Holiday Mortgage News. More of the Same

Rates continue to hover near historic lows

The short holiday week saw little change in mortgage rates.

According to Mortgage News Daily, the Best-Execution Rates for Friday, November 25^th ranged from 3.875% (“very few”) to 4.125% (“some”), with most seen at 4.0%. Realty Times reported the results of Freddie Mac’s Primary Mortgage Market Survey for the three-day week:

• 30-year fixed-ratemortgage averaged just under 4.0%, down from 4.40% a year ago
• Average rate for 5-year adjustable-rate mortgages (ARMs) reached a new low of 2.91%, down from 3.45% last year
• Average rate for 1-year ARMs was 2.79%, down from 3.23% last year

Although home sales were slightly up in October, according to the National Association of Realtors (NAR), they could have been even better had there not also been a high number of failed sale contracts in October. NAR’s chief economist attributes the failed contracts in part to appraised values not matching the negotiated sale price and to tight credit standards.

Time to Be Thankful For Housing Market News?

Recent forecasts predict better times ahead in 2012

Although small, a slight uptick in the housing market next year is predicted. A survey by MacroMarkets of more than 100 economists and industry experts shows they expect home values to go up — just a little. About .25 percent in 2012 and a total of 1.1 percent through 2015.

Slowing the recovery down are the many foreclosures clogging the market. A recent article in Money Magazine notes that Freddie Mac predicts that in 2012, 4.8 million homes will be sold in total, while there are more than 5 million homes for sale. The market considers six months of housing inventory to be healthy — more than a year’s worth of inventory is a sign that the going will be tough to return to healthy market conditions.

For buyers and sellers in 2012, the recommendations are to “think small” and “price smart.” For buyers, looking at smaller properties mean smaller loans, smaller payments and smaller home costs overall (energy, water, etc.). For sellers, working with — and listening to — an experienced Realtor when it comes to setting the sale price of their home is critical. According to Trulia, about 25 percent of homes it tracks has reduced its price at least once, by an average of about eight percent.

And of course, for homeowners not looking to sell, now is the time to look at refinancing, as mortgage rates continue to hover at all-time lows. Considering that just recently 15-year mortgage rates were more than half a point less than 30-year mortgage rates, a homeowner who could afford the higher payment could refinance a $250,000 mortgage with a 15-year loan and save more than $100,000 over the life of the loan compared to a 30-year mortgage.

The Battle Over Principal Reduction Rages On

States, including NY and CA, push to include assistance for underwater loans

The latest settlement proposal between the states’ coalition and five major banks after 11 months of talks includes financing support for underwater loans, including refinancing, principal write downs and other forms of assistance. According to CoreLogic, about 22.5 percent of all residential mortgages are underwater.

Multistate talks to craft a settlement with the major banks stalled a few weeks ago when California State Attorney General Kamala Harris withdrew. Harris pointed to the combination of the banks’ demands for broader immunity from litigation and penalty for their earlier “abuses” along with the inadequate relief proposed for homeowners whose loans are underwater as unacceptable to protect the interests of California and California homeowners.

Earlier this month, Harris stated that she thinks the head of Fannie Mae and Freddie Mac should “step aside” if he will not approve principal reduction for underwater loans. PICO, a California community organizing network, pointed out in a press release that Fannie and Freddie “continue to keep more than one million California families trapped in unsustainable debt.”

The talks, led by Iowa State Attorney General Tom Miller and supported by the Obama administration, had recently increased the suggested penalties from $20 billion to $25 billion. The additional $5 billion, paid directly to state and federal governments, is intended for eligible victims of the five participating banks’ foreclosure processes — restitution payments are estimated to be between $1,500 and $2,000.

In addition to Harris, attorneys general from several other states including New York, Massachusetts, Nevada, Minnesota, Kentucky and Delaware have stated that they don’t feel that the proposed $25 billion settlement is adequate to protect their states’ homeowners.

Gathered from the following sources:

• California Pulls Out of Foreclosure Talks (WSJ)
• States near foreclosure deal with banks (Reuters)
• Kamala Harris, California Attorney General, To Fannie And Freddie Head: 'Step Aside' Over Mortgage Crisis (Huffington Post)
• Should Fannie, Freddie Write Down ‘Underwater’ Mortgages? (WSJ Blogs)

Obama Announces Expanded HARP Program

Two years later after its debut, how has the Home Affordable Refinance Program changed?

Last month, President Obama announced that the Home Affordable Refinance Program (HARP) was being revised and expanded.

HARP was introduced in 2009 as a measure intended, according to a statement by the President, to “make it possible for an estimated four to five million currently ineligible homeowners who receive their mortgages through Fannie Mae or Freddie Mac to refinance their mortgages at lower rates.” In the two years since HARP’s debut, not quite one million homeowners — or 20 to 25 percent of the intended beneficiaries — have received HARP assistance.

As reported on HSH.com, there are two notable changes in the HARP guidelines, impacting borrower qualifications and lender obligations.

Elimination of LTV caps — The original guidelines for qualifying borrowers capped the loan-to-value (LTV) ration at 125 percent. The revised guidelines eliminate this cap, which is good news for borrowers in hard hit states including Nevada and Arizona, where some LTVs exceed 200 percent.

Elimination of Reps and Warranties — The other significant change is the elimination of some representations and warranties for HARP-participating lenders. By transferring certain lender obligations in the case of a loan going bad from the lender to the government, the government is encouraging more banks to participate in HARP, offering homeowners more options and access to loan modification choices.

Tim Manni, managing editor at HSH.com, comments in his post that he anticipates these changes helping Fannie Mae and Freddie Mac (as only mortgages through either of these institutions are eligible for HARP) as well as the loan orginators, who are now able to take on more debt with less risk. Manni does not, however, see these revisions having a noticeable impact on the housing market’s biggest problem: distressed borrowers and shadow inventory. Borrowers who are behind or seriously delinquent are not eligible and REO held out of the market will not be impacted by the expanded guidelines.