1) First Time Homebuyer Tax Credit: Statements from Nancy Pelosi and other Congressional / Administration officials indicate that an extension to the first time homebuyer tax credit is in the works! Yeah! J There are also some great benefits being proposed for any military members which were/are deployed during the credit period. There is still discussion as to whether it should be extended to non first time homebuyers and if the amount will be increased. It is estimated that the program costs the US Government about $ 1 bil./month. Comparing that to the almost $25 billion spent by the Federal Reserve on Mortgage Backed Securities just last week, it seems like quite a lot of "bang for the buck"...especially in light of the current foreclosure overhang , the option ARM loans which have yet to go into foreclosure, and new foreclosures tied directly to a growing number of unemployed home owners. I wonder if anyone's considered opening up the tax credit to all homebuyers for a short period (3-6 months) to help cut inventory and then restricting the credit back to first time homebuyers in order to encourage move-up activity? Should lending standards continue to tighten, the number of first time homebuyers eligible for financing may shrink to a level which would not generate adequate demand on its own...so it seems to be a double edged sword. The tax incentives only work if you are capable of buying a home (in most cases requiring a loan)...
2) The Kiplinger Letter (vol 86, No. 40) published October 2, 2009 had some very interesting info I'd like to share with you.
a. In the economy section, San Antonio, TX and Austin, TX were listed along with Denver, Raleigh, and Boston as metro areas which are most "likely to lead the pack" during the economic recovery! (Houston was listed as a leader in energy sector recovery, too). Have I mentioned lately how much I love being a Texan! J
b. The Federal Reserve has extended the Mortgage Backed Security purchase program through March 31, 2010. This extension is being used to phase out the program. The Fed currently is purchasing "about 80%" of new home mortgages being written/secured. Your eyes aren't tricking you...the figure is 80%!! The Fed has also indicated that they will reduce purchases to every other week in the very near future. It is hard to believe that this will not cause much greater volatility in the mortgage rate market. There is still a very large amount of private money still sitting on the sidelines. It is also believed that these investors are risk averse (ie they are still on the sidelines), so it is hoped that when they come back into the market they are looking for Mortgage Backed Securities as a significant portion of their portfolios. I REALLY hope so, because finding buyers for 80% of the loans generated to replace Fed demand, seems a little daunting.
c. Kiplinger's letter also predicts rates to be in the 6+% range for a 30yr mortgage by the end of March 2010. Savvy buyers and owners would be well advised to take advantage of historically low rates while they are available.
3) Private Mortgage banks may get warehouse lending relief! Yesterday, the Wall Street Journal published an article by James R. Hagerty discussing a program where Fannie Mae and Freddie Mac issue what appears to be forward purchasing agreements with pre-determined guidelines to independent mortgage banks in order to reduce warehousing risks and costs. Warehouse lines are essentially large revolving lines of credit where loans are funded and held until end investors or enterprises purchase them. Guideline changes have been coming fast and furiously which has resulted in some loans losing guideline eligibility for sale during the time they are on the warehouse line, which results in the originating mortgage bank either selling the loan at a steep discount or servicing the loan. With current mortgage interest rates lower than extended warehouse line rates, either option is a losing proposition for the originating lender and potentially the warehouse lending company. Due to this risk and a desire to consolidate mortgage lending into their retail channels, the big banks have greatly reduced or eliminated their warehouse funding operations to independent mortgage bankers. This program is designed to relieve some of the warehouse lending issues which currently affect the market. In the San Antonio area, if you need a loan to close in less than 30 days at very competitive terms, your best bet is a skilled and established independent mortgage bank. It is great to see steps being taken to help boost the ability of these providers to continue to fund good loans, quickly.
4) FHA Streamline Refinances are going through a lot of changes...on November 18, 2010 (Mortgagee Letter 2009-32)! Some highlights are as follows:
a. The borrower must have made at least 6 payments on the loan being refinanced
b. No more than 1 mortgage late within the last 12 months (and not within the last 90 days), unless owned less than 12 months, then no mortgage lates allowed, at all
c. Increased benefit to borrower requirements (good thing)
d. Credit scores will now be required
e. Borrower may NOT roll in discount points to lower the interest rate...must bring discount points from their own funds.
As always, thank you for taking the time to read my blog, I hope you found it helpful and I look forward to your comments! -Marshall
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