Archive for First Time Homebuyers
SURVEY SHOWS CONSUMERS POSITIVE ABOUT FINANCES
Posted by: | CommentsConsumers Are Taking Control of Their Finances: Survey
05/17/2010 By: Brittany Dunn
In light of the economic crisis, consumers are taking financial matters into their own hands by implementing 
proactive spending habits and mortgage management strategies, according to findings from the Western Union Global Business Payments Money Mindset Index, a national survey of 3,000 consumers conducted by Englewood, Colorado-based Western Union.
Of those surveyed, 78 percent expect their financial situation to improve or remain unchanged over the next six months. In addition, the survey found that 73 percent of respondents are learning to cut back on their spending, 61 percent have switched to bargain retailers, and 39 percent have created a budget to ensure their spending stays on track.
The survey also found that many Americans are beginning to understand the impact their mortgage has on their financial well being. Nearly half – 45 percent – of consumers with a modified mortgage understand that scheduling regular payments will help keep them current on their monthly payments, and almost one-third of consumers believe modifying their mortgage will improve their debt situation.
According to the survey, 34 percent of consumers have contacted their mortgage companies about loan modifications, and 9 percent have actually modified their loan agreements in the last six months. However, the survey found that approximately 50 percent of American consumers with a mortgage do not fully understand the requirements to qualify for a loan modification or refinance a mortgage, indicating a need for more education in this area.
Western Union said consumers’ improved spending behaviors, coupled with the respondents’ proactive approach to mortgage payments, paint a picture of positive money management behavior. This, the company said, demonstrates Americans’ determination to take hold of their finances.
“The resilience of the U.S. consumer is clearly captured in the latest Money Mindset Index,” said David Shapiro, SVP of Western Union Global Business Payments. “With Americans understanding how to better manage their mortgage and spending, they are positioning their households to survive and thrive in this economy.”
Tax Credit Expiration Unlikely to Deter Homebuyers
Posted by: | Comments Tax Credit Expiration Unlikely to Deter Homebuyers: Study
04/28/2010
Only time will tell how the residential real estate market will be affected by the expiration of the homebuyer tax credits on April 30,2010 when purchase agreements must be signed and June 30,2010 when deals have to be closed.
A survey released Wednesday by Prudential Real Estate and Relocation Services, Inc., found that the sunset of these incentives is unlikely to deter future purchase activity.
While more than 90 percent of consumers surveyed said the tax credits have helped both first-time homebuyers and the U.S. housing market overall, 65 percent of consumers shopping for a home said the end of these credits will have little or no effect on their interest in purchasing a home.
Consumers are still unsure about the direction of the housing market, but the survey revealed that they are becoming more optimistic about real estate values, with 46 percent of respondents expecting real estate prices in their area to increase over the next year and just 12 percent predicting a decline. Over the next five years, 79 percent of those surveyed believe prices will increase, with 20 percent anticipating prices to increase substantially.
“The survey underscores the key role the federal homebuyer tax credits played in stimulating residential real estate market activity and the U.S. economy,” said
James Mallozzi, chairman and CEO of Prudential Real Estate and Relocation Services. “It also shows that most consumers believe the market has hit bottom and are more optimistic about the future.”
When identifying the most important factors affecting their decision to purchase a home, respondents cited concerns about rising mortgage interest rates and unemployment, along with more stringent lending criteria and fewer mortgage-backed securities purchased by the Federal Reserve. In fact, the expiration of the tax credits placed lowest on their list of concerns.
Among those who had recently purchased a home, 61 percent cited low mortgage interest rates as “very important” to their decisions – an amount greater than either the tax credit or low prices. Home mortgage rates continue to remain below 5% for a 30 year fixed mortgage and as low as 2.9% for some types of adjustables, still at 40 year lows.
“The tax credits clearly helped stimulate the market when consumer confidence was low and housing inventory was high,” said Earl Lee, president of Prudential Real Estate and Relocation Services. “While the tax credit expiration is a concern for many, the bigger issues now are the availability and cost of financing as well as if they will have a job.”
The survey also found that the dream of homeownership and the perception that owning a home is a good investment remain intact. Among current renters, 75 percent still believe owning their home is a better long-term choice for their needs the renting. And the majority of consumers surveyed said that homeownership is a better investment than individual stocks or bonds, mutual funds, or savings accounts. And most recognize that the tax advantages of home ownership outweigh the negligible tax credits that renting offers where none of the costs are usually deductable.
“While the market is picking up in terms of sales and confidence, and the majority still believe that owning a home is a good investment, the outlook for the market remains highly dependent upon the direction of the economy overall,” Lee said.
PAYING OLD BILLS CAN HURT YOUR FICO
Posted by: | CommentsWhen paying bills can hurt your credit
Cynthia worked hard to improve her credit scores. She was careful to pay her bills, including an auto loan and a credit card, on time every month. Finally, in December 2004, she decided to pay off the one old debt on her credit reports.
Her scores promptly plunged by as much as 95 points.
“I spent over $1,200 in paying off hospital bills from six years ago, thinking this would help,” she wrote in an e-mail. “Did this hurt me instead?”
Borrowers who try to pay off old delinquencies, charge-offs and collection accounts often learn the hard way: Sometimes, doing the right thing does the wrong thing to your credit.
Quirky credit scoring system
Thanks to the sometimes bizarre quirks of credit scoring, state statutes of limitations and the federal Fair Credit Reporting Act, consumers can’t always assume that paying off old debts will improve their financial situation or make them a better risk in lenders’ eyes. Add in the tactics of some unethical collection agencies, and you have a real quagmire.
The one bit of good news, though, is that what happened to Cynthia — a score plunge because of a new payment on an old debt — is much less likely to happen today. That’s because the company that creates the leading credit score, the FICO, worked with credit bureaus to iron out that particular wrinkle in the formula.
But there are still other problems that can arise:
Settling accounts for less than you owe can often hurt your credit scores.
Arranging a payment plan or even inquiring about an old debt can restart the statute of limitations in some states, allowing creditors to sue you.
Simply contacting a creditor about a past-due account can revive its interest in trying to collect, leading to harassment and hardball tactics.
Unethical collection agencies may promise to upgrade how your debt appears on your credit report in exchange for payment — then not follow through or make matters worse by making the debt seem more recent than it is.
To understand how these things happen, you need to understand some of the practices of the credit industry, such as:
How delinquencies and charge-offs are handled
A lender will generally write off an account as a bad debt within six months after it becomes delinquent — in other words, six months after the borrower stops paying. The write-off is reported to the credit bureaus as a “charge-off.”
Some people incorrectly believe that a charge-off means they no longer have to pay their debt. But “charge-off” is basically just an accounting term, notes debt expert Gerri Detweiler, author of “The Ultimate Credit Handbook.” It doesn’t relieve you of the legal or ethical obligation to pay the loan, and the lender or a collector can still come after you.
Usually, a lender will turn the charged-off account over to its collections department or a collection agency, and you’ll have two entries for the same account on your credit report: one from the original creditor showing the account’s status as “charged-off” and another from the collection agency showing the account’s status as “in collections.”
(If you have more than two entries for the same debt, which sometimes happens when an account is passed from one collection agency to another, you can demand the credit bureaus remove the extra entries.)
How your credit score views old debts
Not paying your bills is a big bad when it comes to your credit. Delinquencies, charge-offs and collections all seriously hurt your score.
But here’s something that’s really important to know:
When it comes to your FICO credit score, the one most used by lenders, what matters most is what the original creditor says on your credit report. The status and amounts owed shown on that entry will figure more heavily in your credit score than what a collection agency reports.
If the original creditor shows a charge-off with a balance still owed, you might be able to boost your score by paying off the bill and getting the original creditor to reset the balance to zero.
If the balance is already zero — which credit bureaus say is typical when a collection agency takes over an account — you can’t improve your score by paying up.
“If the trade line balance is showing zero, you’re not going to help your FICO score by paying off a collections account,” said Craig Watts, spokesman for Fair Isaac Corp., creators of the FICO credit scoring methodology.
‘Settling’ an old debt can hurt your score
In the past, making any payment on an old, past-due debt could actually make matters worse because the action “updated” the negative mark in the eyes of the credit-scoring formula, making it look more recent than it actually was.
“Recency,” or how long it’s been since you’ve had a negative mark, matters a lot to your credit score. The more recent the problem, the more heavily it weighs against you.
In the last couple of years, however, Fair Isaac worked with the credit bureaus to change how new payments on old debts were reported, said Tom Quinn, the company’s vice president for scoring. Now, the scoring formula can distinguish between the new payments and actual new delinquencies.
“If you’re making a payment (on a past-due account),” Quinn said, “that will not negatively affect your score, in and of itself.”
You still can hurt your score, however, by “settling” an account for less than what you owe. Such settlements may get the creditor off your back, but the notation of “settled” on your credit report can sometimes be worse for your FICO score than just leaving the account open and unpaid, said Barry Paperno, a Fair Isaac manager.
“Settling the account can add a new element to its record at the bureau,” Watts said. “Since that element’s date would be more recent than the original item, it can end up lowering the score.”
Now, this assumes you’re still dealing with the original creditor. If you’re dealing with a collection agency, a settlement can be more of a wild card: It could help your score, it could hurt your score or it may have no affect.
Lenders may require you to pay old debts
Of course, just leaving the account unpaid might not be an option if you want to buy a house. A mortgage lender may require that you pay off or settle any open collections that show up on your credit report as a condition of getting the loan.
If you’re interested in a settlement, credit repair experts suggest that, as part of your negotiations, push to have the creditor or collection agency either stop reporting the account altogether or demand that the account be reported as “paid in full” rather than “settled.” Such treatment might not help your score, but it’s less likely to hurt it. You’ll have more clout if you’re able to pay a lump sum than if you have to set up a payment plan.
Credit bureaus really hate it when collection agencies agree to these demands and have even banned companies for failing to properly report transactions. But that doesn’t mean you can’t try.
How long credit bureaus can report your accounts
Your credit score is based on information in your credit report, and there are limits on how long your bad marks can be used against you. Once a negative item is on your file, it generally can be reported for 7½ years from the time you stopped paying on the account. (Bankruptcies can be reported for up to 10 years.)
So, if you stopped making payments on your Visa bill in January 2004, the lender can report a charge-off the following June. The account can be reported to the credit bureaus until June 2011, when it must be deleted from the bureaus’ records.
How letting sleeping dogs lie can affect your credit
You can see why some borrowers choose to just let their old debts “fall off” their credit report rather than try to repay. Once the bad marks are gone, your credit score probably will improve, and you’ll still have the money you would otherwise have sent to your old creditors.
Note the word “probably.” In credit scoring, little is certain. Thanks to the way the FICO is designed, sometimes a score actually drops after old, bad accounts disappear.
That’s because the FICO formula groups borrowers based on certain characteristics, such as whether they’ve had a bankruptcy or other credit problem. You could rise to the top of the “had-a-bankruptcy” group but, once your bankruptcy drops off your report, be “transferred” to another group, where you’d rank near the bottom.
“That move (from one group to the next) can sometimes be pretty graceless,” Watts concedes. “It’s as though you fell off a chair. Your score can change a couple dozen points for no apparent reason.”
Fair Isaac attempted to ease this transition with its “next generation” credit-scoring model, known not surprisingly as NextGen. But most lenders still use the classic FICO scoring formula, so a sudden score drop when a negative item disappears is still a possibility.
Know your state’s statute of limitations
That’s not the end of the complications. Each state limits the amount of time in which a creditor can sue you after an account becomes delinquent. Sometimes the statute is longer than the credit reporting limits, sometimes shorter.
The statutes of limitations for written contracts, for example, range from three years in Delaware to 15 years in Ohio, although the typical limit in most states is five or six years. The rules vary widely, but, in some states you can inadvertently extend the statute of limitations by entering into a repayment plan with a creditor or even by acknowledging that a debt is yours. Getting dragged into court and having a judgment entered against you could further hurt your credit score and your efforts to rehabilitate your credit.
Before you contact your creditors, you should know the details of the statute of limitations in your state. (If you’ve moved, it may be the state you live in now whose law will apply, even if you entered into the credit agreement in another state.) Your best bet may be contacting a consumer law attorney for help; you can get referrals from the National Association of Consumer Advocates.
Several Internet sites, including CreditBoards.com, have message boards whose members share advice and tactics.
In the end, you may decide that trying to pay off your old accounts isn’t worth the hassle — or you may decide just the opposite. You may decide the ethical obligation to pay what you owe outweighs any short-term concerns you have about your credit.
“If you can afford to pay, pay,” said Steve Rhode, chairman of the credit-crisis counseling firm MyVesta.org. “Too many people live and die by what their credit report says.”
-Liz Pulliam Weston, MSN MONEY
SHOULD YOU USE A CREDIT CARD ONLINE?
Posted by: | CommentsReducing the Anxiety of Paying Online
Last year, 92 million people bought things online using credit cards, debit cards and services like PayPal and Google Checkout. Millions of others paid bills and wired money electronically from bank accounts with just a few clicks.
Despite the apparent popularity of all these services, they still cause nagging anxiety for many of us.
We wonder, how secure are these payment systems? Will I be out the money if someone steals my account numbers and goes on a wild shopping spree or bleeds my savings dry?
Deciding which online payment method to use would seem to be a simple matter of picking whichever offers higher security. But the wise consumer also weighs the legal protections in the case of theft: the best security and the lowest liability don’t necessarily go together.
Here’s the lowdown on the risks associated with the most popular ways to pay online:
CREDIT CARDS
After you hear some of the horror stories, using a credit card online may seem as risky as Russian roulette. Crooks can and frequently do capture card numbers by sneaking malware onto home computers or by tricking people into revealing numbers in “phishing” schemes in which people unwittingly type in the numbers on fake sites. Some thieves hack shopping sites.
There are a few precautions everyone should take. First, look for signs of quality security at sites you use, like logos, or seals, from security providers like VeriSign and McAfee, said Aleksandr Yampolskiy, director of security at the luxury shopping site Gilt Groupe. To check that a seal is legitimate, click on it to make sure it takes you to the verification page of the security service.
Also make sure that “https” appears in the address bar, because that indicates that digital transmissions from the site are being encrypted, Mr. Yampolskiy said.
Security seals, however, are just a starting point, not a guarantee a site is secure. They affirm only that it has met specific criteria set by that security service. And the lack of a seal doesn’t necessarily mean a site is risky. So use common sense when deciding which merchants to do business with. For instance, it isn’t wise to shop at a site you reached by clicking on a spam e-mail. If you’re suspicious of a site, run its name through a search engine and see if there are complaints from other shoppers.
SSL encryption, which is indicated by the “s” in “https” in the address bar and a padlock icon in the lower right-hand corner of the browser, is your best insurance against theft of your data while it’s being transmitted.
Sending your personal data across a network is a key moment of vulnerability, said Robert Zigweid, a senior security consultant at IOActive, which helps companies secure their sites and networks. Responsible sites will automatically use “https” on pages where sensitive information is sent and received.
If you get a pop-up or other warning that something is wrong with a site’s SSL certificate, “back away,” said Tim Callan, vice president at VeriSign. Professional, well-put-together sites do not tend to have certificates that are expired or have other problems.
And since shady sites can use encryption, too, also check the address bar for a bit of green or the site owner’s name written in green. (Recent versions of major browsers all now use green in some way to indicate the existence of another layer of security called an extended validation SSL certificate). It indicates that the site you’re visiting has been vetted and belongs to a legitimate company; it is not a phishing site. You will certainly see green on larger e-commerce sites and on bank sites.
None of this encryption will help you if you’re infected with malware known as a keylogger. It captures your keystrokes and images from your screen and then sends them to hackers. Your only real line of defense is to use security software and install all the updates from that software and all the other software you use.
Password-management software can also help. This stores your login information and, typically, the personal data used in Web forms in an encrypted place on your computer. You can then enter this sensitive data onto Web site forms without retyping it.
Now that you are frightened enough, here’s the good news about online payments: There is little to worry about using credit cards online, because the risk of loss from unauthorized charges, by law, is almost nil.
“The strongest protections are when you pay by credit card,” says Carole Reynolds, a senior lawyer at the Federal Trade Commission. Under the Truth in Lending Act, consumers’ maximum liability for unauthorized use of their credit card is only $50, and when a card is used online, it’s zero.
If you report fraud quickly, banks will typically reverse the charges rapidly and without much fuss, though in these tight times banks are scrutinizing fraud claims more closely, says Avivah Litan, a payment-fraud expert at research firm Gartner.
For extra protection against having your card number stolen, consider using one-time credit card numbers for online purchases, which you can often set up with your card provider.
DEBIT CARDS
Using debit cards online is a bit riskier. These transactions, which draw directly from your bank account, are subject to a different federal law, the Electronic Fund Transfer Act. This law provides considerable protection from liability, but the level of protection diminishes as time passes.
If you report unauthorized charges on a debit card within two business days of discovering the problem, your liability is limited to $50 offline and zero for online transactions, Ms. Reynolds says. If you neglect to do that, but report the loss within 60 days of the date your bank sent the statement listing the bogus transactions, your liability is capped at $500 for offline transactions and remains zero online. If you miss those deadlines, however, you could end up in a bigger mess. Ms. Reynolds warned that your liability could be unlimited. (See a related blog post at nyti.ms/6VEItV for other information.)
PAYMENT SERVICES AND BILL PAYMENT
Shopping online using services like PayPal, Google Checkout and BillMeLater offer some useful additional security because you entrust your sensitive account information to one company and not to every online store you may buy something from. This can be a good idea, especially if you frequently buy from little-known merchants that may not have top-notch Web defenses.
But Ms. Litan warns that if your PayPal account is used fraudulently, it may be harder to get your money back than if you use a credit card.
For those who pay bills online, note that, like debit cards, online bank accounts — savings, checking and other personal “asset accounts” — are covered by the Electronic Fund Transfer Act, so your responsibility for unauthorized transactions is limited depending on when you discover and report fraud.
So even if your computer becomes infected with a malicious program and thieves are able to steal your password and plunder your bank account, you will get your money back if you catch it quickly. Ms. Litan says it’s a good idea to set up automatic bill payments with your bank, as opposed to individual billers like the gas company or the day care provider, because banks and their payment processors are generally better at protecting data than merchants.
A version of this article appeared in print on March 18, 2010, on page B10 of the New York Times.by RIVA RICHMOND
HOME PRICES UP 5% OVER LAST YEAR
Posted by: | CommentsHome Prices Up 5% Year-Over-Year: Clear Capital
New data released by Clear Capital Thursday shows that home prices nationally are up 5.0 percent compared to February 2009.
The quarter-over-quarter price change for the numbers through last month was flat at 0.0 percent, indicating a softening during the winter months. But Clear Capital noted that the year-over-year price variations have been in positive territory for two months straight, and the company said it expects another big price boost to come when home sales pick up before the contract deadline for the homebuyer tax credit.
“If the increase in demand that preceded the end of the last tax credit is any indication, home prices may dip only slightly into negative territory before getting an added boost before the April tax credit deadline,” said Dr. Alex Villacorta, senior statistician for Clear Capital.
All four U.S. regions posted very consistent quarterly price changes in February, according to Clear Capital’s analysis, with only the Northeast showing a decline of 1.4 percent.
On a year-over-year basis, just the West had a drop, and it was a mere 0.5 percent. Prices in the Midwest skyrocketed 13.8 percent compared to February 2009.
Clear Capital says February’s year-over-year price gains speak volumes about the improved market picture today compared to the first months of 2009, when credit was limited, nearly all properties were rapidly losing value, and REOs flooded the market as banks faced the risk of failure.
While the current supply of foreclosed homes is significant and the swollen pipeline for loan resolution is feeding concerns over shadow inventories, Clear Capital says demand for discounted REOs by investors and new homebuyers has buoyed prices well into the winter and should continue into the spring. The company noted, though, that this demand has been muted by the typical slowdown in winter sales, pushing REO saturation to 26.1 percent – a 1.3 percent increase over January.
“We observed an expected increase in REO saturation this month, as the flow of foreclosures continued to come into the market, while traditional non-distressed sales wait to be listed in the spring and summer months,” Villacorta explained.
Clear Capital says while the risk of additional REO inventories arriving later in 2010 should not be taken lightly, the company suspects this inflow will arrive with a stronger springtime and summer buying season, helping to ease the shock to the marketplace.
“Although many markets have seen a slow down in price gains, I’m encouraged that prices have remained positive through the first two months of the year despite all the negative economic news and threat of more REOs hitting the markets,” Villacorta said.
Home Prices Rise, According to FHFA Index
Posted by: | CommentsHome Prices Rise, According to FHFA Index
December 23, 2009
Home prices rose 0.6% in October and rebounded from a 0.4% decline in September, according to a house price index compiled by the Federal Housing Finance Agency. The index, however, only reflects homes funded by Fannie Mae and Freddie Mac loans. Regionally, the FHFA HPI registered a 3.7% jump in the Pacific states, which includes California. The Mid-Atlantic states ranked second with a 1.8% increase in house prices. The South-Atlantic region, which runs from Maryland to Florida, experienced the worst monthly performance with a 1.6% price decline in prices. FHFA bases its house price index on Fannie Mae and Freddie purchase mortgage transactions. Overall, U.S. prices are down 1.9% since October 2008, according to the regulator’s HPI. The FHFA index is 10.8% below the April 2007 peak in prices.
“Cash for Caulkers” could mean $12K per home
Posted by: | Comments“Cash for Caulkers” could mean $12K per home
• By Steve Hargreaves, CNNMoney.com staff writer
• On 6:24 pm EST, Tuesday December 8, 2009
Cash for Caulkers could mean $12K per home
President Obama proposed a new program Tuesday that would reimburse homeowners for energy-efficient appliances and insulation, part of a broader plan to stimulate the economy.
The administration didn’t provide immediate details, but said it would work with Congress on crafting legislation. Steve Nadel, director at the American Council for an Energy-Efficient Economy, who’s helping write the bill, said a homeowner could receive up to $12,000 in rebates.
The proposal is part of the President’s larger spending plan, which also includes money for small businesses, renewable energy manufacturing, and infrastructure.
We know energy efficiency “creates jobs, saves money for families, and reduces the pollution that threatens our environment,” Obama said. “With additional resources, in areas like advanced manufacturing of wind turbines and solar panels, for instance, we can help turn good ideas into good private-sector jobs.”
The program contains two parts: money for homeowners for efficiency projects, and money for companies in the renewable energy and efficiency space.
The plan will likely create a new program where private contractors conduct home energy audits, buy the necessary gear and install it, according to a staffer on the Senate Energy Committee and Nadel at the American Council for an Energy-Efficient Economy.
Big-ticket items like air conditioners, heating systems, washing machines, refrigerators, windows and insulation would likely be covered, Nadel said.
Consumers might be eligible for a 50% rebate on both the price of the equipment and the installation, up to $12,000, said Nadel. So far, there is no income restriction on who is eligible. That would mean a household could spend as much as $24,000 on upgrades and get half back.
Homes that take full advantage of the program could see their energy bills drop as much as 20%, he said. The program is expected to cost in the $10 billion range.
It’s not clear how the home efficiency plan would be administered – the government may issue rebates to consumers directly, homeowners might get a tax credit, or the program could be run via state agencies.
If consumers have to spend a lot of money up front to get the credit, it could throw a wrench in the works, David Kreutzer, an energy analyst at the Heritage Foundation, told CNN.
“This will not be something that’s attractive to people who are having trouble already making their budget payments month to month or week to week,” he said.
To keep consumers from having to spend thousands of dollars before getting reimbursed, Nadel said, one idea is to have contractors or big box retailers pay part of the cost up front.
Fraud issues could also come up, Kreutzer said.
“Any program that is going to run through a third party and is going to distribute billions of dollars needs to have lots of checks and balances to make sure there’s not abuse,” he said.
Nadel noted that as a way to guard against fraud, contractors would have to be certified to participate.
Energy company boost
Obama’s new spending plan also calls for renewable energy companies to get additional support. That could come in the form of loan guarantees – basically, money the government uses to secure loans for startups.
In the original stimulus bill passed earlier this year, $6 billion was earmarked for such loan guarantees. But then lawmakers took away $2 billion to fund Cash for Clunkers – the popular program that paid people to turn in their old cars.
The $4 billion from the original bill has funded about $40 billion in loans, said the staffer on the Senate Energy Committee. Meanwhile, firms are hoping for another $4 billion in loan guarantees, since they have another $40 billion worth of projects that need funding.
A bill on energy efficiency reimbursements already has supporters in the Senate.
“Not only will [such legislation] increase our energy security and transform our energy infrastructure to a modern, clean and efficient one,” Senate Energy Committee Chairman Jeff Bingaman, D-N.M., wrote in a recent op-ed column in the Hill, a Capitol Hill newspaper. “But it also will position the United States to lead in the development of clean energy technologies.”
RATES RISE CAUSING REFINANCE SURGE
Posted by: | CommentsRefinancing Application Surge May Reflect Rate Rise Nudging Borrowers
An increase in the average 30-year fixed mortgage rate for the first time in over a month during the week ending Dec. 4 could be responsible for an increase in refinance applications during the period, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. A rate rise sometimes causes a rush to refinance as borrowers may see it as a sign rates are rising and they need to lock in immediately. A relative improvement in unemployment put upward pressure on rates Dec. 4. During that week, the MBA’s Market Composite Index, a measure of overall mortgage loan application volume, increased 8.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 54% compared with the previous week, which was a shortened week due to the Thanksgiving holiday. The Refinance Index increased 11.1% from the previous week and the seasonally adjusted Purchase Index increased 4% from one week earlier. The increase in purchase applications reflected a 10% increase in applications for government mortgages and a 0.2% decrease in conventional mortgage applications, both on a seasonally adjusted basis. The share of refinance activity increased to 74.4% of total applications, up from 72.1% the previous week. The adjustable-rate mortgage share of activity decreased to 4.7% from 4.8%. The average contract interest rate for 30-year fixed-rate mortgages, which for the previous week was at its lowest point since May of this year, increased from 4.79% to 4.88%, with points increasing to 1.17 from 1.00 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The increase ended a run of six consecutive weeks of decline in the average rate. The average contract interest rate for 15-year FRMs came off of its lowest point ever increasing by 6 basis points, to 4.33%. For one-year adjustable-rate loans, rates decreased by 1 bp to 6.55%. The MBA stopped disclosing index values with the July 31 data release. The MBA can be found online at http://www.mortgagebankers.org.
as reported in the National Mortgage News 12-09-09
Freddie: Rates Hit Another New Low
Posted by: | CommentsFreddie: Rates Hit Another New Low
The weekly average for the 30-year fixed-rate mortgage that dominates the market had fallen again to yet another record low at 4.71%, according to the most recent Freddie Mac Primary Mortgage Market Survey. That average rate for a 30-year fixed-rate mortgage during the week ending Dec. 3 was the lowest seen since Freddie started tracking the rate in 1971. It was 4.78% the previous week and 5.53% a year ago. The average 15-year FRM rate, which Freddie has been tracking since 1991, also dropped to a new record low. It was 4.27% during the most recent week, 4.29% the previous week and 5.77% a year ago. In contrast, the average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage inched up during the most recent week to 4.19% from 4.18% the week previous. This rate was 5.77% a year ago. The average one-year Treasury ARM rate during the most recent week, at 4.25%, was higher than the average five-year rate during that time but down compared to the rate for the same type of loan the week previous. During the previous week, the average one-year Treasury ARM rate was 4.35%. A year ago this rate was 5.02%. Points in the most recent week were 0.7 for 30-year FRMs and 0.6 for the three other types of mortgages. “Interest rates for 30-year and 15-year fixed-rate mortgages fell for the fifth consecutive week to an all-time record low while the average rate on five-year Arms hovered near its record set in the previous week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “In addition, interest rates on 30-year and 15-year fixed mortgages thus far in 2009 averaged one percentage point below their respective average in 2008.” These rates are average for Freddie Mac loans with a loan amount of $300,000 or more for a single family owner occupied purchase or refinance with an excellent credit score. Loan to value ratio is assumed to be no more than 80%.
NAR says PENDING SALES hit 3 YEAR HIGH
Posted by: | CommentsPending Home Sales Hit Highest Mark in More than 3 Years: NAR
The National Association of Realtors (NAR) said Tuesday that its index of home sales contracts is up yet again, representing the ninth straight month that pending sales have recorded a rise – the longest run of increases since NAR began tracking sales agreements back in 2001.
The trade group’s Pending Home Sales Index showed an increase in signed contracts of 3.7 percent in October compared to September.
Perhaps even more noteworthy is that the latest reading is the highest on record since March 2006 and is nearly 32 percent above October 2008. The rise from a year ago is the biggest annual increase ever posted for NAR’s pending sales index.
Although the pending home sales numbers don’t always turn into tangible closed transactions – according to NAR they’ve been thwarted as of late by new appraisal rules – we’re still exceeding what the association deems as customary stats.
Lawrence Yun, NAR’s chief economist, says based on the country’s demographics, existing-home sales should be in the range of 5.5 million to 6.0 million annually. Based on the trade group’s existing-home sales report last month, the industry is currently moving properties at an annual rate of 6.1 million.
According to Yun, the gain is primarily due to the federal government’s popular $8,000 tax credit for first-time buyers, seeing as how the annual sales rate was well below the 5-million mark before the homebuyer tax credit stimulus was passed.
“This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future,” Yun said.
Yun cautioned, though, that home sales could dip in the months ahead. “The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months. Given the lag time, we could see a temporary decline in closed existing-home sales from December until early spring when we get another surge,” Yun explained.
Yun projects that as inventories continue to decline and balance is gradually restored between buyers and sellers, housing conditions will become self-sustaining and prices in most areas will begin to stabilize around the middle of 2010.