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)

New Mortgage Rules Roll Out - What Will Be the Impact?

DAILY REAL ESTATE NEWS | FRIDAY, JANUARY 10, 2014

New mortgage rules take effect Friday that set out to protect borrowers against risky lending practices. One of the biggest changes is that borrowers will likely need to show more proof that they can actually afford the mortgage they’re applying for. 

Here are two main terms to know from the new rules: 

“Ability-to-repay” rule: Mortgage lenders must ensure borrowers can actually afford their loans over the long term. Applicants’ income, assets, savings, and debt against their monthly house payments will be more closely scrutinized. Borrowers likely will need to produce “even more tax records, pay stubs, and bank and investment account information,” USA Today reports.

Qualified Mortgage: Borrowers who meet the ability-to-repay requirements will likely be eligible for a QM. QM loans must meet at least some of the following guidelines: They cannot contain risky features, such as terms that exceed 30 years or interest-only payments; carry more than 3 percent in upfront points and fees for loans above $100,000; or push a borrowers’ total debt above 43 percent of their monthly income unless the loan qualifies to be backed by Fannie Mae, Freddie Mac, the FHA, or a small lender. 

Lenders can still issue loans outside of the QM guidelines, but lenders will have to do so realizing they’ll have less protections against future lawsuits. 

The Consumer Financial Protection Bureau estimates that about 92 percent of mortgages currently meet QM requirements.  

Still, the real estate and mortgage industry, the CFPB, and others will watch implementation of the new rules closely to determine whether they make it more difficult for borrowers to qualify for mortgages. 

The new rules may make it more difficult for borrowers who have fluctuating incomes or self-employed individuals to validate their incomes, according to Goldman Sachs. The 43 percent debt standard also may prove a hurdle for some borrowers who find they can’t qualify for the loan they need to buy the house they want, and some borrowers may find they need larger down payments to keep within that 43 percent rule. 

The new rules may also cause some delays in lending, at least initially, says Keith Gumbinger, mortgage expert with HSH Associates.

"It'll be a muddy mess until the rules settle in," Gumbinger says. 

Source: “New Mortgage Rules Aim to Prevent Risky Loans,” USA Today (Jan. 9, 2014)

Read More

REALTORS®, CFPB to Monitor New Mortgage Rules

Learn More About Qualified Mortgages

Education Campaign on New Mortgage Rules

Vacation Home Market Heating Up

DAILY REAL ESTATE NEWS | TUESDAY, MAY 21, 2013

As consumer confidence, the economy, and job market all make gains, more Americans are feeling like they have money to spend on second residences and summer homes. Low interest rates are still a big draw. 

Vacation home sales increased 10 percent nationwide in 2012, according to the National Association of REALTORS®. Real estate professionals are also reporting sales have been strong this spring in many vacation home hot spots. 

"A lot of buyers who were sitting on the sidelines decided last year was probably a good time to take advantage of buying a vacation home," says Paul Bishop, NAR’s vice president of research. "They were feeling pretty good about their own financial situation, given the growth in the market and in the economy."

In vacation home hot spots like the Hamptons, home prices are “roaring back” and rentals are fully booked for the season, CNBC reports. 

"We've seen bidding wars in the four to five million dollar range as well as in the overall market," Laura Nigro, a real estate broker in Bridgehampton, N.Y., told CNBC. "It's so much better than when the 2008, 2009 economy shrank and people were very much afraid to invest in anything.”

Mostly fueling the demand for vacation homes in the Hamptons has been buyers from China, Nigro says. 

After super storm Sandy struck the coast last year, more buyers are evaluating the FEMA flood requirements more closely and coastal erosion zones before buying, real estate professionals report. But the storms of the past aren’t appearing to dampen their willingness to buy.

For example, New Jersey beach vacation spots in Avalone and Stone Harbor were hit by Sandy last year, but second-home buying activity remains strong and there was no big price fluctuation after the storm, says Allan Dechert, co-owner of Ferguson Dechert in Avalon. 

Source: “Vacation home sales sizzle; rentals book up,” CNBC (May 20, 2013) and “Desire For Vacation Homes Heating Up, Sales Strong,” Investor’s Business Daily (May 16, 2013)

February Average Selling Price Increases Nearly 20%

February Average Selling Price Increases Nearly 20%

3/19/2013

According to the MLS reports compiled by the Michigan Association of REALTORS®, 85% of reporting units reported an increase in average selling price from Feb 2013 to Feb 2012; statewide the average selling price increased by a whopping 19.19%. As inventory tightens however, 7,979 single family homes were sold in Michigan in February 2013, a decrease of 4.97% over February 2012. Key Statistics: $106,258 - 2013 average sales price, YTD 16,412 - 2013 single family units sold, YTD $1.74 billion - 2013 total sales volume, YTD Monthly housing statistics for MAR are reported by participating Michigan REALTOR® local boards and associations. Click here for 2013 February Housing Statistics Source Michigan Association of Realtors- http://mirealtors.com/content/News.htm?view=3&news_id=329&news=1%2c2

8 Reasons Why You Should Work With a REALTOR®

Not all real estate practitioners are REALTORS®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics. Here’s why it pays to work with a REALTOR®. 

1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.

2. Information and opinions. REALTORS® can provide local community information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

3. Help finding the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.

4. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5.  Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.

6. Someone who speaks the language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.

7. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.

8. Objective voice. A home often symbolizes family, rest, and security — it’s not just four walls and a roof. Because of this, homebuying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they’ll every make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.

Mortgage Rates Fall Back to Record Lows

DAILY REAL ESTATE NEWS | FRIDAY, SEPTEMBER 21, 2012

Fixed-rate mortgages are back at all-time record lows or hovering near them, Freddie Mac reports in its weekly mortgage market survey. For those who can qualify for a loan, the ultra-low mortgage rates are pushing housing affordability higher. 

"Following the Federal Reserve's announcement of a new bond purchase plan, yields on mortgage-backed securities fell, bringing average fixed mortgage rates to their all-time record lows, which should aid in the ongoing housing recovery,” says Frank Nothaft, Freddie Mac’s chief economist. 

Here’s a closer look at the national averages with mortgage rates for the week ending Sept. 20:

• 30-year fixed-rate mortgages: averaged 3.49 percent, with an average 0.6 point, matching its all-time low. A year ago at this time, 30-year rates averaged 4.09 percent. 
• 15-year fixed-rate mortgages: averaged 2.77 percent, with an average 0.6 point, setting a new record low this week. Last year at this time, 15-year rates averaged 3.29 percent. 
• 5-year adjustable-rate mortgages: averaged 2.76 percent, with an average 0.6 point, rising from last week’s 2.72 percent average. Last year at this time, 5-year ARMs averaged 3.02 percent. 
• 1-year ARMs: averaged 2.61 percent this week, with an average 0.4 point, holding the same as last week. A year ago, 1-year ARMs averaged 2.82 percent. 

Source: Freddie Mac