Mortgage rates actually rose a bit this week for the first time in a couple of months. After bottoming out earlier in the week on renewed global economic fears, a string of positive economic reports had stocks rallying in the second half of the week creating a sell-off in US Treasuries. After falling to 2.42% on Monday, the yield on the ten year T-Note had risen to 2.72% by Friday afternoon causing a corresponding rise in the thirty year fixed mortgage rate from 4.125% to 4.375%.
The rally on Wall Street started on Wednesday when reports showing manufacturing activity in the US and China expanding. This was followed by upbeat reports on consumer spending and home prices and a better than expected report on August unemployment. The S&P Case Schiller Home Price Index showed that home prices have risen nationally by 3.6% over the past year and 4.4% in the second quarter. Perhaps the best news in recent days, however, was the unexpected jump in pending home sales in August. After a dismal July that reflected the end of the first-time homebuyer tax credit, the number of new contracts surprised everyone by rising 5.2% for the month.
There are some FHA changes coming down the pipe that I wanted to make everyone aware of. HUD, in an attempt to bolster FHA’s loan loss reserves, has altered their up-front and monthly mortgage insurance premiums for all case numbers assigned after October 4th. The up-front premium will be reduced by .75% going form 1.75% to 1% of the base loan amount. However, the annual premium, that which is paid each month in the payment, will increase from .55% to 1.55%. This means that on a sales price of $100,000, the new up-front premium will be $965 ($100,000 X .965 X 1%) and the new monthly premium will be $124.64 (1.55% x $96,500 / 12). Compare this to the old formula ($96,500 X .55% /12) which would have yielded a monthly premium of $44.23. So borrowers will be paying roughly $80 more per month for their FHA mortgages on a sales price of $100,000 which will in turn reduce the amount of loan they will qualify for.
Lastly, Rural Development has announced they expect to have funding restored by the middle of this month so we no longer have to close with a conditional commitment.
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