Mortgage Matters - Tom Drasler - HomeQuest Mortgage Corporation

About 76 percent of home owners believe their home is worth more than their agent’s recommended listing price -- that’s up from 73 percent last year, according to a new survey conducted by HomeGain of real estate professionals and home owners.
On the other hand, 68 percent of home buyers say homes are overpriced, with 32 percent saying homes are overpriced by more than 10 percent.
“Home buyers and sellers continue to remain apart as to home valuations with the vast majority of home owners thinking their homes are worth more than their agents and the market are telling them,” Louis Cammarosano, general manager of HomeGain said in a statement.
Source: “Three Quarters of Owners Continue to Overvalue,” RISMedia (Dec. 6, 2011)

US Mortgage Applications Jumped Last Week

2011-12-07T08:44:00.001-08:00

http://www.cnbc.com/id/45579988/

Why Home Prices Are (and Aren’t) Stabilizing

2011-12-06T19:16:00.001-08:00

Goldman: Housing Market Bottom Is Really, Finally (Almost) Here

10 Things Santa Won't Tell You

2011-12-05T08:46:00.000-08:00

http://www.smartmoney.com/spend/family-money/10-things-santa-wont-tell-you-1323055503304/

Pendiing Home Sales Rise

2011-12-01T11:17:00.000-08:00

http://blogs.wsj.com/developments/2011/11/30/behind-the-numbers-pending-home-sales-rise-2/?blog_id=36&post_id=20563

WSJ Article - Owning Continues to Become More Affordable Relative to Renting

2011-11-28T11:03:00.000-08:00

http://online.wsj.com/article_email/SB10001424052970203764804577060502694077494-lMyQjAxMTAxMDIwODEyNDgyWj.html?mod=wsj_share_email

Obama Signs Bill to Raise FHA and VA Loan Limits

2011-11-18T16:39:00.000-08:00

http://www.mortgagenewsdaily.com/11182011_revised_loan_limits_loan_fees.asp

Congress Expected to Pass Bill Tomorrow Returning FHA Loan Limits to $729K

2011-11-17T16:59:00.000-08:00

http://news.yahoo.com/house-approves-bill-averting-government-shutdown-212123132.html

New Obama HomeOwner Refinance Program HARP 2.0 Launched Nov. 15th

2011-11-17T12:09:00.000-08:00

Obama launched his promised HARP 2.0 refinance program offering homeowners who are underwater and opportunity to refinance into a lower fixed rate and payment, regardless of above 125% loan-to-value. There are some confusing qualification guidelines, so contact me or a licensed mortgage professional for details. Click on the link below to learn more.

http://online.wsj.com/article_email/SB10001424052970203699404577042452772433294-lMyQjAxMTAxMDEwNzExNDcyWj.html?mod=wsj_share_email_bot

Mortgage Scams in a Weak Housing Market

2011-11-16T12:16:00.000-08:00

Great article that appeared in today's Wall Street Journal regarding the many scams that are defrauding both lenders and homeowners. Be careful.

http://online.wsj.com/article/SB10001424052970204358004577028341848990920.html?mod=WSJ_PersonalFinance_PF15

Internet Home Value Sites Like Zillow Use 'Fuzzy Math'

2011-11-14T08:50:00.000-08:00

How to Figure the Fuzzy Math of Internet Home Values
Excerpts from Wall Street Journal article, November 13th, 2011

Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad, complete with game room, custom wine cellar and an infinity-edge pool overlooking Folsom Lake. When interest rates fell recently, Mr. Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That's when he got startling news—the home had dropped more than $200,000 in value while he was renovating.
Or at least, that's what one real-estate website told him. Another valued the house at only $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refinancing loan, pinned its value at $1.5 million. "I have no idea how those numbers could be so different," Mr. Gonsalves says.
Right or wrong, they're the numbers millions of consumers are clamoring for. After years of real-estate pros holding all the informational cards in the home-sale game, Web-driven companies like Zillow, Homes.com and Realtor.com are reshuffling the deck, giving home shoppers and owners estimates of what almost any home is worth. People have flocked to the data in startling numbers: Together, four of the biggest sites that offer home-value estimates get 100 million visits a month, with web surfers using them to determine what to ask or bid for a home, or whether to refinance.
But for figures that can carry such weight, critics say, the estimates can be far rougher than most people realize. Valuations that are 20% or even 50% higher or lower than a property's eventual sale price are not uncommon, as the sites themselves acknowledge. The estimates frequently change, too—sometimes by hundreds of thousands of dollars—as sites plug new data into their algorithms.
After Frank and Sue Parks put their manor-style house in Louisville, Ky., on the market, they watched as Zillow put a $331,000 value on the dwelling in May; by July it had climbed to $1.5 million. (Zillow says the lower estimate reflected errors in its statistical model.) The couple got potential buyer referrals from the site, but they fended off a stream of lowball offers before they sold this fall. Mrs. Parks says the estimate roller coaster "really affected our ability to move the place."
But appraisers and real-estate consultants say the online models can veer off target with alarming frequency. Most data for the models come from two sources: records from tax assessors and listing data for recent sales. Collection is a challenge, however, because not every county tracks properties the same way—some calculate home size by number of bedrooms, others by overall square footage. And automated models aren't designed to account for the unique construction details that often make or break a deal, or for intangible factors like a neighborhood's gentrification. "You cannot use a computer model in certain areas and expect the value to come out right," says John May, the former assessor of Jefferson County, Ky., which includes the state's largest city, Louisville
Therefore, Zillow has accepted revisions on 25 million homes—perhaps the strongest testament to how seriously consumers take its estimates. Today, the site says its figures are accurate enough to give consumers a good sense of any home's value.

Buying a Home: Look at the Cost, Not Just the Price

2010-09-23T12:26:00.000-07:00

While economists and so called real estate market experts continue to struggle with where the residential real estate market is headed, with concerns of continued declining values, pending shadow inventory of bank foreclosures, and dismal unemployment figures, there are some bright spots for home buyers. When I visit real estate offices, their sales in process boards are full. The good news is Housing Affordability is RISING, and many move-up and first time buyers will be coming to the table.

An interesting thing happened last week. For the first time since April, the interest rate for a 30 year fixed mortgage increased two weeks in a row. It didn t increase much (.05%) but it was news because it had been so long since rates have ticked up. It will be interesting to see what the Fed reports today. We are not announcing that rates are headed higher. It is way too early to make that argument. However, the increase did make us look at what the bargain rates are today.

Home values have fallen to October 2003 levels as measured by the Case Shiller 20 City Index. You can buy a home today for the same PRICE you would have prior to the housing bubble. That s amazing!
The more amazing part is that it would COST you much less. You can purchase a home with a mortgage at a much lower rate than you would have in 2003. Research has found that the mortgage rate at that time was 5.95%. Today rates are at 4.5%. When we calculated what that would mean to a buyer s monthly mortgage payment.

How much would you save?
Let s assume for the sake of this example that you purchased a home and borrowed $200,000 via a mortgage. In 2003, your monthly mortgage payment (principle and interest) would have been $1,192.68. If you borrowed the same $200,000 today your monthly payment would be $1,013.37. Same house, same price but the COST is $179.31 less a month. That s a savings of over $2,000 a year! Over the life of a 30 year mortgage, you would save over $64,000.

Bottom Line, if you are considering the purchase of a home but believe that waiting is the prudent thing to do because prices may continue to soften, make sure you keep an eye on interest rates.
We have a tendency to look at just the PRICE of the house instead of the COST. The cost is actually more important.

10 Reasons Why Now is a Great Time to Buy a Home

2010-09-18T15:46:00.000-07:00

Great article published in this week's Wall Street Journal. Clearly there is alot of gloom and doom sentiment to go around, but sometimes we have to see the glass as "half full".

Wall Street Journal - September 16th, 2010

Enough with the doom and gloom about homeownership.

Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.

But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.

1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.

Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.

.2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.

3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.

.4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.

.5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.

6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.

.7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.

8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.

9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.

10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.

Survey Says: Why Over 70% of Americans Believe It's a Good Time to Buy

2010-09-18T15:08:00.000-07:00

HOME PRICES: A large majority of Americans (78 percent) believe that home prices either will remain flat or go up over the next year, up five points from the beginning of the year. Forty-seven percent believe prices will hold steady, while 31 percent think they will go up. This is a notable shift from January 2010, when these numbers were 36 percent and 37 percent, respectively.

Thirty-nine percent think rental prices will increase over the next 12 months, while 46 percent said they will stay the same. Consumers continue to believe it is a buyers' market; 70 percent said it is a good time to buy a house, up six points from January. However, 83 percent believe it is a bad time to sell a house.

GOOD TIME TO BUY, BAD TIME TO SELL: 70% of Americans think it is a good time to buy a house, up from 64% in January 2010, and 36% think now is a very good time to buy a house. More than three-quarters of Mortgage borrowers and Underwater borrowers think it is a good time to buy. 83% of Americans think it is a bad time to sell a house. 91% of Delinquent borrowers think it is a bad time to sell a house, with 67% thinking it is a very bad time to do so...

MORTGAGE RATES: Americans expect home mortgage interest rates to go up rather than down over the next year by a ratio of 5 to 1.Among the sub-groups, the highest percentages expecting mortgage interest rates to rise over the next 12 months are among Mortgage borrowers and Underwater borrowers. Delinquent borrowers are more likely than other groups to think rates will remain the same or go down.

IS BUYING A HOME A SAFE INVESTMENT ?: Fewer Americans consider buying a home a safe investment than in January 2010 or 2003.Although 67% of Americans think buying a house is a safe investment, this is down 3 points from January 2010 and 16 points from 2003 – the largest declines among all tracked alternatives over both timeframes. The perception that buying a home being is a safe investment has decreased among all sub-groups since January 2010, especially among Delinquent borrowers, Renters, and Underwater borrowers (down by 8, 7, and 6 points, respectively). Mortgage Borrowers and Owners view purchasing a house as a safer investment than the General Population and the rest of the sub-groups

QUALIFICATION: Most Americans think it would be difficult to get a home loan today. However, this sentiment is waning: 42% of Americans think that it would be somewhat easy or very easy to get a home loan today up 7 points since January 2010. The vast majority of Delinquent borrowers continue to believe it would be difficult.

2010-09-07T10:47:00.000-07:00

Dear Clients,

There was an interesting article featured in the Wall Street Journal, that illustrates a change in mindset taking place with consumers as it relates to managing debt. There is a growing number of consumers, mostly older and financially established, who are choosing to pay down or pay off their mortgages at a faster rate - even if it means a substantial jump in their monthly payments.

I personally witness this mindset shift more often, as many clients look at the numbers I work up and see how a shorter mortgage term and relatively modest payment increase can save thousands of dollars in interest, while eliminating several years of mortgage payments. In addition, mortgage debt reduction becomes an integral part of their overall retirement strategy. Today's historic low mortgage rates are adding fuel to the fire.

I encourage you or anyone you know to contact a licensed mortgage advisor, such as myself, who can access your situation and produce a comprehensive analysis to save mortgage interest and accellerate term payoff.

Call me today at 714-478-3153 or visit my website www.HomeQuestMortgageCorp.com to fill out a confidential application.

Wall Street Journal - August 29th, 2010

A growing number of homeowners are choosing to pay down their mortgages at a faster rate--even if it means a substantial jump in their monthly payments.
Between January and June, 26% of homeowners who refinanced chose a 15-year fixed-rate mortgage, according to data from CoreLogic, a provider of financial, property and consumer information. During all of 2009, 18.5% of borrowers who refinanced opted for a 15-year term.

What's prompting the shift to shorter loans?

Historically low interest rates for fixed-rate mortgages.
Homeowners are doing the math and realizing that rates have fallen enough so the increase in payment between a new 15-year mortgage and their current loan is no longer unbearable for their budgets, says Bob Walters, chief economist.
The average rate on a 15-year fixed-rate mortgage was 3.86% for the week ending Aug. 26, according to Freddie Mac's weekly survey of conforming mortgage rates.

A Change in Thinking

The financial situation of those capable of refinancing today is a factor in the shift, Mr. Walters says. These people typically are homeowners with the best credit and the most equity -- and, therefore, most suited for a shorter-term loan.
But there might be some other psychology at work. "We're seeing a different view on debt than maybe we've seen in the past," he says. Today, homeowners are saying, "I really want to pay this off. I'm going to bite the bullet and take the payment and work toward paying this down."

A 15-year mortgage also acts as somewhat of a forced savings account for homeowners, says Leif Thomsen, chief executive of Mortgage Master, a privately owned lender, given that the higher payments help a borrower pay down the principal at a quicker clip.

This is a huge shift in borrower thinking. "There was a drive a couple of years ago to take out the biggest mortgage that you could and use all of the money you would have otherwise had in the house and put it into stocks and bonds--to think of your house and mortgage as part of your entire investment portfolio," says Amy Crews Cutts, deputy chief economist for Freddie Mac.

"That worked for people who do investment finance for a living and are good at managing accounts," she says. "But for the average person, debt is a drag on their psyche as well as their overall budget." Many Americans have reverted to the goal of paying off their house and getting rid of their mortgage, Ms. Cutts adds.

Doing the Math

Refinancing into a shorter-term mortgage isn't a strategy for everyone, however.
Choosing a shorter term usually means you'll get a better rate--and you'll pay much less interest over the life of the loan--but a shorter time frame ramps up monthly mortgage payments.

For example, with a 4.5% interest rate on a 30-year fixed-rate mortgage of $200,000, you would have a monthly payment of $1,015, including principal and interest, Ms. Cutts says. The monthly payment jumps to about $1,480 with a 4% interest rate on a 15-year fixed-rate loan.

Of course, if the refinancing borrower's current 30-year loan has a higher rate, the difference between the monthly payments could be lower. Still, you should count on some increase in monthly payments.

In general, Mr. Walters says, those who choose 15-year fixed-rate mortgages are older and have more equity and less debt than other folks. They also earn higher incomes and don't have some of the added expenses that younger homeowners typically do.

"People who are taking these loans are financially stable and can afford the payments, but at the same time are planning on staying in their home for an extended period of time," Mr. Thomsen says.Mr. Walters says you shouldn't take on a 15-year fixed-rate mortgage unless you have substantial savings, including at least a year's worth of living expenses in liquid accounts.Also, he recommends having a debt-to-income ratio below 35%. So if you have a gross salary of $5,700 per month, for instance, your monthly debt--including any mortgage payments, taxes, insurance, homeowners-association dues as well as auto and student loans and credit-card debt--would have to be a max of $1,995 to get a 35% ratio.

Credit Score Improvement Tips

2010-08-05T21:24:00.000-07:00

A recent report by FICO shows more than 25% of Americans have a credit score lower than 599. With a credit score that low, it makes it very difficult to take advantage of the current record-low interest rates. Below are the main factors, and the percentage of importance of each, that are used to determine your credit score.

1. Payment history = 35% – The most important thing is to pay your bills on time.

2. Amounts owed = 30% – This is the amount of money you owe versus the amount of credit you have available to you. A 20% debt-to-credit limit ratio is optimal.

3. Credit history = 15% – It’s better to keep old credit accounts than to close them.

4. New credit = 10% – Don’t apply for new credit without a good reason.

5. Credit mix = 10% – Try having a good mix of credit, such as credit cards, retail accounts, mortgage, installment loans, and consumer finance accounts.

Doubling Down on Housing

2010-07-24T11:56:00.000-07:00

Dear Clients:

I am seeing more of my clients actually put money into their homes, or "Cash In" to take advantage current lifetime low interest rates by either refinancing their current residence or buying up to their dream home, while home prices remain low. If they do not have the required 20% equity position needed to refinance, they are coming in with cash to reach the 20% level plus closing costs.

I am happy to review your situation and present a cost benefit analysis to determine if this financing strategy is right for you. Simply call, click or email me for a full mortgage review, or go to my website at www.HomeQuestMortgageCorp.com to apply.

Regards,

Tom
714-478-3153
Wall Street Journal

Record-Low Interest Rates and a Scary Stock Market Are Prompting Investors To Sink Even More Money Into Their Homes.

The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.

But some might not be as trapped as they think.

Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.

Larry and Mary Schuck paid about $29,000 to refinance into a 15-year mortgage at a rate of just 4.5%. That's like an investment return of about 10% a year over five years. They also reduced their total interest payment by more than $95,000.
Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for "cash-in" refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.

Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, "about half are willing to bring money to closing, anywhere from $5,000 to $45,000," she says.

Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.

Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive.

."If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?" says Christopher J. Mayer, a Columbia Business School economist.

The refinancing equation is changing, too. Thanks to rock-bottom interest rates and liberal lending terms for Federal Housing Administration loans, a person who plunks down cash to retire a higher-rate mortgage might be able to reduce his monthly payments, even as he shortens his loan term to 20, 15 or 10 years.

In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return.

"At this point," says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, "if they don't have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to."

During the fourth quarter of 2009, 33% of refinancings were of the cash-in variety, the highest percentage since Freddie Mac began tracking the characteristics of refinance transactions in 1985. Figures for the second quarter are due next week.

"Historically high percentages of borrowers are paying down their principal when they refinance their mortgages," says Brad German, a Freddie Mac spokesman.

It helps that interest rates are lower than they have been in decades. The average rate on a 30-year fixed-rate loan was about 4.74% on July 21, according to Bankrate.com. That is down from 5.26% in January. Rates on 15-year loans averaged about 4.18%.

The Mortgage Bankers Association said Wednesday that low interest rates sent the volume of mortgage applications 7.6% higher during the week ended July 16. Purchase applications increased for just the second time since the expiration of a temporary federal tax break in May. Refinance applications grew 8.6%, to the highest level since May 2009.

The attractive terms are spurring people like Scott Ayler, 35 years old, into action. He and his wife, Jaclyn, 33, recently decided to trade up to a larger home in their native Denver, despite taking a loss on their current house. In 2004, they paid $234,000 for a three-bedroom, 2½-bath house builtthat same year in Green Valley Ranch, a subdivision that has among the highest foreclosure rates in the city and lacks upscale amenities. They are in contract to sell the home for about $204,000.

Their new home, built this year, cost about $323,000, comes with four bedrooms and three baths, and sits on a corner lot overlooking a reservoir. The house, which was initially listed at $379,000, is in Denver's desirable Cherry Creek area, known for excellent schools, plentiful amenities and few foreclosures.

With $195,000 remaining on their original 6.625%, 30-year fixed-rate loan, the Aylers estimate their total paper loss will be around $45,000. They are putting down only $11,500 on the new house. But because the new FHA loan carries a 4.5% rate, their monthly payment will rise by only $290 a month.

.They say they expect better price appreciation in their new home. And with a young daughter and plans for another child, they need more space anyway.

"We don't want to wait for the market to come back," says Mr. Ayler, general counsel for an energy company. "We wanted a better quality of life now."

Of course, many homeowners in states like Arizona, Florida and Michigan are seriously underwater, having overpaid for houses now worth as little as half their value at the market's peak. Making up that yawning gap and scraping up additional cash for a new down payment is beyond their means.

Some of those people are going to extremes by engaging in "strategic defaults," a highly controversial strategy in which they stop paying their mortgages and go into foreclosure to get out of their obligations. But while cutting losses on a bad housing investment might seem liberating, it can stain a person's credit report for years.

The vast majority of homeowners remain reluctant to sell their primary residence at a loss, perhaps irrationally so. In a study of seller behavior in condominium transactions in downtown Boston from 1990 to 1997, economists David Genesove of Hebrew University in Jerusalem and Prof. Mayer of Columbia showed that sellers were so "averse to nominal losses" that it affected their behavior. Those who were selling their homes in down markets and faced the possibility of nominal losses kept their homes on the market for much longer than other sellers, in some cases to their detriment.

Major Lenders Are Beginning to Loosen JUMBO Guidelines

2010-07-20T13:28:00.000-07:00

One of my National lenders announced today they will be offering loan amounts of 80% Loan-to-Value up to $2,000,000.

This represents a very good sign, that lenders are beginning to loosen guidelines to low risk borrowers who qualify and want to take advantage of today's lifetime low interest rates.

This program applies to 15,20,30-year fixed rate and 5/1,7/1, and 10/1 LIBOR ARMS. Interest-Only loans do not apply.

Borrower requirements include: Maximum Debt-to-Income ratio of 45%; 720 Minimum FICO; Full Doc; subordinate financing not permitted; Purchase or Rate and term Refinance and program ALLOWS up to 6% seller closing cost contribution.

Call me today at 714-478-3143 to learn if you qualify!

June Housing Inventory Numbers RISE!

2010-07-16T08:51:00.000-07:00

Housing Inventory Rises in Many Markets in June

The number of homes listed for sale grew in many U.S. cities in June, a month that typically brings a slowdown in listings. Inventory grew amid signs that demand plunged after the expiration of the home-buyer tax credit.

The supply of homes available for sale in 27 major metropolitan areas at the end of June was up 3.7% from one month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data includes all single-family homes, condominiums and townhouses listed on local multiple-listing services in markets where the firm operates. (See all the inventory data.)

Inventories typically decline modestly in June, as the summer slowdown begins. Zelman & Associates, a research firm, says June listings nationally have fallen an average of 0.5% from May over the past 27 years.

Compared to one year ago, the June inventory in the 27 markets covered by ZipRealty was up 2.1%. Western markets saw the biggest month-over-month uptick in inventory, rising by 10.5% in Las Vegas, 9.4% in San Diego and 7% in Orange County, Calif.

Compared with the previous month, inventory fell in just one of the markets covered by Zip, declining by 1.5% in Jacksonville, Fla.

Inventory could continue to rise over the second half of 2010 as more banks take title to homes through foreclosure. More than seven million households are behind on their mortgage payments or in some stage of foreclosure.

Meanwhile, demand appears to have fallen sharply in the months following the expiration of the tax credit. New home sales fell to a record low in May, while pending sales were down 30% from April. Mortgage rates remain near 60-year lows, and yet demand for home-purchase loans fell to a 14 year low last week, according to the Mortgage Bankers Association.

Jumbo Loan Rates Plunge

2010-07-14T08:13:00.000-07:00

Attention Jumbo Home Loan Borrowers:

Nearly two years after the credit crunch virtually froze mortgage markets, high-end borrowers are seeing some relief: Rates for "jumbo" mortgages on pricier homes are at their lowest since 2003.

Just a year ago, the average rate on a 30-year jumbo mortgage—a loan of more than $729,750 not backed by government-sponsored agencies Fannie Mae or Freddie Mac—was 6.86%. Now it is 5.48%—a rate that rivals those available during the height of the credit bonanza.

"In just the past couple of months, jumbo loans have really started to be competitively priced," says Keith Gumbinger of HSH Associates, a publisher of consumer-loan information.

Cheaper mortgages could provide a spark to the market for high-end homes. The lower rates signal relief for homeowners looking to shed an onerous mortgage—and for the high-end housing market itself. More-affordable jumbo loans will likely whet appetites for new home purchases, helping to stabilize prices at the upper end of the market. For consumers, the lower rates will make home purchases more affordable and enable existing homeowners to trim their monthly bills by refinancing.

Applications Are Up

More lenders are expected to make jumbo loans a "top priority" as they view it as a safe and profitable business to get into because jumbo loans are only going to borrowers with pristine credit.

Competitive pricing has spurred an uptick in activity among borrowers around the country, say mortgage brokers. "In the last couple of months alone, I've seen almost a 50% rise in sales of homes that need jumbo mortgages," says Frederick Wohlfarth, president of Manhattan real-estate broker Wohlfarth & Associates.

After the financial crisis struck, the market for jumbo loans ground to a halt. Instead of selling loans into the secondary market, lenders had to hold them on their balance sheets. With housing prices on a dizzying dive, most lenders weren't willing to take the risk of keeping potentially risky new loans on their books, which crippled the market for higher-end homes. Investors headed for the safety of government-backed home loans and steered clear of the private-lender variety.

"Now banks have more capital and are beginning to lend," HSH's Mr. Gumbinger says. "My ultimate question is: How long will these rates really last?"

Big Savings for Borrowers

A single percentage drop spells big savings for borrowers—and that is good news for the housing market. For example, a homeowner with a 30-year fixed-rate $800,000 mortgage at 6.86% pays $5,247 a month. If he were to refinance at 5%, his monthly payments would be reduced by $952.

While financial experts advise caution, prudent borrowers also can use lower rates to refinance existing mortgages and cash out some of their equity, while still ending up with an affordable mortgage.

Along with favorable rates, well-heeled borrowers are finding it easier to qualify for new jumbo loans and refinance existing loans at attractive terms. Underwriting standards are still strict, with most major lenders requiring a credit score in the 700s and down payments of up to 40%, but those with good credit can find good deals.

A borrower in Laguna Beach, Calif., is trading in his 30-year interest-only mortgage for a cheaper one. Four years ago, the 50-year old real-estate developer took out the mortgage, which had a fixed rate for 10 years, to buy his dream home, which has 180-degree views of the Pacific. The $1.5 million loan, which was issued by Countrywide Financial, required him to pay $7,500 a month—causing him more distress than he expected.

With the help of his mortgage broker, the borrower is now in the process of refinancing into a new 30-year loan with a fixed rate of 4.875% for seven years. "I am working to save some money, and this enables me to do that," he says. "I am thrilled."

Mortgage Rates Hit Lifetime Lows

2010-07-02T09:24:00.000-07:00

Mortgage rates have sunk to the lowest level in decades. If your current mortgage interest rate is above 5% on either investment, 2nd home, or primary residence, now is the time to find out if you qualify.

The reason rates are dropping is that investors are seeking out mortgage bonds backed by the U.S. government as a safe haven from the tumult of the global economy, a reversal of fortune that has helped drive mortgage rates for consumers to record lows.

Thursday saw a slew of downbeat data, with the Institute for Supply Management saying its index of manufacturing activity fell unexpectedly to its lowest level of the year; auto makers reporting lower U.S. sales in June; and the Labor Department announcing a rise in weekly claims for jobless benefits.

The average rate for a 30-year fixed-rate mortgage tumbled this week to 4.58%, government-sponsored mortgage agency Freddie Mac said Thursday, from 4.69% last week. That is the lowest rate since Freddie Mac started keeping track in 1971.

A refinancing wave would be welcome now, with the economy appearing to lose momentum. The housing market has been a particular source of worry. A report Thursday from the National Association of Realtors showed that pending home sales sank 30% in May from the month before, far worse than economists expected.

If you or anyone you know who wants to take advantage of these rates and secure a lower payment or shorten their term to a 15yr fixed, without seeing a payment increase, please call me today at 714-478-3153.

Tom

Factors Needed to Heal Housing Market

2010-06-28T11:41:00.000-07:00

As expected, the expiration of the Homebuyer Tax Credit incentive is borrowing buyers from the future. Many of these buyers would have been in a position to purchase in the months ahead, given continued low interest rates and buyer-friendly home prices; this is reflected in recent home sales and mortgage application reports. For this to reverse five things need to happen:

1. Interest rate must remain low. - I believe interest rates will remain low for the unforeseeable future, at least until 2011.

2. Private-sector wages will need to rise, enabling the current employed to better qualify for mortgages. - Most of 2010 job growth has occurred in the government sector, ie. 230,000 Census workers.

3. New jobs must to be created in the private-sector to bring new households into the homebuying ranks. - Economists expect a decline of 115,000 jobs for June.

4. The consumer savings needs to increase thus creating the down payment and closing costs for home purchases. - the savings rate did increase in May from too 4% from 3.8% in April.

5. Consumer Spending must increase. - Latest statistics show consumer spending as flat in May at only .2% growith.

Steve Wood of Insight Economics concludes: "The growing economy, which is now creating private sector jobs with a lengthening workweek, combined with ongoing monetary and fiscal stimulus, has strengthened growth in personal income and wages and salaries. Although still soft, they are much stronger than they were just 6 months ago."
So, it appears that the US economy is modestly advancing on all five points. If it continues to improve it will still take time to create qualified homebuying households.

June 28th Key Mortgage News Bites

2010-06-25T23:00:00.000-07:00

The Good,The Bad, & The Ugly

The Good - The Fed's kept the fund rate at the 0%-25% level given slow improvement in the economy.

Good and Bad - Due to record low interest rates of sub-5%, refinancing applications have increased over 51% since the end of April and they account for 74% of all mortgage applications.

The Bad - Existing home sales declined 2.2% in May.

The Ugly - New home sales declined 32.7% in May, the lowest level since this data was tracked in 1962.

Call Today for Personalized Mortgage Services

We are a full service mortgage brokerage firm offering Conventional, FHA, VA, CalPERS, CalSTRS and Jumbo mortgage programs up to $3,000,000.
Tom Drasler - (714) 478-3153 - Lincensed Mortgage Specialist DRE#01775516
"Serving Southern California Since 1996"

Modified Loans See High Default Rate

2010-06-25T22:58:00.000-07:00

Credit Rating firms forecast 65% to75% of borrowers who receive lower mortgage payments as a result of loan modifications will default within 12 months. These are loan modifications supported under President Obama's Home Affordable Modification Program (HAMP).
The median debt to income ratio using debt payments to pretax income, still averages 64%, well above today's conventional lending standards of 45%.
Experts believe these failures are likely to be high largely because most of the borrowers are mired in credit-card debt, car loans and other obligations, leaving little left over for

The Treasury Department has said even with the modifications it often means little money is left over for food, clothing or such emergency expenses as medical care and car repairs.

FHA Reform Act - Update

2010-06-25T22:48:00.000-07:00

H.R. 5072 & H.R. 4213 - FHA Reform Act of 2010

The House overwhelmingly passed reform legislation on June 11th that is believed will strengthen the FHA loan insurance program while keeping it available and affordable to responsible home buyers. Changes include:
• FHA to raise monthly insurance premiums and lower up-front premiums that place burdens on cash strapped borrowers.
• Amendment to increase FHA minimum down payment requirement from 3.5% to 5% was defeated; if approved it is estimated 300,000 homebuyers would be disenfranchised.
• Home Buyer Tax Credit CLOSING deadline is extended from June 30th to September 30th; Amendment does NOT extend the deadline for home buyers to qualify.
• The extension is expected to allow over 180,000 transactions to close that would not have otherwise made the June 30th deadline.

Mortgage Rates Fall, Boost Sales

2009-09-04T07:05:00.000-07:00

Interest rates on home mortgages dropped this week, with the 30-year fixed-rate mortgage averaging 5.08%, according to Freddie Mac's weekly survey of conforming mortgages.

The 30-year fixed-rate mortgage averaged 5.14% last week and 6.35% a year ago. Fifteen-year fixed-rate mortgages also dropped, averaging 4.54% for the week ending Sept. 3, down from 4.58% last week. The mortgage averaged 5.9% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.59%, down from 4.67% last week and 5.97% a year ago. And one-year Treasury-indexed ARMs averaged 4.62%, down from 4.69% last week and from 5.15% a year ago.

"Bond yields pushed mortgage rates slightly lower this week," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. "Low mortgage rates are helping to keep housing very affordable."

Seven of the top eight most affordable months, as measured by the National Association of Realtors' Housing Affordability Index, have taken place during 2009, he said. The NAR's index dates back to 1971.

"As a result, pending sales of existing homes rose for the sixth month in a row in July, a trend unseen since the NAR began reporting data in 2001. Moreover, July's sales were the strongest since June 2007," Mr. Nothaft said.

The NAR's pending-home-sales index rose 3.2% for the month and came in 12% higher than July 2008, the Washington-based trade group reported on Monday.

In a separate release Wednesday, the Mortgage Bankers Association reported that mortgage applications were down a seasonally adjusted 2.2% for the week of Aug. 28 compared with the prior week.

Yes, the Housing Market Has Rarely Looked Better

2009-09-03T16:38:00.000-07:00

By JAMES B. STEWART, Wall Street Journal
Passing through the Fort Myers, Fla., airport a few weeks ago, I noticed people eagerly signing up for a free bus tour of foreclosed real estate—with all properties offering water views. During the ride to my hotel, the young driver volunteered that he had just bought his first house, paying $65,000 for a foreclosed property in nearby Cape Coral that last sold for over $250,000. He said he had never expected to be able to buy anything on a driver's salary, let alone something that nice.

Last week, Standard & Poor's reported that its S&P/Case-Shiller U.S. National Home Price index of real-estate values increased this past quarter over the first quarter of 2009, the first quarter-on-quarter increase in three years. Its index of 20 major cities also rose for the three months ended June 30 over the three months ended May 31, with only hard-hit Detroit and Las Vegas experiencing declines. The week before that, the National Association of Realtors reported that sales volume of existing homes was up 7.2% in July from June.

In short, the data suggest that real-estate prices hit a bottom some time during the second quarter, and have now begun to rise. There's no way to be certain that this marks the end of the long, painful correction that followed the real-estate bubble, but clearly prices are no longer in free-fall. That means if you've been sitting on the fence, it's time to act.

Ordinarily I'd never try to time the real-estate market, but I can understand why buyers have been cautious. Few want to buy in down markets, just as stock buyers avoid bear markets. And for most people, of course, buying a house is a much bigger decision than buying a stock. But with real-estate prices nationally now down about 30% from their 2006 peak and showing signs of turning up, the prices aren't likely to go much lower. Every real-estate market is local, and so there may be a few exceptions. Overall, though, I can't imagine a better time to buy than now.

In addition to bargain prices, buyers also should find plenty of homes to choose from. The inventory of unsold homes was 4.09 million units in July, up 7.3% from June, according to the National Association of Realtors. And mortgage rates this week were at a two-month low of close to 5%, according to Zillow. Even the stricter appraisal process is working to the advantage of buyers. Appraisals are coming in far lower than most sellers have been expecting, forcing them to face the new reality of sharply lower prices. And with stricter standards, lenders aren't going to let buyers borrow more than they can afford, which protects buyers and helps to keep prices down.

Unless you're really prepared to accept the demands (and headaches) of being a landlord, I don't recommend direct ownership of real estate as an investment. The days of buyers lining up to flip Miami Beach and Las Vegas condos are mercifully gone.

There are much easier ways to make money in real estate, such as real-estate investment trusts or buying shares in home builders and other housing-related businesses (such as Home Depot). Historically, the mean rate of return on real estate has been around 3%, according to research from Yale economist Robert Shiller, who co-developed the Case-Shiller index. Shares in REITs and other stocks have often done much better.

But there's a good reason homeownership has been such a central part of the American dream. It delivers security, pride of ownership, a sense of community and decent investment returns as a bonus. I felt glad for my driver in Florida. He represents the other side of the foreclosure crisis. For every hardship story, and no doubt there are many, others are realizing their dreams of home ownership and getting what may well turn out to be the deals of their lives.

Fewer Catching Up on Lapsed Mortgages

2009-08-29T09:19:00.000-07:00

I believe this article illustrates the challenge and reluctance banks have with extending loan modification terms to borrowers who are delinquent in making their mortgage payments. Some sobering facts.....

By JAMES R. HAGERTY, Wall Street Journal

Homeowners who fall behind on their mortgage payments have become much less likely to catch up again, a new study shows.

The report from Fitch Ratings Ltd., a credit-rating firm, focuses on a plunge in the "cure rate" for mortgages that were packaged into securities. The study excludes loans guaranteed by government-backed agencies as well as those that weren't bundled into securities. The cure rate is the portion of delinquent loans that return to current payment status each month.

Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For so-called Alt-A loans -- a category between prime and subprime that typically involves borrowers who don't fully document their income or assets -- the cure rate has fallen to 4.3% from 30.2%. In the subprime category, the rate has declined to 5.3% from 19.4%.

"The cure rates have really collapsed," said Roelof Slump, a managing director at Fitch.

Because borrowers are less willing or able to catch up on payments, foreclosures are likely to remain a big problem. Barclays Capital projects the number of foreclosed homes for sale will peak at 1.15 million in mid-2010, up from an estimated 688,000 as of July 1.

Cure rates have sunk despite the Obama administration's prodding of banks to ease terms for millions of borrowers to try to prevent foreclosures. Without those loan-modification efforts, cure rates would be even lower.

Job losses have left some borrowers unable to make payments. In addition, Mr. Slump said, some who could continue to make payments probably are no longer willing to. That may be because the values of their homes have fallen below their loan balances and they see little hope of ever recovering their investments.

What's more, because of widespread backlogs and delays in the foreclosure process, people who quit paying may be able to stay in their homes for more than a year before being evicted.

The Fitch study covers about $1.7 trillion of mortgages held in securities, representing about 16% of U.S. mortgages outstanding.

Mortgage Fraud: A Classic Crime's Latest Twists

2009-08-27T10:35:00.000-07:00

By ANNE TERGESEN,Wall Street Journal, August 27th
Last summer, Lawrence Ford jumped into the fast-growing market for so-called reverse mortgages. The retired auto mechanic and horse trainer used the money he received to pay off his existing $70,000 mortgage and "piddled away" the remaining $24,000 on things like restaurant meals for his four girlfriends, he says.

..Or so Mr. Ford thought. Last month, the owner of the Orlando, Fla., title company that handled his loan admitted to stealing more than $1 million from several reverse-mortgage holders, including Mr. Ford. Bank of America Home Loans, a unit of Bank of America Corp., says the title agent never sent it the money required to pay off Mr. Ford's mortgage. As a result, Mr. Ford says, the bank recently threatened to foreclose on his seven-acre ranch in Archer, Fla.

"That will put me on the streets with my cars and horses and tools," says the 68-year-old Mr. Ford. Bank of America, which says there is no immediate danger of foreclosure, adds that it is working with Mr. Ford "to find a home-retention solution."

In the wake of the mortgage meltdown, regulators and law-enforcement officials are sounding alarms about the potential for yet another type of mortgage fraud—this time, in the small but fast-growing reverse-mortgage market. Such fraud, though still rare, "is occurring in every region of the United States and reverse-mortgage schemes have the potential to increase substantially," according to a recent publication issued by the Federal Bureau of Investigation and the Office of Inspector General at the U.S. Department of Housing and Urban Development, which oversees the federally insured loans that account for some 99% of the reverse-mortgage market.

Available to people 62 and older, reverse mortgages allow homeowners to convert their home equity into cash. Instead of writing a check to the bank each month, the bank pays the homeowner, who can elect to receive a lump sum, a line of credit or monthly payments. The loan is repaid, with interest, when the borrower dies, moves, sells the house, or fails to pay property taxes or homeowner's insurance.

Reverse-mortgage fraud, typically committed by homeowners' relatives, caretakers or financial advisers, has also been cropping up recently in schemes to unload distressed real estate. Regulators cite cases in which real-estate speculators bought properties on the cheap and then sold them, using inflated appraisals, to senior citizens willing to take out reverse mortgages.

Lenders and administrators of the HUD program say reverse mortgages, for the most part, are still working well. "There are little scams around the edges," says Meg Burns, director of Single Family Program Development for the Federal Housing Administration, the HUD division that administers the reverse-mortgage program. But she dismisses talk of widespread abuse as "unsubstantiated."

Understating the Problem
Yet recent data—and HUD's own inspectors—indicate reverse-mortgage scams are on the rise. So far this fiscal year, which ends Sept. 30, HUD has referred 29 cases of suspected fraud to its Office of Inspector General for investigation, up from two the year before. Jacqueline Felton, who heads the FBI's mortgage-fraud team, says her agency is also seeing an increase. Indeed, HUD's data on suspected fraud likely understates the extent of the problem. Anthony Medici, who in June testified before Congress as a special agent in the OIG's Criminal Investigation division, said current cases "involve hundreds of properties."

.This corner of the mortgage market is attracting concern for a couple of reasons. As the falling stock market has crushed retirement nest eggs, the number of federally insured reverse mortgages soared to 112,000 in 2008, up from 43,082 in 2005. HUD forecasts some 165,000 will be originated in this fiscal year. At the same time, Congress earlier this year temporarily raised the maximum amount homeowners can borrow against, from $417,000 to $625,500, making the loans "more lucrative for misdeeds," Mr. Medici told Congress.

In recent months, lenders including Wells Fargo Home Mortgage, MetLife Bank and Financial Freedom Acquisition LLC have taken steps designed to prevent and detect fraud. For instance, many are now looking for evidence that reverse-mortgage applicants have owned their homes for a set time frame—typically at least six months or a year.

Fighting 'Flipping'
Such measures are designed to curtail "flipping." Under these arrangements, speculators purchase distressed properties and, with the aid of cosmetic repairs and inflated appraisals, deed them to seniors at above-market prices. Seniors—some of whom may be part of the scheme—typically are promised homes for no money down. In return, they secure a reverse mortgage and divert some, if not all, of the proceeds to the scheme's promoters. Regulators say promoters have even recruited seniors from homeless shelters.

In response, U.S. Sen. Claire McCaskill (D., Mo.) is pushing legislation that would, among other things, require government-certified professionals to conduct appraisals on these loans. Because the government insures lenders against losses if a home ultimately sells for less than it takes to pay off a reverse mortgage, Sen. McCaskill has expressed concern about the risk fraud poses to taxpayers.

Despite such transactions, experts say most reverse-mortgage scams are perpetrated by people well-known to their victims. In one case, Larry Bekis, 51, of St. Paul, admitted to absconding with just over $121,000 from a reverse mortgage he arranged in 2006 on his 84-year-old mother's Lauderdale, Minn., home. From March 2007 to March 2008, Mr. Bekis—who was legally responsible for his mother's finances—failed to pay over $49,000 in nursing-home bills on his mother's behalf, police say.

After pleading guilty to theft by swindle, Mr. Bekis was sentenced in June to 30 days of home detention, plus five years of probation. Mr. Bekis's attorney, John Cabak of Pine City, Minn., says he plans to contest an order that Mr. Bekis pay $80,975 in restitution to the nursing home.

Thomas Prusik Parkin, of Brooklyn, N.Y., allegedly went a step further. In April, according to local prosecutors, Mr. Parkin received a reverse mortgage in his mother's name—despite the fact that Irene Prusik has been dead since 2003. Mr. Parkin withdrew some $463,000 of the $600,000 available under the loan's line of credit, using it for expenses including tax liens on the roughly $1.5 million home he continued to claim title to, even after a 2003 foreclosure, prosecutors say.

Prosecutors also state that Mr. Parkin pocketed some $52,000 of his deceased mother's Social Security and thousands more in other government benefits she qualified for. Dennis Ring, deputy bureau chief in the rackets division of the Kings County District Attorney's Office, says Mr. Parkin maintained the fiction his mother was alive by giving the funeral director who completed her death certificate a false Social Security number and date of birth; thus, "under her legitimate information, there was no death certificate on file," Mr. Ring says. Occasionally, Mr. Parkin would also don a dress, cane and oxygen mask to disguise himself as Irene Prusik, Mr. Ring adds. Mr. Parkin pleaded not guilty, and his attorney declined to comment. He is being held on $1 million bail.

Ensnared in a Scam
Mr. Ford, in Florida, became ensnared in a larger scam. Before moving to Orlando in 2008, Garry Martin, 37, the title agent on Mr. Ford's reverse mortgage, was convicted of mortgage fraud in New York.

In Florida, Mr. Martin orchestrated about 10 reverse-mortgage schemes, pocketing about $1 million, prosecutors say. As title agent, Mr. Martin was obligated to distribute funds from his victims' reverse mortgages to retire their conventional mortgage loans. But according to prosecutors, he kept much of the money. To prevent his victims from catching on, he arranged for their monthly mortgage statements to be mailed to an address he controlled. The scheme unraveled when the banks contacted the victims about their missed mortgage payments.

Mr. Martin, who pleaded guilty to stealing over $5 million from more than 50 victims of mortgage-related frauds, faces up to 20 years in prison. His attorney declined to comment.

Mr. Ford, meanwhile, fears he may be running out of options. Unless the bank agrees to modify his loan, he says, "I don't see a way out."

New-Home Sales Post Another Strong Gain

2009-08-26T07:58:00.000-07:00

New-home sales climbed more than anticipated in July, staging their fourth straight month of strong gains to add to evidence that the housing market is emerging from its long slump.

Separately, demand for long-lasting goods rebounded sharply in July, staging their biggest gain in two years on the back of big orders for planes and capital goods.

Sales of single-family homes increased by 9.6% to a seasonally adjusted annual rate of 433,000 compared to the prior month, the Commerce Department said Wednesday.

That was the highest number sold since September 2008 and well above projections for a 1.6% gain to 390,000 by economists surveyed by Dow Jones Newswires.

The increase was the fifth in seven months, as buyers are returning to the market in search of bargains.

The market for new homes appears to have bottomed in January, when sales hit 329,000Home construction unexpectedly fell 1% in July, however, according to data released earlier in the month.

June new-home sales were revised up to an annual rate of 395,000, a 9.1% increase, Wednesday's data showed. Originally, the government had reported an 11% jump in June sales to 384,000, though May sales were also revised up to 362,000 from 346,000.

Year over year, July new-home sales were still down 13.4%, however.

The market for new homes is expected to continue to lag sales of used homes, where foreclosures have dragged down prices.

The median price for a new home was $210,100 in July, down 11.5% from $237,300 the same month a year ago. On a monthly basis, the price edged down 0.1% from $210,400 in June.

Oversupply has been is one factor keeping prices down, though there was significant improvement in that area, as well. The ratio of houses for sale to houses sold in July was 7.5, the lowest level since April 2007 and down from 8.5 the month before. At the end of July, there were an estimated 271,000 homes for sale, the smallest number since March 1993. That compares with 280,000 in June.

Regionally last month, new-home sales jumped 32.4% in the Northeast and 16.2% in the South, with sales up 1% in the West. Sales were down 7.6% in the Midwest.

An estimated 39,000 homes were actually sold in July, up from 36,000 in June, based on figures not seasonally adjusted.

Biggest Durables Gain in Two Years
Manufacturers' orders for durable goods jumped 4.9% last month to a seasonally adjusted $168.43 billion, the Commerce Department said Wednesday. That was the largest increase since 5.4% in July 2007.

Economists surveyed by Dow Jones Newswires had projected a 3% gain in July orders.

Overall durable goods orders for June were revised up, estimated to have declined 1.3% instead of the 2.2% drop previously reported.

Transportation-related durables climbed 18.4% in July, the biggest gain since September 2006. Orders for commercial planes soared 107.2%, following a 30% drop the previous month.

Motor-vehicle orders increased 0.9%, with General Motors Co. joining Chrysler to emerge out of bankruptcy and both firms getting a boost from the "Cash for Clunkers" program.

Excluding the transportation sector, orders for all other durables climbed 0.8%. Demand ex-transportation had gained 2.5% in June. Orders for all durables except defense goods increased by 4.3% in July, also a two-year high, after rising 0.7% in June.

Orders for nondefense capital goods excluding aircraft -- a key barometer for capital spending by U.S. businesses -- fell 0.3%. That follows a 3.6% gain in June.

Overall capital goods orders rose 9.5% in July. Nondefense capital goods -- items meant to last 10 years or longer -- gained by 8.6%. Defense-related capital goods orders went up by 14.8%.

Durable goods are products designed to last at least three years, such as cars, planes and computers. While the monthly figures tend to be volatile, such big ticket items provide an indication about the health of U.S. manufacturing and domestic demand.

Data out earlier this month showed a 0.5% pickup in U.S. industrial production in July, for the first monthly gain since October 2008 and only the second since the recession began in December 2007.

On Thursday, second-quarter gross domestic product is expected to be revised down to a 1.5% contraction, instead of the 1% decline in the preliminary estimate. That's due in part to expectations that businesses liquidated more inventory than initially thought. Still, most economists believe that the recession is at or near its end.

Wednesday's report showed that manufacturers are still reducing inventory, however, with inventories of durable goods registering their seventh straight month of declines at 0.8% in July.

Unfilled manufacturers' orders for durables, a sign of future demand, decreased 0.1% for the tenth consecutive decline.

Home Prices Show Gains for Second Month in Row

2009-08-25T12:56:00.000-07:00

By NICK TIMIRAOS and KELLY EVANS, August 25th, Wall Street Journal
Home prices in major U.S. cities increased for the second-straight month in June, the latest sign housing markets may be bouncing along a bottom after years of declines.

The S&P/Case-Shiller index measure of home prices in 20 major cities in the three months ended June 30 was up 1.4% from the level in the three months ended May 31. Prices gained in 18 of 20 markets. It was the first time the index rose two months in a row since mid-2006.

"Momentum matters," said Robert Shiller, the Yale University economist who helped create the index. "This is a sudden break in momentum."

Housing: Should Congress Extend Tax Credit

Fewer Catching Up on Lapsed Mortgages

The hint of improvement in housing and the broader economy was underscored in a separate report Tuesday showing consumer attitudes improved in August after two months of decline. Consumer confidence rose to a level of 54.1 in August, just shy of the 54.8 level reached in May, according to a survey produced by the Conference Board, a New York-based business research group.

One component of the index, consumer expectations, rose to 75.8, its highest since the recession began in December 2007. Their assessment of present conditions also improved, and buying plans for autos, homes, and major appliances increased across the board.

Housing economists and real-estate professionals warn that the eventual recovery is likely to be bumpy and home prices could drop again as job losses drive foreclosures higher. "It really is too soon to call this as a turning point," Mr. Shiller said, recalling an improvement in prices in early 2008 before the deteriorating economy sent housing back into a tailspin.

Home prices are down 15.4% for the year ending in June, though that's an improvement over the 19.1% decline reported in the first quarter. Government officials used the Case-Shiller 10-city index when modeling their assumptions for stress tests used to gauge the health of U.S. banks earlier this year. Under a baseline scenario, officials predicted declines of 14% for 2009, while an adverse scenario forecast a 22% drop. So far, that index is down 15.1% for the last 12 months, and down 5.5% so far this year.

A separate price gauge calculated by the Federal Housing Finance Agency, which uses sales price information on mortgages owned or guaranteed by Fannie Mae or Freddie Mac, showed that home prices increased by 0.5% in June from May.

Recent home price gains have been driven, in part, by competition between first-time buyers and investors making all-cash bids for foreclosed properties. Demand also has been boosted by government intervention that helped drive mortgage rates to half-century lows in the spring and a tax credit of as much as $8,000 tax credit for first-time home buyers, set to expire Nov. 30.

Other headwinds remain. Mortgage defaults and foreclosures aren't likely to peak until unemployment ebbs. The rate of 90-day delinquencies on loans owned or guarantee by state-backed mortgage-finance company Freddie Mac rose to nearly 3% in July from 2.8% in June and 1% in July 2008.

While rising demand has helped soak up foreclosure inventory in several hard-hit markets, rising mortgage defaults have fueled concerns among real-estate professionals that the supply of new foreclosures could jump later this year. Efforts to stave off foreclosures by modifying mortgages could determine how many of those homes end up for sale. "The government has not yet handled the foreclosure problem," said Mr. Shiller.

Las Vegas and Detroit were the only markets that saw monthly declines in June. Home prices in Las Vegas have dropped by 32.4% over the past 12 months, moving ahead of Phoenix, which is down by 31.6% from one year ago. Only five markets have posted annual declines in the single digits: Dallas, Cleveland, Denver, Boston, and Charlotte, N.C.

Home Prices Show Gains for Second Month in Row

2009-08-25T12:29:00.000-07:00

By NICK TIMIRAOS and KELLY EVANS, August 25th, 2009 - Wall Street Journal
Home prices in major U.S. cities increased for the second-straight month in June, the latest sign housing markets may be bouncing along a bottom after years of declines.

The S&P/Case-Shiller index measure of home prices in 20 major cities in the three months ended June 30 was up 1.4% from the level in the three months ended May 31. Prices gained in 18 of 20 markets. It was the first time the index rose two months in a row since mid-2006.

"Momentum matters," said Robert Shiller, the Yale University economist who helped create the index. "This is a sudden break in momentum."

Housing: Should Congress Extend Tax Credit
Fewer Catching Up on Lapsed Mortgages

The hint of improvement in housing and the broader economy was underscored in a separate report Tuesday showing consumer attitudes improved in August after two months of decline. Consumer confidence rose to a level of 54.1 in August, just shy of the 54.8 level reached in May, according to a survey produced by the Conference Board, a New York-based business research group.

One component of the index, consumer expectations, rose to 75.8, its highest since the recession began in December 2007. Their assessment of present conditions also improved, and buying plans for autos, homes, and major appliances increased across the board.

Housing economists and real-estate professionals warn that the eventual recovery is likely to be bumpy and home prices could drop again as job losses drive foreclosures higher. "It really is too soon to call this as a turning point," Mr. Shiller said, recalling an improvement in prices in early 2008 before the deteriorating economy sent housing back into a tailspin.

Home prices are down 15.4% for the year ending in June, though that's an improvement over the 19.1% decline reported in the first quarter. Government officials used the Case-Shiller 10-city index when modeling their assumptions for stress tests used to gauge the health of U.S. banks earlier this year. Under a baseline scenario, officials predicted declines of 14% for 2009, while an adverse scenario forecast a 22% drop. So far, that index is down 15.1% for the last 12 months, and down 5.5% so far this year.

A separate price gauge calculated by the Federal Housing Finance Agency, which uses sales price information on mortgages owned or guaranteed by Fannie Mae or Freddie Mac, showed that home prices increased by 0.5% in June from May.

Recent home price gains have been driven, in part, by competition between first-time buyers and investors making all-cash bids for foreclosed properties. Demand also has been boosted by government intervention that helped drive mortgage rates to half-century lows in the spring and a tax credit of as much as $8,000 tax credit for first-time home buyers, set to expire Nov. 30.

Other headwinds remain. Mortgage defaults and foreclosures aren't likely to peak until unemployment ebbs. The rate of 90-day delinquencies on loans owned or guarantee by state-backed mortgage-finance company Freddie Mac rose to nearly 3% in July from 2.8% in June and 1% in July 2008.

While rising demand has helped soak up foreclosure inventory in several hard-hit markets, rising mortgage defaults have fueled concerns among real-estate professionals that the supply of new foreclosures could jump later this year. Efforts to stave off foreclosures by modifying mortgages could determine how many of those homes end up for sale. "The government has not yet handled the foreclosure problem," said Mr. Shiller.

Las Vegas and Detroit were the only markets that saw monthly declines in June. Home prices in Las Vegas have dropped by 32.4% over the past 12 months, moving ahead of Phoenix, which is down by 31.6% from one year ago. Only five markets have posted annual declines in the single digits: Dallas, Cleveland, Denver, Boston, and Charlotte, N.C.

What Makes this Economic Recovery Different

2009-08-24T10:22:00.000-07:00

In a normal economic cycle, an inventory-led recovery would be followed by corporate capital expenditure, leading to employment expansion. Rising employment leads to consumption growth, which expands profitability and more capex. Why won't it work this time? The reason, as I have argued before, is that a big bubble distorted the global economic structure. Re-matching supply and demand will take a long time.

Why the ‘Wave’ of Foreclosure Listings Might Never Happen

2009-08-21T12:02:00.000-07:00

By Nick Timiraos, Wall Street Journal - August 21st, 2009

For weeks, even months, real-estate professionals have been asking the same question: when will the so-called shadow inventory of homes in the process of foreclosure finally hit the market?

Most mortgage servicers ended a foreclosure moratorium in March, and pre-foreclosure filings have accelerated since then, even as the supply of bank-owned properties in some markets has dwindled.

But what if that wave of foreclosures never hits the market? “For those of you still waiting for a surge of foreclosure sales, the truth is you’ll likely be waiting a long time,” writes Sean O’Toole, the founder of ForeclosureRadar.com, which tracks foreclosure filings in California. He breaks down his argument at his blog in this pithy post here.

For one, the time between a mortgage default and a foreclosure listing has grown longer as more homeowners try to complete loan modifications or short sales. Banks aren’t likely to cancel foreclosures even if they put a borrower into a trial modification. Instead, they’ll simply keep the opportunity to foreclose in case the loan modification fails.

One clue that modifications will work: cancellations of foreclosure auctions. So far, cancellations are up slightly, Mr. O’Toole says, but not enough to explain the yawning gap between mortgage defaults and bank-owned listings.

One possibility: foreclosures will simply stay at an elevated level for the next couple years, he says, but there won’t be a huge wave of inventory added all at once. For now, California is seeing a housing inventory shortage, in part because short sales are still hard to execute. Many homeowners are underwater and can’t sell, and those who can don’t want to put their homes on the market if they’re looking at a big loss.

Mr. O’Toole has done some interesting analysis that shows just how profound government policies may have been in encouraging banks to slow down foreclosures. His argument: When the U.S. last September began purchasing direct obligations of government-sponsored mortgage companies, and later began buying mortgage-backed securities that sent a message to banks that they didn’t need to refill empty cash cushions by foreclosing. Policymakers also changed accounting rules so that banks wouldn’t have to take as severe writedowns.

While the raw data suggests that foreclosures should be increasing, it’s harder to predict because “there’s so much government middling into this process,” Mr. O’Toole told the Developments blog. “When you have this much government intervention going on, things don’t necessarily proceed as they should.” (See our earlier post this week on the topic.)

As for the idea that banks are deliberately holding onto foreclosed homes? Mr. O’Toole shoots that idea down too, with a quick back-of-the-envelope sketch that shows that while the gap between bank repossessions and foreclosure sales stands at around 90,000 in California, the actual shadow inventory is probably closer to 22,500.

Readers, what do you think: is the shadow inventory just a Realtor pipe dream?

Has Government Intervention Stalled Home Price Declines?

2009-08-19T16:15:00.000-07:00

Some housing analysts have made the case that home prices have stabilized in recent months, in part, because foreclosure moratoria earlier this year helped to limit the supply of homes coming on the market during the spring and summer—just as the policymakers simultaneously goosed demand by lowering mortgage rates and offering a tax credit to first-time home buyers.

That raises some big questions: What happens when those new foreclosures accelerate later this year, and more supply hits the market? Will prices decline further if those demand-side incentives run their course? Have government efforts simply hit the pause button on the housing market downturn?

The answers to those questions produce different estimates about how much further the housing market has to fall, and a new forecast from Lazard Asset Management offers several different scenarios. The most probable scenario forecasts that home prices have another 10-15% decline from the current level, though prices are expected to rise slightly through the end of the summer as government intervention helps boost the housing market.

But Lazard also offers two additional scenarios: a “bull” market forecast that predicts an 8% home price decline from May, and a “bear” market scenario that forecasts a 19% price decline from the first quarter of 2009.

“Even in our bear case, it is clear that the government intervention to increase affordability and demand through lower mortgage rates, and to decrease supply through foreclosure moratoria and modifications, are having a positive impact on house prices relative to what would have occurred in the short term,” writes Ronald Temple, portfolio manager and co-director of research at Lazard Asset Management. ”The key question is how sustainable the benefits of such intervention will be.”

Even if government efforts simply delay an onslaught of new bank-owned supply of homes, the government’s attempt to kick the supply can down the road could have a positive benefit–provided that the economy is in better shape and consumer confidence has improved when that supply becomes available, there could be more buyers ready to soak up the inventory.

Also, various moratoria and foreclosure modification programs have increased the average time it takes for a lender to move a home from foreclosure to sale to around 11 months (and longer in some states, such as Florida and New York), according to Lazard. That means that homes slated for foreclosure last November might not sell until later this year or early 2010, providing some tailwinds for home prices through next year.

Home Prices: There's No Quick Recovery Ahead

2009-08-17T21:59:00.000-07:00

By BRETT ARENDS, Wall Street Journal
So, is our long national nightmare over? Has the housing market finally hit bottom?

There has been some muted -- albeit exhausted -- cheering from homeowners in recent weeks. But before we break out the champagne, look out for further potential problems just down the road.

The good news? According to the closely watched Case-Shiller Home Price Index, which tracks home prices across 20 major cities nationwide, the three-year housing slump slowed sharply in April and May.

May's decline was just 0.2%, the slowest in two years. And several cities actually saw prices rise -- among them Denver, Washington, D.C., Chicago, Boston, Cleveland and Dallas.

Even Miami only fell about 1% in May. That's a great month down there. Previously, prices had been falling 3% a month.

We'll get an even better picture of the situation when the Case-Shiller figures for June are released on Aug. 25.

But these data aren't the only hopeful signs.

Inventories of unsold homes have come down. According to the National Association of Realtors, there were about 3.8 million unsold homes on the market at the end of June. That's down a long way from 4.5 million a year ago.

And yes, housing affordability is dramatically better. People, obviously, need to live somewhere. At some point, housing gets cheap enough that the fundamentals start to look good.

The average home is about a third cheaper than it was at the peak three years ago, a plunge unprecedented since the Great Depression. In the hardest-hit places, such as Phoenix, Las Vegas and Miami, average prices have been halved or better from their bubble peaks.

Cheap Mortgages, Too
Factor in falling mortgage rates as well, and housing starts to look cheap by many measures. Thirty-year mortgage rates, at around 5.5%, are still low by historic standards. A few months ago, when they fell below 5%, they were very cheap.

There's some other good news for homeowners from the rest of the economy. July's job losses were better than feared: The unemployment rate, which was heading vertical a few months ago, eased to 9.4% last month from 9.5%.

Some are saying the worst is behind us, for the economy and the housing market. No wonder the iShares Dow Jones U.S. Home Construction exchange-traded fund (ITB), which tracks shares of home-building stocks, has bounced sharply since early July.

So, is that it?

Not so fast.

Prices may -- may -- be nearing the bottom in many markets. But beyond the headlines, there are plenty of reasons to stay cautious. There may even be fresh dangers just ahead.

And even if prices have stopped falling, it may be years before they start rising sharply again.

First, late spring is traditionally the strongest season in the real-estate market.

And it's hardly a surprise the market saw some green shoots this time around. It's enjoying not one, but two, gigantic taxpayer subsidies -- an $8,000 refundable tax credit, or gift, for first-time buyers, as well as those cheap mortgage rates. The Federal Reserve has been spending billions of dollars to keep interest rates down.

Both are only short-term fixes. Any sustained economic upturn would be expected to send long-term mortgage rates rising again, dousing the real-estate market with fresh cold water.

Glut of Empty Houses
The picture on inventories isn't as good as it sounds, either. A lot of unsold homes have simply been put up for rent instead, especially in the most difficult markets like Miami. The result? A glut of empty rentals as well.

New waves of foreclosures and distressed sales may be coming, too. In states such as California, it can take many months for delinquencies to turn to foreclosures, which means last winter's bad news may still be coming down the pike. Meanwhile, vast tranches of teaser-rate mortgages are due to reset later this year and in 2010.

As for the economy: Both unemployment and household debt levels remain at extremely high levels by the standards of postwar history. Either is bad news for housing. The combination is very bad.

Dean Baker, co-director of the Center for Economic and Policy Research, argued in a recent paper that the fundamentals still aren't great. It still remains cheaper to rent than to own in many markets, he says.

The biggest bubbles usually produce the deepest busts. And the 2002-2006 bubble was a doozy. The bad news may have ended after three terrible years, but maybe not. Japanese housing prices still haven't recovered from the late 1980s bubble. Western U.S. markets took six or seven years to recover after the last big bubble burst there in the early 1990s.

Yes, there are some hopeful signs, but don't let them fool you into thinking it's all clear. It might not be. As ever, anyone making a major financial decision needs to think more about his or her own situation than what "the market" is doing. A real-estate purchase needs to make sense on its own terms. And measure it on cash flow today, not the hope for capital gains tomorrow. When you factor in all the costs, is the purchase cheaper than renting?

If you get a cheap mortgage and you are aggressive on price, you may get a bargain. That's especially true if the owner has to sell. Foreclosures and other distressed sales are selling for about 20% below the rest of the market. There are opportunities out there. But you can afford to take your time to shop around.

Mortgage Rates Will Drop - Are We in a Bull Market Yet ?

2009-08-14T09:03:00.000-07:00

Dear Clients,

If you’re waiting for interest rates to drop, a pull back in the equities market will be a catalyst. I side with the author of this article, that we are in a ‘bear market rally’ and a pull back is eminent.

If you are a client of mine who has already received lender approval, as a service to you, I have placed you on my daily ‘rate watch’ monitor and you should expect regular updates on rate drops so I can get your permission to lock. Please make sure you have provided me with the best number to reach you, because rates can change at a moment’s notice, so you have to strike while the iron’s hot.

For most people, the article below is “too much information”. I happen to love economics, and actively trade stocks, so I stay on top of financial and economic news on a daily basis. By doing this, I am able to provide my clients with factual guidance so they can make informed decisions.

Feel free to contact me if you have any questions.

The time to lock is here.

Tom

Thomas L. Drasler
HomeQuest Mortgage Corporation
CA DRE#01775516
FHA - VA - Conventional
Direct: 714-478-3153
Office: 949-460-7799/877-966-3696
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Are We in a Bull Market Yet?
By MICHAEL KAHN
The technical evidence suggests that we're still in a bear-market rally. So get ready for a pullback.

WITH SO MANY PUNDITS arguing that we have finally entered into a bonafide stock-market recovery, it's worth studying how the current stock rally stacks up with the last true early bull market in 2002-2003.
While there are many structural similarities on the charts, there is one factor that is very different.
As of this month, the current rally has not yet reached, let alone broken through, a trendline that defined the bear market from its October 2007 peak. That makes the current rally still officially of the bear-market variety.
To be sure, bear-market rallies can carry on for a long time, and that means it is possible for the market to touch its bear-market trendline before all is said and done. If the trend continues at its current pace from March, then it is possible that 1100 on the Standard & Poor's 500 is in the cards.
That is a tough pill for a bear like me to swallow.
One precedent for this possibility comes from the 1972-1974 bear market when the index shed just under half its value. The ensuing bear-market rally lasted nearly two years and regained more than three-quarters of what was lost before the next bearish cycle took hold.
I am not saying the current rally will last that long, and I do not believe it will reach 1100. The point is that after brutal bear markets, when panic sets in and the world seems as if it is about to end, recoveries can also go "too far" before equilibrium is restored. The pendulum swings too far in both directions.
Before moving on, let me restate that I do not think this type of gain is likely. But ignoring the evidence on the charts that does not fit in with one's theories is always a bad move.

Several months ago, I began to look at the exact slopes of the two bear markets starting in 2000 and 2007, respectively. Using basic trendline drawing techniques, I was amazed to see that the two bear markets had exactly the same initial rates of decline. In other words, the trendlines drawn from their respective peaks were exactly parallel.

The big difference was that the 2007-2009 bear was 17 months from top to bottom while the 2000-2002 bear was 24 months for the S&P 500 and even longer for the Nasdaq. What this means is that the market fell much harder during the most recent bear, and to me that means it needs more time to recover.
Much has been written about a huge inverted head-and-shoulders pattern that was broken to the upside last month. When a similar pattern completed in 2003, the market never really looked back so it is no wonder people are excited now.
However, the bear-market trendline was already broken to the upside so the move above the huge pattern was confirmation of what had already triggered -- a bull market. Fast forwarding to today, the corresponding bear-market trendline, as mentioned, has not been broken.
We can debate how high the rally will continue and reaction in the post-Fed days to come should be telling. My thesis is that the gyrations and emotional disruptions of the bear market have not been fully resolved. That means that I do not believe the bear-market trendline will be broken during this bear-market rally.
For the S&P 500, there is a level I am watching very closely in the short term. Several factors are converging on 950 as the do-or-die level, where my thesis is proved right or wrong. At that level, the rising trendline from March, the horizontal support from June, and both the 50- and 200-day exponential moving averages all meet.
If I am right and 950 does not hold as support, then another scary selloff is in the cards. However, I do not see new lows being reached.
If I am wrong and 950 serves as a springboard for the next leg up, then I will have to admit that 1100 is entirely possible.

Don't Make Rookie Home Buyer Mistakes

2009-08-11T08:59:00.000-07:00

By JUNE FLETCHER, WSJ
Like many first-time buyers who want to take advantage of the $8,000 tax credit before it expires on November 30, Brendt Montgomery was in a rush to buy a home. And what better than a seemingly bargain-priced distressed property?

Mr. Montgomery, a 25-year-old manufacturing engineer, recently moved to Atlanta from Pittsburgh. After looking around for a day, he quickly found a condo that had been repossessed by the bank. He gave it a quick tour, made an offer and then embarked on a short vacation. While he was gone, a bidding war erupted, and spurred by the competition, he upped his bid to $143,100. His offer was accepted, and as soon as he returned, he signed a 33-page contract without really reading it. He was thrilled.

Before You Buy Your First Home…
Research properties online, but don't make a decision until you've toured a number of places, talked to neighbors, and developed a feel for the community.
Prepare a monthly budget, and factor in costs for taxes, association fees, insurance, maintenance and repairs, as well as the mortgage.
Make sure that any contract that you sign, even for a foreclosed property being sold "as is," has a clause that allows you to have an inspector examine the property, and to cancel the deal without penalty if you don't like the findings. That will give you an out should the cost of repairs be too high.
Understand that any contract that's prepared by the seller will protect the seller's interests, not yours. Read it carefully and question any provisions that you disagree with or don't understand. And have your own attorney review it.
Realize that if you back out of a contract, you may lose your deposit and be liable for brokers' fees. If you don't have a valid reason to cancel, legally you may be obligated to go through with the sale.
.But the high didn't last more than a week or two. After paying $2,000 for an earnest money deposit, plus $250 for an inspection and $85 to the condo association—but before the deal closed--he again toured the condo.

There were problems: dirty carpets, mold in the air conditioning system, holes in the wall. He had second thoughts about how secure the first-floor location might be, and realized that the north-facing windows would never let in much light. "It was a little depressing," he says. "I realized I'd acted hastily."

Mr. Montgomery called his agent and asked how he could unwind his deal. He quickly learned that backing out wouldn't be easy or cheap. He agreed to talk about his mistakes so that other first-time buyers wouldn't duplicate them.

His first mistake was to sign a contract after looking at listings for only one day, even though he'd spent considerable time beforehand doing online research. But one day, he now realizes, really isn't enough time to get to know a neighborhood or to explore all of the potential deals, and he's sorry now that he rushed. Just to get a tax credit, "it's not worth buying a property you're not satisfied with," he says.

His second mistake was to decide on a condo based just on the purchase price, without taking into consideration taxes, homeowners' association fees, and the cost to fix up and maintain a distressed property. He admits in the excitement of a bidding war, he didn't calculate these costs; he was focused only on winning the deal. He started doing the math only after he'd signed the papers, and soon regretted not adding up these expenses before he'd committed himself. "There were little issues I hadn't anticipated that would add up in the long run," he says.

Associated Press
.His third—and probably most important—mistake was not to read the contract carefully before he signed it. The contract stipulated that if he backed out of the deal, he'd lose his $2,000 earnest money deposit, plus other out-of-pocket expenses, and also made him responsible for paying the entire 6% brokers' commission. He wishes now that he'd negotiated those provisions.

Luckily, there was a contractual loophole: His parents rescinded the down payment money that they were gifting him, so he no longer qualified for a mortgage. The agents involved didn't press for the commission, but he lost his deposit.

Mr. Montgomery was much more cautious in his next round of house-hunting. Eventually, he found a new condo that has more space and better views than his original choice, and made an offer. But this time, before he signed any papers, he had his agent run comparable sales prices, figured out his total monthly expenses, and had an attorney read over the fine print. The offer was accepted, and Mr. Montgomery is looking forward to closing the deal. "I've learned some valuable lessons," he says.

Help, We're Underwater!!

2009-08-08T13:50:00.000-07:00

Q: In October 2007, my wife and I bought a two-bedroom condo for $525,000. About a year later, we both lost our jobs. We put our condo on the market for $512,000 last November, and dropped the price in January to $499,000. We got zero offers. As far as we can tell, prices for condos similar to ours are now $465,000; we now owe more than the condo is worth. We approached our lender early this year, seeking a loan modification and were turned down because we still had some emergency funds available. But we are running through this money fast, and expect it will be gone in six months. We do have some retirement funds, as well; if we do a short sale, will the lender be able to come after us? What other options do we have?

--Chicago

A: I'm sorry to hear about your problems. Many others are in the same predicament, as property prices continue to slide. In Illinois, according to Moody's Economy.com, more than one out of five homeowners are upside-down on their mortgages.

Although the Chicago market is improving on a month-to-month basis -- median prices for condominiums went up 1%, to $282,500, in June from May -- prices are still down 14% from a year earlier, according to ChicagoCondosOnline.com. And since there's an almost 13-month supply of condos on the market, according to ChicagoCondos, it's unlikely that you'll be able to sell your place for as much as you paid for it before your emergency funds run out.

But don't despair. You do have options:

■Try again for a loan modification: The federal government rolled out its Making Home Affordable program on Feb.18, giving lenders new financial incentives to refinance or modify loans. To qualify for a refinance, you must be up-to-date on your loan payments and your first lien can't exceed 125% of the current market value of your house. For a loan modification that lowers interest rates and perhaps even reduces the principal owed, you must document hardship, have a monthly mortgage payment that's more than 31% of current gross income and have an unpaid balance on a principal residence of less than $729,750. Normally, a lender would probably require that either you or your wife have a job or other steady income stream before changing the terms of your loan. But, says Chicago real estate attorney J. Kelly Bufton, "these are not normal times." Your lender may decide it's better to stick with you if you can make the payments for a few more months, she says, rather than foreclosing and trying to sell in an over-supplied market.

Getty Images

Condo prices in Chicago have stablized but they haven't bounced back.
.■Declare bankruptcy: Filing for bankruptcy could automatically forestall your foreclosure and discharge your debts—or allow you to repay them over a long period of time. (More information.) Though bankruptcy will hurt your credit, you'll be able to rebuild it faster if you have a clean slate.
■Try a short sale: Many buyers are concentrating on distressed properties these days. So you may be able to find one who will pay enough for your place to satisfy your lender, even if it's less than you owe. Accepting short sales saves lenders from the carrying and processing costs of foreclosure. However, they won't agree to this solution unless you prove that you don't have the money to pay off the debt (retirement funds are exempted from this calculation, by both federal and Illinois state law). Chicago real estate attorney Michael McCormick says to make sure that the agreement that you sign with your lender forgives the debt permanently. Don't agree to a "release of lien" that requires you to pay back the shortfall sometime after the sale.
Related
Developments: More homeowners upside down on mortgages.
Developments: Strategies for backing out of condo deals.
.■Return the condo to the lender: If all else fails, you can return the keys to the lender (deed in lieu of foreclosure), or simply stop paying the mortgage, which will eventually lead to foreclosure and your home being sold at auction. In the former instance, you transfer ownership of the property to the lender; in return, you get a document that marks your note "paid" as well as a waiver for a right to a deficiency judgment, meaning the lender can't make you pay for the difference between what you owe and the price the condo fetches on the courthouse steps. A "deed in lieu" won't hurt your credit rating as much as a foreclosure. However, you'll have to leave your home immediately; in a foreclosure, the rent-free period between when you stop making payments and you're evicted can last more than a year.
■A note on taxes: Normally, you have to pay tax on any forgiven debt, which is considered income to you. But the Mortgage Forgiveness Debt Relief Act gives many financially-strapped homeowners a pass until January 1, 2010.
■And a caveat: Whichever option you pick will affect both your ability to borrow and your financial stability for years to come. Don't go it alone. Before you decide what to do, call 1-888-995-HOPE for free mortgage advice. The National Foreclosure Mitigation Counseling Program, administered in your area by the Illinois Housing Development Authority, also provides free counseling and legal assistance.

To find out if you qualify for the Home Affordable Refinance Program, launched as part of Obama's economic stimulus program in February. I am approved to provide these programs with most all major lenders and get homeowners quickly approved and into a more stable loan product and lower monthly payment.

Call me directly to arrange for a no-cost consultation at 714-478-3153 or apply at www.tomdrasler.com/loanapplication.

Strong Economic Data Pushes Mortgage Rates Higher

2009-08-07T10:25:00.000-07:00

With just minor exceptions, all of the economic data released this week beat the consensus forecast, indicating that the economy is improving more quickly than expected. While current inflation levels remain low, faster economic growth generally leads to higher future inflation, which is negative for mortgage rates. As a result, mortgage rates ended the week higher.

Early in the week, stronger than expected manufacturing and housing data convinced economists to revise higher their forecasts for economic growth, and Friday's Employment data supported the improved economic outlook. Against a consensus forecast for a loss of -300K jobs, the economy lost -247K jobs in July, and the May and June data was revised to show fewer job losses as well. This was the 19th straight month of job declines, but it was the smallest level of losses since August 2008. The July Unemployment Rate fell to 9.4% from 9.5% in June, its first decline in 15 months. In addition, wages and the length of the average workweek increased. Overall, this report revealed unexpected improvement in nearly every area.
This week's housing market data also came in stronger than expected. June Pending Home Sales rose 4%, the fifth consecutive monthly increase. Pending Home Sales are a leading indicator for future housing market activity, meaning that Existing and New Home Sales reports may show improvement in coming months. According to the chief economist of the National Association of Realtors (NAR), affordable home prices, low mortgage rates, and a rush to take advantage of the $8,000 first-time homebuyer tax credit have helped increase home sales.

Mortgage-Servicer Performance Is 'Uneven'

2009-08-04T08:04:00.000-07:00

By MAYA JACKSON RANDALL and JESSICA HOLZER
WASHINGTON -- Some 9% of eligible borrowers have received trial modifications under the Obama administration's ambitious effort to help struggling homeowners, according to data released by the Treasury Department Tuesday.

More
Econ: List of Banks' Progress
.The administration announced its highly anticipated plan to stabilize the housing market in February through a program that provides $75 billion in incentives for borrowers, mortgage servicers and investors. However, foreclosures are still mounting amid ongoing weakness in the labor market. U.S. foreclosure activity in the second quarter was up 11%, according to a July RealtyTrac report.

The administration Tuesday acknowledged that the performance of participating mortgage servicers has been "uneven."

For instance, Bank of America Corp. has started trial modifications with only 4% of the eligible mortgages in its servicing portfolio, according to a report Treasury provided. Meanwhile, J.P. Morgan Chase & Co. has started trial modifications on behalf of 20% of its eligible delinquencies. Wells Fargo Bank's share is 6% while trial modifications started by Wachovia Mortgage make up just 2% of estimated eligible delinquent loans, the data show.

Despite the low numbers, Treasury still says the "Making Home Affordable" loan modification program is on pace to offer assistance to up to 4 million homeowners over the next three years.

For each homeowner who makes regular payments for three months, the loan servicer collects $1,000 from the government. If the borrower stays current for three years, the servicer gets a maximum of $4,500.

The administration said it has asked servicers to more than double the total of trial modifications started by Nov. 1, which would bring the cumulative total to 500,000 in a few months. Currently, only 235,247 modifications have been started.

Additionally, the administration said it has asked Freddie Mac to audit loan modification applications that have been declined.

Meanwhile, Treasury on Tuesday announced plans to provide transparency reports on modifications on a monthly basis.

'Underwater' Need Not Mean Foreclosure

2009-07-28T09:41:00.000-07:00

This article appearing in today's Wall Street Journal by By KAREN BLUMENTHAL, offers very good advice to homeowners who are 'underwater' in their homes.
There are loan programs offered by the Stimulus Program that provide qualified homeowners with the ability to refinance up to 125% of their homes current value. Feel free to email me or call me if you are interested in finding out if you qualify. TomDrasler@cox.net or 714-478-3153

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What does being "underwater" in your house really mean? Probably not that you're drowning.

The number of underwater homeowners -- those who owe more on their mortgages than their home is now worth -- has been growing sharply since 2006 as real-estate prices have tumbled. By some estimates, between one in six and one in eight homeowners are in that position, most of them people who bought homes in the past few years or who put down small or no down payments.

This worries economists and policy makers, since owing more than your home is worth is the first step toward foreclosure. And it's a concern to the rest of us because foreclosures are roiling the financial markets and, closer to home, they drag down our neighborhoods. (Most people who still have equity, by contrast, would rather sell their houses at a loss than lose what's left of their investment.)

View Full Image

Getty Images.In response to concerns about rising foreclosure and delinquency rates, federal regulators are studying possible new programs aimed at needy homeowners. There are concerns that such programs could attract a flood of applications from those who don't truly need assistance or encourage lenders to push homeowners into foreclosure. At the same time, lenders such as J.P. Morgan Chase and Bank of America have committed to working on new loan terms for the most-distressed homeowners.

But experts who have studied previous sharp housing downturns in Texas, California, New York and Massachusetts say that being underwater, while unpleasant, doesn't lead huge numbers of homeowners to default on their mortgages and end up in foreclosure.

Christopher L. Foote, Kristopher Gerardi and Paul S. Willen of the Boston Federal Reserve Bank studied more than 100,000 homeowners who were underwater in Massachusetts in 1991 and found that just 6.4% of them lost their homes to foreclosure over the next three years, according to a paper published in the September Journal of Urban Economics. The vast majority of homeowners simply continued paying as usual because they focused on the affordability of their payments, not on what they owed, and they believed home values would eventually recover.

.The economists found that homeowners typically lost their homes only after at least two things happened: Their home values dropped and they either couldn't afford the payments or stopped making payments after losing hope that prices would eventually recover.

Homeowners in California also were more likely than expected to keep paying during the deep 1990s slump, says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. More people turned in their keys in Ohio and Michigan during the difficult 1980s downturn because they lost faith in an economic turnaround.

Typically, homeowners fall behind after a job loss, divorce or serious illness. In the current downturn, foreclosures are higher than in previous cycles because more homeowners reached beyond their means to buy their homes and simply can't keep up the payments. As a result, the Boston economists project that up to 8% of underwater Massachusetts homeowners could lose their homes between now and 2010 -- a significant amount, but still not catastrophic.

So what does this all mean for you?

If you have a low-interest fixed-rate loan, you have a valuable asset that might be hard to replace in the current market, no matter what your home's value is. Keeping that mortgage current has some value, even if it means cutting other household expenses.

In addition, the penalties for defaulting are great. In most cases, walking away from a mortgage can knock a top credit score down to the cellar, says Ethan Dornhelm, a senior scientist at Fair Isaac Corp., which sells credit-scoring formulas to credit bureaus.

A person with a stellar credit score from the high 700s to the top score of 850 would see it drop more than 200 points. A person whose credit score is lower may see it fall by fewer points, but still end up with a score in the mid 500s. At that level, reasonably priced new debt, from credit cards to car loans, will be out of reach. In addition, a default could lead landlords and utilities to require more cash up front and even affect your job prospects.

If the borrower continues to pay other debts on time, the score will climb gradually, though it may take three to five years to return to "good" scores, from the mid-600s and up. Scores of 790 or more -- which are rewarded with the lowest interest rates -- won't be attainable for at least seven years, when the default blemish finally disappears, Mr. Dornhelm says.

Fannie Mae requires borrowers who have lost their homes to foreclosure to wait five years before it will accept a loan from them, though borrowers who had extenuating circumstances, such as an illness or job loss, may requalify within three years.

What's more, lenders in most states can go after homeowners for an unpaid balance on a mortgage. That's a real risk, especially if you have other assets.

The longer you stay in your house, the better the chances of making it through this down cycle. Though a return to peak prices may take five or 10 years, some housing markets may start to bounce back once credit becomes more available. Meanwhile, you'll be reducing your mortgage as you make your payments.

Lenders aren't going to renegotiate just because prices have fallen, but if you truly can't afford your payments, contact your mortgage servicer to see if you can rework your interest rate or work out new payment options. The federal Hope for Homeowners program, which began Oct. 1, is intended to provide some relief if lenders will agree to reduce the loan amount to 90% of the home's current value.

If you can't get help from your lender, try contacting a credit counselor certified by the Department of Housing and Urban Development. These counselors have direct access to lenders' loss-mitigation departments, which consumers don't, says Natalie Lohrenz, counseling administrator for Consumer Credit Counseling Service of Orange County, Calif. A list of HUD-certified counselors is available through Hope Now, a consortium of lenders and counselors. (Call 888-995-HOPE or go to www.hopenow.com.)

If you need to sell the property and can't afford to cover the shortfall, your lender may agree to a "short sale," in which you sell at a price below the mortgage amount. This is a much more complicated transaction to pull off than a regular home sale, though, and it may hurt your credit score if the lender reports that you failed to pay off the whole obligation.

Latest Home Price Index by Metro Area

2009-07-28T07:44:00.000-07:00

July 28, 2009, A Look at Case-Shiller Numbers, by Metro Area (July 2009 update).The S&P/Case-Shiller home-price indexes, a closely watched gauge of U.S. home prices, posted their first month-to-month increase in nearly three years in May, but annual weakness continued.

In the 20-city index, no area experienced year-over-year price gains, the fourteenth straight month that has happened. Boston, Cleveland, Dallas and Denver were the only areas with annual declines under 10%. Every other metro area was in double digits.

However, 15 cities managed to avoid month-to-month declines, up from nine last month. Prices in Tampa and New York were flat, while just Los Angeles, Seattle, Miami, Phoenix and Las Vegas posted monthly declines.

Las Vegas and Phoenix continued to posted the largest monthly and annual declines. Phoenix is down 55% from its peak in June 2006, while Las Vegas is off 53% from its highest level. On the positive side, Dallas and Denver have reported three consecutive months of positive returns.

Ian Shepherdson of High Frequency Economics notes that the nose-dive in home prices that followed the collapse of Lehman Brothers and the intensifying credit crisis has begun to stabilize. “The plunge in prices reflected the freezing of credit and all-round panic, which generated a step decline in home sales. Activity is now recovering, and with inventory falling, prices are dropping much less quickly and could even rise a bit over the next few months.”

Wells Fargo’s John Silvia says the month-to-month pattern is more important than the steep annual declines. “Once again TV commentators that emphasize the year-over-year numbers being down 17% are welcome to have their sarcasm but they are missing the point as well as the turn,” he said. “Recession is over, economy is recovering — let’s look forward and stop the backward looking focus.”

But Shepherdson says that while the plunge has stopped, sustained increases in home prices aren’t likely in the cards. “We would not expect any gains to last, because prices are still high relative to incomes and rents, and also because the uptick in sales will, we think, prompt a new wave of supply,” he said. “But this is still very welcome news today.”

See the full S&P/Case-Shiller report.
Read full story: Home Prices Drop at Slower Pace
Below, see data from the 20 metro areas Case-Shiller tracks, sortable by name, level, and year-over-year change — just click the column headers to re-sort.

(About the numbers: The Case Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the metro market.)

Home Prices, by Metro Area

Metro Area May 2009 Change from April Year-over-year change
Atlanta 105.69 0.3% -15.0%
Boston 148.77 1.6% -7.2%
Charlotte 119.8 0.9% -10.0%
Chicago 123.68 1.1% -17.5%
Cleveland 102.11 4.1% -6.2%
Dallas 116.54 1.9% -4.1%
Denver 123.78 1.3% -4.6%
Detroit 70.05 0.2% -24.5%
Las Vegas 109.49 -2.6% -32.0%
Los Angeles 159.18 -0.1% -19.8%
Miami 144.59 -0.8% -25.2%
Minneapolis 109.77 1.2% -21.7%
New York 170.51 0.0% -12.2%
Phoenix 103.56 -0.9% -34.2%
Portland 146.97 0.1% -16.3%
San Diego 145.06 0.4% -18.5%
San Francisco 120.16 1.4% -26.1%
Seattle 148.96 -0.3% -16.6%
Tampa 140.35 0.0% -20.8%
Washington 169.49 1.3% -14.9%

Source: Standard & Poor’s and FiservData

California Home Sales a Mixed Bag

2009-07-27T10:45:00.000-07:00

Wall Street Journal article:

In California, San Diego and Sacramento both have become much more affordable, she says. Ms. Kahn also thinks prospects are relatively good in Denver; Raleigh, N.C.; San Jose, Calif.; and the Texas cities of Austin and San Antonio—areas that generally avoided the housing bubble and so don’t have as much need to adjust.

Thomas Lawler, an independent housing economist in Leesburg, Va., says areas that seem to be nearing stability include San Diego, Sacramento, Minneapolis, Boston and the Virginia suburbs of Washington.

Among metro areas that “still have a long road to recovery” are Detroit, Phoenix, Las Vegas, Miami-Fort Lauderdale and Chicago, says Ms. Kahn. Mr. Lawler includes New York, Seattle and Portland, among others, in this category. Problems in these areas include high unemployment and large numbers of vacant homes.

Of course, there are lots of variations within metro areas. The most appealing neighborhoods, offering short commutes and good schools, may vastly outperform marginal areas that thrived during the boom.

The job market outlook is a major wild card for those seeking to divine the direction of house prices. Looking ahead one year, Moody’s Economy.com sees the metro areas of Washington, Minneapolis, Houston and Dallas among those likely to have unemployment rates below the national average. Those expected to be above the national average include Detroit, Las Vegas, Los Angeles, Miami, Orlando, Sacramento and Portland, Ore.

Unemployment may be the most important factor in assessing a metro area’s housing-market prospects, says Mark Zandi, chief economist at Moody’s Economy.com. “If people don’t have jobs or fear losing their jobs ,then buying homes is out of the question,” he says.

FHA plan will stimulate new home sales and help stabilize housing market

2009-07-14T12:30:00.001-07:00

DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME
FHA plan will stimulate new home sales and help stabilize housing market

WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to 'monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.

CAP AND TRADE WILL DESTROY REAL ESTATE OWNERSHIP

2009-07-09T12:22:00.000-07:00

Cap and Trade will destroy real estate ownership.

Among other provisions that control nearly every aspect of our lives, the Waxman-Markley energy bill has a requirement that forces the entire United States to use a National Building Code based on the green building standards of California. Regardless of whether your house is in Miami, Florida or Bangor, Maine, you'll have to adhere to the standards used in a state that has one of the most moderate climates in the U.S. The construction industry is really going to suffer.
The bill forces sellers to have an energy inspection prior to being able to sell their home. Windows, appliances and insulation will have to be inspected and approved by a government inspector and modifications would have to be made for compliance before you can close the sale.

Basically, you won't be able to sell until you go through the expense of bringing your house up to the new code. This will cost a prohibitive amount in many cases. For example, let's say that you own an older house which you bought in 2003 for $250,000 and you now need to sell. Not only has the value fallen to or below the level of the mortgage due the the drop in prices, but you are now faced with re-insulating the entire house, installing new windows, and changing the HVAC & other appliances. The total cost for this type of renovation might easily come to well over 10% of the house's value.

It begins to look as if defaulting on the mortgage might become even more common. The real tradegy is that low income families are more likely to live in older houses which won't meet the new standards and which will require major upgrades. I thought that we weren't going to see any new taxes on people who make less than $250,000. What a cruel joke!

If you want to sell, you'd better do it now, just in case the administration is successful and gets the bill passed by the Senate. Of course, this means that housing inventory will go up and prices will necessarily go down just at the time that interest rates are predicted to go up. Oh, wait! Isn't this just going to add to the housing crisis? I don't know, maybe it's just me...

The bill even mandates that all energy efficiency evaluations of one particular type must be performed by one single company, regardless of where in the U.S. the house is located. Wow! I'd sure like to own that company. I wonder who does?
To further compound the irony, the EPA has now released a new study which states that the average temperature of the Earth is in decline. It seems that this data has been available for some time, but is only now being released. Hmmm!
Woops! Since I wrote this, the EPA has suppressed the study again. I guess it was an inconvenient time.

Of course, this bill has to pass the Senate and then go to the reconciliation committee before it goes to the President to be signed into law. The White House is deviously trying to push off the Senate's consideration of the bill until sometime in September after they have voted on the horrendous, healthcare-rationing bill. By then, I expect that they think that the average citizen will have forgotten all about what Cap and Trade is going to do. The only good thing about this delay is that there's time to let your Senators know what you think about this massive bill which will make all aspects of our lives far more expensive and destroy American industry and competitiveness.

Revised Stimulus Plan allowing Refi's at 125% of Value

2009-07-07T15:15:00.000-07:00

July 1st 125% Refi's were announced!

The government appears to recognize how many Americans are upside down in their homes. However, are we prolonging the inevitable delinquency for borrowers who own more house than they can really afford?

Fannie Mae and Freddie Mac announced they will be allowing borrowers to refi their homes that are underwater up to 125% of current appraised property value.

Previously the cap was at 105% LTV, resulting in President Obama's hyped Home Affordable & Stability Plan being way behind on the estimated number of homeowners it was meant to help.

Whether or not the government should be doing this is up for debate.

The argument against is all for letting the free market work its magic. Get the pain over now and let the economy recover.

Those for government intervention argue that the nation's housing market is "too big to fail". If the government bailed out the "fat cats" on Wall Street, then it should bail out ""Joe Six-Pack" also.

Since we've already started down this slippery slope, it would have been better if they would've done away with the appraisal requirement on refinances all together. A new appraisal hasn't been required on an FHA Streamline refi since 1984. Now with FNMA/FHLMC owned by the government, what's the difference? If it works for FHA, it'll work for FNMA/FHLMC.
Either way, this county's mortgage debt is backed by the government and if payments can be lowered, less homeowners will foreclose. People have to live somewhere.

As a side note, think about what doing away with appraisals on refiances would do to HVCC appraisal issues!

Now, keep in mind that this will take awhile to be implemented as a lot of software needs to be rewritten.
Also, when the government approved the 105% LTV, FNMA & FHLMC both added pricing hits, which offset some of the gains of lower rates. I would hope they don't do the same this time.

Lastly, let's hope FNMA & FHLMC allow more lenders and brokers to do these loans. Right now, FHLMC forces homeowners to only go to their current lender. These lenders are pretty backed up, some taking 60-90 days or more to close these loans causing many homeowners to miss low rate opportunities.

Interest Rates are holding but not reaching past low

2009-07-07T09:31:00.000-07:00

There is no relevant economic news scheduled for release again today. The weakness in stocks will probably keep bonds from turning sour today. We have seen some improvements in mortgage rates over the past couple of days, but there is question as to whether or not they can hold. It currently appears that they may for the time being, but we know that mortgage rates will rise much quicker than they improve. Accordingly, if still floating an interest rate please be very cautious over the next several days. At least until we get the results of Wednesday's Treasury auction and a couple of the major earnings releases behind us.

The New HVCC Appraisal Law is Killing the Residential Real Estate Recovery Across the Country

2009-07-03T09:33:00.000-07:00

HVCC 60 Day Anniversary - We Need Your Help!!

Almost 60 days of HVCC - Are you having fun yet?

Nearly 60 days of HVCC and there seems to be very few success stories. Instead, we hear horror stories how borrowers are being hurt, and the industry is losing loan opportunities while AMCs are making money.

Please take a 20 seconds to visit the following website from the National Association of Mortgage Brokers (NAMB) and voice your concerns.

As an active member of NAMB's affilliate, California Association of Mortgage Brokers (CAMB), I ask you take an active part to call and write your congressmen and senators demanding they suspend HVCC requirement for 18 months, until a more sane and reality based proposition can be reached.

http://www.propertyunitesus.com/index.php?option=com_content&view=article&id=1:welcome&Itemid=28

California's Median Home Price Rises

2009-06-26T07:08:00.000-07:00

By STU WOO
SAN FRANCISCO -- California's median price for an existing single-family house rose for the third straight month, a sign that the state's battered real-estate market may be bottoming out.

The median sales price increased to $267,570 in May for a California home, an increase of 4.2% from April, according to a report released Thursday by the California Association of Realtors. The inventory of unsold houses continued to drop, to 4.2 months' supply in May compared with 4.6 months in April and 8.7 months in May 2008. Prices were still well below their year-ago levels, down 30.4% compared with May 2008.

One explanation for the increase in housing prices is that fewer foreclosed properties are among those being sold, said Kirk Lesh, an economist for California Lutheran University's Center for Economic Research and Forecasting. Banks tend to sell foreclosed houses at lower prices than do people selling their own homes.

California's real-estate market, the nation's largest, is seen as a barometer of the U.S. economy. Housing prices soared during the boom, and their plummet during the market's collapse resulted in massive foreclosures and fueled the recession. Economists say the state's housing market will lag behind the nation's in recovering, so any indication of improvement in California bodes well for the rest of the U.S.

With Thursday's report, real-estate experts said they were a bit more optimistic that the California market is healing. But they warned that the state's 11.5% unemployment rate could result in more foreclosures and drive down real-estate prices again, as could lawmakers' plan to slash more than $10 billion from state spending to close a $24 billion deficit.

The budget proposals include laying off thousands of state workers and cutting health and welfare programs for millions of Californians, as well as raising taxes. If enacted, they would further batter the state economy and, consequently, the housing market, said Mr. Lesh, the economist.

The Realtors' report also said that 556,590 California houses were sold in May, up 35.2% from a year earlier. Sales may increase in coming months because prospective buyers believe the market is at a bottom, said Robert Bridges, a professor at the University of Southern California's Marshall School of Business. "The 'buy' decision would be a wise one right now because those pricing levels are getting attractive," he said.

Home Resales Up From Previous Month, as Prices Fall

2009-06-23T07:43:00.000-07:00

WASHINGTON -- Existing-home sales rose a second month in a row during May, but prices again fell sharply, threatening a delay to a housing sector recovery.

Home resales increased by 2.4% to a 4.77 million annual rate from 4.66 million in April, the National Association of Realtors said Tuesday. The NAR originally reported April sales rose 2.9% to 4.68 million.

Wall Street expected a 4.80-million sales rate for previously owned homes in May.

Of the 4.77 million homes actually sold in May, about 33% were foreclosures and short sales. While elevated, that figure is lower than the 45%-to-50% range earlier this year.

Distressed property sales have pushed prices lower, year over year. The median price for an existing home last month was $173,000, down 16.8% from $207,900 in May 2008.

"We need to have increased sales to stabilize prices," NAR economist Lawrence Yun said.

Mr. Yun also said poor appraisals are stalling transactions. "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected," he said.

Low prices and mortgage rates have encouraged buying amid the recession. But rates have climbed. The average 30-year mortgage rate was 4.86% in May, up from 4.81% in April, Freddie Mac data show. Rates have gone up in June and analysts fear rising borrowing costs might restrain demand.

Tighter credit and a quarter-century-high unemployment rate of 9.4% have hurt sales. Realtors hope the $8,000 tax credit for first-time home buyers, inserted in the Obama administration's economic stimulus package, keeps prodding demand.

Previously owned home sales, year over year, were down 3.6% from the pace in May 2008, Tuesday's report said.

Weak demand has kept inventories of unsold homes high. Inventories of previously owned homes fell 3.5% at the end of May to 3.8 million available for sale. That represented a 9.6-month supply at the current sales pace, compared to 10.1 in April. Excess supply is depressing prices.

Regionally, sales in May compared to April rose 3.9% in the Northeast and 9.0% in the Midwest. Sales were flat in the South. The West slid 0.9%.

California Housing Shows Pockets of Recovery

2009-06-21T12:18:00.000-07:00

REAL ESTATE JUNE 20, 2009 California Housing Market Shows Pockets of Recovery
Prices Have Dropped Far Enough to Lure Buyers in a Trend Also Showing Up in Other Parts of the Country

By JIM CARLTON
SAN JOSE, Calif. -- A home-sales revival that began last year in some of California's cheaper inland areas has begun to spread to several more expensive coastal areas, another hint that devastated real-estate markets in the state -- and other parts of the country -- may see less grim days ahead.

Homes are selling briskly again in the lower end of the market in Santa Clara County, just south of San Francisco, with prospective buyers making multiple offers and bidding well above asking prices. The median sales price of a single-family home in May was $445,000 in the county, up 5.7% from February, when prices stopped dropping.

Santa Clara County is one of several areas around the U.S. where prices have dropped far enough to lure buyers, including investors, back into the market. Other metro areas showing this trend include the northern Virginia suburbs of Washington, parts of Phoenix and San Diego, said Ivy Zelman, chief executive of research firm Zelman & Associates. Even in glutted markets like southern Florida, investors are "gobbling up distressed inventory" in some areas, she added.

Getty Images

Homes are designated as sold on a map of a new development in South San Francisco, Calif., last month. Homes in the area are selling briskly again.
In Northern California, a big factor is first-time buyers like Denise and Steve Petrosky, who are newly optimistic about the market and can afford a home for the first time. The Petroskys in February paid $374,900 for a three-bedroom home in Morgan Hill, just south of San Jose, that last sold in 2006 for $610,000.

The couple were too leery to enter the market last year while prices were still heading down, said Mrs. Petrosky, 43 year old, an office manager, but felt prices had bottomed early this year. "Basically, we had set a budget what we could afford, which was below $400,000," Mrs. Petrosky said. "When the prices came down below that, we bought, because we could afford to."

Home prices are still falling in many California markets. But the state's average existing single-family home price has been inching up for two months, with the median sales price climbing to $256,700 in April from $247,590 in February. Much of that increase is thanks to a growing number of pockets of recovery in the housing market.

In Northern California, the median price has risen for four straight months in Santa Clara and for three months in Contra Costa County, according to estimates by MDA Dataquick Information Services, a market-research firm in La Jolla, Calif. In Southern California, the median price has risen or stayed the same three months in a row in Los Angeles County.

Those price increases might not presage a lasting resurgence in California's housing market. The state's high unemployment rate -- 11.5% in May -- could lead to more foreclosed homes that banks could then dump on the market. California's median home price remains down 37% from a year ago.

More broadly, Ms. Zelman and other housing economists cautioned against interpreting signs of greater sales activity as meaning the housing bust was nearly over. Interest rates on 30-year, fixed-rate prime mortgages have risen well above 5% in recent weeks and could rise further if inflation fears push up rates. A national tax credit for first-time home buyers ends Nov. 30, removing a big incentive.

"The overall economy in California hasn't gotten its footing," said Katherine Aguilar Perez, executive director of the Los Angeles office of the Urban Land Institute, an industry think tank. "So it's difficult for me to say we have hit bottom." Still, she said, "there are some pretty clear signals there is some leveling."

A look at Santa Clara County shows some of the dynamics behind the leveling. Home to Silicon Valley in the north, the county of 1.8 million residents went into the slump with the rest of the state, with county unemployment shooting above 10% this year from 5% in 2007. The median price of a previously owned home fell 48% to $420,000 in January from a high of $805,000 in August 2007, according to Dataquick.

Late last year, the county's sales still lagged behind those in inland areas like Riverside and San Bernardino counties, where sales volumes were up 251% in November 2008 over November 2007, according to the California Association of Realtors. Santa Clara County's November sales were up only 16%. The inland sales were booming, in part, because prices fell further there.

Then the lights seemed to turn back on in Santa Clara County home sales. Sales were up 40% in December, and kept rising into 2009. The median price, which had slid steadily since June 2008, stopped falling in February. The number of pending sales in the county has nearly doubled to 3,882 as of last week from 2,096 a year ago, according to the Santa Clara County Association of Realtors.

The biggest catalyst, local agents say, has been affordability. By April, the number of Santa Clara county residents who could afford a home in the county, based on household income, had jumped to 50% from 18% two years ago, said Quincy Virgilio, president of the Santa Clara County Association of Realtors.

Typical buyers are Scott and Yuriko Herbig. Mr. Herbig, a 28-year-old engineer, said they had a budget of less than $400,000, and couldn't find anything in that range when they began looking in 2008. Then, early this year, Mr. Herbig said, the market suddenly started filling with homes under $400,000. The couple in March bought a four-bedroom home in Gilroy for $362,000. "We got lucky," Mr. Herbig said. "I think we hit right at the bottom."

As in other areas of California, the hottest part of the Santa Clara market has been at the lower end -- in this area, that's under $600,000. For example, prices rose 15.6% to $540,000 in April in one zip code near downtown San Jose from $467,000 in January, according to Dataquick.

By contrast, prices in some higher-income neighborhoods in Santa Clara County are still falling -- such as in parts of tonier towns like Cupertino and Los Gatos. Agents said that reflects borrowers' problems getting jumbo mortgages to make those purchases. Home prices are still falling in parts of San Francisco and San Diego County for the same reason, they said.

—James R. Hagerty contributed to this article.

Caution: First Time Homebuyer Tax Credit

2009-06-18T08:00:00.000-07:00

Practice: Advances on the First-Time Homebuyer Tax credit
The First-Time Homebuyer Tax Credit, which offers up to $8,000 to qualifying buyers who purchase a home through Nov. 30, is a generous perk worth taking advantage of. But it can also get some home buyers into deep trouble.

In late May, the Department of Housing and Urban Development (HUD) said it would permit FHA-approved mortgage lenders to offer eligible borrowers an advance based on the tax credit. Borrowers, in most cases, are still required to make the standard 3.5% down payment required for FHA-insured mortgages, but they can add the value of the credit to the down payment or they can use it to pay for closing costs, says Cummings.

Repayment rules vary, but depending on the lender, borrowers will have to pay the loan each month, pay a lump sum when they receive their tax credit or make payments
over several years. And, in most cases, they'll be paying interest, too. (HUD recommends that lenders refrain from charging fees that surpass 2.5% of the tax credit.)

Bottom line for the borrower: If a borrower needs to rely on an advance of their tax credit to afford the purchase, then they'll probably have a hard time affording both their loan payments on the advance and the mortgage payments, says Cummings.

Risk for the economy: “We’re building a house of cards like we did before,” says Cummings. “We’re getting people into homes that they can’t necessarily afford with no equity, which is artificially propping up the market.” A new ripple effect of foreclosures could occur in the next two years as a result of this practice, he says.

Rates Continue to Rise

2009-06-13T08:14:00.000-07:00

Home-mortgage rates took another leap this week, bringing the average rate on a 30-year fixed-rate mortgage to its highest in seven months, Freddie Mac reported Thursday.

The 30-year fixed-rate mortgage averaged 5.59% for the week ended June 11, according to Freddie Mac's weekly survey of conforming mortgage rates. That is up from 5.29% last week. The mortgage averaged 6.32% a year ago, and the rate hasn't been higher since the week ending Nov. 26, when it averaged 5.97%.

"Mortgage rates followed the increase in bond yields this week as the May employment report showed that the economy lost fewer jobs than the market consensus had expected," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.

Rates on 15-year fixed-rate mortgages also rose, averaging 5.06% this week, up from 4.79% last week. The mortgage averaged 5.93% a year ago, and hasn't been higher since Dec. 11, when it averaged 5.20%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.17%, up from 4.85%. The ARM averaged 5.51% a year ago. And one-year Treasury-indexed ARMs averaged 5.04%, up from last week's 4.81%; it averaged 5.09% a year ago.

Mr. Nothaft said that while higher mortgage rates are slowing refinancing activity, they haven't slowed demand for home purchases.

New Ruling on $8000 Tax Credit for 1st Time Buyers

2009-06-12T06:57:00.000-07:00

WASHINGTON (MarketWatch) -- Federal Housing Administration-approved lenders can now provide short-term loans to first-time borrowers eligible for the $8,000 home buyer tax credit.

But under guidance issued by the Department of Housing and Urban Development late last week, the loans must be on top of -- not instead of -- the minimum 3.5% down payment normally required on FHA-insured loans.

Houses still not priced to sellOne out of every four homes on the market has experienced a price reduction, but when you look at the discounts, sellers still are loath to lower their asking prices, a Trulia.com study says. Jonathan Burton reports.
Buyers can still receive down-payment assistance from their parents, employers, nonprofit groups and certain government entities. But other than that, the down payment must come from their own funds. See previous Realty Q&A.

Thus, FHA borrowers relying on the lender to finance the tax credit will have to come up with their own money for the 3.5% down payment. But after that, they can use the proceeds from the short-term loans to increase their down payments, cover their closing costs or buy-down their mortgage rate.

The rules for advancing the tax credit from a refund received weeks or even months after an eligible buyer files a tax return to cash at the settlement table were announced by HUD. Secretary Shaun Donovan, who said allowing buyers to take advantage of the credit right away is "a real win for everyone."

HomeQuest has been an approved FHA lender since 1996. Please call me at 714-478-3153 if you have questions on this announcement or any lending related questions.

Interest Rates WILL Keep Rising

2009-06-10T08:36:00.000-07:00

The current debt being placed upon us by decisions made by the Obama Administration will keep interest rates on the rise.

The growing debt will burden Americans not just with heavier taxes but also with higher interest rates and slower economic growth. On June 3, Fed chairman Ben Bernanke warned Congress that heavy borrowing is one of the factors driving up rates. The trend is just beginning, according to Allan Meltzer, the distinguished monetarist at Carnegie Mellon. "Rates can only stay low if foreign investors keep buying our debt," he warns. "I predict far higher rates over the next few years." The risk that the U.S. will follow Britain, which was warned recently that it could lose its triple-A bond rating, has risen from virtually nil to a real possibility, judging by the sevenfold jump in the cost of insuring Treasury debt in the past year. The big borrowing is already spooking the bond markets. This year rates on 10-year Treasuries have jumped from 2.2% to 3.7%. A further increase in rates would aggravate the situation, raising the interest costs on the debt and increasing its size even more.

Interest Rates Continue to Worsen!

2009-06-05T09:41:00.000-07:00

It appears today's published job loss number is having the biggest influence on stock trading this morning. The smaller figure indicates that job cuts may be slowing, which is important for the economy to start to pull out of the recession. It fuels the theory that the economy may begin to recover later this year. This is bad news for bonds and mortgage rates because a slowing economy usually makes long-term securities such as mortgage-related bonds more attractive to investors. This news, coupled with concern about the next debt offering from the Fed has fueled another morning of bond selling.

This has not been a pleasant week for mortgage shoppers with rates ending the week much higher than it began. Next week is moderately important in terms of economic reports. There are a couple worth noting but they don't start until the middle of the week. There is no relevant data scheduled for release Monday, so there is little news to help change the current momentum in bonds. This could lead to further increases in rates until we get to the data. I'll be sending out more details over the next few days.
I am telling my refinance clients to continue to get their loan applications in regardless of this news, as with so much market volatility rates could quickly fall. It takes at least 15-20 days to receive mortgage underwriting approval anyway, so get your applications submitted and be in a position to lock an attractive rate should we see an improvement.
To apply, go to: http://www.tomdrasler.com/loanapplication

April Home Sales Report - Forming a Bottom

2009-06-02T09:37:00.000-07:00

WASHINGTON (MarketWatch) -- Pending sales of existing homes rose for the third month in a row in April, boosted by record-low mortgage rates and special incentives for first-time buyers, a real estate trade group reported Tuesday.
The pending home sales index for April rose 6.7% after a 3.2% increase in March, the National Association of Realtors said. The index, based on sales contracts on existing homes, was 3.2% above April 2008.
"This is yet another positive indication that the bottoming process is forming" in home sales, wrote Jennifer Lee, an economist for BMO Capital Markets. "Now if only prices would stabilize."
The NAR reports on sales of existing homes in a separate report once a transaction closes, usually six to eight weeks later. In April, existing-home sales rose 2.9% to a seasonally adjusted annual rate of 4.68 million, 3.5% below year-earlier sales rates.
With mortgage rates hovering near all-time lows, housing affordability has improved, said Lawrence Yun, chief economist for the NAR. Yun expects existing-home sales to rise about 17% by the end of the year to a seasonally adjusted annual rate of 5.48 million. Sales of new homes, by contrast, are expected to fall another 12% to a 308,000 annual rate.
"Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers," Yun said.
The federal government is offering an $8,000 tax credit for first-time home buyers, which can be used for the down payment. Other incentives are being offered by state or local governments.
Recently, first-time buyers have accounted for about half of sales, a much larger percentage than in normal markets. With a large number of owners underwater in their mortgage, many are not able to sell their home in order to buy a different house. About half the sales have been foreclosures or short sales.

The Fed Surprises Investors and Rates Rise

2009-05-30T07:17:00.000-07:00

As the pressure for higher mortgage rates has increased in recent weeks, investors have speculated that the Fed would step in to "defend" certain interest rate levels, but that hasn't happened. This week, Fed officials explained that their mortgage-backed securities (MBS) purchases are designed to support the mortgage market and not to set rates. The Fed's MBS purchases of $25.5 billion this week were similar to levels seen in recent weeks. Disappointed that the Fed hasn't increased its quantity of asset purchases, investors sold MBS this week, and mortgage rates moved higher.
A number of factors have been developing which typically push interest rates higher. The coming supply of debt needed to pay for government programs will compete for investor funds. Despite strong demand for this week's large Treasury auctions, investors are concerned that higher rates will be required in the future. In addition, an improved economic outlook has made investors more willing to move funds to riskier assets and away from safer assets such as bonds. It also means that higher inflation may be a concern sooner than previously expected.
The difference between short-term and long-term rates reached record spreads during the week. With the Fed-controlled fed funds rate close to zero, short-term rates remained low. Long-term rates, which are market-controlled and influenced by investor expectations, rose significantly. A wide yield curve spread is often found during periods when the economy is strengthening.

Residential Mortgage Rates are on the rise!!!

2009-05-29T07:39:00.000-07:00

Remember the old expression commonly used by equities and bond traders, when investor's become overly greedy, "Pigs Get Slaughtered". Well, certainly interest rates stabilizing in the mid to high 4's the last three months has been awesome for home buyers and homeowners, but these low rates will not last.

If I had a crystal ball on what they will look like in 6 - 12 months, I wouldn't be writing this blog. But I can tell you, economists are predicting mortgage interest rates will likely go up before they go down, going forward. Rates this week have worsened significantly, as much as .500% landing in the 5.250% for a 30year fixed with a .5 point cost. Obtaining a rate in the low to mid 5's is still terrific, however, many consumers are stilll waiting on the fence, hoping to see rates go down to 4% or better. They should not hold their breathe. The 10 year Treasury yield has been trending up and is now holding in the 3.9% range. When this happens, coupled with the stock market gaining value, and inflation around the corner, all makes for a negative effect on interest rates.

In addition, with the rise in mortgage applications recently, the banks are clogged with loans, limited staffing, merger dislocation, and tougher lending standards which all spells out a longer loan turnaround process for "worthy" borrowers.As it is, currently we're seeing refinances take between 45-60 days to actually close and fund.

That's why I tell clients to get your applications in so your mortgage broker can get your loan package into the lender approval cycle, as underwriting approval which normally takes 5 days is taking up to 25 business days, depending on the lender. Once a loan package is received and accepted by the lender, the broker can float the rate, wating for an opportune time to lock.The closer the lock is to the target close time the better the rate. In this environment, I usually lock in a 30 day window.

Bottom line, the lending complex is clogged up, and the loan process can be painful due to risk averse lenders, so talk with your mortgage specialist or call me to discuss your situation and take advantage of these rates while they last.

OBAMA Refi Program - One Time Opportunity

2009-05-23T10:08:00.000-07:00

Attention Linked In Members and Community Bloggers:

IF YOU OR ANYONE YOU KNOW OWNS A HOME AND DUE TO MINIMAL TO NO EQUITY CANNOT REFINANCE TO A LOWER RATE AND PAYMENT --- PLEASE READ!

Everyone who owns a house in California needs to examine their current mortgage program and determine if they qualify for an exciting new program that was just released as part of President Obama's Economic Stimulus Plan.

Homeowners can now refinance their homes to a 30 year fixed mortgage at a rate of 4.375% even if they have NO EQUITY to declining values. Even if their 1st mortgage is up to 5% higher than their homes current appraised value!

If your loan is owned by either Fannie Mae or Freddie Mac and your 1st mortgage is 105% or less of current appraised value, you may qualify.

Most people are averaging between $200 to $500 in payment reductions! And they now have the peace of mind knowing they have a predictable payment, that will never be at risk of adjusting upward.

If you want to learn more specifics about this program please call my Free Recorded Message that will provide additional details regarding the Obama refi program:

Free Recorded Message: 877-274-4511 Ext 3

Leave your name and phone number to receive a call back from me to determine if you qualify or contact me directly at 714-478-3153.

Tom Drasler
Licensed Mortgage Specialist

What will an Economic Recovery Due to Mortgage Rates

2009-05-08T14:10:00.000-07:00

The hype this week as a result of Bernake louding that the economy will show significant signs of recovery by the end of this year will put pressure on mortgage rates!

Rates are still at Record Lows ---for the moment!

Refinance up to 105% of Value Now with the Obama Home Affordable Refi Program or H.A.S.P!

· FHA Specialists
· Conforming, Jumbo Conforming
· Jumbo and Super Jumbo
· Interest Only
· Government and Special Obama Stimulus Programs NOW Available

CALL ME TODAY at 714-478-3153 to Find Out If You Qualify!

Improved Economic Outlook

Increased optimism about the pace of an economic recovery helped the stock market and hurt bond markets this week. As a result, mortgage rates ended the week a little higher. Mortgage rates are being pressured by concerns that an economic rebound will bring increased inflation sooner than recently thought.

Comments from Fed Chief Bernanke and generally stronger than expected economic data fueled upward revisions to the consensus economic forecast this week. In Tuesday's testimony to Congress, Bernanke offered his most optimistic economic outlook since the recession began. He expects economy activity to "bottom out, then to turn up later this year". He warned that the labor market may recover very slowly, but he expects that the Unemployment Rate will peak below 10%. He pointed to the decline in mortgage rates as a successful outcome of Fed programs and suggested that there have been signs that the housing market may be near a bottom. Housing sector data released during the week supported his view. Pending Home Sales, a leading indicator for the housing market, rose 3%, and Construction Spending posted gains as well.
In a typical economic recovery, the labor market is one of the last areas to turn around, and the pattern is expected to hold this year. The April Employment report showed that the economy lost -539K jobs, which was a large number but fewer than expected. The Unemployment Rate rose to 8.9% from 8.5% in March. The consensus outlook is that a pickup in the job market will lag an improvement in the overall economy by several months.

Tax Consequences of a Short Sale

2009-05-01T10:16:00.001-07:00

I am often asked about the tax consequences to the property seller of a 'short sale". I've attached an article from Bill Bichoff, a 25 year CPA and tax columnist for SmartMoney.com.

I also want to add that homeowners who have loans totaling more than the current value of their homes, and simply have found it impossible to refinance into a new loan taking advantage of today's low interest rates to reduce their payment, now there is a solution: the government sponsored "Home Affordability Refinance Program". This program allows able paying borrowers to refinance the 1st mortgage on their primary residence, second home, or 1-4 unit rental property for up to 105% of the properties current appraised value, with loan amounts as high as $729,750. Your 1st mortgage simply needs to be owned by Fannie Mae or Freddie Mac.

Call me to find out if you qualify! (714) 478-3153

Tax Consequences of a Short Sale

It's not so unusual these days to have mortgage debt that exceeds the current value of your principal residence. If you hang on to the property long enough, you have a reasonably good chance of riding out the storm with little or no harm done. On the other hand, if you have to sell now, you face what's called a "short sale" -- which means selling for a net sales price (after subtracting commissions and other closing costs) that's less than the outstanding mortgage debt.
What are the tax consequences of a short sale? The easiest way to explain it is with some examples.
Tax gain on a short sale. Say you paid $200,000 years ago for a principal residence that you could now sell for a net sales price of $300,000. Unfortunately, you also have $350,000 of first and second mortgages against the property because you took out a big home-equity loan a couple of years ago at the top of the market when the home was worth $500,000.
Believe it or not, you'll have a $100,000 gain for tax purposes if you sell. Why? Because the net sales price exceeds the tax basis of the home: $300,000 sales price minus $200,000 basis equals a $100,000 gain. (Your tax basis equals what you paid for the property plus the cost of any improvements made over the years, minus any past depreciation write-offs if you rented the property out or used part of it for deductible business purposes.)
While it doesn't seem fair that you could have a $100,000 tax gain from a sale that leaves you $50,000 in the red with your mortgage lenders, that's the way the law works. Mortgage debts don't enter into the gain-on-sale calculation.
Now for the good news: You'll probably be able to exclude the $100,000 gain for federal income-tax purposes, thanks to the federal home-sale-gain exclusion break. If so, you won't have to report the $100,000 gain on your Form 1040. You may or may not qualify for the same favorable treatment on your state income-tax return.
Tax loss on short sale. Of course, you can also have a short sale where the net sales price is less than your tax basis in the property.
Say you paid $415,000 for a principal residence that you could now sell for a net sales price of $300,000. You also have $350,000 of first and second mortgages against the property. For tax purposes, you'll have a $115,000 loss if you sell because the sales price is lower than your tax basis in the home: $300,000 sales price minus $415,000 basis equals a $115,000 loss. Will the IRS let you claim a write-off for that loss? Nope. You can only claim a federal income tax loss on investment or business property. A loss on a personal residence is considered a nondeductible personal expense. Most states follow the same principle.

New Gov't Refinance Program helps Homeowners Upside Down

2009-04-30T09:43:00.000-07:00

New Government Refinance Program – Helping Responsible Mortgage Payers!!!!
More than 90% of all home owners meet their mortgage payment obligations. Now there is a new government sponsored refinance program called the Home Affordable Refinance Program, or (H.A.R.P.), aimed at helping responsible home owners refinance into a 30 year fixed stable loan regardless of their homes current appraised value.

· Refinance up to 105% with no Mortgage Insurance Required
· High Balance Loan Amounts Are Eligible
· No Minimum Credit Score Requirement
· Reduced Income Documentation Available
· Stable 30yr Fixed Rate

This program is limited to Fannie Mae and Freddie Mac owned mortgages, so to learn if you qualify simply go to the following secured government website and enter your name and property address: http://makinghomeaffordable.gov/loan_lookup.html.

Program Eligibility:
· 1st mortgage must have been originated with 80% loan-to-value prior to March 1st, 2009
· Existing loan must be owned by Fannie Mae or Freddie Mac
· 1-4 units, condo’s, second homes and investment properties allowed
· Program offered for only a limited time

The H.A.R.P. program has some restrictions so give me a call today at 714-478-3153 to find out if you are eligible!.
. Markets Quiet Ahead of Fed Meeting
With little economic news released during the week, mortgage rates moved very little this week. Treasury yields and the stock market also were little changed ahead of next week's major economic events. The fed funds rate is already close to zero, so no change in rates is expected at Wednesday's Fed meeting next week. At the last meeting on March 18, the Fed shocked investors with an aggressive expansion of its mortgage-backed securities (MBS) purchase program from the previously announced $500 billion to a total of $1.25 trillion.
My opinion, now is the time to refinance as the government needs to issue a huge amount of debt to pay for all its new programs and inflationary times could be ahead which will raise interest rates!

New Government Refinance Program – Helping Responsible Mortgage Payers!!!!

2009-04-30T09:42:00.001-07:00

First Time Buyer $8000 Tax Credit

2009-03-03T21:24:00.000-08:00

The Federal Housing Tax Credit Enhanced Tax Credit Provides Outstanding Opportunity for Home BuyersIn its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for first-time home buyers.But time is of the essence for buyers who want to take advantage of this opportunity. Only homes purchased on or after January 1, 2009 and before December 1, 2009 are eligible. Use the links below to find out more about the tax credit.The following is some of the benefits of this tax credit, for more details or answers to frequently asked questions, please visit the link below:· The tax credit is for first-time home buyers only. · The tax credit does not have to be repaid.. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. · The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009. · Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. For complete details visit:http://www.federalhousingtaxcredit.com/2009/home2.html or
Call 714-478-3153

Stimulus Impact on Mortgage Rates

2009-02-27T12:26:00.000-08:00

Dear Clients and Partners:

There has been quite a lot of controversy expressed by the public regarding the stimulus package and whom among us it benefits and what precedence is being set that will leave it’s mark for many years ahead. I’ve attempted to concisely highlight and clarify recent announcement made this week that affect all of us who own homes, or are looking to purchase or refinance a home.

If you have any questions on how these announcements affect your situation on purchasing or refinancing a home, please contact me at 714-478-3153, blog me at http://tomdrasler.blogspot.com/ .or visit my website at www.TomDrasler.com.

Regards,

Tom Drasler
DRE # 01775516
HomeQuest Mortgage Corporation
25283 Cabot Road, Suite 108
Laguna Hills, CA 92653
FHA – Conventional – VA
“Serving Southern California since 1996”

Stimulus Package Loan Amounts - The Question of the Day:

Q: When will lenders begin accepting loans under the new 2009 limits?

A: Very soon. FHA just released ML 09-07 today outlining the new loan limits for 2009 under the new American Recovery Act (ARRA). Most lenders are telling us roughly two weeks from now. In the meantime, below is a link to the new Mortgagee Letter. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-07ml.doc

New FHA/VA Minimum FICO: Most lenders are implementing a new minimum FICO of 620 for all FHA/VA loans including streamlines and no longer accepting submissions that do not meet the new FICO requirement. The typical deadline to close any existing loans with FICOs below 620 is March 5th. **Note: Higher default rates on government loans continue to be an issue so don't be surprised to see further FICO tightening from the investor community.

Events This Week:
GDP Lower
Home Sales Fell
Confidence Dropped
Manufacturing Down
Events Next Week:
Mon 3/2 ISM Manuf. Income
Tues 3/3 Pending Sales
Thur 3/5 Productivity Factory Orders
Fri 3/6 Employment

Supply Concerns Boost Mortgage Rates
All the economic news released during the week indicated that future inflation concerns should be minimal. In addition, the Fed purchased more mortgage-backed securities (MBS) than in any prior week. Despite these favorable events, however, mortgage rates rose slightly during the week. The reason is that concerns about the enormous supply of debt that the government will need to issue outweighed the other factors.
The amount of money the US Treasury will need to borrow to fund government spending seems to rise every week. Two weeks ago, it was the $787 billion Economic Stimulus Plan. Last week, the government announced the $275 billion Financial Stability Plan. This week, the Obama administration proposed a $3.6 trillion budget plan, with an estimated deficit of $1.75 trillion, which is enormous by historical standards. The Treasury will need to issue debt to borrow money to fund all of this. As the government issues more debt, the interest rate offered generally must rise to attract additional investors. Interest rates on similar investments such as MBS then move higher as well to compete for funds from investors.
Reflecting their concerns about an increase in supply, investors required higher interest rates at the large Treasury auctions during the week. The auction results showed that demand from foreign investors remained strong, which was very good news. If foreign investors should ever reduce their purchases of US bonds, then interest rates in the US would be likely to rise.

Also Notable:
January Existing Home sales fell 5% to the lowest level since 1997
Continued Jobless Claims rose above five million to a new record high
The Dow stock index dropped to the lowest level since 1997
The Fed purchased $25 billion in agency MBS during the week ending 2/26

Average 30 yr fixed rate:
Last week:
dn 0.05%
This week:
up 0.14%
Stocks (weekly):
Dow:
7,100
-200
NASDAQ:
1,380
-60

Week Ahead
The important Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for a loss of over 600K jobs in February. Before the Employment Data, the ISM national manufacturing index and Personal Income will come out on Monday. Pending Home Sales, a leading indicator for the housing market, is scheduled for Tuesday. Productivity will be released on Thursday. Factory Orders, Construction Spending, and the ISM Service index will round out a busy week.

Rate Watch Advisory

2009-02-22T19:05:00.000-08:00

This week brings us the release of six pieces of economic data for the bond market to digest along with some very important testimony from Fed Chairman Bernanke. Two of the reports are considered to be of low importance, but since we have data being posted every day of the week except for tomorrow, it is likely that we will see plenty of movement in mortgage rates the next few days. Tuesday morning brings us the first of this week's data with the release of February's Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 37.7 in January to 36.0 this month. A lower reading would be considered good news for bonds and mortgage rates.Mr. Bernanke will deliver the Fed's semi-annual testimony on the status of the economy late Tuesday morning. He will be speaking to the Senate Banking Committee and market participants will watch his words very closely. The Fed Chairman is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the banking and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate during this session, possibly affecting mortgage rates also. January's Existing Home Sales report will be posted late Wednesday morning. This is one of the least important reports of the week, along with Thursday's New Home Sales report. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. The Existing Home Sales report is expected to show an increase in sales but new home sales are expected to fall slightly.The only important data scheduled for release Thursday is January's Durable Goods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A larger drop than the 2.3% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal. The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts' forecasts currently call for a decline of 5.4%, indicating that the economy was weaker in the last quarter of the ye ar than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market. The last piece of data scheduled for release this week is the University of Michigan's revision to their Index of Consumer Sentiment for February. Current forecasts show this index revising slightly higher than previously thought. The preliminary reading was 56.2 and is now expected to stand at 56.5, indicating that consumer sentiment was slightly stronger than previously thought. This index is important because it helps us measure consumer confidence that translates into consumer willingness to spend. Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Tuesday or Thursday, but Friday may be fairly active also. This would be a good week to maintain contact with your mortgage professional.If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

2009-02-20T11:52:00.001-08:00

Friday's bond market has opened up sharply following early stock losses and renewed fears about the economy. The stock markets are showing early sizable losses after international markets posted large declines during overnight trading. The Dow is currently down 120 points while the Nasdaq has lost 13 points. The bond market is currently up 31/32, which will likely improve this morning's mortgage rates by approximately .375 of a discount point.The Labor Department gave us January's Consumer Price Index (CPI) this morning, saying that the overall index rose 0.3% as expected. The core data rose 0.2%, exceeding analysts' forecasts of a 0.1% increase. This means that consumer prices rose more than expected if excluding volatile food and energy prices. That is considered bad news for bonds, but the stock and economic concerns has prevented a negative reaction to this morning's news.The concerns, both here and overseas, about the global economy are contributing greatly to this morning's bond gains. We are seeing a shift to safety as investors sell stocks and move funds into bonds. While this is good news for the bond market and mortgage rates, this is sometimes only a temporary move and could lead to further volatility in trading in the coming days and weeks. If investors become more comfortable with stocks, we could see those same funds move from bonds back into stocks, driving bonds prices lower and mortgage rates higher. Still, no reason to panic. This just means we need to watch the markets closely.Next week is fairly active in terms of economic releases and relevant events. There is no important news scheduled for release Monday, but we do get important data and the semi-annual monetary policy testimony from the Fed Chairman to Congress on Tuesday. The rest of the week is scattered with relevant data releases, so look to Sunday's weekly preview for details.If I were considering finan cing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

2009-02-19T11:19:00.001-08:00

Conventional – Non-Conventional – VA - FHA

Dear Clients and Business Partners:
In an effort to address the foreclosure crisis, the Obama administration announced Wednesday, February 18th, some details about Obama’s Foreclosure –Prevention program, intended to provide incentives for lenders to ease mortgage payments for struggling borrowers. Details are still forthcoming as the final plan is still in flux.
Key Components of Obama Plan and Who it Will Help:
· Homeowners who are behind in their payments or in foreclosure proceedings
· Homeowners still current on their home loan but with a high debt-to-income ratio
· Homeowners whose mortgages are held by an investor other than Fannie Mae and Freddie Mac (Jumbo non-conforming lenders, private money lenders or portfolio lenders) that would agree to modify the loan in exchange for government subsidies
· Homeowners whose mortgages are worth between 80% and 105% of their homes’ value, which currently makes it difficult to refinance a loan
· Homeowners whose loans are either held by or guaranteed by Fannie and Freddie
· Other criteria, possibly relating to debt-to-income ratios that are still under discussion
Who Misses Out:
· People who have already lost their houses
· People with mortgages on vacation homes or investment properties

Rate Watch Advisory

2009-02-19T10:01:00.000-08:00

Thursday's bond market has opened well into negative territory following the release of much stronger than expected economic data. The stock markets are relatively flat with the Dow and Nasdaq both down 2 points. The bond market is currently down 19/32, which will likely push this morning's mortgage rates higher by approximately .125 - .250 of a discount point.Both of today's monthly reports gave us stronger than expected results. The first and more important of the two was January's Producer Price Index (PPI) from the Labor Department. They announced a 0.8% jump in the overall reading and a 0.4% rise in the core data when they were expected to show 0.3% and 0.1% increases respectively. This means that prices paid at the producer level of the economy rose much more than expected. That is considered bad news for bonds and mortgage rates because it raises inflation concerns that make bonds less appealing to investors.The second piece of data p osted this morning was January's Leading Economic Indicators (LEI). This Conference Board report attempts to predict economic activity over the next three to six months and showed an increase of 0.4% compared to the 0.1% increase that latest forecasts were calling for. This means that the data is predicting economic activity to increase over the next few months at a faster pace than analysts had thought. This is negative news for bonds and mortgage rates.The Labor Department also posted weekly unemployment figures, showing that 627,000 new claims for benefits were filed last week. This matched the previous week's revised total but was higher than expected. The higher total of claims is good news for bonds, but since it tracks only a week's worth of claims it is not considered to be of high importance to the markets, especially with the inflation related readings being posted this morning.The Labor Department will also release January's Consumer Pr ice Index (CPI) early tomorrow morning, which measures inflationary pressures at the very important consumer level of the economy. With exception to maybe the Employment report, the CPI is the most important report that we see each month. Its results can have a huge impact on the financial markets, especially long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall.If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and c annot be guaranteed to be in the best interest of all/any other borrowers.

2009-02-05T08:31:00.001-08:00

Rate Lock Advisory - Wednesday Feb. 4th

Wednesday's bond market has opened in negative territory again as investors prepare for the upcoming debt sales the Treasury announced. The stock markets are showing moderate gains with the Dow up 23 points and the Nasdaq up 25 points. The bond market is currently down 9/32, which will likely push this morning's mortgage rates slightly higher.Today's only economic news was the Institute for Supply Management's (ISM) service index. It showed a reading of 42.9 that was higher than expected, meaning the service sector was more optimistic about business conditions last month than in December. It also was a higher reading than was expected, but fortunately not enough to affect this morning's mortgage rates.There are two pieces of important data scheduled for release tomorrow. The first is December's Factory Orders data and is similar to last week's Durable Goods Orders report except this one tracks new orders for both durable and non-durable goods. Current forecasts are calling for a decline in new orders of 3.0%. A large variance from forecasts could lead to changes in mortgage pricing.The second report of the day is Productivity and Costs data for the 4th Quarter. Since a high level of productivity is thought to allow economic growth without inflationary concerns, this data can cause enough movement in the bond market to affect mortgage rates. If it varies greatly from analysts' forecasts of a 1.0% increase, we may see some movement in mortgage rates tomorrow.Also on tap for tomorrow are weekly unemployment claims from the Labor Department. With January's monthly statistics due out Friday morning, traders will be watching the data to help predict Friday's monthly numbers. Current forecasts are calling for 592,000 new claims. The larger the number the better scenario for mortgage rates.If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Mortgage Rate Watch

2009-01-28T19:28:00.000-08:00

WEDNESDAY, January 28th Finacial Wrap: Today's FOMC meeting adjourned with no change to key short-term interest rates, keeping the benchmark Fed Funds Rate near 0%. The stock markets rallied following the adjournment, pushing the Dow up 200 points and the Nasdaq higher by 53 points on the day. The bond market soured though, driving bond prices lower that pushed yields and mortgage rates higher. Overall, we can expect to see an increase in tomorrow's mortgage rates of approximately .375 of a discount point unless the morning's data offsets those losses or pushes them higher.The post meeting statement did give us some insight into what actions the Fed may take to help boost economic activity since this rate can't be lowered any further. They indicated that they were ready to buy longer-term government securities such as the 10-year Treasury Note and 30 year Bond if they felt that it would generate lending. This is actually good news as it creates another buyer for all the debt that could some to market to pay for the stimulus package currently being considered. Unfortunately, the statement was not very definitive, more or less saying that it is an option available not a commitment to do so.The statement also hinted at the Fed's forecast for the economy, saying that significant risks still remain but that a ?gradual recovery? could begin late this year. In other words they expect the economy to continue to slow for most of the year before slowly rebounding. That is actually fairly favorable news for bonds, but traders apparently were disappointed by the lack of solid details of what the Fed will do, particularly regarding the possibility or likelihood of buying government securities. The result was a weak afternoon for bonds and a likely upward revision to mortgage pricing.Tomorrow morning brings us the release of December's Durable Goods Orders. This data helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years. The data often is quite volatile from month to month, but is currently expected to show a decline in orders of 2.0%. A larger than expected drop would be good news for bonds and mortgage rates.December's New Home Sales report, the sister release to Monday's Existing Home Sales, will be posted late tomorrow morning. It is expected to show another decline in sales of new homes, but is not important enough to heavily influence mortgage pricing.If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaran teed to be in the best interest of all/any other borrowers.

Daily Rate Lock Advisory

2009-01-26T09:38:00.001-08:00

This week is extremely busy in terms of economic data scheduled for release and will likely be another active week for mortgage rates. The number of releases is actually irrelevant due to the importance of the some of the reports. There are eight economic releases scheduled for the week in addition to the first Federal Open Market Committee (FOMC) meeting of the year. All but two of the releases scheduled are considered to be of moderate or high importance, meaning we should see quite a bit of movement in mortgage rates again this week. The first report of the week is tomorrow's release of December's Existing Home Sales. It gives us a measurement of housing sector strength by tracking sales of newly constructed homes. It is one of the week's least important reports, therefore, it will likely not have a significant impact on bond trading or mortgage rates. Current forecasts are calling for a small decline in sales.December's Le ading Economic Indicators (LEI) will also be posted late tomorrow morning. This index attempts to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting to see a 0.3% decline, meaning that economic growth over the next few months will likely slow. A larger than expected drop would be good news for the bond market and mortgage rates, but an unexpected rise could lead to bond selling and an increase to mortgage rates tomorrow morning.January's Consumer Confidence Index (CCI) will be released Tuesday morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 38.0 would be ideal for the bond market and mortgage rates.There is no factual economic data scheduled for release Wednesday, but we will get the results of this year's first FOMC meeting. It will begin Tuesday and adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to short-term interest rate, but as is often the case, traders will be looking for any indication of the Fed's next move. However, I am not expecting this meeting to have a major impact on the markets or mortgage rates because the Fed can't lower key rates much more. There is little chance of indicating a possible rate hike in the near future, so I don't believe that this meeting will have the influence they usually do. Thursday morning brings us the release of December's Durable Goods Orders. This data helps us measure manufactu ring strength by tracking new orders at U.S. factories for products that are expected to last three or more years. The data often is quite volatile from month to month, but is currently expected to show a decline in orders of 1.8%. A larger than expected drop would be good news for bonds and mortgage rates. December's New Home Sales report, the sister release to Monday's Existing Home Sales, will be posted late Thursday morning. It is expected to show another decline in sales of new homes, but is not important enough to heavily influence mortgage pricing.Next up is Friday, which has three reports scheduled for release. The first of them is one of the most important reports that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early Friday morning. This data is so important because it is considered to be the best measure of economic growth. The GDP itself is the total sum of all goods and services produced in the United States. Its' results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter's activity, each released approximately one month apart. The first, which usually carries the most volatility, is expected to be a decrease of 5.2%. A weaker reading would be great news for the bond market, but the 5.2% decline would be the biggest quarterly drop in 26 years. The 4th Quarter Employment Cost Index (ECI) is also scheduled for release early Friday morning. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. It usually has more of an effect on the bond market than the stock markets. Current forecasts are showing an increase of 0.7%. A lower than expected reading would be favorable to bonds and mortgage rates, but the GDP reading will be the biggest influence on trading and rates F riday morning. The last report of the week is the revised reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer confidence, which is thought to indicate consumer willingness to spend. I don't see this data having much of an impact on the markets or mortgage rates due to the importance of the employment index and GDP figures. Overall, look for Tuesday or Friday to be the biggest days for mortgage rates. Friday's GDP is the single most important piece of data this week, but we may see quite a bit of movement in rates Tuesday also. If we see weaker than expected results from the most important reports, we should see rates close the week much lower than last Friday's closing levels. If the data shows stronger than expected results, we may see mortgage rates move higher again this week. This is of course, assuming that the Fed meeting doesn't reveal any surprises. I strongly recommend that fai rly constant contact is maintained with your mortgage professional this week if still floating an interest rate.If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Mortgage Rate Watch

2009-01-24T22:08:00.000-08:00

Dear Clients and Business Partners:Thursday's bond market has opened in negative territory yet again despite significant stock weakness. The Dow is currently down 220 points while the Nasdaq has lost 45 points and it appears that those losses may widen as the day progresses. The bond market is currently down 19/32 as supply concerns continue to weigh on trading. This will likely push this morning's mortgage rates higher by approximately .250 of a discount point.There were two pieces of economic data released this morning and both gave us much weaker than expected results. Unfortunately, it appears bond traders are ignoring the data since they are not usually considered to be of high importance. This is despite wide variances between forecasts and actual readings.The first was December's Housing Starts that showed a decline in new home starts that was quadruple the drop that was expected. This gives further credence to the theory that the housing sector has not bottomed out ye t.The second piece of data was weekly unemployment figures from the Labor Department. They reported that 589,000 new claims for benefits were field last week, greatly exceeding the 543,000 claims that were forecasted. This points to a still softening labor market and does not give hope of a economic recovery anytime soon without stimulus assistance.There is no relevant economic data scheduled for release tomorrow, so I would not be surprised to see more weakness in bonds and pressure in mortgage rates. It is becoming clear that the market is quite concerned about the amount of debt that the government will need to sell to meet goals that the new administration is expecting.If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.