Mortgage Happenings

Global events and oil prices have an impact on mortgage rates

Jesse Geiken (Lakeland Mortgage Corporation) — Thu, 14 Aug 2008 14:17:31 -0500

The connection between the world's political events and mortgage rates here at home is not always clear, but Russia's invasion of Georgia provides a strong working lesson.

Georgia is a former Soviet republic on the eastern shores of the Black Sea. Oil pipelines within its territory supply about 1 percent of the world's daily oil needs, mostly to ports in Western Europe.

Last week, Russia bombed Georgia's oil and natural gas transport systems. None of the bombs struck the pipelines, but several exploded close to it. Pipeline part-owner BP shut down two of its oil lines as a precaution, but Russia is reported to have struck one of BP's other pipelines this morning.

The cost of oil is generally based on the normal economics of supply and demand so when oil supplies are threatened, damaged, or shutdown -- because of war, weather or otherwise -- oil prices respond by moving higher.

Higher oil prices, of course, are considered inflationary and that causes mortgage rates to rise here in the United States. High oil prices, for example, are one reason why mortgage rates spiked throughout June and July of this year. And as oil prices have settled, rates have calmed a bit, too.

It's easy to ignore politics and news when it's not happening in your own country, let alone your own hometown. But that doesn't make it any less important.

When you're buying a home, or thinking of refinancing one, you'll likely need a mortgage and the rate you pay on that mortgage will be influenced by every geopolitical event in the world.

Especially when the event involves oil.

Source
Russia-Georgia conflict raises worries over oil and gas pipelines
Elizabeth Douglass
Los Angeles Times, August 13, 2008

In Pictures : Mortgage Guidelines Get Tough For All Borrower Types -- Quickly

Jesse Geiken (Lakeland Mortgage Corporation) — Wed, 13 Aug 2008 14:50:18 -0500

It's not your imagination -- getting approved for a home loan is becoming increasingly more difficult.

Taken from the Federal Reserve's quarterly survey of 84 banks, it illustrates the changing dynamic of mortgage guidelines.

Most notable is the steep curve for "prime" mortgages, a type of home loan given to applicants exhibiting:

A well-documented credit history
High credit scores
Low debt-to-incomes

Americans have come to expect sub-prime loans to be tougher, but it's the sharp tightening of prime guidelines shows us that nobody is exempt from the newfound underwriting prudence that banks are exhibiting right now.

If you plan to buy or remortgage a home over the next year, consider a popular expression in financial circles -- the trend is your friend.

Know that mortgage guidelines will get tougher before they get easier and applicants on the cusp of being approved today will almost certainly be denied a mortgage three months down the road.

Owning real estate and making sound financial decisions requires a tremendous amount of advance planning and, sometimes, looking at the past is the best way to prepare for what's coming ahead.

According to the Federal Reserve's survey, what's coming ahead more mortgage application scrutiny.

Why July May Be The Best Time To Write A Purchase Contract In 2008

Jesse Geiken (Lakeland Mortgage Corporation) — Tue, 08 Jul 2008 08:50:40 -0500

It's a terrific time to buy a home, but not because homes happen to affordable.

It's a terrific time to buy because the variety of mortgage products available to home buyers looks poised to shrink.

Monday, Alt-A mortgage lender IndyMac Bank stopped accepting mortgage applications and it's likely that other Alt-A lenders will likely follow suit.

Alt-A loans are ones in which borrowers can't (or won't) verify one of two major underwriting criteria:

Evidence of income
Evidence of assets

Since the Credit Crunch began last July, Alt-A mortgages have been a steady source of funds for "in-between" borrowers -- those that are not quite prime, and not quite sub-prime. IndyMac was among the largest lenders of its type and had outlasted many of its peers.

Its position as a market leader and subsequent exit from lending means that the remaining Alt-A lenders will likely make one of two choices in the coming weeks:

Raise rates and fees because of greater Alt-A mortgage risk, or
Follow IndyMac's lead and exit mortgage lending altogether

Both outcomes would be harsh for home buyers of all types because when any large bank takes mortgage-related losses like IndyMac just did, it tends to create major risk aversion in the market.

Risk aversion impacts everyone -- even the "good" borrowers.

Banks have been nervous about lending for several months and so they'd rather pass on an "average" mortgage application rather than risk getting stuck with a potentially "bad" one. IndyMac's exit may cause fewer mortgages to get approved.

In other words, buyers eligible for financing today may be ineligible tomorrow.

Therefore, if you're a home buyer and you know your credit profile is less-than-ideal, consider writing a purchase contract sooner rather than later. Your mortgage options may be thinning, and the ones you have may be getting more expensive.

Simple Real Estate Definitions: Discount Points

Jesse Geiken (Lakeland Mortgage Corporation) — Wed, 02 Apr 2008 11:27:00 -0500

More commonly called "points", discount points are up-front fees charged by mortgage lenders in exchange for lower mortgage rates.

The cost of one point is one percent on the loan size and discount points appear on Line 802 of the HUD-1 Settlement Statement.

As a general guideline, each point paid lowers a mortgage lender's offered interest rate by 0.250%.

For example, a $200,000 home loan offered at 6.000% can be had for 5.750% if the borrower agrees to make an up-front payment of one point ($2,000).

In addition to lowering your interest rate, discount points are usually tax-deductible, too. Therefore, be sure to provide any settlement statements from the previous calendar year to your accountant during Tax Season.

Lastly, as an added note: discount points should not be confused with origination points, a one-time charge for the lender's service appearing on Line 801 of the HUD-1 Settlement Statement. Origination points are not tax-deductible.

Looking Back And Looking Ahead : March 31, 2008

Jesse Geiken (Lakeland Mortgage Corporation) — Mon, 31 Mar 2008 08:34:39 -0500

Mortgage rates were up last week on weak housing data and a growing nervousness about mortgage bond quality.

Rates would have been up more if not for a tame inflation reading Friday.

The Personal Consumption Expenditures report fell Friday to 2.0% year-over-year, putting it back within the Federal Reserve's comfort zone of 1-2 percent.

PCE is the Fed's preferred inflation gauge and with inflation in check, Ben Bernanke & Co. can focus on other elements of the economy such as housing and employment.

Mortgage rates figure to be volatile (again) this week.

The first major event to strike markets is today's release of a 200-page, government-written plan outlining sweeping reforms for the financial industry.

If markets interpret the government's plan to be bad for bond markets, expect mortgage rates to rise as demand for bonds falls. Conversely, if the reforms are expected to benefit bonds, mortgage rates should fall.

Then, Wednesday, Fed Chairman Ben Bernanke testifies to Congress about the U.S. economy.

Expect the Fed Chief to stay on message, but mortgage rates will respond to his word choice and tone -- especially in remarks about large banks and their ability to survive the current market. Traders are already on edge and will take Bernanke's testimony very seriously.

And lastly, also moving markets this week is the March jobs report, due Friday.

Remember that job growth was negative in January and February so with a third negative month in March, the calls of recession will grow louder; the expectation is the economy shed 40,000 jobs last month. Whether a negative number will be good or bad for mortgage rates, though, will depend on the bond traders' mood come Friday morning.

Either way, though, if the actual jobs number deviates from the expected jobs number of 40,000, mortgage rates will swing wildly starting at market open Friday and continuing into the weekend.

(Image courtesy: The New York Times)

How Seasonal Factors Change Homeowner Vacancy Rates

Jesse Geiken (Lakeland Mortgage Corporation) — Tue, 25 Mar 2008 08:41:10 -0500

Each quarter, the Census Bureau releases the Homeowner Vacancy Rate, a housing statistic the measures the percentage of homes for sale that are vacant.

A home listed for sale may be vacant for several reasons including:

The home has been foreclosed and the owner has moved out
The home seller moved into a new home and not sold his former home
The home was a rental property and is being sold without a tenant

In Q4 2007, the Homeowner Vacancy Rate matched its all-time high of 2.8 percent.

The statistic can be misleading, however, because Homeowner Vacancy Rates appear to be seasonal and the fourth quarter is more prone to high figures.

As evidence: In 6 of the last 7 years, Q4 posted higher vacancy rates than for the preceding three quarters.

Vacancy rates may increase in the fall because homesellers without a "need" to sell tend to take their properties off the market during the Holiday Season. That leaves an over-weighting of empty homes for sale -- precisely what the Homeowner Vacancy Rate measures.

For an interactive version of the chart above, visit the Wall Street Journal Online.

Source
Housing Markets: A Vacant Look
The Wall Street Journal Online
March 21, 2008
http://online.wsj.com/public/resources/documents/retro-VACANCY08.html

Looking Back And Looking Ahead : March 24, 2008

Jesse Geiken (Lakeland Mortgage Corporation) — Mon, 24 Mar 2008 10:32:27 -0500

Conforming mortgage rates edged slightly lower for the second week in a row.

Mortgage rates fell for two main reasons:

The Federal Reserve offered fiscal support for troubled mortgage-backed securities
A government group gave Fannie Mae and Freddie Mac permission to lend more of money to American homeowners

These two actions combined to make mortgage-backed securities safer for mortgage bond investors and when mortgage bonds are safer, their required rate of return (i.e. interest rate) comes down.

This is the financial concept of Risk vs. Reward in action.

Expect mortgage rates to be in flux and highly volatile again this week, however.

Aside from housing and consumer confidence data, markets will respond to Friday's Personal Consumption Expenditures data. PCE is a "Cost of Living" index that the Federal Reserve watches very closely.

PCE is different from other Cost of Living indices because it accounts for "substitutes". For example, if beef is getting too expensive, PCE will substitute chicken -- much like a regular person would.

In this way, PCE better reflects the true cost of living for the average American.

PCE is expected to show 2 percent growth year-over-year. If the actual figure is higher, expect mortgage rates to rise on inflation concerns.

Re-Approve Your Pre-Approval

Jesse Geiken (Lakeland Mortgage Corporation) — Thu, 20 Mar 2008 10:48:50 -0500

Since December 2007, mortgage lending guidelines have changed very quickly and often without notice.

Some of the more well-known changes include:

Broad restrictions on stated income home loans
Broad restrictions on 100 percent financing
"Risk-based fees" for credit scores under 740

Some of the lesser-known restrictions relate to property type and occupancy status as well as debt-to-income levels and mortgage payment histories.

Because of the number of changes and their collective scope, home buyers should be prudent and get re-pre-approved for their home loan.

Even if you last spoke with your loan officer four weeks ago, it's important to know how market changes could ultimately impact your home loan approval.

The market really is that different. Talk to your loan officer about a re-pre-approval today.

Expect A Fed Funds Rate Cut This Afternoon

Jesse Geiken (Lakeland Mortgage Corporation) — Tue, 18 Mar 2008 10:50:11 -0500

The Federal Open Market Committee meets today and will issue a press release in addition to cutting the Fed Funds Rate at 2:15 P.M. ET.

The verbiage of the press release will be as widely watched as the rate cut itself because markets are curious about how far the Federal Reserve will go to lessen the impact of an economic recession.

With every Fed Funds Rate cut, recession becomes less likely, but the other side of the equation is that the probability of long-term inflation grows.

Like recession, inflation can be bad for the economy, too.

The Fed Funds Rate now stands at 3.000% this morning and the FOMC is expected to lower it by 0.750% or more this afternoon.

Mortgage rates are rising today because cuts to the Fed Funds Rate weaken the U.S. dollar which, in turn, makes mortgage re-payments less valuable to investors.

Looking Back And Looking Ahead : March 17, 2008

Jesse Geiken (Lakeland Mortgage Corporation) — Mon, 17 Mar 2008 08:30:46 -0500

Mortgage rates fell last week on growing evidence of a recession, but far fewer Americans were eligible to take advantage.

Mortgage lenders continue to reduce product menus and that is leaving homeowners with fewer mortgage financing options than before.

As an added hurdle, Fannie Mae and Freddie Mac recently added "risk-based" fees on all conforming home loans, subjecting mortgage applicants to higher mortgage rates based upon:

Property Type
Credit Score
Loan-to-Value

So, even though mortgage rates moved lower last week, for many homeowners, the cost of homeownership did not.

This week, the biggest scheduled news is the Federal Open Market Committee's Tuesday meeting.

It's widely expected that the Federal Reserve will lower the Fed Funds Rate by 0.75%, lowering Prime Rate to 2.250%.

This is good news for Americans carrying revolving consumer debt because those credit types are often tied to Prime Rate. Two popular types of revolving consumer debt are:

Home equity lines of credit
Credit cards

Meanwhile, a cut in the Fed Funds Rate should push mortgage rates up because Fed Funds Rate cuts can lead to inflation.

Since September 2007 -- when the Fed started to cut its benchmark rate -- the Fed Funds Rate is down 2.250% but mortgage rates are slightly higher. This is a normal occurrence and should happen again this week.

Markets will be closed for Good Friday this week.

Go Beyond The Headlines: Unemployment Data

Jesse Geiken (Lakeland Mortgage Corporation) — Wed, 12 Mar 2008 08:17:42 -0500

The Unemployment Rate fell to 4.8 percent in February.

This is 0.1% lower than from January and that's confusing to a lot of people; it's been highly publicized that U.S. companies shed 63,000 jobs last month.

Americans are losing jobs at the same time that the Unemployment Rate is falling. Seem strange?

Well, it's possible because the Unemployment Rate measures workers unemployed versus workers in the workforce.

The "jobs number", by contrast, measures active workers collecting actual paychecks.

So, when the government reported that Unemployment Rates fell in February, it happened because the "workforce" figure used to calculate the unemployment was 644,000 less than the workforce figure from January.

644,000 people have left the workforce entirely. This not only includes those retiring, but the government specifically excludes Americans from the workforce that:

Hadn't looked for a job in the last 4 weeks, or
Felt "discouraged" by their prospects and didn't look for a job at all

And that's why the Unemployment Rate fell in February even as companies were laying off workers -- the total workforce size was reduced by more than the total number of jobs lost.

On paper, it looks like the jobs market may be improving but after a closer look, the opposite may be true.

Similar to mortgage-related stories, there is always more to know than just the headline -- you have to dig deeper to find out what the news really means and how it applies to you.

(Image courtesy: Wall Street Journal)

The Right Question: "How Much Do I Want To Spend On Housing Each Month?"

Jesse Geiken (Lakeland Mortgage Corporation) — Thu, 06 Mar 2008 09:33:01 -0600

One of the most popular questions that home buyers ask real estate and mortgage professionals is "How much home can I afford?"

It's a normal question to ask, but it's not the most effective way to plan your finances.

Banks will almost always approve you for a home loan in excess of your household budget.

The more appropriate question is: "How much do I want to spend on housing each month?"

By focusing on a home's payment instead of its list price, home buyers exert more control over their short- and long-term financial goals. List price is only one piece of the monthly payment puzzle.

The cost of owning a home month-after-month is the sum of multiple expenses:

The mortgage payment
The real estate taxes on the property
The condo/management fees to an association (if applicable)
The cost of homeowner's insurance
The cost of mortgage insurance (if applicable)

In other words, because monthly payments are combination of costs, buying a home based on its list price does very little to help plan a budget. A home selling for $300,000, for example, may cost a homeowner anywhere from $1,800 to $3,000 monthly.

This is why "How much do I want to spend on housing each month?" is a better starting point than "How much home can I afford?".

Home affordability comes from more than just the list price.

Recession or Inflation? Even Fed Members Don't Know For Sure.

Jesse Geiken (Lakeland Mortgage Corporation) — Wed, 05 Mar 2008 07:47:52 -0600

With Friday's jobs report looming, mortgage markets are especially skittish about whether the economy is in a recession, or facing inflation.

Four Fed speakers Tuesday did little to quell the debate:

9:00 A.M.: Fed Chairman Bernanke stayed on message that foreclosures and falling home values are dragging down the economy.
10:00 A.M.: Fed Vice Chairman Kohn said that banks will "face challenges" but will not fail en masse.
1:00 P.M.: Federal Reserve Governor Mishkin said that deflation is more concerning to him than inflation
1:00 P.M.: Dallas Fed President Fisher said fighting inflation is more important than fighting recession.

Four speeches, four different perspectives.

The speakers' mixed messages confused market participants and, as a result, mortgage rates varied wildly from hour to hour.

The confusion was so great that several mortgage lenders had to shut down their rate lock desks on three separate occasions Tuesday to re-price rates to the "new" market.

That's a highly unusual occurrence and the market's volatility underscored the uneasiness exiting in mortgage markets lately. Without a clear picture of where the economy is headed, investors are left to guess (and they're not very sure of themselves).

Friday's job report may add some clarity, but until Friday comes, consider locking a mortgage rate if you see one you like -- it probably won't stick around for very long

What High Oil Prices Mean To Mortgage Rates

Jesse Geiken (Lakeland Mortgage Corporation) — Tue, 04 Mar 2008 08:24:22 -0600

After briefly exceeding its all-time high, oil closed Monday at $102.45.

Rising energy costs can lead to inflation because American Business eventually passes on its higher costs to American Consumers.

When consumers have to spend more money for the same amount of product, it's called "inflation".

Another way to look at inflation is like an erosion in the value of a dollar.

The presence of inflation causes mortgage rates to rise because mortgage debts are repaid in dollars. If those dollars are losing their value, the rates tied to those debts have to increase to "cancel out" the erosion.

This is why mortgage rates spiked Monday. As oil prices rose, the fear of inflation grew larger.

Over the next few weeks, expect mortgage rates to be highly sensitive to oil prices. As oil prices rise, mortgage rates should, too. As oil prices fall, mortgage rates should follow.

(Image courtesy: New York Times)

As The Fed Funds Rate Falls, 30-Year Fixed Mortgages Rise

Jesse Geiken (Lakeland Mortgage Corporation) — Thu, 28 Feb 2008 08:51:35 -0600

Federal Reserve Chairman Ben Bernanke testified to Congress Wednesday, alluded to further rate cuts to support an ailing U.S. economy.

Already, the Federal Reserve has lowered the Fed Funds Rate by 2.250% since September 2007.

The graph at right comes from the Wall Street Journal and it highlights a very important correlation between the Fed Funds Rate and mortgage rates.

The correlation is that there is no correlation.

Since the Fed began cutting rates five months ago, mortgage rates on 30-year fixed mortgages are higher, as are jumbo mortgage rates. ARMs, however, are lower.

Especially noteworthy is how 30-year fixed rates started to spike as the Fed cut rates through January. Another half-point cut in March could have a similar impact.

How Is Housing Doing? It Depends Who You Ask.

Jesse Geiken (Lakeland Mortgage Corporation) — Wed, 27 Feb 2008 22:26:01 -0600

Yesterday, the Office of Federal Housing Enterprise Oversight released its fourth-quarter housing data.

The OFHEO report color-coded each state according to its annual price changes. The states shown in red lost value, and everyone else gained. Overall, the OFHEO measured a 0.8% national increase.

Also hitting the wires yesterday was the Case-Shiller Home Price Index.

This report focuses on the 20 largest metropolitan statistical areas in the United States and painted a much more grim outlook for housing. According to Case-Shiller, prices declined 8.9% nationally.

Both reports are imperfect but one notable difference is that the OFHEO report measures all 291 MSAs in the United States and its data showed that two-thirds of them appreciated last year.

Once again, this just reminds us: real estate is a local phenomenon. Every market is unique with its own price trends, independent from the rest of the country.

Real Estate Term: Earnest Money

Jesse Geiken (Lakeland Mortgage Corporation) — Tue, 26 Feb 2008 08:31:09 -0600

When a buyer and seller reach agreement on a home sale, the buyer typically puts a small amount of money into a trust account.

This up-front deposit is more commonly known as "earnest money".

A sales contract's earnest money requirement will vary from contract to contract. It can be as high as 10 percent of the purchase price and could be as low as $500; earnest money is a negotiable item between buyers and sellers.

Some factors that can influence earnest money amounts include:

Market conditions: Stronger markets often call for more earnest money
Buyer economics: First-time buyers often give less earnest money
Seller psychology: Skeptical sellers often ask for more earnest money

No matter how large or how small, however, earnest money is supposed to give the seller a sign of good faith that the buyer wants to purchase the home.

To this end, earnest money can be forfeited if the buyer later "backs out" of the deal, or breaches the terms of the purchase agreement. Breaching, however, is infrequent.

This is because most purchase contracts are written with buyer-focused "outs" called "contingencies".

A typical contingency is that the seller must provide a clean title policy to the buyer, or that the buyer must secure financing prior to given date, or that the home must pass a satisfactory inspection.

If any of these contingencies cannot be met, the purchase agreement is voided and earnest money returned to the buyer.

When contingencies are met, however, earnest money becomes a deposit and is applied directly to the buyer's bottom line at settlement. If the buyer is expected to have $50,0000 for the closing, for example, the true bottom line is $50,000 minus the earnest money deposit.

Earnest money customs vary from state to state, city to city, and even locale to locale. Be sure to ask your real estate agent and/or real estate attorney for professional counsel before signing purchase contracts.

The earnest money you save may be your own.

Looking Back And Looking Ahead : February 25, 2008

Jesse Geiken (Lakeland Mortgage Corporation) — Mon, 25 Feb 2008 10:52:03 -0600

It's a big week for mortgage markets (again) and that should cause rates to fluctuate wildly (again).

The volatility we've seen since December has not been for the faint of heart. Even this past Friday, as mortgage rates were poised to end the week lower, a late-afternoon stock market rally reversed it.

In the last 45 minutes of trading, the Dow Jones Industrial Average swung 225 points. Mortgage rates rose, too, peeving Americans who planned to go house-hunting over the weekend.

This week, mortgage rates will take direction from a handful of economic reports including the Federal Reserve's preferred inflation marker -- the Personal Consumption Expenditures report. PCE is a Cost of Living index.

The biggest story, though, is Fed Chairman Ben Bernanke's Wednesday testimony to Congress.

While he's not expected to say "the economy is in a recession", or "the economy is doing just fine", markets expect Bernanke to give guidance about how far the Fed would cut the Fed Funds Rate to stimulate the economy.

The Fed Chairman won't say outright, "The Federal Reserve intends to lower the Fed Funds Rate to 1.000%". Therefore, it will be the guessing of how low the Fed will go that should cause markets to buck.

But remember: Cuts to the Fed Funds Rate do not necessarily lead to lower mortgage rates. To the contrary: Since the Fed started cutting the Fed Funds Rate in 2008, mortgage rates have moved higher. As they cut, though, ARM interest rates should become more attractive versus fixed-rate mortgage rates.

This is because additional cuts the Fed Funds Rate will fan inflation fires longer-term and inflation erodes the value of long-term mortgage bonds.

(Image courtesy: West Linn Tidings)

6 Things To Avoid While Waiting For A Mortgage Approval

Jesse Geiken (Lakeland Mortgage Corporation) — Thu, 21 Feb 2008 09:53:09 -0600

When buying a home, there are two stages in the home loan approval process.

Stage 1 starts when a homebuyer submits a mortgage application to his loan officer for a pre-approval.

A pre-approval is a "walk-through" mortgage approval that says -- at a given purchase price and downpayment amount -- the home loan application will very likely be approved.

Stage 1 ends when the buyer signs a purchase contract on a home. At this point, the "walk-through" approval is useless because the buyer now needs a real home loan approval from an underwriter and not a loan officer.

Thus begins Stage 2.

During the second phase of the approval process, a mortgage underwriter is reviewing income, assets, credit, job history, and other items, too; the underwriters job is to make sure that the buyer meets the bank's criteria for lending.

If the loan officer did his job in Stage 1, Stage 2 is just a formality. And most times, it all goes according to plan.

Occasionally, though, a homebuyer sabotages his own mortgage approval by inadvertently changing his "risk profile". It doesn't happen on purpose, of course -- it just happens.

So, consider this a quick primer of what not to do while you're between Stage 1 and the completion of Stage 2 of the home loan approval process. Following these pointers will help keep the risk profile consistent.

Don't buy a new car (or take on a larger lease payment)
Don't quit your job or change industries (and certainly don't switch to a heavily commissioned role)
Don't transfer large sums of money into or out from your bank accounts (and remember that "large" is relative)
Don't miss a payment to a creditor (even if you don't think you owe it)
Don't open a new credit card (even if you're getting 10% off your new bedding)
Don't accept a cash gift without talking to your loan officer first (because there's rules on how to accept them)

There's other items, too, but this a good start.

Now, avoiding these mistakes may not be practical for everyone. Therefore, if you know you're going to violate a "rule", check with your loan officer first.

There are a lot of "gotchas" in mortgage lending and it helps to have professional guidance for your individual questions.

Tuesday May Have Marked The Unofficial End Of Low Mortgage Rates

Jesse Geiken (Lakeland Mortgage Corporation) — Wed, 20 Feb 2008 10:07:47 -0600

For homebuyers and homeowners expecting low mortgage rates this week, Tuesday marked the unofficial end to basement 30-year fixed mortgage rates.

According to the market analysts at BestInfo, Inc., the 30-year fixed rate measured its largest one-day movement in more than 10 years Tuesday.

Nationally, 30-year fixed mortgage rates increased 0.375%.

Here is the "real life" impact to mortgage applicants whose mortgage rates were not yet locked:

$150,000 mortgage: $37 increase to the monthly mortgage payment
$250,000 mortgage: $61 increase to the monthly mortgage payment
$300,000 mortgage: $73 increase to the monthly mortgage payment
$400,000 mortgage: $99 increase to the monthly mortgage payment

ARMs did not move as harshly as fixed-rate mortgages but they still increased Tuesday.

Mortgage rates can change quickly, and often do. Be prepared to lock your mortgage rate and make informed decisions quickly.

The mortgage markets wait for no one.

Looking Back And Looking Ahead : February 19, 2008

Jesse Geiken (Lakeland Mortgage Corporation) — Tue, 19 Feb 2008 08:48:41 -0600

Early last week, mortgage rates rose on strong consumer spending and Warren Buffett's offer to assume $800 billion in debt from three major bond insurers.

Both reports were interpreted as signs of long-term strength in the economy, leading mortgage rates higher for long-term products such as the 20- and 30-year fixed rate mortgage.

Meanwhile, Fed Chairman Ben Bernanke painted a different picture about the economy's health.

In his testimony to Congress, Bernanke called attention to credit market weakness and alluding to a need for future Fed Funds Rate cuts.

The chairman's testimony, coupled with the worst consumer sentiment reading in 16 years, helped to hold short-term mortgage rates flat, even as long-term rates were rising.

In this holiday-shortened week, there is very little data and only one Fed speaker to influence the markets. Therefore, expect external pressures to weigh on market sentiments this week.

The lingering questions about the economy's health remain and so long as that uncertainty exists, mortgage rates will stay unsettled.

We've seen extreme bouts with volatility since December and there's little reason to suspect it will stop now.

(Image courtesy: Bankrate.com)

What The New Conforming Loan Limits May Mean To You

Jesse Geiken (Lakeland Mortgage Corporation) — Thu, 14 Feb 2008 13:20:14 -0600

The $168 billion economic stimulus plan signed Wednesday includes a temporary increase to conforming loan limits in some parts of the country.

Currently, many homeowners whose loans exceed $417,000 are paying higher interest rates because their loans are not securitized the way that smaller loans are.

The loan limit increase is intended to make housing more affordable in certain "high cost" areas around the United States.

However, the loan limit changes are not immediate. The stimulus package grants HUD 30 days to determine which metropolitan areas should be designated as "high cost" and it should take another few weeks for Fannie Mae and Freddie Mac to remodel their mortgage pricing engines.

All told, it could be mid-April before the new limits are in place.

Author's Note: There is a lot of speculation about which areas will be designated as "high cost" and nobody knows for certain until HUD decides. Rather than misreport the facts, we'll save our coverage until something is concrete. However -- if you're in a "high cost" area, you probably already know it.

When the new limits are official, though, expect that many homeowners will take advantage. That will lead to underwriting delays because mortgage refinance activity will surge.

Therefore, consider being proactive about your financing options if:

You suspect you live in a high-cost area
You have liens on your home exceeding $417,000

If you don't live in a high cost area, you can't take advantage of the new loan limits; and if your outstanding liens total less than $417,000, you won't want to be helped.

Converting from a jumbo home loan will not be appropriate for everyone, but it will be right for some. Get personal advice and figure out what's best for you.

And then hope the HUD fingers your neighborhood as high cost.

Planning For A "Quick Close"? Now May Not Be A Good Time.

Jesse Geiken (Lakeland Mortgage Corporation) — Tue, 12 Feb 2008 09:38:02 -0600

On the backs of surging purchase activity across the country and low mortgage rates, home loan applications have surged to a near four-year highs.

For people with mortgage applications in process, some patience may be required.

In 2006 and 2007, mortgage volume slowed nationwide. Narrowing mortgage guidelines restricted the number of eligible borrowers and rising mortgage rates made refinancing impractical for many homeowners.

In a push for profitability, lenders eliminated jobs because fewer applications meant fewer people were needed on staff.

So now, with rates edging near their 2004 lows and with strong demand for home purchases nationwide, mortgage lenders are finding themselves short-staffed.

Lenders are understaffed to handle the volume of mortgage applications coming in each day.

As a comparison:

October 2007: 24 hours to review and approve a home loan
February 2008: As long as 20 days to review and approve a home loan

Some lenders have gone so far as to eliminate the benchmark 30-day rate lock option, replacing it with a 60-day option instead.

60-day mortgage rates are typically 0.125% higher than comparable 30-day ones.

As a home buyer, home seller, or mortgage refinancer, it's important to recognize that lenders may not have the capacity to move as quickly as you'd like them to. To help them move more quickly (and possibly save you money), be prepared and be responsive.

30-day closings are still possible, but, given today's demand for mortgage money, they are increasingly rare.

Looking Back And Looking Ahead : February 11, 2008

Jesse Geiken (Lakeland Mortgage Corporation) — Mon, 11 Feb 2008 08:45:34 -0600

Mortgage markets are conflicted about the U.S. economy and the confusion is impacting home buyers.

If you've recently tried to lock a mortgage rate, you've probably experienced it personally.

On one hand, reports of plunging sales suggest that the economy is slowing more quickly than expected.

This is recessionary and tends to be good for mortgage rates. So, some days, rates have been down.

On the other hand, some pundits (including a Federal Reserve official) are saying that recent Fed cuts may stoke inflation in the second half of 2008.

This is inflationary and tends to be bad for mortgage rates. So, some days, rates have been up.

Neither side is wrong -- 2008 will likely show signs of both recession and inflation at some point. Markets are waking up to this fact.

And this is why mortgage rates have changed so much from day-to-day -- investors can't agree upon exactly when the Fed rate cuts will work their way through the economy. With each "target date" change, mortgage rates change.

This week, expect more of the same volatility with January's Retail Sales data being released and five Fed speakers (including Fed Chairman Ben Bernanke) stumping.

The spoken word of the Fed Chief can be a very powerful influence on markets.

If you've recently gone under contract for a home, you may find peace of mind by concentrating on a mortgage payment as opposed to a mortgage rate; rates could change multiple times each day and timing a market-bottom can be futile.

Where Presidential Candidates Stand On Matters Of Money

Jesse Geiken (Lakeland Mortgage Corporation) — Thu, 07 Feb 2008 10:09:19 -0600

In an election year, voting for a presidential candidate can be a lot like buying a home.

Both require a fair amount of analysis but -- in the end -- the decision is still highly emotional.

Using Bankrate.com's side-by-side candidate comparisons, some of that emotion could be replaced by fact.

In a gridded format, candidates are pitted head-to-head the following topics:

Education
Jobs
Health Care
Social Security
Taxes

The charts can help Americans get a better feel for where the candidates stand with respect to "pocketbook issues" that impact them personally in their businesses, their lives, and in their homes.

Opinions on the issues are current as of January 29, 2008. As with everything in politics, though, the candidate positions are subject to change.