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
Friday, June 5, 2009
Tuesday, June 2, 2009
April Home Sales Report - Forming a Bottom
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 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.
Saturday, May 30, 2009
The Fed Surprises Investors and Rates Rise
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.
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.
Friday, May 29, 2009
Residential Mortgage Rates are on the rise!!!
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.
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.
Saturday, May 23, 2009
OBAMA Refi Program - One Time Opportunity
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
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
Friday, May 8, 2009
What will an Economic Recovery Due to Mortgage Rates
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.
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.
Friday, May 1, 2009
Tax Consequences of a Short Sale
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.
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.
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