Mortgage rates have been unfazed by recent stock market volatility and have managed to stay low despite improvements in employment, retail sales and housing starts which are typically all signs of an improving economy and usually result in weaker demand for bonds. But worry over some sovereign debt problems and a sense of uncertainty regarding the global economy have renewed investors’ demand for perceived safe havens such as US Treasury securities and the dollar thereby helping keep rates low. This despite signals from the Federal Reserve that it may be time to start tightening monetary policy in order to ward off inflation down the road.
I have a couple of things of note from the mortgage front. After a long absence in the wake of the mortgage meltdown, private mortgage insurance is once again available in Florida. It still sounds strange to say but PMI is now available for conventional loan purchases up to 90% loan to value provided the borrower has a 680 credit score and it is a primary residence. During the absence of PMI in Florida a buyer had to have a 20% down payment to obtain a conventional mortgage.
FHA announced that beginning April 5th, the up-front mortgage insurance premium will rise from 1.75% to 2.25%. The increase in the MIP is part of a comprehensive look at the FHA program which has grown to 40% of all mortgage originations and has seen its reserves dwindle in recent years and faces even more losses with 500,000 loans currently headed towards foreclosure. Other potential changes include lowering the seller allowed contributions from 6% to 3% of the sales price and instituting a minimum credit score requirement.
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