said, so many buyers applying may not have the equity they need for approval. As a result, more applications "might end up in the circular file rather than the closing tables," he said.
Still, Larson expected the Fed's actions will result in more staying power and success, giving stressed homeowners a bit of breathing room.
"The Fed gave us an early Christmas gift," he said.
Rich Storey
Mortgage Advisor
615-260.8028
Credited to: www.CNNMoney.com
Mortgage applications more than double
Bankers' group cites Fed's bailout of Fannie and Freddie for plummeting rates, with refinancing leading the way.
NEW YORK (CNNMoney.com) -- Mortgage applications more than doubled last week, a mortgage bankers' group said Wednesday, as government bailouts led to sinking interest rates that made refinancing especially more attractive.
In the weekly report, the Market Composite Index - the association's measure of mortgage loan application volume - surged 112.1% on a seasonally adjusted basis from the week earlier.
On an unadjusted basis, the index increased 51.4% from the previous week; it was down 21.9% from a year earlier, the report said. Results included an adjustment to account for the Thanksgiving holiday.
Rates plummeted following the Fed's announcement that it would buy debt and mortgage-backed securities from mortgage finance companies Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), according to Orawin Velz, associate vice president of economic forecasting, in a statement.
"Many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound," Velz said.
The Mortgage Bankers Association said 30-year fixed-rate mortgages fell to 5.47% this week. That's was down from 5.99% last week.
Rates on 15-year fixed-rate mortgages fell to 5.13% from 5.78%, the report said. The rate on a one-year adjustable-rate mortgage declined to 6.61% from 6.87%.
Refinancing
While the application statistics were high, "this is more a refinance story than a purchase story," said Mike Larson, real estate and interest rate analyst at Weiss Research.
The report's Refinance Index increased 203.3% to 3802.8 from the previous week, and the seasonally adjusted Purchase Index increased 37.4%.
"While purchasing a home is a big commitment, refinancing is often a no-brainer," Larson said. "You may be less inclined to go buy a house in this weak economy. Refinancing will go forward if the gains can hold."
In the short-term, the Fed "did manage to get quite a bit of bang for their buck," Larson said. "Most things they've done so far have improved some credit spreads slightly, but you didn't see the effect on Main Street. Now, these are big numbers - the biggest we've ever seen."
Today's rates are lower because lenders' standards are tighter, Larson said, so many buyers applying may not have the equity they need for approval. As a result, more applications "might end up in the circular file rather than the closing tables," he said.
Still, Larson expected the Fed's actions will result in more staying power and success, giving stressed homeowners a bit of breathing room.
"The Fed gave us an early Christmas gift," he said.
Thursday, December 4, 2008
Treasury Considers Dropping Rates to 4.5%
From the desk of:
Rich Storey
Mortgage Advisor
615-260.8028
Credited to: www:WashingtonPost.com
Treasury Considers Plan to Stem Home-Price Decline
Rates Could Be as Low as 4.5% for Newly Issued Loans
WASHINGTON -- The Treasury Department is considering a plan to revitalize the U.S. housing market by reducing mortgage rates for new loans, according to people familiar with the matter.
The plan, which is in the development stages, would use mortgage giants Fannie Mae and Freddie Mac to bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages.
Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.
Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S.
Rich Storey
Mortgage Advisor
615-260.8028
Credited to: www:WashingtonPost.com
Treasury Considers Plan to Stem Home-Price Decline
Rates Could Be as Low as 4.5% for Newly Issued Loans
WASHINGTON -- The Treasury Department is considering a plan to revitalize the U.S. housing market by reducing mortgage rates for new loans, according to people familiar with the matter.
The plan, which is in the development stages, would use mortgage giants Fannie Mae and Freddie Mac to bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages.
Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.
Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S.
Tuesday, December 2, 2008
FED HINTS AT ANOTHER RATE CUT
From the desk of:
Rich Storey
Mortgage Advisor
615.260.8028
Credited to: www.CNNMoney.com
Fed hints at rate cut, lowers forecast
The Fed reduces its GDP projection, signals additional interest rate cuts and sees unemployment over 7% next year.
WASHINGTON (AP) -- The Federal Reserve on Wednesday sharply lowered its projections for economic activity this year and next, and signaled that additional interest rate reductions may be needed to help combat the worst financial crisis to jolt the country in more than a half-century.
With the economy forecast to lose traction, or even jolt into reverse, unemployment will move higher, the Fed predicted.
Facing the likelihood of "significant weakness" in the economy, some Fed officials suggested "additional policy easing could well be appropriate at future meetings," according to documents from the Fed's most recent closed-door deliberations on interest rate policy at the end of October.
At that Oct. 29 session, the Fed ratcheted down rates to 1%, a level seen only once before in the last half-century. Many economists predict the Fed will lower rates again at its last meeting of the year on Dec. 16, to help brace the sinking economy.
Even while hinting that another rate reduction could be forthcoming, Fed officials worried that the effectiveness of previous rate cuts "may have been diminished by the financial dislocations, suggesting that further policy action might have limited efficacy in promoting a recovery in economic growth," the documents said.
Unprecedented steps
To help ease financial turmoil and spur banks to lend money more freely again to customers, the Fed has taken a series of other unprecedented steps, including offering short-term cash loans and buying up mounds of short-term debt that companies rely on to pay day-to-day expenses like payrolls and supplies.
Under its new economic forecast, the Fed now believes gross domestic product could be flat or grow by just 0.3% this year. GDP could actually shrink by 0.2% or expand by 1.1% next year. Both sets of projections are lower than the Fed's forecasts delivered to Congress in July.
GDP is the value of all goods and services produced within the U.S. and is the best measure of the country's economic health.
The forecasts are based on what the Fed calls its "central tendencies," which exclude the three highest and three lowest forecasts made by Fed officials. The Fed also gives a range of all forecasts that showed some Fed officials projecting a 0.3% dip this year, followed by a deeper 1% contraction next year.
The economy "would remain very weak next year" and "the subsequent pace of recovery would be quite slow," according to the Fed documents.
The prospects for weaker economic activity will push up unemployment. The Fed projected that the national unemployment rate will rise to between 6.3% and 6.5% this year. The rate in October was 6.5%, and last year the rate averaged 4.6%.
Next year, the Fed expects the jobless rate to climb to between 7.1% and 7.6% - also higher than its summer forecast.
Inflation, deflation
Inflation, meanwhile, is expected to be lower this year and next compared with the Fed's previous forecast. A global economic slowdown is sapping demand for energy, food and other commodities, driving down prices. That - along with a stronger U.S. dollar - has reduced inflation risks, the Fed said.
The Fed now expects inflation to be between 2.8% and 3.1% this year. And, inflation should moderate further to between 1.3% and 2% next year. Both forecasts are lower than the projections made in the summer.
In minutes of the October meeting, the Fed said "more aggressive easing" in interest rates "should reduce the odds of a deflationary outcome."
Deflation is a prolonged and widespread decline in prices, something the U.S. hasn't seriously suffered through since the 1930s. Once established, it is hard for Fed policymakers to break. That's partly because the Fed can lower its key rate only so far - to zero - to combat it.
Earlier Wednesday, the government reported that consumer prices dropped 1%in October, the biggest monthly decline on records dating back to 1947. The sharp drop spurred concerns about the possibility - however remote right now - of deflation.
Rich Storey
Mortgage Advisor
615.260.8028
Credited to: www.CNNMoney.com
Fed hints at rate cut, lowers forecast
The Fed reduces its GDP projection, signals additional interest rate cuts and sees unemployment over 7% next year.
WASHINGTON (AP) -- The Federal Reserve on Wednesday sharply lowered its projections for economic activity this year and next, and signaled that additional interest rate reductions may be needed to help combat the worst financial crisis to jolt the country in more than a half-century.
With the economy forecast to lose traction, or even jolt into reverse, unemployment will move higher, the Fed predicted.
Facing the likelihood of "significant weakness" in the economy, some Fed officials suggested "additional policy easing could well be appropriate at future meetings," according to documents from the Fed's most recent closed-door deliberations on interest rate policy at the end of October.
At that Oct. 29 session, the Fed ratcheted down rates to 1%, a level seen only once before in the last half-century. Many economists predict the Fed will lower rates again at its last meeting of the year on Dec. 16, to help brace the sinking economy.
Even while hinting that another rate reduction could be forthcoming, Fed officials worried that the effectiveness of previous rate cuts "may have been diminished by the financial dislocations, suggesting that further policy action might have limited efficacy in promoting a recovery in economic growth," the documents said.
Unprecedented steps
To help ease financial turmoil and spur banks to lend money more freely again to customers, the Fed has taken a series of other unprecedented steps, including offering short-term cash loans and buying up mounds of short-term debt that companies rely on to pay day-to-day expenses like payrolls and supplies.
Under its new economic forecast, the Fed now believes gross domestic product could be flat or grow by just 0.3% this year. GDP could actually shrink by 0.2% or expand by 1.1% next year. Both sets of projections are lower than the Fed's forecasts delivered to Congress in July.
GDP is the value of all goods and services produced within the U.S. and is the best measure of the country's economic health.
The forecasts are based on what the Fed calls its "central tendencies," which exclude the three highest and three lowest forecasts made by Fed officials. The Fed also gives a range of all forecasts that showed some Fed officials projecting a 0.3% dip this year, followed by a deeper 1% contraction next year.
The economy "would remain very weak next year" and "the subsequent pace of recovery would be quite slow," according to the Fed documents.
The prospects for weaker economic activity will push up unemployment. The Fed projected that the national unemployment rate will rise to between 6.3% and 6.5% this year. The rate in October was 6.5%, and last year the rate averaged 4.6%.
Next year, the Fed expects the jobless rate to climb to between 7.1% and 7.6% - also higher than its summer forecast.
Inflation, deflation
Inflation, meanwhile, is expected to be lower this year and next compared with the Fed's previous forecast. A global economic slowdown is sapping demand for energy, food and other commodities, driving down prices. That - along with a stronger U.S. dollar - has reduced inflation risks, the Fed said.
The Fed now expects inflation to be between 2.8% and 3.1% this year. And, inflation should moderate further to between 1.3% and 2% next year. Both forecasts are lower than the projections made in the summer.
In minutes of the October meeting, the Fed said "more aggressive easing" in interest rates "should reduce the odds of a deflationary outcome."
Deflation is a prolonged and widespread decline in prices, something the U.S. hasn't seriously suffered through since the 1930s. Once established, it is hard for Fed policymakers to break. That's partly because the Fed can lower its key rate only so far - to zero - to combat it.
Earlier Wednesday, the government reported that consumer prices dropped 1%in October, the biggest monthly decline on records dating back to 1947. The sharp drop spurred concerns about the possibility - however remote right now - of deflation.
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