30-year fixed mortgage rates dip below 5% again

The rate, which has hovered around that mark since September, fell to 4.97% this week from 5.05% last week

E. Scott Reckard
The Los Angeles Times

The typical rate offered by lenders on 30-year mortgages slipped back below 5% this week, Freddie Mac said Thursday.

The mortgage giant’s weekly survey found that the average rate available on 30-year fixed-rate loans fell to 4.97%, down from 5.05% last week, with an average of 0.7% of the loan balance paid in upfront fees known as points.

The 30-year rate has bumped around the 5% level since September, falling to a record low of 4.71% in a Freddie survey in December. This year it has been above 5% in six of the weekly surveys and below seven times.

Not since the 1950s have rates remained so low for so long, said Greg MacBride, a senior financial analyst at Bankrate.com, citing data from the National Bureau of Economic Research.

The historically low rates have been engineered by the federal government in response to the deep recession.

Freddie Mac’s survey, conducted Monday through Wednesday, asks lenders to report for each loan type the interest rate they are offering, along with the points they are charging for that rate, for borrowers with good credit and at least a 20% down payment or home equity.

The 15-year fixed-rate mortgage this week averaged 4.33% with an average of 0.7% in points, down from 4.4% a week ago.

The five-year Treasury-indexed hybrid adjustable-rate loan, which has a fixed rate for the first five years, averaged 4.11% with 0.6% of the loan balance in points. The rate averaged 4.16% a week earlier.

Mortgage professionals say well-qualified borrowers often negotiate slightly better deals than lenders’ reported offering rates.

Shopping for a loan? A good-faith estimate will protect you

By Kenneth R. Harney
The Los Angeles Times

If you plan to take out a mortgage or refinance any time soon, you might want to hear this blunt message from federal officials: Don’t fly blind. When you’re shopping among competing lenders for the best loan terms and fees, make sure you know which quotes come with a guarantee and which do not.

Depending upon how loan officers provide their quotes upfront — on an informal “work sheet” that carries no federal consumer protections or on a new, three-page “good-faith estimate” mortgage shopping tool that comes with rock-hard guarantees — there could be a world of difference.

A loan officer might quote you fees that are low-balled by hundreds of dollars on an informal work sheet to get your business. But if the quotes are made on a good-faith estimate, they’ve got to be accurate because, under federal rules that took effect Jan. 1, any significant excesses must come out of the lender’s own wallet at closing.

This month the Department of Housing and Urban Development brought together representatives of the highest-volume mortgage lenders in the country — who originate a combined 80%-plus of all new home loans — to review the agency’s reformed good-faith-estimate and closing documents.

Among the issues discussed: the widespread use of informal work-sheet estimates to quote loan shoppers mortgage rates and closing fees. HUD does not object to lenders using work sheets to give casual shoppers a rough idea of what they’ll pay. But the agency says it wants lenders and loan officers to make clear to customers that work sheets are not good-faith estimates, and they are not guaranteed. continue reading »

Professor advises underwater homeowners to walk away from mortgages

Brent T. White, a University of Arizona law school professor, says that it’s in the homeowners’ best financial interest to stiff their lenders and that it’s not immoral to do so.

By Kenneth R. Harney
The Los Angeles Times

Reporting from Washington - Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don’t feel guilty about it. Don’t think you’re doing something morally wrong.

That’s the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.”

White contends that far more of the estimated 15 million U.S. homeowners who are underwater on their mortgages should stiff their lenders and take a hike.

Doing so, he suggests, could save some of them hundreds of thousands of dollars that they “have no reasonable prospect of recouping” in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume, he says.

“Homeowners should be talking away in droves,” White said. “But they aren’t. And it’s not because the financial costs of foreclosure outweigh the benefits.”

Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, “one can have a good credit rating again — meaning above 660 — within two years after a foreclosure.” continue reading »

Jumbo loan market is thawing out

The meltdown sent interest rates soaring and availability shrinking, but rates are declining and lenders are more willing to make loans that top the limits for Freddie Mac, Fannie Mae and the FHA.

By E. Scott Reckard
The Los Angeles Times

Phil Kelly had 18 more months to go before the fixed rate on his $2.5-million mortgage became adjustable.

But when Kelly, a former computer executive living in Rancho Santa Fe, learned he could knock his interest rate down by a full percentage point by refinancing, he went for it.

“It’s always tough to pick the exact bottom or top of anything.” Kelly said. “But I think this rate is about as low as you’re going to get.”

Rates on jumbo mortgages - loans of more than $729,750 in counties with the highest-cost housing - shot up during the financial crisis as lenders and loan investors shunned anything tainted with even a whiff of higher risk. Rates on big mortgages were especially high relative to this on smaller loans.

But in a boon for borrowers in California’s expensive housing markets, the jumbo-loan market is starting to return to normal.

Two weeks ago, the average interest rate on 30-year fixed-rate jumbos dropped to 5.79%, a nearly five-year low, according to rate tracker Informa Research Services of Calabasas. It edged up to 5.88% on Tuesday, still very attractive by historical standards. The average is down from well above 7% in late 2008.

Rates are even lower on so-called hybrid adjustable mortgages, on which the rate is fixed for, say, five years and then adjusts annually.  Kelly’s new loan is a five-year hybrid adjustable identical to his old one, except that he’s paying about 5%, down from 6%. continue reading »

New wave of foreclosures by end of 2010 is feared

By Jim Puzzanghera
The Los Angeles Times

About 4 million U.S. homeowners are 90 days or more delinquent on their loans or in foreclosure proceedings, Moody’s Economy.com says. A federal loan modification program is helping a relative few.

Reporting from Washington - Experts fear that a new wave of foreclosures will hit this year as prolonged unemployment makes it difficult for millions of homeowners to pay their mortgages - and many of them aren’t likely to get much help from a federal program aimed at keeping them in their houses.

Banks participating in the Home Affordable Modification Program, announced a year ago this week by President Obama, have been slow to turn temporarily reduced mortgage payments into permanent ones.

“The overarching sense is that the mortgage modification process has not worked that well,” said Bert Ely, an independent banking consultant.

Obama administration officials acknowledge that the $75-billion program, which offers banks cash incentives to reduce payments, has had growing pains, and they said they were considering revisions to make it more effective.

Still, the program is expected to show continued progress when data from January are released Wednesday after a strong push by Treasury Department officials to get banks to make more of the modifications permanent.

For example, Bank of America Corp., the nation’s largest servicer of mortgages, said Tuesday that it had increased the number of permanent mortgage modifications to 12,700 last month from 3,200 in December. BofA said an additional 13,700 permanent modifications were in their final stage.

But that’s a drop in the bucket considering that BofA holds about 1 million mortgages that are at least 60 days delinquent. About 4 million homeowners nationwide are 90 days or more delinquent on their mortgages or in foreclosure proceedings, according to Moody’s Economy.com, which analyzes data from credit reporting company Equifax Inc. continue reading »

30-year fixed mortgages dip below 5% again

By E. Scott Reckard
The Los Angeles Times

The average interest has remained just above or just below 5% so far this year, but the end of Federal Reserve mortgage bond purchases is expected to bump up rates about half a percentage point.

Average interest rates for traditional 30-year fixed mortgages have fallen below 5% again, Freddie Mac said Thursday.

The giant mortgage buyer’s weekly survey, conducted Monday through Wednesday, pegs the average rate nationally at 4.97%, with 0.7% of the loan balance on average paid in upfront charges, or points.

Last week, 30-year rates averaged 5.01%. That continues a trend so far this year in which the average has come in either just above or just below 5%.

The survey asks 125 lenders across the country the rates they are offering to borrowers with good credit and a 20% down payment or at least 20% equity for those refinancing their home loans.

The approaching end of Federal Reserve purchases of Freddie Mac and Fannie Mae mortgage bonds is expected to result in rate increases later this year. The Mortgage Bankers Assn. estimates the typical interest rate might rise by half a percentage point.

If the average 30-year fixed rate rose half a point to 5.5%, that would still be unusually low by historical standards.

Nonetheless, such an increase would make home purchases more expensive and could put an end to a continuing mini-boom in refinancings, which have accounted for about two-thirds of home loan applications this year. continue reading »

30-year mortgage rate climbs

The average rate on a 30-year fixed mortgage was 5.01% this week, up from 4.98% last week, mortgage company Freddie Mac said.

The average rate on 15-year fixed mortgages rose to 4.40% from 4.39%. Five-year adjustable-rate mortgages averaged 4.27%, up from 4.25%. Rates on one-year adjustable-rate mortgages fell to 4.22% from 4.29%.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year and 15-year mortgages. It averaged 0.6 point for five-year loans and 0.5 point for one-year loans.

Banks aren’t imposing further limits on loans

Associated Press

Washington - Most banks aren’t erecting new hurdles for people and businesses to get loans, a fresh sign that credit problems are easing.

In a quarterly survey released Monday, the Federal Reserve found that “commercial banks generally ceased tightening standards on many loan types” at the end of last year. The one exception: commercial real estate loans.

But banks aren’t ready to ease the tough loan standards put in place during the financial crisis. Banks “have yet to unwind the considerable tightening that has occurred over the past two years,” the Fed said.

Meanwhile, demand for home mortgages and other consumer loans weakened, a sign consumers are leery of making big-ticket purchases given double-digit unemployment and the fragile economic environment.

Consumers will help support economic growth, but they won’t lead it by going on spending sprees. That’s one reason the recovery this year is supposed to be modest rather than booming.

Looking ahead, “significantly fewer” banks expected widespread deterioration in the value of the loans they hold this year, the Fed said.

On the consumer end, some banks indicated that the credit quality of home equity loans and home mortgages held by prime borrowers probably would erode further in 2010.

New FHA measures may cost home buyers

Mary Ellen Podmolik
The Los Angeles Times

The Federal Housing Administration will raise mortgage insurance premiums, update requirements for so-called FICO credit scores and down payments for new home buyers and take other measures designed to shore up the agency’s low capital reserves.

The FHA, which insures mortgages, also will reduce allowable seller concessions to 3% from 6% and institute a number of measures to increase lender enforcement, the agency is expected to announce today.

The proposals were outlined last month by U.S. Housing and Urban Development Secretary Shaun Donovan.

Home buyers who want to make the minimum down payment of 3.5% on an FHA-insured loan would need a minimum FICO credit score of 580, instead of the current 500. New borrowers with scores under 580 would have to put down 10%. However, most participating lenders require borrowers to have a score of 620 or higher.

In addition, the FHA seeks to raise the upfront mortgage insurance premium to 2.25% from 1.75% of the loan amount.

Costs may increase for FHA mortgages

Kenneth R. Harney
The Los Angeles Times

For several years, the Federal Housing Administration has been the go-to financing resource for cash-strapped home buyers who can’t come up with a big down payment. It has zoomed from barely a 3% market share to nearly 30% of home purchase loans. But now, FHA-insured mortgages could be on the verge of becoming more expensive and tougher to obtain.

In the wake of an independent actuarial study that found the FHA’s insurance fund reserves far below the congressionally mandated minimum, the agency confirms that it is exploring ways to pump up its reserves - including raising insurance premiums, minimum down payments and a variety of other unspecified moves.

How might these changes affect home buyers and refinancers? FHA officials won’t discuss precisely what they’re looking at. But here’s an overview of some of the possibilities:

• Higher down payments. FHA’s current minimum cash down payment is 3.5%. On a $200,000 house, a buyer can bring just $7,000 to the table, aside from closing costs.Critics say 3.5% does not force buyers to have enough “skin in the game” to discourage them from missing payments or risking foreclosure. Rep. Scott Garrett (R-NJ) introduced legislation in October requiring a minimum 5% down payment for future FHA loans. Ed Pinto, Fannie Mae’s chief credit officer in the 1980’s and now a mortgage consultant, says FHA needs to move to a 10% minimum.

  But many lenders and mortgage brokers contend that raising the limit could scuttle FHA’s core purpose - serving consumers of modest means. Jeff Lipes of Family Choice Mortgage Corp. near Hartford, Conn., said a move to a 10% minimum “would effectively eliminate FHA as an option for first-time buyers.” A 5% standard would reduce volume, he said, but not exclude as many currently eligible borrowers.

• Higher mortgage insurance premiums. FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount. Most borrowers roll that into their loan and finance it. The FHA also charges an annual premium, paid in monthly installments, of either 0.5% or 0.55%, depending on the down payment. To rebuild reserves, FHA could tweak one or both premiums as high as the statutory maximum of 2.25%. It could also raise the annual fee, but the total premium could not exceed 3% under current congressional limits.Mortgage industry officials say raising premiums would have a gentler effect on borrowers. On a $200,000 loan, Lipes said, an increase in the upfront premium to 2% - and a move to 0.6% on he annual - would raise a monthly payment by $10 a today’s interest rates.
• Cutting home-seller “concessions” to borrowers’ loan costs. One of the big attractions of FHA financing has been the agency’s liberal allowance for seller contributions to borrowers to offset settlement and loan-related fees. The current FHA limit is 6% of the house price, which critics believe to be excessive. They say the policy allows financially marginal borrowers to buy houses they shouldn’t, raising FHA’s exposure to losses. Pinto wants Congress to order FHA to reduce maximum  concessions to 2%.
• Toughening credit standards. In the mortgage market, FHA is by far the most lenient and flexible player when it comes to evaluating applicants’ creditworthiness. It does not have a minimum credit score, though it permits lenders to impose their own FICO score minimums. FHA also has been far more tolerant of credit history peccadilloes than Fannie Mae or Freddie Mac.

But critics say underwriting generosity can lead to higher delinquencies, foreclosures and losses. Many mortgage market participants would prefer to see FHA move to the approach used by private insurers - risk-based pricing.

Paul Skeens of Colonial Mortgage Group in Waldorf, Md., says FHA should calibrate premiums to a tiered system of credit scores and down payment amounts, charging more for borrowers with low down payments and low scores, and less for those with higher cash in the deal and better scores.