If you took out a ‘piggyback’ second mortgage (aka a ‘junior-lien loan’) to cover, say, your down payment or private mortgage insurance (PMI), then you may have problems if you need a loan modification. Read the rest of this entry »
It was a record-setting week all around, which adds up to good news for mortgage shoppers:
While economic weakness is enough to give some home buyers pause, it is important to remember this same economic weakness is creating the extraordinary buying opportunity.
Late yesterday (Tuesday) afternoon, the Federal Reserve slashed its target for the overnight federal funds rate to a range of 0 to 0.25 percent. That may sound like meaningless gobbledygook, but it’s not. It’s an all-time record low. Read the rest of this entry »
This week’s mortgage news was dominated by a dramatic drop in mortgage rates triggered by a new Federal Reserve approach to the financial crisis.
Of all the actions taken to address this crisis, none has had such immediate and tangible effects. Neither lowering Fed rates nor providing direct financial support to lenders seemed to make so much as a ripple in the credit markets. However, on news of this latest Fed program, 30-year mortgage rates dropped the better part of a full percentage point, falling near their all-time lows.
The Fed has announced that it will buy $600 billion in existing, mortgage-backed debt. This move both frees up capital for new lending, and gives lenders renewed confidence to make loans. It is the latter especially that accounts for the immediate drop in interest rates.
It is worth a closer look at what this action will and won’t accomplish, but in the short term it is undeniable that it has created a rare opportunity for home buyers and people who want to refinance.
Mortgage rates, which had enjoyed a sustained downtrend through mid-September, rose for the second consecutive week, as of October 2, 2008.
This rise was despite the fact that the mortgage bailout bill seemed to have edged a step closer to passage by achieving overwhelming Senate approval. The rise also appeared to occur into the headwind of bad economic news, as factory orders were reported to have dropped sharply in August, while new jobless claims rose.
The contradiction is that the bailout bill is supposed to give lenders more confidence, while interest rates in general typically fall during an economic slowdown. Despite this, mortgage rates rose. So what is going on here?
As congress debated the Wall Street bailout, there seemed to be an underlying assumption that some kind of package was necessary to put liquidity back into the mortgage lending industry. The general impression is that tougher lending standards have made mortgages scarce, and indeed, the number of existing home sales continued to slip in August. Taken at face value, these stories might be enough to scare potential home buyers out of the market, at least long enough for the bailout package to kick in. However, before heading to the sidelines, those potential home buyers would do well to ask two key questions:
30-year mortgage rates fell sharply over the past week, extending a sustained move into more affordable territory. Two key factors were behind the change:
Is this reason to be optimistic about the housing market? As always, optimism about housing should be tempered with a healthy dose of caution, but this does spell opportunity for certain buyers and home owners who want to refinance — especially those with strong credit histories.
It was enough to make any mortgage observer recall the old joke about the light at the end of the tunnel turning out to be a train. A steady drip of positive news lately was overshadowed by the news that lender GMAC Financial Services was closing 200 retail offices and laying off 5,000 employees. The move was designed to scale back the firm’s mortgage lending presence in reaction to losses in that sector.
Still, while this story grabbed the headlines, home buyers and mortgage shoppers should not lose sight of some of the more positive news:
While the GMAC story was a reminder of why economic recoveries can take so long to develop, the underlying fundamentals suggest that conditions may be getting better for the housing market.
The past week saw more symptoms that the mortgage crisis is likely to drag on:
For prospective homebuyers, these symptoms of long-term consequences of the mortgage crisis signal that waiting for the storm to blow over may not be the best strategy.
Mortgage rates remained unchanged for the second consecutive week, as a troublesome reading on consumer prices neutralized growing optimism over falling oil prices.
Though the Consumer Price Index (CPI) measures a period which trails the recent declines in oil prices, the latest reading was a reminder of how difficult it can be to put inflation back in the bottle once it escapes.
30 Year Fixed 4.00% (APR 4.21%)
15 Year Fixed 3.75% (APR 3.99%)
30 Year FHA 0.00% (APR 0.00%)
15 Year FHA: 0.00% (APR 0.00%)
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