Mortgage Rates At 37-Year Lows!!

Finally, some good news.  Mortgage rates are now at their lowest since 1971 as the Federal Reserve continued to pour money into the morgage market in an effort to jump-start  housing sales. Freddie Mac announced that rates for 30-year, fixed conventional mortgages have dropped to 5.19%. This is the lowest rate since Freddie began its weekly mortgage survey in April 1971. Subsequently, nationwide rates fell to 5.06, the lowest since the 1960s.

All this comes as a result of the Federal Reserve buying up $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and other Federal Home Loan banks.

This has resulted in a surge of homeowners seeking to refinance adjustable-rate mortgages.  Refinancing, however, has become a much more difficult game than in the past few years when home owners seemed to view their homes as alternative ATM machines, refinancing sometimes two or even three times in the same year. Refinancing is now far more difficult.

First, homeowners must have equity in their homes.  Here in SoCal where prices have dropped over 35% in the past year, this means either the very conservative who did not participate in the refi craze or those who have owned their homes in good areas for a long time.  Second, the old days of no qualifying and no verification are over. Now homeowners must  qualify, providing evidence of   income via tax returns, W-2s  and bank statements. Also, even qualifying homeowners must be aware that refinancing costs money for points, title and  escrow fees as well as appraisal fees.  Yes, the fees are integrated into the new loan, but in these days of plummeting equity is that a good idea?

For those near or in foreclosure these new rates will mean little or nothing as the foreclosure will continue. However,Fannie and Freddie do plan to help distressed more homeowners via loan modifications. In fact, the plan is to up the loan mods from the 60,000 last year to 75,000 this year.  Loan modifications typically are applicable only to those who’ve missed at least three loan payments, have sufficient income to make a modified payment and still live in their homes.  Recent data have shown that, distressingly,  even those who get loan mods wind up in foreclosure a few months later.

Falling interest rates are a godsend to the economy. Just as consumers have benefited from falling gas prices, homeowners who buy now or who can refinance will find themselves with quite a windfall of extra money in their pockets. In the aggregate, this should account for billions of dollars of extra spending power and may accomplish its goal of stimulating the now-moribund housing sector.

It looks like good news for the new year. We could certainly use some.

Mortgage Rates Keep Falling! Can You Refi?

Mortgage rates continued to fall today as the Federal Reserve furthers its action plan to help stimulate demand for homes.  Freddie Mac announced that mortgage rates that are hovering around 5.19% this week for a 30-year fixed mortgage haven’t been this low since 1979.  Today rates were at 5.0%.  Now we’re back to 1971! Earlier this week the Fed cut the federal funds rate to a range of 0 to .25%.As mentioned in the last post, rates are expected to continue falling into January when they may hit 4.5%!

What does that mean if you are trying to refi? Real estate loans always come in two parts: the borrower and the property. Each has to qualify. Banks now, of course, have considerably tightened their lending standards. Gone [for the most part] are the sub-prime loans, the option ARMs and the stated income, Alt-A,  loans. Now, you will have to qualify for your mortgage, so you need the income. And, you still need good credit. Above 720 is for primo rates with descending steps down to about 680. Below that, you may have trouble getting the loan.

That’s one part. The other part of the loan, as always, is your house. This is where things get very dicey as potential refiers have to come out of denial and admit that their home has lost probably at least 30% of value. Banks today will give primo rates only to those wanting loans of 75% LTV, meaning you have at least 25% equity in your home or property.

Psychologically, all of this is very hard to swallow. The enticing cheap homes are there for buyers with income. Unfortunately, the unemplyment rate is soaring. The great deals on refis are there now, too.  Then comes the kicker: prices have dropped so much that even good borrowers may not be able to refi because they no longer have the equity they need. Go figure.

What’s Your Best Mortgage Move?

Thinking about refinancing? This might be your best shot since 2003, the fabled Year of the Refinance when rates for 30-year fixed rates went below 5.5% for the first time in 30 years. This year it happened again with rates dipping to their lowest point in 45 years! In the meantime, rates have jumped up a bit, but assuredly will gyrate for the next little while.If you’re wondering what a refinance might accomplish for you, check out this link to a great mortgage calculator: http://www.bankrate.com/baw/mortgage-calculator.asp