If you’re thinking about applying for a FHA loan or a Streamline Refi, now’s the time to start and get your new FHA case number pulled before the MIP is raised again.
The Federal Housing Administration will “soon” increase its annual premium on jumbo mortgages by 25 basis points, according to government budget documents released today. The increase means FHA loans with a principal balance above $625,500 will carry a 140-bp annual premium. On lower balance loans, FHA is raising the annual premium by 10 bps.
FHA currently charges a 1% upfront fee and a 115 bp annual premium on residential loans with loan-to-value ratio higher than 95%. “These [premium] increases will bolster FHA’s capital reserves, accelerating the point at which FHA will regain compliance with its capital reserve ratio,” according to the President’s Fiscal Year 2013 budget proposal. Some analysts claim the higher annual premium will reduce demand for FHA jumbos and push more borrowers to seek out private jumbo loans. Congress instructed FHA to increase its annual premium by 10 bps late last year when lawmakers passed a bill to extend a payroll tax reduction for two months. Source: National Mortgage News
Posted in Mortgage News
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Tagged FHA, MIP
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Greece continues to be the subject of attention. Late last night it was announced that they would receive their bailout to avoid default next month. Markets didn’t seem to care too much about the info. It just goes to show that no matter how much research and forecasting you do, you can’t predict how markets will react. US interest bond rates are a little higher on the news this morning, but Mortgage Backed Securities are trading around the same range as last Friday. After two days of weakening at the end of last week, I’m hoping for a little correction and rates to improve slightly through this week. Probably why there was no change today as markets priced in the Greek bailout expectation last week.
- Checkout our improved pricing on the 15 yr Fixed Conventional! Mortgage data from 2011 Q4 revealed that almost 50% of loans originated during the quarter were either 20 or 15 yr loans. Lower rates and purchase prices have made it easier to build equity and pay loans off quicker. Want to know what your payment would be on a 15 yr loan at 3.25%? Check out our mortgage calculator here
A few weeks back the Fed announced they plan on keeping short term interest rates low thru the end of 2014. Be careful not to misinterpret this statement!
The other day a friend of mine who has been enjoying his LIBOR based adjustable mortgage told me he plans on milking the low adjustable rate and will refi to a fixed rate towards the end of 2014. I’ve heard others mention they too will wait till 2014 to start purchasing real estate. This is risky business my friends and not Bernanke’s intention when he stated his rate would stay low thru 2014.
There are several things you need to understand about the Fed. First off they don’t set mortgage interest rates. They control the Federal Funds Rate, or the overnight rate at which banks trade money to balance their books. This can influence mortgage and other bond yields but ultimately the market decides interest rates. Another thing, the Feds comment to keep short term rates low thru 2014 does not mean they won’t change this guidance if the economy starts to improve. Two weeks after the Fed made their comment January employment figures shocked the country with better than expected job growth, dropping the unemployment rate to 8.3%. Seems like there is a bit of disconnect between what the FOMC (Federal Open Market Committee) is seeing and what is actually going on in our economy. Don’t be surprised if they back pedal from their comments if the economy continues to improve. Suppose by this time next year the economy has shown several continuous quarters of growth, now inflation will become a concern for the Fed. How do you control inflation? Raise interest rates. Lastly, suppose the status quo continues and everything turns out the way the Fed is predicting. As we get closer to 2014 and the Fed starts making statements about their next moves post-2014, the market will immediately begin to price in this new info. Rates will rise on the expectation that rates will rise.
All we can do is hypothesize about what may or could happen. No one has a crystal ball they can look into that will predict the future. But you can hedge your bets and try to minimize your risk. Look at your current situation and weigh your options. If you think it’s a good time to buy, or a good time to lock in a low interest rate, and you’re happy with what that payment will be, then go for it! If your goal is to time the bottom, whether it’s for the lowest rate or the lowest purchase price, you will only know it was the bottom once rates and prices are higher, and you will have missed it. Be careful to gamble with your life’s biggest financial transaction.
Greece continues to throw shock waves throughout the world financial markets. Greece announced last Thursday that they had secured another round of funding from the EU to avoid default which sent our 10yr T Bill up almost 10 basis points and interest rates right along with it, only to come right back down Friday when Europe’s central banks said this was not quite the case. Not a ton going on domestically this week and expectations are for rates to remain about where they are with a pretty tight range of trading in the bond markets.
:: Highlight ::
FHA GR$$N Program:
- FICO score 680+
- Max DTI 50%
- Primary resident only (all FHA)
- Non occupant co-borrowers not allowed
- Check the FHA max loan limits for your country here
President Barack Obama proposed a plan aimed at helping millions of homeowners refinance their mortgages to today’s historically-low rates. To pay for it though, he’ll need $5 billion to $10 billion. The plan would allow borrowers who are current on their loan to save thousands of dollars by refinancing into loans backed by the Federal Housing Administration, according to the U.S. Department of Housing and Urban Development. To pay for it, Obama is proposing to impose a fee on large banks — a move that likely won’t get past Congress, which must approve the measure. What’s different about the new proposal is that it would help borrowers with private bank loans who could not obtain new, refinanced loans in the past because they owed more on their mortgages than their homes were worth. “If you’re underwater through no fault of your own and can’t refinance, this plan changes that,” Obama said in a speech in Falls Church, VA.
To be eligible for the new refinancing program, borrowers must not have missed a payment for at least six months and have no more than one late payment in the six months prior to that. They also must have a credit score of 580 or better, a threshold that the administration says 9 out of 10 borrowers meet. Their mortgage balance also cannot exceed the loan limits for FHA-insured loans in their communities, which range from $271,050 in low housing cost areas to $729,250 in high-cost ones. They also must own and occupy the home covered by the loan.
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My Thoughts for the Week of Jan 30, 2012: January employment numbers this week, along with other key data mixed in, we’ll be watching. Interest rates have been improving daily since last Wednesday when the Fed announced they will be keeping key rates low thru 2014, gotta love their clear guidance now. Stock market is likely to continue to lag this week after the Fed’s comments that the economy is still uncomfortably weak. Bond markets will hopefully continue their rally and we should see rates stay low in the short term. Take advantage and lock ‘em if you got ‘em.
The bond and mortgage markets opened better this morning, still reacting to the Fed’s surprise yesterday saying the FF rate would stay at 0.00% to 0.25% clear out to the end of 2014. Prior to yesterday the Fed was saying mid-2013. The motivation from the Fed is that the central bank has lowered its forecasts for US growth this year and next. Bernanke apparently is more concerned about growth that he was six weeks ago. The recovery seen so far he considers anemic with unemployment to remain high for another two years, the housing sector showing little in the way of stabilizing let alone improving much, and he is very likely believing Europe will decline into another recession and that there will be defaults on a lot of the debt piled up.
Posted in Mortgage News
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Tagged Fed, fomc
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Your weekly Rate Update™ from Mike Thomas
My Thoughts for the Week of Jan 23, 2012: Last week we started seeing some upward adjustments in the rate and bond markets on increasing confidence that the US economy is improving. The 10 yr Treasury note, a key indicator for mortgage rates, increased 15 basis points (.15%) last week. We’ll continue to watch the 10 yr note to see if the yield adjusts back down to its 50 day moving average after this over correction. This week we have another FOMC meeting and earnings releases from major players in the equity markets, including Apple today. Positive earnings estimates lead to stock market rallies and less interest in bonds, which could hurt mortgage rates further.
Follow the 10 yr Treasury here
FHA GR$$N Program:
- FICO score 680+
- Max DTI 50%
- Primary resident only (all FHA)
- Non occupant co-borrowers not allowed
Greenfront Mortgage is licensed by the CA Dept of Real Estate lic # 1711892 NMLS # 365479 :: www.greenfrontmortgage.com
Remember when Obama said his new proposed two month payroll tax waiver extension wouldn’t add to the deficit? Well someone has to pay the price, and they found a way to pay for it and bury it out of view… a new back-end mortgage tax. Any loan delivered to Fannie Mae or Freddie Mac (our government backed loan purchasers) after April 1st will include an additional tenth of a percent fee tacked in to your interest rate that will go directly to the US Treasury, they’re calling it a Guarantee Fee. 10 bp (basis points, 100bp being 1%) is just the first fee increase, and the new tax verbiage leaves the door open to raise that fee again as needed. And once the Treasury wets their mouth with this new revenue, don’t expect to see it disappear any time soon. FHA will similarly see an increase in the monthly mortgage insurance premium for new loans funded after a not yet announced future date, probably sometime on or after April 1st as well. At least the FHA MIP will fall off at some point during the loan term.
So the cold hard truth is that they decided to fund a 2 month payroll tax waiver extension, hooking up your company/boss with a little more pocket money, by taxing the housing recovery and directly hitting you in the pocket over the life of your loan. Job Creators, Job Creators, I’m sick of hearing all this crap about the job creators, who instead of creating jobs are just increasing profits. Doesn’t matter if it’s a Democrat or a Republican at the wheel, expect to be screwed. One can just shake their head in disbelief…
At the end of the day this will just be one more back end fee that is attached to your final rate. A tenth of a percent is not the end of the world; I’ve seen intraday mortgage price changes worse than that. Rates could drop a bit more, or they could adjust up just as quick, most won’t even notice the tax (which of course was the idea). It’s the way in which our government does things and who becomes penalized that is frustrating. Just like future generations will be responsible for paying back our current National deficit, new borrowers carry the burden of paying back the losses of a previous housing bubble with overly tight underwriting, higher risk based fees, and higher mortgage insurance premiums in what is now a much more stable and lower risked mortgage environment.
So, what can we do? Live and adapt. If you are thinking about doing a FHA Streamline refi or purchase, do it now before the Mortgage Insurance Premium goes up again. If you are in the market for a Conventional loan, now is the time to lock. Even though the Fannie/Freddie Guarantee Fee isn’t scheduled to take affect until April 1st, most believe that this increase should start to reflect on mortgage applications in February, if not sooner.
