Tiffany's Tips and Mortage Matters...

Home Prices Lower In August...

Platinum Funding — Tue, 27 Oct 2009 03:20:28 -0500

According to the governments numbers, home values edged lower last month.

The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.

The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index than its private-sector cousin, the Case-Shiller Index.

But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:

Is considered new construction
Is a multi-unit property
Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring. FHA represents about one-third of all mortgage loans in 2009.

Because of these exceptions, some analysts label the Home Price Index incomplete. The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.

In light of these shortcomings, therefore, what's most important is to recognize that both of the "popular" home valuation reports show similar patterns -- home prices have leveled and are showing signs of a rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Gas Prices Rise, and so are mortgage rates!

Platinum Funding — Fri, 23 Oct 2009 02:21:28 -0500

With crude oil at its highest levels since October 2008, retail gas is up 8 cents per gallon this week.

It's bad news for home buyers and mortgage rate shoppers. The same force that's driving oil higher is linked to rising mortgage loan rates.

We're talking about the weakening U.S. Dollar which is now at its worst levels versus the Euro in 15 months.

Crude oil is priced in U.S. dollars, by the barrel. When the dollar loses value, more of them are needed to buy the same barrel of oil. As a result, predictably, the price of crude oil goes up.

Now, there are other reasons why crude oil is rising, but the fading U.S. dollar is one of the major ones and it's why we're addressing it.

The dollar has a similar impact on mortgage rates.

Mortgage rates are based on the price of mortgage bonds that -- like crude oil -- are also denominated in dollars. As the dollar loses value, so do mortgage bonds. This causes demand for bonds to drop and prices on bonds to fall.

Because bond prices and bond rates move in opposite directions, mortgage rates rise and this is precisely what's happening on Wall Street today.

Since touching a 5-month low in early-October, mortgage rates have tacked on as much as 1/2 percent, depending on the product. Moreover, with the dollar showing no signs of a rebound, the upward pressure on rates should continue.

Mortgage nightmare | HVCC appraisal regulation

Platinum Funding — Fri, 03 Jul 2009 06:26:44 -0500

The HVCC code of conduct is the result of a legal settlement with the attorney general of New York. It is applied nationwide. And it should be considered a case study in the value of the legislative process: If the HVCC had been a bill introduced into Congress, it would have never passed without having undergone drastic changes. But it wasn’t a bill and it isn’t a law; it’s a legal settlement by one state’s attorney general, imposed on all 50 states.
Every public policy has unintended consequences. But that doesn’t mean that the consequences are unforeseen. Plenty of people foresaw the unintended consequences arising from the HVCC. Because it didn’t go through a legislative committee system, because it wasn’t passed by two houses, and because it wasn’t signed by a governor or president, those foreseeable but unintended consequences could be — and were — ignored. As a matter of fact Cuomo was a paid board member of AMCO, an appraisal management company. His buddy is Ed Davidson (a major campaign contributor of Cuomo) and was the CEO of AMCO, which was sold to SIRVA and renamed Valuation Services, LLC. It is reported that Davison has rights to future income from Valuation Services, LLC. (and I wouldn't be surprised if Cuomo does get a couple of bucks from it either, but that's pure conjecture on my part.)
HVCC was supposed to include Independent Valuation Protection Institute, which is a place to report fraud and coercion. That was never funded so AMCs are unregulated. It was rumored that Ed Davidson was to head the IVPI. As it stands, HVCC is nothing but a profit center for the big banks who own them.

After 18 years in the mortgage industry, I can’t believe that such poorly written legislation is being enforced and the only loser is the consumer. All wholesale lenders have an appraisal review process, there is no way to pay off or entice an appraiser to bring in a value that isn’t supported by comps. If you do the appraisal will be cut and the appraiser will be placed on the black list. AMC’s can just as easily enticed, so how does this solve the so called problem? The bottom line is that consumers will pay 3.8 billion dollars more in appraisal fees this year… What a Gong Show!

How Accurately Did Economists Predict 2009

Platinum Funding — Wed, 01 Jul 2009 05:31:40 -0500

With The Year Half-Over, How Accurately Did Economists Predict 2009

At the start of the year, the "experts" made a lot of predictions about the U.S. economy and what to expect in 2009.

Some said housing would rise
Some said housing would fall
Some said mortgage rates would rise
Some said mortgage rates would fall

And nobody predicted just how big the government's stimulus package would be.

Now, on June 30, with the year officially half-over, it's as good a time as any to remember that people are much better at interpreting the past than predicting the future. Economists can make educated guesses about the future, but they're guesses nonetheless.

It's like watching the Weather Channel. A meterologist can look at the data and say it's going to rain next week, but the forecast is never 100%.

So far this year, mortgage rates have been up and down, credit availability has been higher and lower, and home prices have varied immensely from neighborhood to neighborhood. These are not the types of predictions we get from the pundits.

There's another 6 months until 2010 and there's no reason to expect the current trends to change.

The world is unpredictable and so is the U.S. economy. Therefore, consider making your personal finance decisions based on the information at hand today instead of on an educated guess about the future.

After all, the weatherman's been wrong before.

Why Mortgage Rates Haven't Fallen As Expected

Platinum Funding — Sat, 01 Nov 2008 02:39:07 -0500

When the government nationalized mortgage lending in September, housing analysts predicted lower mortgage rates.

For a brief two-week stint, they were right -- post-takeover, the 30-year, fixed rate mortgage fell below 6.000 percent nationally for the first time in 7 months.

Since then, however, mortgage markets have reversed. Rates are now at pre-takeover levels.

Now, this isn't to say that the nationalization was a failure -- far from it. The government's takeover of Fannie Mae and Freddie Mac accomplished two very important goals:

It restored failing confidence in the U.S. mortgage markets
It opened legislative channels for faster, more relevant housing reform

And, long-term, most people agree, these are essential elements for a U.S. economic recovery. Over the short-term, however, the plan has not delivered the sustained low mortgage rate environment that was envisioned.

The biggest reason why rates are higher is because of Wall Street's manic trading behavior. When the economic outlook shows hints of sun, investors sprint to risky stock markets; when it shows signs of gloom, they flee in favor of ultra-safe treasuries. The buy-sell patterns have led to some of the wildest trading days on record and it's not what the Treasury expected.

See, when the takeover was first announced, mortgage-backed bonds were elevated to "government status". This created new demand for mortgage bonds which helped to push down rates. But, in the weeks that followed, the world's credit markets unraveled and traders sought the dual comfort of safety and liquidity in their portfolios.

That's a combination that only U.S. treasuries can provide. Versus "true" government bonds, mortgage-backed securities are just quasi.

We can't know where mortgage rates will move for certain but, for now at least, the 4 percent range some had predicted is out of reach. Until credit order is restored globally, expect volatility to continue and rates to remain up.

How Falling Gas Prices May Stave Off Recession

Platinum Funding — Sat, 11 Oct 2008 02:15:22 -0500

Given the stock market's recent performance, it's not surprising that gasoline's falling prices are garnering very little attention. That doesn't make it any less relevant, however.

Since peaking in July, gas prices are off by 20 percent.

Falling gas prices are an important positive for the U.S. economy because less money spent at the pump means that more money is saved per household for everyday items including food and other staples.

In addition, consumer spending makes up two-thirds of the economy.

Therefore, falling gas prices may lessen the impact of a forecasted recession. Because Americans are notoriously poor savers, the extra cash-on-hand is likely to get spent which will, in turn, push the economy forward through the upcoming holiday shopping season.

So, just as inflation can bad for mortgage loan rates, so can recession. And while recession won't always cause mortgage loan rates to rise, right now, it's one of the factors driving rates higher. Falling gas prices may help keep that scenario at bay.

Pending Home Sales Shows That More Buyers May Be Shopping For Homes Than You Thought

Platinum Funding — Thu, 09 Oct 2008 21:41:26 -0500

Buyers are returning to the housing market.

Each month, The National Association of REALTORS^®tracks homes under contract to sell, but whose closing has not yet happened. It calls them "pending sales" and publishes a monthly report to quantify them.

The Pending Home Sales report is important because it's meant to predict future home sales activity. History shows that 80 percent of homes under contract will "close" within 60 days, and most of the rest will close within 120 days.

If Pending Home Sales are up, it's believed, actual home sales will be up, too.

In August, Pending Home Sales jumped 7 percent from the month prior, returning to levels not seen in over a year.

The report's strength suggests that buyers are returning to the housing market, continuing the trend that started in March. This is tremendously good news for sellers because more buyers on the hunt means more demand for homes which, in turn, leads sale prices higher.

The Pending Homes Sales report is not a perfect predictor, however. For one, it's not measuring an actual sale -- just the expectation of one. In addition, it only accounts for "used" homes, ignoring new construction.

But that aside, the strong uptick in August tells us that home buyers are re-engaging at a quickening pace and finding that "now" is a good time to buy real estate. When buyer demand rises, the real estate market as a whole isn't usually that far behind.

(Image courtesy: The Wall Street Journal Online)

The Impact Of The Federal Reserve's Emergency Half-Point Rate Cut To 1.500 Percent

Platinum Funding — Wed, 08 Oct 2008 23:08:35 -0500

The Federal Reserve made an "emergency rate cut" this morning, dropping the Fed Funds Rate by one half-percent to 1.500 percent.

The move is meant to stimulate the U.S. economy.

When the Federal Reserve changes the Fed Funds Rate, it often takes 9 months for the changes to work their way through the economy.

On a broad scale, therefore, we won't know if the cut truly "worked" until Summer 2009.

But, as it relates to Americans in general, the rate cut spurred two immediate changes.

First, because Prime Rate is directly tied to the Fed Funds Rate, Prime Rate fell by 0.500 percent today, too. That means that interest rates on credit card debt and home equity lines of credit are now lower, reducing monthly interest costs for the majority of American households.

The second change is that mortgage rates are rising today.

The Fed's actions today sparked optimism in some corners of Wall Street and money is now flowing into the stock market at the expense of bonds. Because mortgage rates move in the opposite direction from bond demand, mortgage rates are higher this morning.

As always, mortgage markets and mortgage rates remain on edge. Therefore, rates are subject to change. And quickly. If you see a rate and payment you like, be ready to commit to it because it likely won't last long.

Fannie Mae Halves One Of Its Mandatory Loan Fees

Platinum Funding — Tue, 07 Oct 2008 01:08:57 -0500

In an effort to provide "the most market support possible", Fannie Mae is cutting one of its mandatory loan fees by 0.250 percent, effective immediately.

Fannie Mae introduced the Adverse Market Delivery Charge in December 2007 to offset foreclosure and delinquency losses. The initial fee was a quarter-percent of the amount borrowed.

Then, as market conditions worsened, Fannie Mae doubled its across-the-board loan fee to 0.500 percent in August of this year.

As of today, the fee is back to its starting point.

Since the start of the 2008, Fannie Mae has made 21 separate changes to its mortgage guidelines. Most have been detrimental to borrowers, increasing the difficulty, or the cost, of qualifying for a conforming home loan.

Today's change is among the few that are beneficial.

This morning, mortgage pricing is edging higher because of the looming Congressional vote and Wall Street's reaction to the weak jobs report. The good news is that price changes could have been worse.

Fannie Mae's Adverse Market Delivery Charge flip-flip is keeping rates from rising as high as they might have otherwise risen today.

Looking Back And Looking Ahead : October 6, 2008

Platinum Funding — Tue, 07 Oct 2008 01:06:53 -0500

Congress approved the $700 billion "Bailout Bill" Friday, answering the question that dogged mortgage markets all week long:

Will they or won't they pass it?

The uncertainty prior to the vote created huge market swings that ultimately sent the Dow Jones Industrial Average to its worst week since the 2001 terrorist attacks, while causing similar damage in the mortgage markets.

Mortgage rates worsened for the third straight week last week.

However, if we take the congressional vote out of the picture and look strictly at last week's data, we would have expected mortgage rates to fall instead of rise.

For example, the economy shed another 159,000 jobs, bringing the 2008 total to 760,000 lost jobs. This reduces the likelihood of inflation and is normally good for mortgage rates. In addition, the U.S. dollar had its strongest week ever against the Euro. This usually attracts buyers to the mortgage bond market, driving down rates.

And third, Fannie Mae eliminated one of its mandatory loan fees. This improves mortgage bond pricing for borrowers, ultimately leading to lower rates.

But, mortgage rates rose didn't fall last week and that shows how deep the economic uncertainty really ran. And this week, with the bill now passed into law, we would expect the market to turn its attention back to fundamentals. But it can't.

Unfortunately, there's no new data for release this week so, in the absence of data, markets should take their cues from the following sources:

The 8 scheduled Fed speakers, including Bernanke on Tuesday
Wednesday's Pending Home Sales report
Persistent rumors of a "surprise" Fed Funds Rate cut

Regardless of to what markets react, though, be prepared for them to react swiftly and for mortgage rates to dip and spike -- often in the same day.

In other words, a mortgage rate quote from the morning is likely to be "expired" by the afternoon so if you see a rate and payment that you like, consider locking it. It likely won't last long.

How Mortgage Rates Responded To The "No" Vote On The Bailout Bill

Platinum Funding — Wed, 01 Oct 2008 03:38:03 -0500

Monday afternoon, the U.S. House of Representatives defeated the $700 billion "Bailout Bill", surprising Wall Street and the world.

The Dow Jones Industrial Average responded by falling 777.68 points -- its largest one-day loss in history and, this morning, every newspaper in America is covering the story as front page news.

Lost in the coverage, however, is how the "No" vote created a terrific opportunity for mortgage rate shoppers.

Yesterday, as money fled the tanking stock market, most of it ended up getting parked in the relative safety of government-backed bonds which includes, of course, the mortgage bonds. This rising demand for mortgage bonds caused rates to fall.

To investors, stock markets represent risk and bond markets represent safety. So, when market sentiment changes, as it did yesterday, Wall Street players often shift their dollars from one forum to the other. This is why yesterday's stock sell-off was good news for mortgage rate shoppers -- the added demand for "safe" securities drove down rates.

Conforming mortgage rates were lower by about an eighth-percent Monday.

Now, today, mortgage rates are opening flat, suggesting that markets are in a Wait-and-See Mode. Wall Streets knows that the defeated bill will re-emerge later this week and, when it does, expect traders to respond accordingly.

If the new-look bill is viewed as favorable to U.S. businesses without harming taxpayers, expect stock markets to improve and mortgage rates to rise. If the bill fails to accomplish that goal, however, expect mortgage rates to improve.

If My Mortgage Lender Fails, Are My Payments Still Due?

Platinum Funding — Fri, 26 Sep 2008 16:42:13 -0500

Thursday, federal regulators seized mortgage lender Washington Mutual. The Seattle-based thrift became the third "big name" lender to close its doors since July, joining IndyMac and Lehman Brothers.

In 2007, these 3 lenders represented about 10 percent of the mortgage market and their subsequent failures are confusing American homeowners.

The most prevalent question:

If my mortgage lender fails, are my payments still due?

And the answer is an unequivocal "yes". If a mortgage lender is seized, goes bankrupt, or is otherwise closed, it doesn't change the terms of the bank's mortgages whatsoever -- just maybe the mailing address.

This is because a mortgage (and its corresponding note) is a legal contract between the lender and the lendee, signed on the date of closing. It is binding and cannot be altered by either party. The only way to "end" the contract is to pay the loan in full.

This can happen in one of 3 ways:

The home is sold and the mortgage is repaid
The home is refinanced and the mortgage is repaid
The home loan is paid down to $0 balance by the homeowners

So, if a mortgage company fails, its doesn't cause the loan to be paid-off and, therefore, the mortgage contracts is still valid. Payments are still due.

However, because its mortgages are an asset, the failed lender will usually transfer them to a new lender's servicing department. This means that homeowners will write the same check for the same mortgage but to a different company.

To reduce confusion around transactions like this, the government puts two safeguards in place. First, it requires the former lender to send a 15-day advance notice of the change to the homeowner. And second, it requires the new lender to do the same.

In situations like this, the onus is ultimately on the homeowner to open and read his mail, and make changes accordingly. It's especially important for people who pay their bills online as opposed by paying them manually; you likely won't get notified if you're sending payments to the wrong place

FHA Makes Homeownership More Affordable -- But Not Until October 1, 2008

Platinum Funding — Thu, 25 Sep 2008 02:06:01 -0500

Earlier this year -- and for the first time in its history -- the FHA changed its funding fees and mortgage insurance structure.

Effective October 1, 2008, it's repealing those changes.

Partly to keep FHA loans affordable, and partly to comply with new laws, the FHA is rolling back its up-front fees and ongoing mortgage loan insurance requirements and replacing them with new ones.

The new up-front FHA loan fees are as follows:

1.750% : All purchase and "standard" refinances
1.500% : All "streamline" refinances
3.000% : All FHASecure programs for delinquent mortgagors

These fees are paid as a one-time cost at closing, and are calculated by multiplying the FHA loan size by the fee. A $200,000 FHA loan purchase, for example, now carries a $3,500 one-time charge.

Ongoing mortgage loan insurance requirements have changed, too. These changes are based on the mortgage loan type and the amount of equity in the home.

15-year fixed with 90% borrowed or less: 0.000% annually
15-year fixed with more than 90% borrowed: 0.250% annually
30-year fixed with 95% borrowed or less: 0.500% annually
30-year fixed with more than 95% borrowed: 0.550% annually

Mortgage insurance premiums are calculated by multiplying the initial loan size by the annual premium. The same $200,000 FHA purchase outlined above, using a 95% 30-year fixed mortgage, would require a monthly mortgage payment add-on of $83.33 until the loan is paid in full.

FHA loans have grown in popularity this year because, while the guidelines of other mortgage loan products have tightened, FHA loan guidelines have remained relatively loose. FHA loans allows 3.500 percent downpayments on purchases, for example, and allows "cash out" refinances to 95 percent.

Fannie Mae and Freddie Mac do not.

How To Lower Your Mortgage Rate Every Time The Market Dips

Platinum Funding — Sat, 20 Sep 2008 03:10:28 -0500

Getting a great, low mortgage rate is often a combination of luck and preparation.

Consider what happened in conforming mortgages this week:

Monday, mortgage rates plunged to their lowest levels of the year
Tuesday, they bounced back in full
Wednesday, they clicked higher by a eighth-percent
Thursday, they clicked higher by another eighth-percent

And so, here we on are Friday, four days after the best rates of the year, and the mortgage market barely resembles itself. Despite what the papers tell you, mortgage rates are not low anymore.

That's the luck element -- you can't plan for rates moving up and down.

But, if you missed Monday's plunge, and don't want to miss the next one, all you have to do is get prepared. Then, you're waiting for luck when it happens.

There are 4 basic steps to prepare for low rates and the key is to follow them before rates plunge, not during. That way, you're ready to pounce on low rates at the moment they present themselves.

The first step is to contact your loan officer.

If you don't have a loan officer, or your loan officer is no longer in the business, ask a friend for a referral. Do not call the 800-number on your mortgage statement -- you'll almost always get a better "offer" from a live person than from a call center representative.

Next, give your loan officer a complete mortgage application, including a "credit pull". Be honest and accurate and don't worry about the credit check harming your score -- the bureaus protect it for a period of 30 days.

Then, ask your loan officer what supporting documentation will be required to approve your eventual home loan. Whatever it is, gather it and send it in -- either by fax or email.

And lastly, be ready to act when your loan officer calls with the good news. If rates have dipped to lower-than-normal levels, it likely won't last long.

This preparation process is very similar to what home buyers do before making an offer on a home. Getting ready for a refinance is like getting pre-approved, but instead of waiting to pick out a home, it's waiting to pick out a rate.

So, to summarize:

Contact your loan officer
Give a complete application
Gather and submit supporting documentation
Be ready to act

Mortgage rates don't plunge often, but when they do, it's usually short-lived. If you're prepared for when it happens, you can lock in the best mortgage rate available at the best possible time.

It will be your lucky day and you will have been ready for it.

What's Good For Home Sellers Is Bad For Home Buyers : Builders Are Dialing It Back

Platinum Funding — Thu, 18 Sep 2008 23:56:39 -0500

In August, home builders broke ground on the fewest number of homes since January 1991.

It was the 16th straight month in which Housing Starts declined.

But, although the press labels these statistics indicative of a recession, home sellers nationwide quietly applaud them.

With fewer new homes coming on the market, home sellers are finding that there's less competition for buyers, helping them to command higher prices for their homes.

It's Supply and Demand in its most basic form.

But that's not all that home buyers have to worry about. The most recent Existing Home Sales report showed an increase in sales nationwide, plus a reduction in the number of single-family homes for sale.

Again, Supply and Demand. Good for sellers, bad for buyers.

However, we should keep in mind that real estate is local. What we see in national and regional trends are not as important as what's happening in your town, your neighborhood, and your street. But, if we learn one thing from the chart above, it's this: builders are rational.

If homes won't sell, builders will stop building them. And, sooner or later, the market -- and home prices -- will catch up.

Making English Out Of Fed-Speak

Platinum Funding — Thu, 18 Sep 2008 01:36:41 -0500

For the third consecutive meeting, the Federal Open Market Committee left the Fed Funds Rate unchanged at 2.000 percent.

Of interest to mortgage rate shoppers, the FOMC led its press release with comments about the health of the financial and labor markets, calling them "strained" and "weakened", respectively. The relative weakness in both of these areas has contributed to low mortgage rates of late.

The FOMC also noted in its release that, although economic growth has slowed this year, the historically-low 2.000% Fed Funds Rate should foster "moderate economic growth" in the future.

In the wake of the announcement, Wall Street is rallying. Investors like what the Fed had to say and this is attracting money to the stock market at the expense of bonds.

Mortgage rates have given up all of Monday's gains, and then some.

Comparing Payback Periods On 15-Year, 20-Year and 30-Year Mortgages

Platinum Funding — Mon, 15 Sep 2008 03:56:22 -0500

On all principal + interest home loans, the first few years of payments include a lot more money going to interest than to principal.

This is because mortgage loans repayment schedules are front-loaded with interest, meaning large-volume principal reduction won't occur until late in the mortgage loan lifecycle.

Comparing products at a 6% mortgage rate, did you know that after 15 years:

A 15-year mortgage will be paid in full
A 20-year mortgage will have 41.21% of its loan balance remaining
A 30-year mortgage will have 73.19% of its loan balance remaining

Of course, this doesn't mean that 15-year mortgages are better than their 20-year or 30-year brethren. It just means that 15-year mortgages pay off faster.

Yet, there are reasons for homeowners to avoid 15-year mortgages.

For example, versus 20-year or 30-year products, 15-year mortgages require the highest monthly payment because the payback period is compressed to a shorter time frame. In addition, mortgage interest tax deductions to which most homeowners are entitled are reduced on a 15-year product.

So, just because the 15-year pays off quickly doesn't mean that it's best for everyone.

Why The Government's Takeover Of Fannie Mae and Freddie Mac Is Lowering Mortgage Rates

Platinum Funding — Sun, 14 Sep 2008 00:46:24 -0500

When comparing two investments with equal risk, a rational person will choose the investment with a higher rate of return.

This behavior is called Risk Aversion and is a basic tenet of personal investing.

An off-shoot of Risk Aversion is that a rational person will only invest in an instrument of greater risk if the returns are greater, too.

The chart at right illustrates this concept, comparing return rates on two investments:

U.S. Government bonds
Mortgage-backed bonds

The difference in investment return rates is sometimes called a "spread" and the historical spread between government debt and mortgage debt is somewhere near 1.5 percent.

However, notice how the spread started to grow starting in July 2007.

July 2007 marked the "official" start of the Credit Crunch and as mortgage delinquencies grew nationwide, so did the market's perceived risk of investing in them.

By the start of this month, the spread had nearly doubled.

But that all changed Sunday. When the government announced its takeover of Fannie Mae and Freddie Mac, it put the same "risk-free guarantee" on mortgage debt that has helped keep U.S. government debt so cheap to finance and the spread immediately shrunk.

This is one reason why mortgage rates fell Monday and why they should continue to stay low over the near-term. With the U.S. government backing the mortgage market, there's no room for the risk premium that helped keep rates high this past year.

It doesn't mean more people will qualify for conforming home loans, but for the ones that do, financing should be cheaper.

Conforming Loan Limits Set To Decrease In Certain High-Cost Areas

Platinum Funding — Fri, 12 Sep 2008 01:59:30 -0500

Conforming mortgages are limited by loan size, based on "typical" housing costs around the country. Since 1980, as home prices have increased, so have conforming loan limits.

The current conforming limit on a single-unit property is $417,000.

Earlier this year, as part of the Economic Stimulus Act of 2008, Congress authorized conforming loan limits increase in "high-cost" areas around the country. In Los Angeles County, for example, a mortgage can be as large as $729,750 and still be considered "conforming".

But beginning in 2009, those increases roll-back. Effective January 1, conforming mortgage in high-cost areas will be limited to $625,500.

Changes to conforming loan limits impact everyone with a stake in real estate, even if their neighborhoods are not considered "high-cost". This is because conforming mortgages offer the widest selection of home loan products, and often at the lowest rates. The widespread availability of conforming mortgages helps to support home sales nationwide ands provide ample refinancing options for homeowners that need it.

Starting with the New Year, fewer people will be eligible.

To lookup the conforming loan limits in your neighborhood, visit the HUD Web site. If you have specific questions related to your home or an upcoming purchase, contact me directly anytime.

Mortgage Rates Fall As The Unemployment Rate Rises

Platinum Funding — Fri, 05 Sep 2008 16:59:59 -0500

On the first Friday of every month, the government releases its Non-Farm Payrolls report.

More commonly called the "jobs report", the two-page analysis examines the nooks and crannies of the U.S. economy to see which industries are hiring and which are firing.

The August jobs report was released this morning and it shows that the U.S. economy shed 81,000 jobs in August.

This marks the eighth straight month in which payrolls declined and puts the annual job loss total at 605,000. The Unemployment Rate jumped to 6.1% -- its highest level in 5 years.

For American workers, this is bad news. But, for American home buyers, the news couldn't be better.

Mortgage rates are improved this morning on weak jobs data.

If this seems counter-intuitive, remember that earlier this year, lingering concerns about inflation in the U.S. economy caused mortgage rates to rise to their highest levels in more than 5 years.

Lately, however, those fears are subsiding and as today's jobs report shows worse-than-expected weakness, it's one more reason for markets to put inflation concerns to rest. With fewer Americans working, there are fewer dollars are available to propel the economy forward, after all.

So, today's jobs data is good for mortgage rates because it reduces inflationary pressures on the economy and as inflation levels fall, mortgage rates tend to do the same.

(Image courtesy: USA Today, The Wall Street Journal)

Simple Real Estate Definitions : Home Inspection

Platinum Funding — Thu, 04 Sep 2008 23:50:56 -0500

A home inspection is a complete, top-to-bottom, visual check-up of the structure and systems of a house.

It is meant to be an objective determination of a home's condition.

A home inspection usually takes 3-6 hours to complete, depending on the size of the home.

During the inspection process, the inspector will examine all of the following components of a home:

Home exterior including doors, decks, and vegetation
Heating and cooling systems for leaks and efficiency
Electrical systems for safety and soundness of design
Plumbing systems for venting, distribution, and drainage

In addition, the inspector will review the roofing system, the home's interior, and several other parts of the property.

A home inspection may be ordered by a home owner or by a home buyer.

For a home owner, an inspection can detail a home's shortcomings and provide a roadmap for repairs. This can help a person prepare his home for sale because "major issues" can be addressed in advance of listing.

For a home buyer, a home inspection physically reviews a home under contract, identifying structural flaws that may impact the home's desirability. This is essential for the negotiation process because no home is "perfect" -- even new ones!

A home inspection highlights potential long-term trouble spots and the likelihood for expensive home repairs. This is why real estate professionals often recommend inspecting a home immediately after signing a purchase contract.

To find a qualified home inspector in your area, ask your real estate agent for a referral, or visit the American Society of Home Inspectors Web site.

See How Mortgage loan Rates Are Trending With Oil Prices

Platinum Funding — Wed, 03 Sep 2008 13:04:12 -0500

Mortgage loan rates are hugely important to household budgets.

Lower mortgage rates free up household cash for spending and long- and short-term saving.

Higher mortgage loan rates, of course, do the opposite.

Unfortunately, it's impossible to predict the future of mortgage rates with any bit of certainty. This is because there are countless influences on mortgage markets, ranging from the obvious to the obscure.

Some obvious influences include:

The strength of the U.S. dollar
The rate of inflation in the U.S. economy
The relative performance of the U.S. housing market

And some of the obscure influences include policy decisions by the Bank of Canada, or political unrest in Nigeria.

But despite the challenge of making accurate mortgage rate predictions, we shouldn't stop looking at trends for clues. The graph at top shows one such trend.

Starting in January, as oil prices rose, mortgage rates followed them higher. Then, as oil started its descent in mid-July, mortgage rates began to fall, too.

The relationship between oil prices and mortgage rates is not one-to-one and, most likely, the similarities are there because both oil prices and mortgage rates are pegged to the ever-stronger U.S. dollar.

As the dollar gets stronger, it's pushing oil prices and mortgage rates down, and improving household cash flow for home buyers and other people in want of a new home loan.

Rates this Week : September 2, 2008

Platinum Funding — Tue, 02 Sep 2008 14:34:55 -0500

For the first time in 4 weeks, mortgage rates closing a week lower than where they opened it

Markets shrugged off uncertainty about Hurricane Gustav and chose to rally on the backs of strong economic data.

Overall, rates were down by about 0.125 percent, or $96 per year per $100,000 borrowed.

Markets were influenced by a handful of positive news last week -- two pieces of housing data gave markets reason to celebrate, as did an upbeat consumer confidence survey.

Sales of "new" homes is reducing the glut of builder homes
Sales of "used" homes is showing stability
Americans, in general, are feeling better about the economy

In addition, equally-important-but-less-well-known data from last week points to similar conclusions -- the U.S. economy may be on more solid footing than many people had believed.

This week, markets re-open Tuesday after being closed for Labor Day. Early in the week, there isn't much data for markets to digest so expect oil markets to take center stage.

First, markets will gauge the damage that Hurricane Gustav caused to oil and natural gas pipelines that dot the Gulf of Mexico shorelines. Then, it will project the damages based on the projected paths of the next storms, Hanna and Ike.

Typically, more damages means higher oil prices and that can lead to higher mortgage rates long-term.

By Friday, though, markets will shift attention to the jobs report.

American businesses have shed jobs in each of the last 8 months, and August is expected to show the same. The jobs report's influence on mortgage rates can be enormous so expect big rate swings Friday, either up or down.

How Labor Day Weekend Complicates Mortgage Rate Shopping

Platinum Funding — Fri, 29 Aug 2008 17:39:53 -0500

As we get closer to Labor Day, volume on Wall Street is dwindling as market players get a head start on their long weekend.

Today could be a difficult day to shop for mortgage rates. Expect volatility.

This is because mortgage rates are based on the price of mortgage bonds and, on Wall Street, bonds trade a lot like stocks.

There has to be a buyer and a seller at a specific price to make a deal.

With so many traders on vacation today, though, there are fewer opportunities to match buyers and sellers. This can cause mortgage prices rise or fall faster than on a "normal" day, directly leading to mortgage rate volatility.

For a light-volume trading day, there is a lot of information for markets to digest, including:

The weather reports on Tropical Storm/Hurricane Gustav
Reports that inflation is rising
Reports that Consumer Spending is slowing
Ongoing political tension between the U.S. and Russia

By themselves, each of these points can move markets. Together, however -- and aided by Labor Day -- they can move markets a lot.

Mortgage bond pricing is fluid, changing every minute of every day. Today, those changes will be exaggerated and, as an example, in the first 30 minutes of trading, mortgage rate pricing swung from rate improvement to rate deterioration in a flash.

To See Where Mortgage Loan Rates May Go This Week, Keep An Eye On The Weather Channel

Platinum Funding — Fri, 29 Aug 2008 04:15:46 -0500

Three years to the week after Hurricane Katrina caused $81.2 million in damages, Tropical Storm Gustav is charting a similar Gulf of Mexico path.

Memories of Katrina are making oil traders nervous. The 2005 storm shut down 30 platforms and 9 refineries. And, this week, oil prices are up nearly 4 percent on fears that the market, once again, may be disrupted by storm.

Mortgage rates are edging higher on the news.

The link between oil prices and mortgage rates is not a direct one, but it's worth paying attention to.

Rising oil prices strain business and consumer budgets, creating inflationary pressures on the economy. And at no time was this relationship more evident than in May and June of this year. As oil prices reached new, all-time highs almost daily, Americans felt the impact each time they opened their wallets -- the Cost of Living inflation gauge reached a 17-year high in July 2008.

Inflation is the enemy of mortgage rates so as inflation rises, mortgage rates tend to rise, too.

And this is one reason why mortgage rates are ticking higher this morning -- there is an overriding fear that Gustav will strengthen into a full-fledged Hurricane before making landfall, causing damage to oil refineries and shipping ports around the Gulf of Mexico.

Damage reduces oil supplies and that causes oil prices to rise. It's basic supply and demand.

Gustav is expected to make landfall Monday or Tuesday. If the storm continues on its path, we may see mortgage rates continue to trend higher. If the storm dissipates, rates should reverse.