Posts Tagged ‘Home Loans’
Home Buyers Could Pay for Payroll-Tax Cut
At face value, it seems like an easy, albeit creative way to pay for the extension of the payroll tax cut. Raise the fees that banks pay mortgage giants Fannie Mae and Freddie Mac to guarantee home loans.
Should Everyone Get Bonus For Paying Mortgage On Time?
As home values continue to fall and more borrowers fall into a negative equity position on their home loans, those who stand to lose, banks and investors, are working to keep borrowers current.
Fannie Mae offers housing aid to military families
Mortgage giant Fannie Mae plans to give military families a break on their home loan payments if they are struggling because of the death or injury of a service member. The Washington-based company says it will reduce or suspend borrowers’ monthly payments up to six months. Fannie Mae is the largest buyer and backer of U.S. home mortgages, owning or guaranteeing about $3.2 trillion in home loans. Fannie Mae also says it would suspend reporting to credit bureaus for up to six months to minimize the impact on the borrower’s credit score. To determine whether they are eligible, military members or their surviving spouses should contact their mortgage company. Or, they can call a special military phone number: 1-877-MIL-4566. AP Logo Copyright 2010 The Associated Press.
USDA Loans – Not as Rural As You Think!
USDA loans are 100% purchase loans offered to people living in rural areas as determined by the United States Department of Agriculture (USDA). The organization's central mission is to help lower income households obtain home loans at reasonable mortgage rates. USDA loan is serviced by direct lenders that meet federal guidelines. USDA loan gives many benefits to people living in these "rural" areas. Under the terms of the program, an individual or family may borrow up to 100% of the appraised value of the home, which eliminates the need for a down payment.Since the main problem of low income households purchasing a home is the lack of funds to make a down payment, this kind of loan guarantees from HCFP makes owning a home a reality. In order to qualify for a USDA mortgage loan you can only have an income up to 115% of the median income for the area that the home you are interested in buying is located. The guidelines also include repayment viability based on P.I.T.I (Principle, Interest, Taxes, and Insurance) divided by gross monthly income being less than 29%. Total debt divided by gross monthly income must also be equal to or less than 41%. Families applying for the loan must not currently have adequate housing. The test of adequacy is based on family size. For example of a family of five is living in a two bedroom apartment then that is not adequate and they would be eligible for the loan. The home must also be reasonable in size based on the size of the family. So if you are living in a place considered as rural area and wish to own a home, don't hesitate to apply for a USDA loan. For more information email me at lindsey_huntington@yahoo.com
Mortgage rates hit low of 4.36%
Mortgage rates fell to the lowest level in decades for the ninth time in 10 weeks as concerns grow that the economy is weakening. Mortgage buyer Freddie Mac said Thursday that the average rate for a 30-year fixed loan was 4.36 percent this week, down from 4.42 percent last week. That’s the lowest since Freddie Mac began tracking rates in 1971. The average rate on a 15-year fixed loan dropped to 3.86 percent from 3.90 percent the previous week. That’s the lowest on records starting in 1991. Rates have fallen since spring as investors shifted money into the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields. The low rates have fueled borrowers to refinance their home loans. Refinancing is at its highest level since May 2009 and made up 82.4 percent of all new loan activity. However, low rates haven’t budged home sales, Those have been stymied by high unemployment, slow job growth and strict credit standards, and have dropped sharply since the expiration of homebuying tax credits in April. To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day. Average rates on five-year adjustable-rate mortgages were unchanged at 3.56 percent. Rates on one-year adjustable-rate mortgages fell to an average rate of 3.52 from 3.53 percent. The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year and 1-year mortgages. They averaged 0.6 of a point for 15-year and 5-year mortgages. Copyright © 2010 The Associated Press, J.W. Elphinstone, AP real estate writer
Average mortgage rates hit low of 4.42%
Mortgage rates fell to the lowest level in decades for the eighth time in nine weeks, a sign that investors are concerned about the weak economy. The average rate for 30-year fixed loans this week was 4.42 percent, down from 4.44 percent last week, mortgage buyer Freddie Mac said Thursday. That’s the lowest since Freddie Mac began tracking rates in 1971. The average rate on 15-year fixed loans dropped to 3.9 percent, down from 3.92 percent last week and the lowest on records dating back to 1991. Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields. Falling rates have pushed refinancing of home loans to the highest level since May 2009. But it’s still lower than during the first three months of that year, when rates first fell to around 5 percent. Low mortgage rates, however, have failed to spark home sales. They remain hobbled by the weak economy and tight credit standards. Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields. To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day. Average rates on five-year adjustable-rate mortgages were unchanged at 3.56 percent. Rates on one-year adjustable-rate mortgages also were unchanged at an average of 3.53 percent. The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year and 1-year mortgages. They averaged 0.6 of a point for 15-year and 5-year mortgages. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Banking execs say gov’t needs to back mortgages
The call from business for less government has a notable exception: the mortgage market. The Obama administration invited banking executives Tuesday to offer advice on changing the government’s role in backing the mortgage market. While they disagreed on the exact level of support needed, the group overwhelmingly advocated for the government to maintain a large role in the $11 trillion market. If the government pulled out, millions of Americans wouldn’t be able to convince banks to take the risk of giving them home loans, the executives said. Ending government support could lead to a spike in mortgage rates. That could deter many from buying homes, and banks, mortgage lenders and Realtors would lose money over time. “It will take on a different form, but there is a role for government,” Kevin Chavers, a managing director at Morgan Stanley, said in an interview. Most attendees agreed the time had come to do away with Fannie Mae and Freddie Mac. Rescuing the two mortgage giants has cost the government nearly $150 billion so far. Bill Gross, the managing director for bond giant Pimco, suggested Fannie and Freddie should be formally merged into the government. He also called on the administration to allow millions of homeowners to automatically refinance their loans to help stimulate the economy. A more widely held view at the conference is for the government to do away with Fannie and Freddie, and instead provide a guarantee that mortgage investors get paid even if borrowers default in droves. Figuring out a plan for Fannie and Freddie is also a political challenge for President Barack Obama and his party. Republicans have seized on the administration’s management of Fannie and Freddie to illustrate Democrats’ push for growing the reach of the federal government. While the banking industry has joined Republicans in criticizing the administration for instituting stronger regulations of Wall Street, they support the government playing a large role in the mortgage market. “There would be a lot of homeowners who wouldn’t be able to afford homes because we’d be dealing with higher interest rates,” said S.A. Ibrahim, chief executive of mortgage insurer Radian Group Inc. Treasury Secretary Timothy Geithner pledged on Tuesday “fundamental change” to the structure of Fannie and Freddie. The mortgage giants profited tremendously during good times but burdened taxpayers with losses when the housing market went bust. He said the two companies weren’t the only cause of the financial crisis, but made it worse. Fannie and Freddie buy mortgages and package them into securities with a guarantee against default. They have ensured that millions of Americans can get home loans – even after the housing market collapsed. The two companies, the Federal Housing Administration and the Veterans Administration together backed about 90 percent of loans made in the first half of the year, according to trade publication Inside Mortgage Finance. Geithner did not offer a specific exit strategy for Fannie and Freddie. But he said, “It is our responsibility to make sure that we create a system that is not vulnerable to these same failures happening again.” The administration is expected to offer a plan next year. One option that dominated the discussion Tuesday is for the government to collect money from the mortgage industry and set up an insurance fund that could be used to cover losses during a severe downturn. This would prevent taxpayers from having to foot the bill for the industry. Some want the administration to take more dramatic actions. Gross said Fannie and Freddie’s function should be consolidated into one government agency that would issue mortgage-backed securities. Without such a solid guarantee, mortgage rates would soar, he warned. He also told the administration that the economic recovery required more government stimulus, particularly in the housing market. He suggested the administration push for the automatic refinancing of millions of home loans backed by Fannie and Freddie. Refinancing those loans at the lowest mortgage rates in decades would give Americans more money each month. That would boost consumer spending by $50 billion to $60 billion and lift housing prices by as much as 10 percent, he said. Without such stimulus in the next six months, Gross said, the economy will move at a “snail’s pace.” Obama officials say they do not plan to enact such a program, which has been the subject of intense rumors on Wall Street in recent weeks. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadca
Senate approves higher gov’t mortgage fees
Higher monthly fees are coming for consumers who take out home loans guaranteed by the Federal Housing Administration, the primary source of mortgages for first-time homebuyers. The Senate late Wednesday unanimously approved legislation giving the FHA the power to hike monthly premiums it charges to consumers. The measure now goes to President Barack Obama, who is expected to sign it. The new law would affect new loans and not ones that already have been made. Officials say the agency needs the authority to stabilize its finances, which have deteriorated because of the foreclosure crisis. The fees are projected to bring in an extra $3.6 billion per year, according to the FHA. The agency does not make loans, but offers insurance against default. People who take out FHA-backed loans pay a smaller downpayment, as low as 3.5 percent of the home price. But they are subject to two additional fees – one at the start of the loan and an annual fee. Both fees are typically spread out in monthly installments over the life of the loan. Borrowers who take out loans through FHA pay an annual fee of 0.55 percent of the total loan. FHA officials expect to raise that to 0.9 percent, though the bill would give them the power to hike it as high as 1.55 percent. Earlier this year, the FHA raised the upfront fee to 2.25 percent of the total mortgage amount from 1.75 percent. Agency officials want to lower that to 1 percent. The combined impact of lowering the upfront fee and raising the monthly fee would mean a borrower taking out a mortgage of $170,000 at an interest rate of 5 percent would pay an extra $38 a month. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer.
FHA is in Better Shape than Expected
Mortgages backed by the Federal Housing Administration have performed better than expected so far this fiscal year, though the improvements could be overturned if home prices sink, according to a report the agency submitted to Congress this week. The report analyzed the FHA’s loan portfolio from October through June and compared the results to the projections in an independent audit released late last year. That audit found that as the FHA’s loan volume expanded, its default rate rose and the excess cash it set aside to deal with unexpected losses eroded to dangerously low levels as of Sept. 30. The auditors concluded taxpayers would be on the hook for losses if worst-case scenarios played out – a first for the agency, which has always used fees it charges borrowers to pay lenders for losses. In its report to Congress this week, the FHA updated lawmakers on the performance of its loans since the audit’s release. The agency said it collected more money than it disbursed in the nine months ended June 30, for a net increase of $446 million. It concluded that FHA loans are holding up better than the audit had predicted on many fronts, in part because the agency has attracted more creditworthy borrowers and rooted out fraudulent lenders. But the report did not update the excess cash reserves calculated in last year’s audit. Those were about $3.6 billion as of Sept. 30. That represented about 0.53 percent of all outstanding single-family home loans insured by the agency – well below the 2 percent required by law. A new audit is due later this year. The FHA’s report to Congress said that from October through June, the FHA had 19,310 fewer insurance claims on loans gone bad and paid $3.7 billion less than projected by the audit. Some states are experiencing a backlog in processing foreclosures, which may help explain the lower-than-expected claims, the report said. But aggressive foreclosure prevention efforts and stabilizing home prices also contributed to the better results. When home values drop and borrowers end up owing more than their homes are worth, they are vulnerable to foreclosure because they can’t sell their properties or refinance if they face a financial setback. But just as better-than-predicted home prices have helped the FHA so far this fiscal year, a sustained drop in prices could severely damage its finances going forward. “That’s the overarching caution,” said Bob Ryan, the agency’s chief risk officer. “We have to think about what loan performance will look like based on what houses’ prices will be doing going forward.” The most at-risk loans are the ones made in 2007 and 2008, the report said. FHA Commissioner David H. Stevens has told Congress that “rogue players” migrated to FHA lending in those years and used aggressive tactics to attract poor-quality borrowers to the FHA. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made. As the loans go bad and clear off the FHA’s books, the agency expects its losses to taper off. The 2009 and 2010 loans – which now make up 60 percent of its outstanding dollar balances – are of better quality, which is why the delinquency rates on those loans are low, the report said. In the quarter ended June 30, only 0.42 percent of the FHA purchase loans were at least 90 days late within their first six months. By contrast, 2.6 percent of the mortgages in the comparable quarter of 2007 and 1.5 percent of the loans in the same portion of 2008 were seriously late. The report also said that the FHA has endorsed more than 1.3 million single-family loans in the first three quarters of the fiscal year as of June, and it’s on pace to ensure 1.7 million by the end of the fiscal year on Sept. 30. Home purchase mortgages alone may surpass the one million mark for the first time since 1987. But refinance activity has slowed dramatically since its peak in late 2009. Copyright © 2010 washingtonpost.com.
