Freddie: No More Record-Low Mortgage Rates

DAILY REAL ESTATE NEWS | TUESDAY, MARCH 25, 2014

While mortgage rates have been rising the last few months, they are still historically low compared to the trend over the last four decades, Freddie Mac says in a blog post.

But rates as low as they were in November 2012 — when the 30-year fixed-rate mortgage reached an all-time low of 3.31 percent — aren’t likely to return any time soon, the mortgage giant says. Still, Freddie assures borrowers that the all-time record high of 18.63 percent reached in October 1981 isn’t on the horizon either. (At 18.63 percent, monthly mortgage payments on a $200,000 loan would be $3,117, compared to $992 a month at today’s 4.32 percent average.)

With mortgage rates at 4.32 percent, 123 of the 157 metros that Freddie Mac tracks remain very affordable to households earning the median income. In order for affordability to be hampered in the majority of markets, interest rates would have to reach 7 percent, according to Freddie Mac.

“Stubbornly high unemployment over the last several years coupled with stagnant income growth exacerbates declining affordability in a rising interest rate environment,” according to Freddie's blog post. “More jobs and income growth would help blunt the effects of higher interest rates and make buying a home more accessible. While jobs and income have shown some improvement in recent months, they continue to be challenged.”

Mortgage Rates Through the Years

Here’s an overview of mortgage rates in the past four decades, as well as the approximate payment on a $200,000 mortgage and how it changes with the rise and fall of rates, according to Freddie Mac.

• 1970s
  Average 30-year fixed-rate mortgage: 8.86%
  Approximate payment on a $200,000 mortgage: $1,589
• 1980s
  Average 30-year fixed-rate mortgage: 12.70%
  Approximate payment on a $200,000 mortgage: $2,166
• 1990s
  Average 30-year fixed-rate mortgage: 8.12%
  Approximate payment on a $200,000 mortgage: $1,484
• 2000s
  Average 30-year fixed-rate mortgage: 6.29%
  Approximate payment on a $200,000 mortgage: $1,237
• 2014
  Average 30-year fixed-rate mortgage: 4.36%
  Approximate payment on a $200,000 mortgage: $997

Source: “Mortgage Rates: From Dirt Cheap, to Cheap,” Freddie Mac (March 24, 2014)

More Banks Lower FICO Score Requirements

DAILY REAL ESTATE NEWS | TUESDAY, MARCH 25, 2014

More banks are lowering minimum FICO score requirements in an attempt to shore up lending for underserved borrowers.

Carrington Mortgage Services is the latest company to announce that it has lowered its minimum FICO score to 550. It also has expanded guidelines on several FHA, VA, and USDA loan programs to aid those with FICO scores below 640.

Wells Fargo, the nation’s largest mortgage lender, said in February that it was lowering its minimum FICO score requirements on FHA-backed mortgages from 640 to 600. The move, bank officials said, was aimed at “opening up our credit box more.”

One in three consumers have a FICO score below 650, according to Carrington. The lender is refocusing its business on targeting the underserved segment and eliminating conventional and jumbo loans. It is limiting its acceptance of wholesale submissions with FICO scores above 680 starting April 1, except for VA loans, HousingWire reports.

“Effectively meeting the needs of clients in the underserved market requires the ability to both originate quality loans and appropriately service them after the fact,” says Ray Brousseau, executive vice president of Carrington's mortgage lending division. “Both Carrington’s lending platform and specialty servicing business were created to serve this particular market segment. That uniquely positions us as the lender of choice for this population of borrowers and the mortgage brokers and real estate agents who work with them. Our message is clear: You can count on Carrington to serve the underserved and get the tough loans done right.”

Source: “Carrington Ups Ante on Wells Fargo by Lowering FICO Standard,” HousingWire (March 24, 2014)