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If you’ve been floating your loan or have yet to apply for a refinance because it just didn’t seem worth the hassle- congratulations! Mortgage rates hit new lows today and it’s now worth the hassle! If you’ve refinanced in the last 20 months, there is a darn good chance your refinance option is back in the money again!

The best 30 year fixed mortgage rates have fallen into the 4.125% to 4.375% range for well-qualified consumers. Some lenders will even go as low as 3.875% if the borrower is willing to pay points. Although the 4.125% quote isn’t being offered by the large retail banks, the smaller mortgage bankers and independent brokers do have access to loan pricing that will allow them to offer new rate lows.
Wednesday was not so great…

After weeks of stagnation, stocks finally took their turn in the spotlight today. As money moved out of the bond market and into equities, mortgage-backed security prices fell and lenders were forced to reprice for the worse. Consequently, consumer borrowing costs are higher than they were yesterday afternoon. The damage was not terribly dramatic though…

The best 30 year fixed mortgage rates are still in the 4.125% to 4.375% range for well-qualified consumers, but fewer lenders are offering rates below 4.25% today. If your lender is still willing to offer a rate below 4.25%, your closing costs are about 25bps higher today (0.25% of your loan amount). Actually, borrowing costs are about 25 basis points higher across the board.

While a better than expected read on the manufacturing sector has been cited as the stock market’s prime motivation and the bond market’s sole source of weakness, we think other factors were at work.

Call it exhaustion, blame it on boredom, but it is a new month and market participants took advantage of an opportunity to try something different. The bond market rallied all summer and has been viewed as “overbought” by many investors for the last two weeks. Unfortunately, weak economic data has prevented the bond market from correcting itself. Better than expected manufacturing data, a sector the market views as weak, gave investors the chance to let that correction take place today.

We’re not panicking over this sell off. There has been no change in our fundamental economic outlook, we see no new reason to be optimistic about a rapid recovery. What we witnessed today was a technical adjustment, an adjustment that could reverse course on Friday morning if the Employment Situation Report fails to match economist expectations. It also an adjustment that could be built on if the employment report meets or surpasses forecasts. Either way, the market remains non-committal and fluctuations are expected to occur within a range. The overall outlook remains highly supportive of low mortgage rates.

Now that doesn’t mean we’re all aboard the float boat though. If you’ve been offered a rate at or below 4.25% and can still execute it, we think you should cash in your chips and lock your loan. If you’ve lost this quote and are back to square one, we think you can afford to float as long as you’re not on a deadline. Your borrowing costs might rise a few basis points in the near term, but we think you’ll have another opportunity to lock in at today’s pricing, and potentially yesterday’s pricing, sometime in the next month.

Remember this advice. This is extremely important!

The “best executed” lock/float strategy comes down to finding an originator who knows the loan market, studies underwriting guidelines, and just plain old gets the J.O.B done. You have to let the loan officer earn their commission. That’s how you “ride the float boat” in this environment…make sure you have a damn good skipper. Plain and Simple.

Information courtesy of:
http://www.mortgagenewsdaily.com/consumer_rates/170001.aspx

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There is good news about Americans and their debt in a quarterly report issued by the Federal Reserve Bank of New York’s Consumer Credit Panel; keeping in mind, of course, that everything is relative. For example, aggregate consumer debt and household delinquency rates, while still in abysmal territory, both declined during the second quarter of 2010.

The report uses detailed Equifax credit report data to construct a longitudinal quarterly panel of individuals and households covering the period 1999 to 2009. The panel is a nationally representative 5 percent sample of individuals with social security numbers and an Equifax credit history. The survey includes all individuals sharing the panel members’ address, allowing the survey designers to construct household-level debt for a representative sample of US households. The database that results from the survey’s design includes approximately 40 million individuals each quarter. To reduce costs, a further 2 percent sample is taken for analysis resulting in a final sample of 240,000 individuals.

The study distinguishes debt across the following types of accounts: mortgage accounts (including home equity installment loans (HEL)), home equity revolving accounts (HELOCs), auto loans, credit cards, student loans, and other loan accounts including consumer finance, retail stores and gas station accounts.

As of June 30, American consumers owed $11.7 trillion, down 1.5 percent from the previous quarter and 6.5 percent below the peak level for consumer debt ($12.5 trillion) at the end of the third quarter of 2008. This downward trend has now continued for seven quarters.

Mortgage indebtedness has declined 6.4 percent since its peak, also in Q3 of 2008. HELOCs were down 4.4 percent since peaking in late 2008 and early 2009. Consumer indebtedness exclusive of mortgage and HELOC accounts was down 1.5 percent from the previous quarter and now totals $2.31 trillion, a decrease of 8.4 percent from the 2008Q3 peak.

Information Courtesy of – http://www.mortgagenewsdaily.com/08182010_consumer_debt_federal_reserve.asp

Starting September 7, 2010, FHA will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgages and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

Here is an excerpt from the article:

The enhancements are designed to maintain homeownership for borrowers who are current on their mortgage but owe more on those mortgages than the market value of the home. Like most of the measures that have been undertaken to stem the flow of foreclosures and stop the collapse of the housing market, these changes rely to a great extent on the cooperation of a homeowner’s existing lenders who must be willing to write off at least 10 percent of the outstanding balance of a senior lien or relinquish or re-subordinate a junior lien position.

Participation in the voluntary program is limited to homeowners who, In addition to a negative equity position and being current on mortgage payments, must be the owner-occupant of a 1-4 family home used as the primary residence and not currently financed with an FHA guaranteed mortgage. The borrower must qualify for the new loan under current FHA underwriting guidelines which, among other criteria, require a “FICO-based” credit score of at least 500.

The requirement that the mortgage be current does not eliminate borrowers who have cured delinquencies. A borrower who has successfully completed the trial modification period under the Making Home Affordable Modification Program (HAMP) may close on one of the new loans the month following the conversion of his loan to permanent status. In the case of a non-HAMP modification, the borrower must have made three monthly payments on time and be paid-to-date at the time the loan is made.

The new FHA mortgage can have a loan to value (LTV) ratio of no more than 97.75 percent, and if junior liens are re-subordinated to the new loan, the combined indebtedness can not constitute more than a 115 percent LTV of the refinanced loan.

The new mortgage can be used only to refinance the unpaid principal balance on the first lien plus any prepaid interest for the month the mortgage is originated, prepayment penalties, late charges, escrow shortages, closing costs, prepaid expenses, and discount points. Any charges that would put the LTV above the levels described above would have to be written off by the mortgagee.
FHA advises borrowers that their credit reports and credit scores might be damaged because of the principal forgiveness requirement and that they should also consult a financial advisor about any tax ramifications that might come from their participation in the program.

To read the full article click the link below:
http://www.mortgagenewsdaily.com/08082010_fha_underwater_mortgages.asp

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The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 30, 2010.

Here is an excerpt from the report:

The MBA’s loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend of purchase applications indicates a decline in home buying demand, a negative for the housing industry and the economy as a whole.

Plain and Simple: Refinance demand continues to bolster the mortgage market as purchases account for only 22% of new loan apps. Home buyers are utilizing the FHA for low downpayment home financing. This is no surprise given the massive destruction of wealth that has occurred over the last two years. Although mortgage rates are hovering near record lows, and will likely hit new lows in the next release as more lenders are offering 4.25% on rate sheets this week, refinance demand just isn’t what it was last spring. This proves the theory that the pool of qualified borrowers has shrunk right along with the industry, or is it the other way around?

HAS PURCHASE DEMAND HIT A BOTTOM YET?
It’s still too soon to say, especially because it’s supposed to be the summer buying season, but three consecutive weeks of index improvement is a start. We just have to hope purchase loan DENIALS don’t rise right along with the increase in purchase loan demand. That whole qualification thing should raise doubts around any uptick in Pending Home Sales.

To read the full report click the link below.
http://www.mortgagenewsdaily.com/08042010_stolen_loan_demand.asp

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