Fixed mortgage rates fall to record lows

By Derek Kravitz, Associated Press

WASHINGTON – Fixed mortgage rates have fallen to historic lows for a fourth week and are likely to fall further.

Freddie Mac says the average interest rate on a 30-year fixed mortgage fell to 4.01% this week. That's the lowest rate since 1951.

The average rate on a 15-year fixed mortgage ticked down to 3.28%. Economists say that's the lowest ever for that loan.

Mortgage rates tend to track the yield on 10-year Treasury notes. Rates could fall further after the Federal Reserve announced last week that it would try to push long-term rates down further.

But low rates have so far done little to boost home sales or refinancing.

A second report Thursday said the number of Americans who signed contracts to buy homes fell in August, after a weaker-than-expected peak buying season.

The National Association of Realtors says its index of sales agreements fell 1.2% last month to 88.6.

A reading of 100 is considered healthy. The last time the index reached that level was in April 2010, final month that buyers could qualify for a federal tax credit that has since expired.

The number of people signing home contracts rose in both May and June. But those increases didn't make up for a huge drop in April, when signings fell more than 11%. Over the past two months, signings have declined 2.5%.

Contract signings fell across most of the country. July's index fell 5.8% in the Northeast, 3.7% in the Midwest and 2.4% in the West. It rose 2.6% in the South.

Contract signings are usually a reliable indicator of where the housing market is headed. There's typically a one- to two-month lag between a contract and a completed deal.

But the Realtors group says a growing number of buyers have canceled contracts after appraisals showed the homes were worth less than the buyers had bid. A sale isn't final until a mortgage is closed.

Home loans are also harder to come by. Many lenders are requiring 20% down payments and strong credit scores to qualify.

The pace of sales for previously occupied homes is slightly above last year's 4.91 million sold, which was the fewest since 1997. In a healthy economy, Americans would buy roughly 6 million homes each year.

In August, sales of new homes fell for a fourth straight month. This year is shaping up to be the worst for new-home sales on records dating to 1963.

Even so, homes are the most affordable they've been in decades. Prices in some metro areas have been cut in half. Still, sales in most areas remain weak.

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Home Prices Climb For Fourth Straight Month

Home Prices Edge Up, but Have They Hit Bottom?

NEW YORK (CNNMoney)

Home prices in July climbed for the fourth month in a row, but are still down from a year ago.
According to the latest S&P/Case-Shiller home price index of 120 major cities, prices rose 0.9% in July compared with June, but they're still 4.1% lower than 12 months ago.

"We are far from a sustained recovery" said S&P spokesman David Blitzer. "Continued increases in home prices through the end of the year . . . must materialize before we can confirm a housing market recovery,"

Adjusted for seasonal differences, the 20-city index was flat month-over-month.
But a handful of cities have shown surprising strength recently. In Detroit for example, prices jumped 3.8% month-over-month, after spiking 5.8% in June. Minneapolis prices increased 2.6% and Washington recorded a 2.4% rise.
Weakness continued in Las Vegas, which was down 0.2% month-over-month and in Phoenix, which edged 0.1% lower.

Blitzer cited some positive signs for the struggling housing market. Existing home sales were up 20% in August compared with 12 months earlier. Foreclosures have dropped most of the year.

On the negative side, however, housing starts are near historic lows and consumer confidence remains depressed.

"These combined statistics indicate the market is still bottoming and has not turned around," he said. Stan Humphries, chief economist for the real estate website Zillow, is not optimistic about the outlook for housing."I still believe that the continued fears about a Greek default, weak employment growth and low consumer confidence will ultimately translate into weaker housing performance in the back half of this year," he said. "Looking ahead, expect fading monthly momentum in Case-Shiller."

Complicating things is that a quarter of homeowners are underwater on their mortgages, owing more than their homes are worth, making it difficult to refinance into low interest mortgages.
Underwater borrowers are also more likely to go into foreclosure since there's no home equity to tap should they run into a rough financial patch.

Even though most analysts can't work up much enthusiasm for the upward price trend, it's still welcome news, according to Anthony Sanders, a professor of real estate at George Mason University.

"Four months of price increases is a pretty good sign that the market has stabilized," he said.
A more stable market could mean that lenders will loosen up purse strings a bit, making it easier for potential homebuyers to get mortgages, which could pump up demand for homes.

That could happen, according to Sanders, but he expects some bad price trend news this fall as a weaker selling season begins.

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Visit First Capital online or call: 310-458-0010First Published: September 27, 2011: 9:10 AM ET

Mortgage lenders have already stopped making loans at old limits $729,750

By Alejandro Lazo, Los Angeles Times

September 26, 2011, 6:02 p.m.

Uncle Sam is about to take a first tentative step out of the mortgage business by lowering the size of home loans that the federal government will guarantee, and it's already hitting California neighborhoods with higher costs and bigger down payments.

The downward adjustments have ignited outcries from California politicians and sparked a campaign by the state's largest real estate group and its national partner to extend the higher limits; they argue that the Golden State's housing market and economy can ill-afford another setback to recovery.

"This is just going to kill us," said Beth L. Peerce, president of the California Assn. of Realtors. "You don't want the real estate market to get any worse than it is, and it surprises me that our congressmen and senators don't understand that."

But with Washington focused on slashing deficits, few observers predict any further extension of the 3-year-old policy that was intended to throw a lifeline to higher-priced housing markets. Most of the nation's biggest mortgage lenders have already stopped making loans at the old limits, concerned that they will not be able to get them off their books before the official Saturday deadline.

The move to lower loan limits is the first major effort by the federal government to reduce its footprint in the mortgage market. The government currently supports about 90% of new mortgages — essentially propping up the home loan market after credit dried up and home sales plunged in the wake of the subprime mortgage crisis.

The loan limit determines the maximum size of a mortgage that the Federal Housing Administration, Fannie Mae and Freddie Mac can buy or guarantee. So-called nonconforming jumbo loans that are offered by the private mortgage market typically require bigger down payments and carry a higher interest rate, driving up monthly payments for borrowers.

In February 2008, with the housing market and economy reeling, Congress raised the limits for the types of mortgages eligible to be insured or bought by the FHA, Fannie Mae and Freddie Mac. The limits, which are based on a county-by-county analysis of home values, have been extended by Congress every year since to give housing a boost.

FHA borrowers in Los Angeles and Orange counties will see loan limits drop to $625,500 from $729,750, a decline of $104,250. Other pricey areas facing the same change include San Francisco, New York and Washington.

Under the new FHA loan limits, Monterey County would see the biggest drop in the limit, falling $246,750; followed by Merced, down $201,450; Riverside, falling $164,650; San Bernardino, declining $164,650; Solano, dropping $157,300; and San Diego, down $151,250.

Fannie Mae and Freddie Mac loan limits will also follow those changes except when they call for dropping the limit below $417,000, which was the old jumbo limit for Fannie and Freddie loans. When that happens, the limits will drop to no lower than $417,000.

Real estate professionals are bracing for the policy change to hit California hard, as buyers begin learning that they may no longer be able to afford the higher-priced homes they had been considering. The California Assn. of Realtors estimates that more than 30,000 California buyers statewide will face bigger down payments, higher mortgage rates and stricter requirements under the adjustment.

Syd Leibovitch, president of Rodeo Realty in Beverly Hills, said many deals by his brokers involve loans done at the highest amount allowed under the old limits.

"It is not going to be good," Leibovitch said. "The majority of our deals are 729-FHA loans because they are the easiest to qualify."

Sen. Dianne Feinstein (D-Calif.) co-sponsored a bill in early August that would allow the higher limits to stay in place for an additional two years. The real estate and mortgage industries also have been lobbying hard to keep those limits.With the nation still recovering from the credit crisis, there is virtually no mortgage market outside the loans eligible for government guarantees. Still burned from the subprime mortgage meltdown, very few investors want to buy a mortgage unless it carries government backing, said Guy Cecala, publisher of Inside Mortgage Finance.

But as time runs out, pleas by industry groups appear to be going nowhere. The government is arguing that taxpayers can no longer afford the cost and risk of subsidizing home loans on a grand scale.

"Everybody is asking California to take one for the team," Cecala said. "It is the largest mortgage market in the country, it is the largest state in terms of mortgage activity and it is also the highest cost, where more mortgages are made at the limit than in any other state. It is basically ground zero to a downward adjustment in the loan limits."

The lower limits arrive at a time when lenders are eyeing borrowers more closely than ever to make sure they can make their loan payments.

Major banks are concerned about being forced to buy back loans that don't adhere to certain standards, so qualifying for mortgages has become an increasingly onerous task, with banks demanding more paperwork and higher credit scores.

"The bottom line is Fannie and Freddie will scrutinize any loan that has any performance issue," Cecala said, "so the way to avoid that as a lender is make sure that they are pristine."

alejandro.lazo@latimes.com

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Mortgage Application Volume Rose 9.3% Last Week - MBA • Sept 26 2011

DOW JONES NEWSWIRES Sept 26 2011 7:00 AM
The number of mortgage applications filed in the U.S. last week rose 9.3% from the prior week, the Mortgage Bankers Association said Wednesday, as interest rates continued to slide following the Federal Reserve's latest stimulus measure.

Refinance activity climbed 11%, according to the MBA's weekly survey, which covers more than three-quarters of all U.S. retail residential mortgage applications. Purchasing grew by a seasonally adjusted 2.6% during the week ended Friday.

Borrowers have reacted cautiously to extremely low interest rates over the past few months, while tighter lending requirements continue to pressure new applications. But mortgage activity picked up last week after the Fed's latest move, dubbed Operation Twist, helped push rates even lower. The move was designed to help lower long-term interest rates by buying up more mortgage-backed securities.

The share of applications filed to refinance an existing mortgage rose to 79.7% of total applications from 78.3% the previous week. It was the highest share since the survey changed its benchmark in January.

The four-week moving average for all mortgage applications is up 1.96%.

Adjustable-rate mortgages made up 6.1% of activity last week, down from 6.7% a week earlier.

The average rate on 30-year fixed-rate mortgages with conforming loan balances edged down to 4.25% from 4.29%, while rates on similar mortgages with jumbo loan balances decreased to 4.51% from 4.55%. The average rate on FHA-backed 30-year fixed-rate mortgages slipped to 4.05% from 4.07%.

Meanwhile, the average for 15-year fixed-rate mortgages ticked up to 3.47% from 3.46%. The 5/1 ARM average decreased to 2.95% from 2.96%.

-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909; Andrew.FitzGerald@dowjones.com

Mortgage rates drop to once unthinkable lows at less than 4%

The Federal Reserve's latest step to prop up the economy means that 30-year fixed-rate loans are available for less than 4%. But many people are in no position to buy or refinance a home. 

The Federal Reserve's latest effort to prop up the economy has dropped mortgages into once unthinkable territory, with 30-year fixed-rate loans available for less than 4% — a record low.

For people lucky enough to still have their credit ratings, bank accounts and home equity in good shape, the change means the opportunity to refinance at rates that once seemed unimaginable.

"I can remember when I thought 7% was a great loan," said Roger Hornbaum, a retired city of Orange employee who has already refinanced his home on California's Central Coast twice since purchasing it last year. "After the news this morning, maybe I'll be getting another call from [my mortgage broker] and be trying it again sometime soon."

Hornbaum's broker, said clients who pay closing costs and a 1% fee to him are refinancing into 30-year fixed-rate loans at 3.75%.

Of course, these days many people are in no position to buy or refinance a home. Many can't meet the stringent lending standards that have prevailed since the housing bust and bank bailout, or they owe so much more than their house is worth that they can't get a new loan at a better rate.

"The phone is ringing off the hook with people who want to refinance," said loan officer Darin Hardin at Premier Mortgage Group in Ladera Ranch. "But the property values just aren't there."

The record low rates are driven by the Fed's announcement Wednesday that it would load up on purchases of long-term government bonds and mortgage securities. The extra demand was intended to drive down long-term interest rates, including those for home loans — and it worked.

The yield on the 10-year Treasury bond, which serves as a benchmark for fixed mortgages, had closed at 1.94% on Tuesday. By the end of the day Wednesday it had dropped to 1.86%, and it plummeted Thursday to 1.72%, setting a record low before rising again Friday to 1.83%.

For a 30-year fixed-rate mortgage, the typical rate for solid borrowers had been 4.09% last week and early this week, according to mortgage finance giant Freddie Mac. That's within a whisker of the record low of 4.08% set in 1950 and 1951. The Fed's action dropped it well into record territory.

Mortgage professionals said many companies were making loans slightly more expensive Friday because their loan pipelines were full of more refinance requests than they could easily handle.

One lender that concentrates on borrowers with solid credit, said on its website Thursday that it could refinance a $300,000 loan on a $450,000 home in Los Angeles County at 3.875% and hand back $3,000 to the homeowner to help with closing costs. On Friday, the rebate on the same loan had dropped to $1,875.

But should the 10-year Treasury yield stay low, there appears to be room for mortgage rates to fall further, industry experts said.

Refinancing mortgages at lower rates should help stimulate the economy by putting more spending money in borrowers' pockets. Lowering the rate on a 30-year $350,000 mortgage to 4% from 5.5% would cut payments by about $3,800 a year.

Mindful of that fact, the Obama administration is trying to encourage greater use of a program that allows borrowers with loans backed by Freddie Mac and Fannie Mae to refinance up to 125% of their home's value. The borrowers must have kept payments current on the underwater loans to qualify.

According to the Mortgage Bankers Assn., more than three-quarters of all home loan applications are now for refinances, although the volume is more of a boomlet than a boom. As rates sank toward 4% recently, borrowers were refinancing their loans at about half the pace seen in early 2009, when rates cracked the 5% barrier for the first time since 1956.

Jay Brinkmann, chief economist for the mortgage trade group, said the torpid housing market had produced few new purchase loans in recent years that would be good candidates for refinancing. What's more, many people already have refinanced at rates less than 4.5% or simply never intend to replace an old loan.

"We'll have to see what happens this week with the [latest big] rate drop," Brinkmann said. "Until a few weeks ago, rates were just back to where they were this time last year."

Meantime, mortgage borrowing to finance home purchases continues to lag despite the record low rates and home prices that in many areas are down more than 30% from their 2006 peaks. Plenty of families are too stressed out financially to buy. Others are leery that housing prices, which rose a bit in the second quarter, could crater again in a double-dip recession.

With a 1-year-old daughter, Joseph and Allison Dillard would normally be prime candidates to stop renting and buy a house.

He is a software engineer and she has a master's degree in mathematics that should allow her to find work when their daughter is older. They have saved enough money for a 20% down payment on a single-family home in Mission Viejo or Laguna Hills, or perhaps a town home in Irvine, she said. And they have been pre-approved for a loan through Hardin, the Ladera Ranch mortgage banker.

Having looked at homes off and on since early this year, the Dillards stepped up the search this month after Joseph settled into a better new job at Google Inc.'s offices in Irvine. But they haven't taken the plunge into ownership.

"The mortgage rates are so low but we're worried, because we don't know much further housing prices will fall," said Allison, 30. "We're trying to gauge the potential risks and benefits."

In any case, the Dillards figure, the economy's precarious state means they'll have at least another year before interest rates rise significantly.

"It doesn't seem like they'll be jumping up any time soon," she said. "So that's not motivating us to do anything right away."

Partial Article E. Scott Reckard, Los Angeles Times Entire Article

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DATA - Foreclosure Outlook In Los Angeles

The housing crisis will claim nearly 200,000 Los Angeles homes to foreclosure through next year - more than 80,000 of them in the San Fernando Valley - a report released last Thursday predicts.

"The Wall Street Wrecking Ball," Get Entire Report a report authored by two nonprofit housing advocates, estimates the mortgage meltdown has eroded almost $80 billion from the region's property values.

"We are all feeling the effects of foreclosures and we need strong solutions to the crisis - not just for families losing their homes but for all of us," said Kevin Stein, associate director of the California Reinvestment Coalition, which collaborated on the study with the Alliance of Californians for Community Empowerment.

The report breaks down foreclosures by ZIP code, along with the decline in value of each property, the financial impact on the surrounding neighborhood and the total impact on property values. The study uses foreclosure information beginning in 2008 - when millions of homeowners begin defaulting on escalating variable-rate loans - and uses current trends to project activity through 2012.

An analysis shows that 80,654 homes in Valley ZIP codes are expected to be lost to foreclosure by the end of next year. The value of those homes is estimated at roughly $10.5 billion.

Citywide, a total of 199,894 homes, with a value of $25.9 billion, will be foreclosed on by the end of 2012.

Sylmar - ZIP code 91342 - is projected to be the hardest-hit area of Los Angeles, with 7,009 foreclosures, followed by Pacoima with 6,049. Van Nuys, which spans three ZIP codes, is expected to have 5,784 homes seized by lenders.
The report also assesses the collateral damage of the foreclosure crisis, with plummeting home values eroding $481 million from the city's property tax revenue.

Local governments in Los Angeles will also spend an estimated $1.2 billion on services like safety inspections, police and fire calls, trash removal and maintenance resulting from foreclosure activity.

"We are still grappling with the economic anchor of our lifetime," Sarah Sheahan, spokeswoman for Mayor Antonio Villaraigosa, said in an email.

"This is not just today's problem. The impact of this massive number of foreclosures and sinking housing market will be felt by families across the Southland for years to come."

Sheahan noted that Los Angeles received $143 million in federal stimulus funds to buy and renovate foreclosed and abandoned properties in blighted neighborhoods. The properties will then be sold or rented to low- and moderate-income residents.The program is generating about 2,000 jobs, she said. The coalition blamed four big banks - Bank of America, Wells Fargo, CitiGroup and JPMorgan Chase - for most of the problem. Representatives of the banks did not return requests for comment.

Both the Mayor's Office and the coalition want more help from state and federal officials in solving the problem.

In addition to the foreclosure crisis, the report's authors estimated that about 80,000 Los Angeles homeowners are under water on their mortgages - owing more than the property is worth. If the banks wrote down the principal on those loans, the authors said, $780 million would be available to pump back into the local economy.

"We need to stop every foreclosure we can," Stein said. "We need to have better solutions in place to deal with the big costs that foreclosures have already imposed."

John Karevoll, an analyst at market tracker DataQuick, said the number of foreclosures is moderating, although the crisis is not over.

"I think that just about everybody will agree that the worst is behind us, but things are still grim and will stay grim for the next year or two," he said.

@FirstCapitalMtg

Video - Fed's 'Twist' • Mixed impact on consumers confidence

The Federal Reserve plans to shift $400 billion in holdings from short-term to long-term treasuries.

(AP)  Operation Twist doesn't give consumers much to shout about.

The Federal Reserve's latest effort to boost the economy by driving down long-term interest rates won't have a big impact on home and car buyers, savers or credit card users.

Any noticeable changes from the central bank shuffling $400 billion of its portfolio are likely to be mixed. Although borrowers may benefit from lower rates on mortgages and other fixed-rate loans, savers holding long-term bonds are likely to see their interest income dip.

The stock market's skeptical reaction reflected the limited outlook for the program's impact. If the Fed's move spurs the economy, investors could see their portfolios climb. But the initial response of investors Wednesday was a sell-off.

Prospects for sustained improvement are still significantly hindered by the shaky job and housing markets as well as Europe's spreading debt crisis.

If the initiative succeeds in helping the economy regain momentum, Operation Twist may be as important for what consumers don't experience — another recession — as for what they do.

"The impact on consumers is pretty minimal," says Greg McBride, senior financial analyst at Bankrate.com.

Some put it more bluntly. For consumers, the new plan is "a big snore," says Glenn MacDonald, professor of economics and strategy at Washington University in St. Louis.

Nonetheless, some rates that affect consumers may see changes in the months ahead as a result of the decision.

A look at how consumers may be affected in various financial categories:
MORTGAGE RATES

Mortgage rates are a focus of the new plan. The Fed intends to sell $400 billion of its shorter-term Treasurys to buy longer-term Treasurys by June 2012. And it will reinvest principal payments from its mortgage-backed securities to help keep mortgage rates ultra-low. - Mortgage Calculator

These steps alone won't spur a housing boom.

Interest rates already are at the lowest level in six decades, averaging 4.09 percent on a 30-year fixed mortgage and 3.30 percent on a 15-year fixed.

Prospective homebuyers aren't putting off home purchases because rates are too high. They're holding off because they're lacking confidence. They're worried about a recession or job loss and are unwilling to take on more debt, even at lower rates, or aren't able to qualify. Others see no reason to jump into the housing market when prices are still falling.

Still, the Fed hopes to at least stimulate more refinancing activity as a way to get the economy moving.

"This may make it even more affordable for those few who can afford to buy," says Diane Swonk, chief economist at Mesirow Financial Inc., a Chicago-based financial services firm. But it only helps a select group, she says, leaving most would-be homebuyers still unable to take advantage.
 
CONSUMER DEBT

Most credit cards have variable rates that are tied to the prime rate. So consumers can still take some comfort in the Fed's August pledge that it plans to keep interest rates very low until at least mid-2013, assuming the economy remained weak; the prime rate has historically tracked the federal funds rate.

But credit card rates won't get any lower because of the Operation Twist, according to McBride. And if it fails to improve the limping economy, they could even rise.

That's because the prime rate and federal funds rate don't necessarily move in lockstep with each other. The prime rate reflects the actual rates at which banks are lending to each other and is determined by the market. So even if the Fed fails to raise rates, the prime rate could rise if banks became skittish about lending to each other.

Similarly, the rates on car loans are expected to be unaffected. From the consumer standpoint, borrowers will benefit only from better rates on longer-term loans: fixed-rate mortgages, fixed-rate home equity loans and, for entrepreneurs, fixed-rate small business loans.

SHORT-TERM SAVINGS

Savers who have been earning next to nothing on their money may see slight improvements.

Operation Twist should push up short-term interest rates for for money-market accounts "from next to zero to something that isn't quite as bad," says James Angel, associate professor of finance at Georgetown University's McDonough School of Business.

But that's not assured.

The Fed's reshuffling of debt may well have the unintended consequence of making it harder for banks to make money from lending, McBride says. If that happens, they'll be less willing to pay as much on consumer deposits.
LONG-TERM BONDS

By buying long-term Treasurys, the Fed aims to drive the rate of those securities down. That means investors in long-term bond funds who sought to play it safe and pocket reliable income could see less of it.

"If you're a retiree who was relying on interest income, this could prove to be a negative depending on where you're invested," says Don Rissmiller, chief economist of Strategas Research Partners.

Another potential negative is that the cost of insurance could rise. Lower rates would be bad news for insurance companies, particularly life insurers. That's because they hold much of their investment portfolios in long-term bonds. If their investment returns drop they could compensate by charging consumers more, says David Nanigian, assistant professor of investments at The American College in Bryn Mawr, Pa.

But neither of these impacts should be drastic. Long-term interest rates aren't expected to come down more than 0.2 percent point in the wake of the Fed action.
STOCKS

Analysts say Operation Twist could raise stock prices by boosting confidence and helping borrowers and savers.

But Fed Chairman Ben Bernanke can only dream of providing the stock market with anything close to the 28 percent rally that took place over seven months following the announcement last fall about the second round of quantitative easing, or QE2 — a $600 billion program to buy government bonds.

Even if stocks head upward for now, Joseph LaVorgna, chief U.S. economist at Deutsche Bank, doesn't see anything for investors to cheer in the Fed's actions.

"As long as the events in Europe are continuing to play out, that's going to keep a lid on equities," he says. "These actions won't do much other than cause people to say, 'OK, what next?'" 

@FirstCapitalMtg

Credit Solutions - What to do first?

Credit solutions can vary depending on your own personal credit situation.

The one that works for you may not have the same positive or negative effect on the next person who tries the same credit solution.  That’s why it’s very important to properly analyze your personal financial situation before deciding on which of these credit solutions is right for you.  If you choose to eliminate this important step in your journey to reestablish your financial footing,you could very well end up doing much more harm than good.

There are 5 main credit solutions that should be considered when making the right choice for your situation. 

Bankruptcy (which should always be your last choice is the most extreme and the damaging to your credit history),debt settlement,credit counseling,debt consolidation,and the do-it-yourself method. But just in case you forget do not attempt any of these methods without knowing exactly what you owe, who you owe, and what your current credit score is.

The best place to start is with your credit score.   You can request a credit report from all 3 of the major credit agencies.  By comparing your credit score from all 3 agencies you’ll get a better idea of the overall damage is as well as what has the most effect on your credit score.    The main key to any of the credit solutions is to educate the consumer first.  This helps insure that the consumer will not do any further damage to their credit while they’re attempting to help.   After you’ve been educated on some of the details of fixing and maintaining your credit score,you should immediately verify the accuracy of each and everything on your credit report.

Jumping the gun and choosing a option before checking the accuracy could mislead you into believe that you are better off or worse the you actually are.  Since each credit solutions depends on how bad your credit is,this could make all the difference.   If you’re confident that you’re ready to move on, you can begin making an educated decision and start executing it.
Which of these credit solutions is right for you?

• Bankruptcy has the most negative and longest-lasting effect on your credit history.  Therefore you should only use it in the most extreme cases without any other options.  There are several types of bankruptcy however none of them are good.
• Debt Settlement is the next option and leaves behind its own stains on your credit.  It’s designed to significantly reduce your unsecured debt,reduce monthly payments,and quickly get your debt paid off.
• Debt consolidation is a good option but only if you have enough equity in your home to refinance and use that money to pay off your debt.  If don’t correctly one might even escape without doing long-term damage to your credit.
• Credit counseling or debt management will lower your interest rates but won’t affect the amount you actually you owe. It however does not affect your credit negatively.

Although the do-it yourself option is not a viable option for everyone,anyone who can should.  Mainly because any of the other options requires you hiring someone to help you and this uses money you obviously don’t have.  The main ingredients needed are a solid game plan that includes a budget that reduces spending and redistributes that money to pay off debt.  It also must make sure that you pay all your bills on time from here on out.

You must choose the option that suits your personal situation the best.  These are all very good if use in the right scenario and all are better than simply doing nothing.  Over 25% of all Americans are in need of one of these credit solutions so don’t feel alone.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.

MBA Reports Increased Applications, New Categories of Data

Sep 21 2011, 8:52AM

The Mortgage Bankers Association (MBA) reported this morning that mortgage applications rose slightly during the week ended September 16.

The change was driven by increased applications for refinancing which offset a drop in purchase mortgage applications.

The seasonally adjusted Market Composite Index, a measure of application volume, increased 0.6 percent from the week ended September 9.  On an unadjusted basis the Index rose 25.2 percent, over the previous week which was shortened by the Labor Day holiday.  The four-week moving average for the seasonally adjusted Market Index was down 3.15 percent.

The Refinance Index increased 2.2 percent but its four-week moving average lost 3.91 percent.  The Purchase Index dropped 4.7 percent on a seasonally adjusted basis and 17.1 percent unadjusted compared to the previous four-day holiday week.  The seasonally adjusted moving average was down 0.54 percent.

Refinancing constituted 78.3 percent of total mortgage applications during the week, up from 76.8 percent and adjustable-rate mortgages (ARMs) had a share of 6.7 percent compared to 7.3 percent a week earlier. 
  
MBA reported that during the month of August, the investor share of purchase mortgage applications was at 5.7 percent, a slight increase from 5.5 percent in July. This change was led by an increase in the Pacific region. In addition, the share of purchase mortgages for second homes increased to 6.0 percent in August from 5.9 percent in July.

The average interest rate for 30-year fixed-rate mortgages (FRM) was unchanged from the previous week at 4.29 percent while points, including the origination fee, increased from 0.38 point to 0.41 point.  The effective rate for these loans increased.  The average contract rate for 15-year FRM decreased from 3.52 percent to 3.46 percent with points increasing to 0.45 from 0.38; the effective rate also decreased.  Interest rates quoted for both the 15-year and 30-year FRM are for loans with conforming loan balances of $417,500 or less.

The average contract interest rate for 30-year fixed-rate mortgages designated as jumbo loans, i.e. with balances over $417,500, decreased to 4.55 percent from 4.57 percent, with points increasing to 0.46 from 0.42. The effective rate increased from the previous week.

The average rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.07 percent from 4.08 percent, with points increasing to 0.51 from 0.48.  The effective rate increased from last week.

The rate for 5/1 ARMs decreased to 2.96 percent from 2.99 percent, with points increasing to 0.49 from 0.46; the effective rate increased from the previous week. All interest rate information is for 80 percent loan-to-value (LTV) ratio loans.

MBA also announced that their weekly report will reflect an enhanced survey sample which now covers more than 75 percent of all retail and consumer direct channel mortgage applications compared to 50 percent in earlier surveys.  This change in sample size has been analyzed in parallel with data from the old sample since January to ensure comparability.  As is apparent from the report this week, the new survey also gathers data on FHA, Jumbo, and 5/1 Hybrid ARM loans.

Sales of U.S. Existing Homes Rise 7.7%

Sep 21, 2011 8:18 AM PT
Sales of previously owned U.S. homes rose more than anticipated in August as investors scooped up distressed properties with cash.

The 7.7 percent increase left purchases at a five-month high 5.03 million annual rate, the National Association of Realtors said today in Washington. The August pace compares with a peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that dragged the economy into an 18-month recession.

“Housing’s been down for so long, we should take whatever good news we can get,” said Brian Jones, an economist at Societe Generale in New York, whose forecast was among the highest in the Bloomberg survey. “Interest rates are low and pricing is attractive and people are responding.”

While foreclosure-driven price declines and record-low mortgage rates are preventing a renewed slump in sales, companies like Lennar Corp. (LEN) say weaker confidence and limited access to financing are limiting demand. As the Federal Reserve meets today to consider ways to bolster the economy, cheaper borrowing costs are doing little to spur housing, which since 1982 has fueled every recovery except the current one.

The median forecast of economists surveyed by Bloomberg News called for a 4.75 million rate. Forecasts in the survey of 74 economists ranged from 4.5 million to 4.99 million.
Stocks fell, sending the Standard & Poor’s 500 Index down for a third day, as investors awaited a Fed announcement that may signal more stimulus for the recovery. The S&P 500 dropped 0.5 percent to 1,196.18 at 11:05 a.m. in New York. Treasuries rose, pushing down the yield on the benchmark 10-year note to 1.92 percent from 1.94 percent late yesterday.

Median Price Falls

The median price of a previously owned home dropped 5.1 percent to $168,300 from $177,300 in August 2010, today’s report showed.
Existing-home sales, tabulated when a contract closes, rose 19 percent from the same month last year.

The number of previously owned homes on the market declined 3 percent to 3.58 million. At the current sales pace, it would take 8.5 months to sell those houses, down from 9.5 months at the end of the prior month.

Month’s supply in the seven months to eight months range is consistent with stable home prices, the group said.
Of all purchases, cash transactions accounted for about 29 percent, the same as in July, Jed Smith, managing director of research at the NAR, said in a news conference today as the figures were released.

Distressed Sales

Distressed sales, comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 31 percent of the total in August, up from 29 percent in the prior month.

“Investors were more active in absorbing foreclosed properties,” Lawrence Yun, the group’s chief economist, said in a statement. Investors accounted for 22 percent of purchases in August, up from 18 percent the previous month.

Contract cancelations were reported by 18 percent of the group’s members in August, up from 16 percent a month earlier. The cancelations reflected mortgage applications that were refused or because appraised home values were coming in below the sales price, the group said.

Sales of existing single-family homes increased 8.5 percent to an annual rate of 4.47 million, the highest since January. Purchases of multifamily properties, including condominiums and townhouses, rose 1.8 percent to a 560,000 pace.

By Region

Purchases climbed in all four regions, led by an 18 percent jump in the West. Demand increased 5.4 percent in the South, 3.8 percent in the Midwest and 2.7 percent in the Northeast.
The residential real estate industry, which helped trigger the recession, is struggling more than two years into the economic recovery that began in June 2009. Housing starts in August dropped 5 percent to a 571,000 annual rate, the slowest in three months, Commerce Department figures showed yesterday.

Miami-based Lennar, the third-largest U.S. homebuilder by revenue, reported a 31 percent drop in profit in the quarter ended Aug. 31 as sales fell. The housing market remains “challenging,” with “already skittish customers” being driven away by burdensome mortgage-qualification rules, Chief Executive Officer Stuart Miller said on a conference call.

At the same time, home prices that have decreased to attractive levels and interest rates on 30-year loans at record lows are reviving interest among potential buyers, he said.

Lack of Financing

“Demand remained constrained however by the availability of financing and general consumer confidence,” Miller said on the Sept. 19 conference call. There’s also “evidence that the consumer is beginning to return in earnest to the homebuilding market.”

Most builders remain pessimistic. The National Association of Home Builders/Wells Fargo sentiment index dropped to 14 in September, a three-month low, from 15 in August, the Washington- based group reported this week. Readings less than 50 mean more respondents said conditions were poor. Gauges of prospective buyer traffic, current sales and purchase expectations declined.

Fed Chairman Ben S. Bernanke this month said while the housing sector was a significant driver of recovery from most U.S. recessions since World War II, this time it has fallen short. He cited an overhang of distressed and foreclosed houses, tight credit conditions for builders and potential homebuyers, and concerns by borrowers and lenders about price declines.
“The weakness of the housing sector and continued financial volatility are two key reasons for the frustratingly slow pace of the recovery,” said in his speech in Minneapolis on Sept. 8.

New home construction fell more than expected in August, but rose 2.2% in the West.

U.S. home construction fell more than expected in August to the lowest level in three months as the faltering industry remained one of the weakest parts of the sluggish economy. Construction of homes and apartments last month decreased 5.0% from a month earlier to a seasonally adjusted annual rate of 571,000, the Commerce Department said Tuesday. The month's results were pulled down by a nearly 30% drop in the Northeastern states.

Compared with the same month a year earlier, new-home construction in August was down 5.8%. Figures for July were revised downward to an annualized pace of 601,000.
Construction remained below a healthy level, which economists say would be around 1 million to 1.5 million starts per year.

However, builders appear to be ramping up for more construction projects. Newly issued building permits, a gauge of future construction, rose 3.2% from a month earlier to an annual rate of 620,000, the highest level since last December.

Economists surveyed by Dow Jones Newswires expected housing starts would fall by 2.3% to an annual rate of 590,000. Permits had been projected to fall 1.8% to an annual rate of 590,000.

The nation's home builders have been battling the worst downturn in generations. New-home sales have been weak, partly due to competition from deeply discounted foreclosed properties. Other troubles for the industry include tight mortgage-lending standards and the elevated unemployment rate, both of which are sapping demand.

In July, new-home sales fell to their lowest level in five months as consumers grew more jittery about weakening economic conditions.
Construction of single-family homes, which made up 73% of all starts, fell by 1.4% from a month earlier. Construction of multifamily homes with at least two units, a volatile part of the market, was down 13.5% on a monthly basis.

Builders are remaining idle due to lackluster demand from buyers. Many buyers have been choosing foreclosures and other previously owned homes rather than new homes, which typically are more expensive
.
Reflecting weak demand, fewer homes were under construction in August than at any time on records dating back to 1970.

Builders have also had problems getting financing to start projects and have been coping with rising costs for materials. They have been gloomy about the industry's outlook. On Monday, the National Association of Home Builders said its index of builders' confidence fell to 14 in September, down from 15 a month earlier.

Readings above 50 indicate that more builders view conditions as good rather than poor. The last time the home builders' confidence gauge was in positive territory was April 2006.

On Monday, Lennar Corp. said its earnings for the fiscal third quarter slumped 31% as the big home builder delivered fewer homes than a year earlier. However, new-home orders climbed, and the company said Monday that it expects to be profitable in the fourth quarter.
The Commerce Department data showed that housing starts fell on a monthly basis in two out of four U.S. regions. They fell 29.1% in the Northeast and 3.3% in the South but rose 2.6% in the Midwest and 2.2% in the West.
By ALAN ZIBEL And JEFF BATER

10 Tips To Refinancing Your Home.

10 Tips To Refinancing Your Home.

The bad news is that we are currently living through a frightening economy. The good news is that mortgage rates have never been this low in the last half of a century. The mortgage process, for buyers as well as home owners is a challenge at best but if you are prepared you can save money AND get through the process with your sanity in tact!

Why should you refinance? There are costs involved with the process, but if you plan to stay in your home long term (five to 15 years) then with current low rates you should consider it! What are some potential benefits from a refinance?

1. If you are in an adjustable rate mortgage, then NOW is the time to check and see if you can convert into a more stable fixed rate mortgage.
2. If you are in an interest rate on a 30 year that is over 5% and you have good credit then you might realize substantial savings on a monthly basis. Even a savings of $50 a month will save you $600 a year.
3. If you extend your term your payments will become more manageable throughout our current economy.
4. If you are currently in a 30 year, rates are so low that you might consider switching to a 15 year loan—your payment would be slightly higher but you save 15 YEARS of payments and interest.

Here are some things to consider when considering a refinance to make the process go smoother and to determine if a refinance is for you at this time:

1. How is your credit? Know your credit rating and how much you currently low on outstanding debts.  Your credit score will help to determine the rate of your new loan.
2. What is the Value of Your Home? Even if your credit is outstanding, the value of your home will determine IF you can refinance as well as how much your payment will be with and without mortgage insurance.
3. Know Why You Are Refinancing: Are you switching from an adjustable rate to a fixed? Just looking for a lower rate? Switching to a different term?
4. Do you currently have a prepayment penalty on your home loan? Some existing adjustable rate mortgages still carry a valid pre payment penalty for refinancing the loan, check your old loan documents or call your lender to see if this applies to you and how it might affect a refinance.
5. Do You Have Steady Employment? Your lender will require a 24 month employment history in the same or similar industry.  However, if you have been unemployed during that time and are currently back in the workforce your lender CAN bridge one job to another using your unemployment compensation in between.

6. Calculate Your Savings in Advance: Mortgage calculators are available online and you might check out potential savings by using different rates on the amount you need to borrow before you call your loan officer.

If you are prepared to refinance, know why you are doing it and have a plan, the process will go much smoother.  Share your refinance input here scrow@ firstcapitalmtg.com (what rate did you get?) , or give us a call: 818-458-0010
• First Capital - Putting Clients First For More Than 25 Years.