Mortgage Rates Jump: Lock in now, or wait???

Grab one now, or hope for lower rates?
Floaters got sunk this week. Anyone who is in the market for a new mortgage, be it a straight-up purchase or refinance, and was letting their rate float in hopes of locking in at a lower rate instead got smacked with a near quarter point rise in the 30-year fixed rate. According to Bankrate’s latest weekly survey (conducted Wednesday morning) the 30-year fixed average was at 5.45%, up from 5.23% That’s the highest level since February, and more than a half point above the 4.9% borrowers in early April could snag.

So what’s a floater to do now? Well, if you’ve lost your betting mojo, lock in and be happy. Yes, happy. Let’s remember that 5.45% is still seriously good. It was only one year ago that the average 30-year fixed rate was 6.1%. And long term, it is all but assured that a 5.45% fixed rate is going to look darn nice. It may take some time before the Fed gives up the fight and has to let rates rise to attract buyers for all the debt we now have to pay off, but it will happen. So while today’s 5.45% is high relative to a month or two ago, it is likely to be one you will boast about in the coming years.

Okay, enough of the long-term perspective. What if you’re still in betting mode and wondering about the next few weeks and months? Well, that’s one big crap shoot. The recent spike has been caused by action in the 10-year Treasury market (the 30-year fixed rate tends to follow movements in the 10-year note.) Late last week the bond market started worrying about inflation and servicing the federal deficit, and one thing led to another and the 10-year Treasury yield shot from 3.4% last Thursday to above 3.7% during trading yesterday (Thursday) before closing lower at 3.67%. Plenty of market watchers are expecting the trend line on the 10-year Treasury to keep moving up. But here’s where it gets interesting: there’s not as clear a picture if a continued rise in the Treasury will automatically cause the 30-year fixed to also rise.

The big wildcard is Ben Bernanke and his merry band at the Federal Reserve. The Fed has been actively buying up long-term Treasuries and mortgage backed securities in an effort to help keep yields low. When rates started rising the past few weeks the Fed signaled it wasn’t too concerned; in fact it seemed to be cheered by the notion that those slightly rising rates were a sign the economy was gaining a bit of strength. But now there’s a sense that the continued rise-capped by the big spike this past Wednesday-could refocus the Fed’s effort to push yields down; it has yet to use up even half the money it has allotted for the buyback programs, so it’s got plenty of gunpowder ready.

That could be good news for rate floaters; assuming the Fed is still worried that rates rising too quickly and too far will put the kibosh on the already anemic credit market recovery, it’s a decent argument to assume the Fed will soon ramp up its repurchases in an effort to push yields back down after their recent spike.

As David Rosenberg, the former Merrill Lynch economist now at Gluskin Sheff noted on Thursday morning:

“It’s one thing to have a Treasury yield backup when mortgage rates are still declining, but that is no longer the case. The yield on the 30-year fixed-rate is already up 20 basis points from the lows; 1-year ARMs have jumped 17bps. This is not what the Fed wants to see.”

Indeed, the recent rate uptick has sent a chill through the still frigid housing markets. According to the Mortgage Bankers Association, mortgage applications dropped 14.2% this week compared to a week prior.

The bet’s yours, floaters: lock in now at what still qualifies as a terrific interest rate, or put your money on the Federal Reserve pushing yields down in the coming weeks. Which way are you leaning?

Thanks for checking out my blog If you know anyone that is facing a Hardship or they have questions about refinance solutions please contact me direct at (562) 673-1136

Robert Vaughan
Vice President
Affinity Lending Group

Thinking of Buying A Foreclosed Home???

Tip No. 1. Don't buy in a neighborhood that has an unusually large number of foreclosed homes.

NEW YORK (CNNMoney.com) -- A study released yesterday by RealtyTrac.com and Truila.com shows that more Americans than ever are interested in buying foreclosed properties.

What's the best way to buy a property?

Buy from a bank and look for a REO, a real-estate owned property. These are homes that fail to sell at auctions and are then put back on the market by the banks that own them.

The bank clears any outstanding liens or loans against the house. And you'll be able to inspect it firsthand, instead of just driving by.

Then, research your market. There a lots of places to get foreclosure listings. Two places you might want to consider are RealtyTrac.com and foreclosurepoint.com.

Contact realtors to get listings as well. These days, large numbers of realtors are specializing in the foreclosure market.

As you evaluate listings, make sure you don't buy in a neighborhood that has an usually large number of foreclosed homes. It could keep prices constrained for a long time.

And check out the laws in your state. There are big differences in the process from state to sate. Some states, for example, require that foreclosures go through the court system, while others don't.

Be aware that in some markets banks aren't selling their foreclosed properties at fire sale prices. Set your initial offer 20% below market, more if your area has a lot of foreclosures.

Also, know that the Federal government is working to make the $8,000 tax credit for first time homebuyers available immediately to qualified buyers. This could help you close the gap if you don't have enough for the down payment.

Some of the best markets to search for foreclosures:

Southern Florida
Las Vegas
Seattle
Colorado
Southern California


Robert Vaughan
Vice President
Affinity Lending Group
(562)673-1136 Direct

Washington Reports: $8,000 Tax Credit!!!

Home builders and Realtors cheered in Washington last week when HUD Secretary Shaun Donovan announced that FHA will allow lenders and government agencies to “monetize” the $8,000 federal homebuyer tax credit, providing purchasers with downpayment cash upfront, available at closing, rather than waiting for the IRS to mail them a tax credit check.

Speaking at the mid-year conference of the National Association of Realtors, Donovan said HUD supports “bridge loan” programs designed to help first-time buyers come up with needed cash.

Under the bridge loan concept, an FHA-approved private lender, a state or local housing agency, or an FHA-approved nonprofit organization could advance as much as $8,000 for downpayment and closing costs -- in anticipation of receipt of the $8,000 credit months or weeks down the road.

Sanctioning bridge loans could improve the effectiveness of the federal credit program significantly, said Joe Robson, president of the National Association of Home Builders.

Bill Riley, incoming president of the Washington State Realtors Association, estimates that half of all would-be first-time buyers lack the downpayment resources needed to complete a purchase, and therefore aren't making use of the credit.

Donovan said technical instructions to lenders for the bridge loan program would be provided by FHA shortly.

In the meantime, 10 state housing finance agencies already run credit monetization programs on their own. They include the states of Missouri, Colorado, Delaware, New Jersey, Tennessee, Idaho, Ohio, Pennsylvania, New Mexico and Washington.

Most of the programs provide second liens with no interest charges for a period of months, with the expectation they'll be paid off immediately after the homebuyers receive their IRS credit checks.

In some cases the liens turn into second mortgages with 10 year terms and floating interest rates if the buyers choose not to repay the advance with the tax credit check.

In the wake of Donovan's announcement, major mortgage lenders are likely to gear up their own programs, bringing bridge loans for first time buyers to all 50 states, not just the ten that pioneered the idea.

However, anyone who wants to take advantage of all this needs to move fast. Under the federal tax credit rules set by Congress, purchasers must close no later than November 30 to be eligible. They must not have owned a principal residence at any time during the three years preceding their purchase. Buyers can claim the 2009 credit against their 2008 federal tax returns - they just need to file an amendment - or can wait and file next April.

For a detailed Q&A on the credit program, go to www.federalhousingtaxcredit.com.

Thank you for checking out my blog. If you or anyone you know is facing a hardship and has questions about what soulutions are avavilable for home owners please contact Robert Vaughan Direct (562) 673-1136

Mortgage MODIFICATIONS Are Happening. Get Yours!!

The Obama administration's housing stabilization plan is underway and starting to have an impact. As of last week, Chase had modified 15,000 home loans.

NEW YORK (CNNMoney.com) -- Two months ago, Ivan Coleman was struggling, his mortgage payment having ballooned to $1,200 - more than half his income. Starting June 1, his monthly payment will fall to $725.

"My mortgage company was helpful, eager to have me stay in my home," said Coleman, who first fell behind on his payments after losing his job.

0:00 /2:45No help for homeowners
Coleman, who has owned his Maple Heights, Ohio, home for ten years, is among the first wave of homeowners to have their mortgages modified under President Obama's foreclosure-prevention program. As of last week, for example, Chase Mortgage, the servicing side of JP Morgan Chase (JPM, Fortune 500), had issued more than 15,000 modifications under the plan.

Bank of America (BAC, Fortune 500), which began reaching out to at-risk borrowers in early April, has sent out 100,000 letters to borrowers who could potentially benefit. It has issued some modifications, although it's not releasing data on just how many.

When the plan went into effect on March 4, Obama predicted it could help as many as 4 million people stay in their homes. It did this primarily by encouraging lenders to assist delinquent or at-risk mortgage borrowers by lowering interest rates to the point that total monthly housing payments would not exceed 31% of their gross monthly income.

How to apply
Becoming one of those 4 million takes five simple steps.

Step 1: Visit the Web site

Everything you need to get started is located here MakingHomeAffordable.gov

Step 2: Take the quiz

Click on "Find out if you are eligible" and then select the "Home Affordable Modification" option. (The "Refinancing" option is just for those who are current on their loans.) Take the five-question quiz. Based on your answers the site will tell you if you likely qualify for a modification under the Obama plan.

If you do - meaning you bought your house before Jan. 1, 2009, and owe less than $729,750; it is your primary residence; you are delinquent on your payments; and your payment is more than 31% of your monthly gross income - the site will present an eight-item checklist of paperwork you'll need to submit to your lenders.

Step 3: Compile the paperwork

The site recommends that you have: household-income documentation, such as pay stubs; tax returns; savings account records; mortgage statements; second mortgage info, such as home-equity loans statements; credit card bills; and information on other debt, including student and car loans.

You will also be asked to write a letter describing why you need assistance. Your reasons could include medical expenses, job or income loss, or even divorce.

A well-done hardship letter can make a difference in whether a loan wins modification, according to foreclosure-prevention counselors. These letters can point out factors that led to the delinquency but that may not be evident from your other paperwork.

"Don't say, 'I never could have afforded it in the first place,'" advised Tom Kelly, a spokesman for Chase Mortgage. "That isn't the ideal answer."

Instead, explain that illness prevented you from working for a time, that you've recovered and are back at work and paying bills again. Or a temporary job loss cause the problem, etc. Without that context, lenders may think you were just careless - or worse.

Step 4: Call your lender or servicer

Once your information packet is complete, call your lender or servicer - the company you write your monthly mortgage check to. To see if your lender is participating in this plan - or to get the phone number - click on "Contact Your Mortgage Servicer" on the Making Home Affordable site. After you've talked to one of their modification specialists, you'll be instructed to fill out an application and submit your documents.

There should be no need for face-to-face meetings with servicers, according to Jumana Bauwens, a spokeswoman for Bank of America. She said borrowers will be able to do everything over the phone and through the mail.

Step 5: Wait

During this phase, the lender will decide the approach it wants to take to reducing your debt: lowering your interest rate, extending the life of your loan, or reducing your debt balance.

The lender's first step will be to get your payment down to 38% of your monthly gross income. Once the debt is reduced that far, the government will pay the lender to lower it to 31% of income.

At that point, the loan will be rewritten, you will get the new paperwork to sign and the new payment will go into effect on your next bill.

This process has been taking several weeks to a month, so be patient. Although the banks expect it will get quicker as their personnel become more familiar with the modification plan.

"The 31% is now an industry standard and that's much more easily calculated," said Chase's Kelly.

One thing to remember: These are trial modifications that only become permanent once you make on-time payments for three consecutive months.

Another option
Some borrowers may prefer going through a foreclosure-prevention counselor rather than dealing directly with lenders. The counselors can answer questions about what specific documents are needed, make sure that applications are complete and take the time to explain the proposed deals.

In addition, the counselors offer advice on getting spending under control. "Budget counseling is critical, but the banks have told us they're not set up to do that," said Mark Seifert, director of Cleveland-based East Side Organizing Project (ESOP), a community advocacy group that does extensive foreclosure counseling.

Ofelia Navarro, executive director of the Spanish Coalition for Housing in Chicago, said her organization filed 300 packages for modification under the new plan on April 9. She is still waiting to hear back on those applications, but she believes the new program will eventually make the process go faster and smoother.

"I understand that the servicers did not get the final regulations until [a couple of weeks ago]," she said. "Now, they're ready to move forward."

In fact, Ivan Coleman used ESOP for his modification, and it took more than two months to complete. "My counselor, Ana Gonzales, handled everything," he said. "She told me to be patient, that it would take 30 days, but it took more than that."

But he's very pleased with the outcome and that he now has a good chance of keeping his home.

Thank you for checking out my Blog. If you or someone you know is facing a hardship and having trouble with there mortgage please call Robert Vaughan (562) 673-1136

Robert Vaughan
Affinity Lending Group

Mortgage Rates Rise Slightly!!

ARMs 'broadly higher' as 30-year fixed increases to 5.27%.

NEW YORK (CNNMoney.com) -- Home mortgage rates ticked only slightly higher this week, according to a report released Thursday.

The average 30-year fixed mortgage rate jumped to 5.27%, up from 5.23% the previous week, according to Bankrate.com's weekly national survey.

Even with the increase, rates remain at historic lows, the report said. Rates have plunged since late October, when 30-year fixed home mortgage rates averaged 6.77%.

"The movement in fixed mortgage rates remains very subdued," despite recent increases in benchmark bond yields, the report said.

"As a result, the spread between the rate paid by a mortgage borrower and the return earned by investors in risk-free government bonds continues to narrow," the report added.

For a conforming 30-year fixed rate mortgage, that spread is the narrowest since November, and on larger jumbo loans, the spread is the narrowest in a year.

That improvement is likely because of the Federal Reserve's continuing purchases of mortgage-backed bonds, the report said.

Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). Jumbo loans carry higher rates than smaller "conforming" loans that do have guarantees.

Six months ago, the average 30-year fixed mortgage rate was 6.44%, meaning a $200,000 loan would have carried a monthly payment of $1,256.25.

With the average rate now at 5.27%, the monthly payment for the same size loan would be $1,106.89, meaning homeowners who refinance now would save almost $150 per month.

Other rates: The average 15-year fixed rate mortgage jumped to 4.78% from 4.73% the week prior.

The average jumbo 30-year fixed rate inched up to 6.68% from 6.65% the week prior.

Adjustable rate mortgages were "broadly higher," the report said, with the average 3-year ARM jumping to 5.27% while 5/1 ARMs increased to 5.07% from 5.05%,

Robert Vaughan
Vice President
(562)685-8159