There's nothing like 30-year mortgage rates near 4 percent and 15-year even lower to make homeowners daydream about refinancing. But not everyone would come out ahead if they did. And borrowers with little (or negative) equity are in a tight spot -- though changes to the federal Home Affordable Refinance Program announced this week are aimed at increasing their chances of getting approved.

Today's guest poster, Dave Skaff, wants to shed some light on the subject. He's an M&T Bank regional mortgage manager responsible for loan officer staff in the mid-Atlantic.

Take it away, Dave:

 ---------------------------------------------------------

Mortgage rates are at historic lows. For millions of Americans, now could be the right time to make a move to improve their monthly cash flow. But getting a home loan in today's mortgage world is not as easy as it once was. Declining values and stricter documentation guidelines make it challenging for many folks. For anyone who is interested in refinancing, there are several key points to consider:

1) A small drop of just 1 percent could make it worthwhile to refinance for someone with a large loan balance. A few hundred dollars per month could be saved on a $300,000 loan, for example. On a lower loan balance, the monthly savings could be outweighed by the costs involved. It is best to consult with a mortgage specialist to see if refinancing makes sense for you.

Continue reading "Dave Skaff: Time to refinance?" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (10)
Categories: Guest post, Mortgage rates, Mortgages
        

Standard & Poor's downgrade of the United States' credit rating late Friday, followed by downgrades of financiers Fannie Mae and Freddie Mac on Monday, might not affect the mortgage rate you can get right this instant. But it probably will down the road, Bankrate.com warns.

Zillow, meanwhile, expects basically no impact on rates for now but a housing-market hit of another sort. More on that in a moment. 

Bankrate's Greg McBride, chatting with me on Monday, said the Fannie and Freddie downgrades from AAA to AA+ matter more for borrowers than the country's debt downgrade.

"The downgrade of Fannie Mae and Freddie Mac debt is what could lead to greater spreads between Treasury yields and those on mortgage-backed securities, and the rates borrowers pay," McBride said.

"Investors that buy mortgage bonds often buy them because they're guaranteed by Fannie Mae and Freddie Mac. The yield they're getting is only as good as the guarantee. If Fannie Mae and Freddie Mac have been downgraded, then those investors may command a higher premium for holding that debt, and that would translate into higher mortgage rates."

How long it might take to see the effect is anyone's guess. Right now, McBride said, the weak economy is helping keep mortgage rates low -- and certainly the Federal Reserve has no interest in seeing them rise. What might happen for a while is that rates could stay where they are rather than falling when Treasury yields fall, he said.

But a pickup in the economy would put upward pressure on mortgage rates, he said.

"The significance of the downgrade is in the long run, Uncle Sam, consumers and businesses will pay higher interest rates, even if only slightly higher rates," McBride said. "But that additional interest is money that's not being spent elsewhere in the economy."

LendingTree said lenders in its network were offering the same rates on Monday that they had on Friday -- 4.125 percent for a 30-year fixed mortgage.

Continue reading "S&P downgrade could affect your mortgage rate -- but probably not soon" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (3)
Categories: Mortgage rates
        

The average rate for a 30-year fixed-rate mortgage was a bit lower last week than it was the week before, a pullback after more than a month of speedy increases.

Rates, which had been just below 4.2 percent in the second week of November, ratcheted up to 4.83 percent before inching back last week. (The average last Thursday was 4.81 percent, according to financier Freddie Mac's most recent survey.)

Financial publisher HSH Associates is seeing the same trend with its survey, which tracks not only the conforming market but also jumbo mortgages. (It put the average at 5.15 percent last week.)

"Warmer economic growth has been largely to blame for the increase in rates during the fall, but this increase has been exacerbated to a degree by the Federal Reserve's stimulus program, some post-election improvement in moods and a tax compromise which lends some certainty (and a little boost) to the outlook as we roll into 2011," HSH said in a market-trends analysis.

It's not expecting additional big increases: "While the economy is moving forward at a measured clip, there are few signals that it is powering ahead so forcefully that interest rates should rise much further than they already have, and they may have even overshot the mark, which is typical."

Greg McBride, senior financial analyst at Bankrate.com, said much the same when he chatted with me earlier in the month about the then-upward trend in mortgage rates. He wasn't anticipating further large jumps or a big reversal. "The better trend of economic data is likely to keep a floor under mortgage rates," he said.

Here's a graph showing the fluctuation in rates this year:

Continue reading "Mortgage rates ease after upward climb" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (0)
Categories: Mortgage rates
        

If your credit score is under 620, don't expect to get a mortgage until your financial situation improves.

Zillow, the real estate site that also runs a "mortgage marketplace," says few would-be homebuyers with a score in that subprime category get even one loan quote in response to their requests. That's true "even if they offered a relatively high down payment of 15 to 25 percent," the company says.

It analyzed 25,000 loan quotes and purchase requests made on the mortgage marketplace in the first half of September.

Here's how quoted rates varied for people with higher credit scores:

Continue reading "Got a credit score under 620? Good luck getting a loan, Zillow says" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (9)
Categories: Mortgage rates, Mortgages, Resources for new buyers & owners
        

So these low-low mortgage rates are having an effect on Americans after all: Applications for refinance deals jumped 17 percent last week to the highest level in 15 months.

That's according to the Mortgage Bankers Association, which surveys lenders. In its previous survey, it noted that applications for loans -- refinance and purchase -- barely budged despite the lowest rates since it began its survey in 1990.

Last week's rates were slightly higher than the week before, according to the survey -- 4.6 percent for a 30-year fixed-rate product rather than 4.57 percent.

Homebuyers, however, are not applying in droves. Applications for loans to purchase homes dropped 3.4 percent from a week earlier.

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (4)
Categories: Mortgage rates
        

Mortgage rates averaged 4.44 percent last week for 30-year fixed-rate products, a new record low in Freddie Mac's 39-year survey. But few borrowers are biting.

After plummeting in the wake of the homebuyer tax credit expiration, the number of applicants for loans has stayed essentially unchanged, according to the Mortgage Bankers Association's weekly surveys.

Seventy-eight percent of those who are applying want to refinance an existing mortgage, not take a new one out for a home purchase. Even so, applications for refinancing barely budged upward in the trade group's most recent survey, released last week.

When home prices fall, fewer people have the equity to refinance. So that's a key reason lenders aren't getting a borrowing boom from these mortgage rates that are half as high as they were in the mid-1970s and mid-1990s -- and one-forth as high as the 17.8 percent rates people were getting in November 1981. (The average last year was 5 percent, and the average in 2008 was 6 percent.)

Freddie Mac's second-quarter report on refinance activity showed some interesting trends among those who are replacing the mortgages on their homes.

Continue reading "Record low mortgage rates -- and low interest, too" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (14)
Categories: Mortgage rates
        

You didn't need to wait long for a sign of what the end of the home buyer tax credit program means: Mortgage applications by buyers fell 27 percent last week -- following a 10 percent drop the week before -- to their lowest level in 13 years.

"The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season," Michael Fratantoni, the Mortgage Bankers Association's vice president of research and economics, said in a statement this week.

It's been mostly downhill for new-purchase mortgage applications since 2005, as this chart shows, but the figures did spike last fall (when the credit was originally set to expire) and again more recently.

Refinance applications did rise nearly 15 percent last week as homeowners tried to take advantage of dropping mortgage rates. (Refi requests accounted for two-thirds of all applications.) The average interest rate for a 30-year fixed rate mortgage was about 4.8 percent that week.

As columnist Eileen Ambrose notes, experts are thanking/blaming fears about financial instability in Greece for the low U.S. mortgage rates. Investors, seeing U.S. Treasuries as a safer bet than European debt, are parking their money there, "and the demand pushed down long-term interest rates that influence the 30-year fixed rate mortgage," Ambrose writes.

Financial publisher HSH Associates says the downward trend has continued: "After setting 2010 lows last week, mortgage rates managed another downshift this week and are once again near historic -- approximately 50-year -- lows."

Any deep thoughts to share on rates or the pipeline of future buyers?

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (3)
Categories: First-time buyer tax credit, Mortgage rates, Mortgages, Repeat buyer tax credit
        

Amidst all the arguing over the future of the housing market, you would be excused for thinking that the past -- specifically, what caused the bubble -- is crystal clear.

Au contraire, several economists say.

Way low interest rates, down payments and lending requirements? Those can only explain part of the price run-up, according to a new policy brief by Edward Glaeser, Joshua Gottlieb and Joseph Gyourko, the former two of Harvard and the latter with the University of Pennsylvania.

They argue that interest rates alone probably account for just a 10 percent increase in price between 2000 and 2006, a small portion of the value escalation in many metro areas.

To wit:

Theoretical and empirical analyses suggest that neither interest rates, nor downpayment requirements, nor approval rates moved enough over the past decade to generate the magnitude of price changes that parts of the United States experienced. Moreover, other standard explanations for rising housing prices, like rising incomes, also fail to explain much of the price volatility. Using the standard toolkit of the empirical economist, we are unable to offer much of an explanation for what happened.

Perhaps UFOs were involved somehow. Or pixies.

Or, wait, perhaps it was good ol' human nature:

Continue reading "What's really to blame for the housing bubble" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (14)
Categories: Mortgage rates
        

Hello, higher interest rates?

Maybe not, says Reuters. At least not right away. What one arm of the government taketh away, the other giveth back.

Fannie Mae and Freddie Mac, the mortgage financiers operating under federal conservatorship, will be buying out $200 billion in delinquent loans, putting "about $140 billion of cash into private investors' hands" for reinvestment into the market.

But Mark Zandi, chief economist at Moody's Economy.com, does expect that rates will go from the current 5 percent or so to over 5.5 percent by the end of the year. 

Rates matter because they play a significant role in how much house buyers can afford -- and how much sellers can get. Low-low rates help increase home prices (i.e. the aughts housing boom), or at least remove a reason for them to fall faster.

Where do you see mortgage rates going?

Are you anxiously rate-watching because you're hoping to buy (or sell) soon?

And when do you think the government will actually scale back its involvement in the housing market?

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (14)
Categories: Mortgage rates, Mortgages
        

There are 3 options:

1. Pull the Fed rate subsidy and housing prices WILL fall further, the only question is exactly how high rates will go and exactly how low prices will fall.

2. Keep the Fed rate subsidy program going indefinitely. The price of housing measured in dollars will be higher, but measured in anything else, gold, gallons of gas, gallons of milk, or loaves of bread, it will be lower.

3. Pursue real pro-growth policy that leads to higher wages and allow those higher wages to drive up prices.

One thing the prior decade showed us is that asset appreciation brought about by financial engineering is unsustainable. The supports being offered now are merely financial engineering, be it on a much larger scale than Wall Street.

See his full comment here.

Do you agree that those are the only options? What do you want the Fed to do (or not do)?

Posted by Jamie Smith Hopkins at 3:29 PM | Permalink | Comments (5)
Categories: Comment of the day, Mortgage rates, Mortgages
        

Enter "A Financial Analysis of Consumer Mortgage Decisions," a new report by the Research Institute for Housing America and the Mortgage Bankers Association. It discusses various mortgage choices and when it makes sense to get what, including a refinancing.

The authors' advice: Don't just consider interest rates. Look sharp at the closing costs.

Play around with this "Optimum Mortgage Refinancing Calculator," noted in the report, and you'll see how cosing costs can make a difference.

Say you've got a 6 percent interest rate on a mortgage with a balance of $250,000. You're contemplating a refi into a loan that has a 5.5 percent interest rate and 1 discount point.

If your closing costs add up to $2,200 and you roll that into your new mortgage along with the point, you'll save $137 a month over your old loan.

But what if you have $5,000 in closing costs, at the higher end of what LendingTree says the range can be?

Then your monthly savings are $121. That's $192 less a year than the savings with the cheaper closing costs.

Ah, you say, but a savings is a savings. Who cares about the closing costs if you can roll them into the mortgage amount and still pay $121 less a month?

Because, the authors say, you want to think about the "opportunity cost" of refinancing now only to see rates fall further. If you refinance now, it might not be in your best interest to refinance later as well.

"If closing costs are significant, say 3 percent of the remaining principal, and you refinance every time there is a 50 basis point drop in rates, you may never fully recover the cumulative closing expense incurred," they write. (And meanwhile your principal keeps growing. That's why the "serial refinancing" encouraged by some -- ah -- "helpful" folks in the mortgage industry isn't a good idea for a typical borrower.)

The mortgage calculator I linked to above attempts to take all this into account and tell you whether -- given your potential interest rate and costs -- it's a great, OK or bad idea to refinance. Its opinion on the refi opportunity with $5,000 in closing costs: Pass. It dubs the one with $2,200 in closing costs "OK, But Not Optimal." (What would be optimal in this case? Closing costs under $1,250. Or $2,200 in closing costs with a 5.4 percent interest rate rather than 5.5 percent.)

The authors dub this "refinancing efficiency."

What do you think of this way of looking at refinancing options?

And something to consider in today's environment: Does it make sense to hold off refinancing on the chance that rates could go lower when the prevailing expectation is for increases?

Posted by Jamie Smith Hopkins at 8:39 AM | Permalink | Comments (2)
Categories: Mortgage rates, Mortgages
        

In a press release today, the trade group points to several factors, including the fast-growing federal debt and the expectation that the Federal Reserve will eventually have to "withdraw the substantial liquidity it has injected into the financial markets to keep a lid on expected inflation." That substantial liquidity has helped keep rates low-low-low, so when it's gone, rates will probably go up, the mortgage bankers say.

The group notes, though, that some believe "continued anemic growth and high unemployment will combine to hold down inflation and the demand for debt" -- keeping interest rates more or less where they are. So if you're trying to decide when to get a mortgage, you might want to invest in a crystal ball.

The mortgage bankers group also said it expects people will get fewer mortgages this year than it anticipated in the spring. Its new forecast is for $2.03 trillion in new home loans, down more than $700 billion from what it forecast in March. Why? Buyers getting smaller mortgages because homes are cheaper, investors snapping up properties with cash, fewer people refinancing and "very low volumes in the Fannie Mae and Freddie Mac Home Affordable Refinance Program."

Posted by Jamie Smith Hopkins at 10:39 PM | Permalink | Comments (11)
Categories: Mortgage rates
        

That's because mortgage rates are below 5 percent for 30-year fixed products. Freddie Mac, releasing its weekly survey Thursday, said it was 4.78 percent -- the lowest since it started tracking the figure in the spring of 1971.

You know, this is exactly the sort of situation that cries out for a graph.

Here you go:

The higher line is the annual average; the lower one is points. There's no 1971 (only a partial year of data from Freddie Mac) and no annual average to be had for '09 yet, obviously. But you can imagine the line dropping from '08.

I included points because they've ranged a lot over the years -- from more than 2 percent to less than half a percent.

I updated the graph above on 4/6 to show the rate and points separately -- which I should have done from the beginning. Desk, meet head.

Posted by Jamie Smith Hopkins at 8:11 AM | Permalink | Comments (4)
Categories: Mortgage rates