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Average US Rate on 30-Year Mortgage at 4.51 Pct.

8/30/2013

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 Average U.S. rates for fixed mortgages declined this week but stayed close to their highest levels in two years.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan fell to 4.51 percent. That's down from 4.58 percent last week, the highest since July 2011.

The average on the 15-year fixed mortgage dipped to 3.54 percent from 3.60 percent, also the highest since July 2011.

Rates have risen more than a full percentage point since May when Chairman Ben Bernanke first signaled that the Federal Reserve might reduce its bond purchases later this year. The purchases have helped keep long-term interest rates low.

Mortgage rates remain low by historical standards. But the sudden spike in rates could slow the housing recovery's momentum.

U.S. sales of newly built homes dropped 13.4 percent in July to a seasonally adjusted annual rate of 394,000, the government said last week. That's the lowest level in nine months.

Also in July, fewer Americans signed contracts to buy homes for the second straight month, according to the National Association of Realtors. Still, the decline has been modest and the level of pending homes sales remains close to a 6 ½ -year high reached in May.

Mortgage rates have been rising because they tend to follow the yield on the 10-year Treasury note. The yield also has surged on speculation that the Fed's stimulus will slow. But the rate on the 10-year note declined this week to 2.78 percent from 2.90 percent last week.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage declined to 0.7 point from 0.8 point. The fee for a 15-year loan was unchanged at 0.7 point.

The average rate on a one-year adjustable-rate mortgage fell to 2.64 percent from 2.67 percent. The fee slipped to 0.4 point from 0.5 point.

The average rate on a five-year adjustable mortgage rose to 3.24 percent from 3.21 percent. The fee held at 0.5 point.

source: http://abcnews.go.com/Business/wireStory/average-us-rate-30-year-mortgage-451-pct-20107166
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July home sales continue up

8/28/2013

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 CONCORD — Residential home sales in New Hampshire saw a year-over-year increase for the 20th consecutive month in July, outpacing July 2012 by 23 percent, while the price of those homes was up by 11 percent for the month as well.

There were 1,637 residential sales in July, compared with 1,331 from a year ago, marking the most sales in a single month since August 2005. With a median price of $230,000 (compared with $207,900 in July 2012), it added up to a 37 percent increase in overall July sales volume, meaning the total dollars exchanged in those transactions.

“I read somewhere that it won’t be long before the ‘housing recovery’ is simply referred to as ‘housing,’” said 2013 NHAR President Bill Weidacher. “We no longer have to qualify the recovery as a hypothetical or as something that we’re forecasting or dreaming about. It’s here.”

Year to date numbers in 2013 continue to be on the upswing as well. For the first seven months combined, compared to 2012, closed sales are up 12 percent, median price is ahead by 10 percent, and sales volume saw a 17 percent increase.

The average days on the market for sold homes, meanwhile, dropped by 18 percent in July, from 107 days in 2012 to 88 days this year. The year to date comparison is a 13 percent decline, from an average of 118 days on the market over the first seven months of 2012 to 103 in 2013.

Pending sales, a forward-looking sales indicator, increased by 23 percent in July and has risen 12 percent year to date.

And months’ supply, which measures the number of months it would take to sell of the current inventory of homes at the current pace of sales, dropped from nearly 15 months in July 2012 to 11 in July 2013.

“We’ve been in a buyers’ market for so long, some of those relatively new to the business are seeing things lean back toward the sellers for the first time,” Weidacher said. “There’s certainly more balance in the market than we’ve seen in years.”

Condominium sales in New Hampshire, meanwhile, trended similarly in July.

Locally, nine of the 10 New Hampshire counties saw residential unit sales increases in July, with Sullivan County the only exception, and nine of 10 witnessed July median price increases as well. 

Source: http://www.fosters.com/apps/pbcs.dll/article?AID=/20130828/GJBUSINESS_01/130829427/-1/FOSBUSINESS
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Jump in mortgage rates hurts US sales of new homes

8/27/2013

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WASHINGTON — Americans cut back sharply in July on their purchases of new homes, a sign that higher mortgage rates may be slowing the housing recovery.

US sales of newly built homes dropped 13.4 percent to a seasonally adjusted annual rate of 394,000, the Commerce Department said Friday. That’s the lowest in nine months. And sales fell from a rate of 455,000 in June, which was revised down from a previously reported 497,000.

The housing rebound that began last year has helped drive economic growth and create more construction jobs. But mortgage rates have climbed a full percentage point since May. The increase has begun to steal some momentum from the market.

Sales of new homes are still up 7 percent in the 12 months ended in July. Yet the annual pace remains well below the 700,000 that is consistent with a healthy market. July’s drop ‘‘may mark an uh-oh kind of moment for the housing recovery,’’ said Mark Vitner, an economist at Wells Fargo Securities.

Stocks of home builders declined sharply Friday, even as overall market indexes rose. Shares of Toll Brothers Inc., D.R. Horton Inc., and Lennar Corp. — three of the nation’s largest builders — all fell in the neighborhood of 3 percent.

And major homebuilders’ shares have been dropping steadily since late May. The slide began after Federal Reserve chairman Ben Bernanke first signaled that the Fed might reduce its bond purchases later this year. The bond purchases have helped keep mortgage rates and other borrowing costs low.

The average rate on a 30-year mortgage reached 4.58 percent this week, according to Freddie Mac. That’s up from 3.35 percent in early May and the highest in two years.

The impact on would-be buyers’ finances is significant.

Take someone who locked in the early May rate on a $200,000 mortgage. They would have a monthly payment of around $875. But the same mortgage at last week’s average rate would cost $1,025 a month.

The difference adds up to $150 more each month — or $54,000 over the lifetime of a 30-year loan. The monthly figures don’t include taxes, insurance, or initial down payments.

Potential buyers appear to have noticed that financing a home purchase has become more expensive. The number of Americans applying for mortgages to buy homes has plummeted 16 percent since the end of April. And builders began work on the fewest single-family homes in eight months in July. Still, mortgage rates remain low by historical standards. The same $200,000 loan would cost a buyer $1,330 a month at a 7 percent rate, the average since 1985.

Most economists expect the housing recovery will continue, albeit at a slower pace.

The impact of higher mortgage rates has surfaced in the new-home market faster than the resale market because the new-home sales are measured when contracts are signed.

Higher rates may have also caused potential buyers to cancel some purchases of new homes. Vitner said that may explain why sales were revised down in May and June. Most of the revisions occurred in sales of homes not yet under construction. Buyers don’t need mortgages until construction begins.

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Average rate on 30-year mortgages up to 4.58%

8/26/2013

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Average U.S. rates for fixed mortgages rose this week to their highest levels in two years, driven by heightened speculation that the Federal Reserve will slow its bond purchases later this year.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan jumped to 4.58 percent, up from 4.40 percent last week. The average on the 15-year fixed loan rose to 3.60 percent from 3.44 percent. Both averages are the highest since July 2011.

Rates have risen more than a full percentage point since May. Last week’s spike comes after more Fed members signaled they could reduce the bond purchases as early as September. The purchases have helped keep long-term interest rates low, including mortgage rates.

Despite the hike, mortgage rates remain low by historical standards. Recent reports suggest the jump in rates has yet to sap the housing recovery’s momentum.

In July, previously occupied homes in the U.S. sold at the fastest pace since 2009. Sales jumped 6.5 percent last month to a seasonally adjusted annual rate of 5.4 million, the National Association of Realtors reported Wednesday. Over the past 12 months, sales have surged 17.2 percent.

The National Association of Home Builders said its measure of confidence among builders rose this month to its highest level in nearly eight years.

Mortgage rates are rising because they tend to follow the yield on the 10-year Treasury note. The yield has also surged on speculation that the Fed’s stimulus will slow. It rose to 2.90 percent Thursday morning, its highest level in two years.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage rose to 0.8 point from 0.7 point.

From The Detroit News: http://www.detroitnews.com/article/20130826/BIZ01/308260011#ixzz2d5CGZ0nE

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James Clooney ranked 45 in Mens 50 PPR Singles

8/23/2013

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Rank Name City State Section District Points
1 Rodgers, Scott D. Scotch Plains NJ Eastern                                             New Jersey Region 756
2 Friedman, Neil New York NY Eastern                                             Metropolitan Region                                             576
3 Clark, James Larchmont NY Eastern                                             Southern Region 516
4 Kalina, Jonathan Fair Lawn NJ Eastern                                             New Jersey Region 384
5 Harrington, Bill New York NY Eastern                                             Metropolitan Region                                             354
6 Satterlee, Richard Thomas                                             Bronx NY Eastern                                             Metropolitan Region                                             259
7 Miyake, Junji Cliffside Park NJ Eastern                                             New Jersey Region 258
8 Okuda, Tatsumi Tenafly NJ Eastern                                             New Jersey Region 198
9 Serebro, Boris White Plains NY Eastern                                             Southern Region 192
10 Olds, Mason Garden City NY Eastern                                             Long Island Region 192
11 Lurie, Jonathan New York NY Eastern                                             Metropolitan Region                                             165
12 White, Ken Elma NY Eastern                                             Western Region 164
13 Hakanson, John East Northport NY Eastern                                             Long Island Region 159
14 Hoffman, Andrew Holmdel NJ Eastern                                             New Jersey Region 132
15 Irom, Bruce Roslyn NY Eastern                                             Long Island Region 126
16 Difabio, Joseph J. Troy NY Eastern                                             Northern Region 126
17 Asher, Jordy Endicott NY Eastern                                             Western Region 104
18 Smith, Theodore Croton Falls NY Eastern                                             Southern Region 96
19 Miller, Grant L. Guilderland NY Eastern                                             Northern Region 96
20 Spano, Joseph Oak Ridge NJ Eastern                                             New Jersey Region 96
21 marshall, william New York NY Eastern                                             Metropolitan Region                                             95
22 Coglietta, Fred F. Saint James NY Eastern                                             Long Island Region 88
23 Boutillette, Michael J. Somerset NJ Eastern                                             New Jersey Region 84
24 Goetz, Philip Brooklyn NY Eastern                                             Metropolitan Region                                             84
25 Yonkers, Paul J Sea Cliff NY Eastern                                             Long Island Region 68
26 Bellcourt, Scott L. Niskayuna NY Eastern                                             Northern Region 64
27 Smith, David Cresskill NJ Eastern                                             New Jersey Region 64
28 Sherlock, John G. Laurence Harbor                                             NJ Eastern                                             New Jersey Region 44
29 L'allier, Jean Flushing NY Eastern                                             Metropolitan Region                                             13
30 Varela, Alejandro Jamaica NY Eastern                                             Metropolitan Region                                             6
31 Greenblatt, Joel Sands Point NY Eastern                                             Long Island Region 4
32 Rakoczy, Roman Clifton Park NY Eastern                                             Northern Region 4
33 Barest, Warren S. White Plains NY Eastern                                             Southern Region 4
34 Gash, Gary M. White Plains NY Eastern                                             Southern Region 4
35 Heath, Timothy New York NY Eastern                                             Metropolitan Region                                             4
36 Appel, Jeffrey New York NY Eastern                                             Metropolitan Region                                             2
37 Gribbin, Bill Manhasset NY Eastern                                             Long Island Region 2
38 Delman, Robert Old Westbury NY Eastern                                             Long Island Region 2
39 Reiley, Jorge A. Manorville NY Eastern                                             Long Island Region 2
40 Soltan, Yasser Ahmed Brooklyn NY Eastern                                             Metropolitan Region                                             2
41 Hesky, Haim Great Neck NY Eastern                                             Long Island Region 2
42 Ackley, Frank Wainscott NY Eastern                                             Long Island Region 1
43 Anton, David Old Bethpage NY Eastern                                             Long Island Region 1
44 Swenson, Christopher B Montclair NJ Eastern                                             New Jersey Region 1
45 Clooney, Jim oyster bay cove NY Eastern                                             Long Island Region 1
46 Weiss, Andrew G. Port Chester NY Eastern                                             Southern Region 1
47 Sedlacek, Paul L. Rockaway NJ Eastern                                             New Jersey Region 1
48 Volpe, John L. Nutley NJ Eastern                                             New Jersey Region 1
49 Mejia, Robert J. Mahwah NJ Eastern                                             New Jersey Region 1
50 Hinshaw, John Levittown NY Eastern                                             Long Island Region 1
51 Gigante, Joseph West Islip NY Eastern                                             Long Island Region 1

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Ways to Sidestep Volatile Mortgage Rates

8/22/2013

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To say mortgage rates are volatile right now is an understatement. Every few days for the past two months, there have been heavy swings in mortgage pricing, translating to strong gyration in mortgage rates. Nothing can be more frustrating for a pre-approved potential homebuyer than knowing their ability to qualify and their subsequent proposed payment could change in an instant. But there are other options that can help take the volatility out of your house hunting.

Should You Lock In a Mortgage Rate?: Most lenders will not lock in your interest rate until you have a ratified purchase contract or a bona fide legitimate purchase agreement. Mortgage lenders offer interest rate locks for 30 days, 45 days, 60 days and some even as long as 90 days, with the majority of buyers doing 30-day rate locks to match the traditional 30 days for close of escrow. Locking in an interest rate means you've committed to an interest rate that will be used for the term of the loan, e.g. 360 months for a 30-year fixed-rate mortgage.

Pros:
• Payment clarity upfront.
• More time to budget and plan your finances during the escrow process.
• More time for the lender to get your loan package through the underwriting process.
• More allowance to focus on other aspects of your purchase offer, i.e. contractual obligations.

Cons:
• Missed opportunity for a reduction in the interest rate, which means a lower monthly payment.

Should You Float?: Floating your rate is defined as simply not locking in your interest rate. Floating essentially allows your interest rate and payment to move on a daily basis until you fully commit to your lender on an interest rate.

Pros:
• The opportunity for a lower interest rates and costs.
• Depending on your individual lender's policies/procedures, the opportunity to switch loan programs during the loan process, such as going from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage.

Cons:
• This can be a risky position to be in during a volatile interest rate environment.
• You risk rates rising while you float, which could reduce your ability to qualify for a mortgage and could impact your earnest money deposit on your purchase transaction.

Which Is Right for You?: It depends on your personal threshold for how much risk you're willing to take on by floating for interest rate opportunity. If you can qualify for the mortgage loan even if rates were to rise during your loan process, you would have the luxury of being able to take advantage of a favorable market reaction the next time the bond market rallies. On the flipside, you'd be entering into a purchase contract with thousands of dollars on the line in exchange for what may or may not come to fruition with rates. This is why it solely depends on your appetite for risk and how much you're willing to gamble in the market. If you have a 30-day close of escrow, that's not much time for floating in an attempt to seize something better.

Other Timing Considerations: Don't forget interest rates aren't the only consideration to take during the home-buying process. Some other factors include:
• Ordering an appraisal, or making sure value comes in at purchase price.
• Inspections.
• Releasing any inspection contingencies.
• Providing updated financial documentation in a timely manner to the lender. (This is a big one!)
• Releasing any loan contingencies.

While these steps in the purchase process seem relatively small, they can very quickly become task-heavy, which otherwise can change your focus from interest rates to making sure everything else is in order. Granted, your loan officer and real estate agent will be handling a lot of these steps in conjunction with you, but these are things to be mindful of in addition to trying to time the market.

Strategy for Locking In a Mortgage Rate: In a perfect situation, locking ahead of major economic news is generally the most conservative approach. It is expected that before large economic market mover information comes out, an idea of how the market will react is typically released beforehand. For example, whenever the Federal Reserve makes a statement about the financial markets, usually there is information and analysis leading up to the speech before the news actually hits the markets. This gives you and your lender an opportunity to examine the market and discuss whether not it makes sense to float or lock the interest rate prior to the official announcement. Keep in mind that the speculation beforehand is just that -- speculation -- and you will need to make your own call based on the information.

source: http://realestate.aol.com/blog/2013/08/21/lock-in-or-float-mortgage-rate/
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Mortgage-refinance market drying up

8/21/2013

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Higher interest rates are strangling the mortgage-refinancing market, eroding the industry's profits and forcing job cuts.

"The refinancing volume has significantly dropped off," said Jim Hunter, president of the board of directors at the Colorado Mortgage Lenders Association. "It is putting pricing pressure into the market."

Wells Fargo announced Aug. 7 that it would let go of 763 loan-processing workers nationally, including 118 in Colorado, because of the slowdown in mortgage activity.

A day later, Chase Mortgage Banking said it would eliminate 150 positions in Colorado, effectively moving its mortgage-processing operations out of state.

Representatives for both banks said mortgage workers, to the degree possible, were being shifted to other positions.

"In response to our customers' changing needs, we are consolidating our mortgage business into fewer locations," said Amy Bonitatibus, a spokeswoman at JPMorgan Chase.

The reductions represent a big change from earlier this year, when lenders were hiring to deal with borrowers beating down the doors to get loans approved in the mid-3 percent range.

Total mortgage originations at Chase were 50 percent higher in the first half of this year compared with 2012, Bonitatibus said.

Since peaking the week of May 3, a weekly index that measures mortgage-refinance applications is down 59 percent, according to the Mortgage Bankers Association.

Refinances, which were 83 percent of all mortgage activity in mid-December, are down to 63 percent. Economists at the MBA estimate they could decline to a third of the total by the third quarter of 2014.

All of that means less business for lenders. Quarterly mortgage-origination volumes were running between $471 billion and $511 billion over the past four quarters. That volume could drop to $247 billion by the fourth quarter, the MBA forecasts.

Interest rates are to blame. The surge in 30-year mortgage rates from the mid-3 percent range in May to above 4.5 percent in June made refinancing much less attractive for many borrowers.

"From these levels, another 50 basis points will put the mortgage rates at the post-crisis highs," said Maninder Sibia, an economist with Economic Advisory Service. "That would indeed kill the refinance market."

Lenders knew that 30-year fixed loan rates below 4 percent, the result of heavy purchases by the Federal Reserve of mortgage-backed securities, weren't permanent, Hunter said.

But the speed of the reversal surprised everyone, he said.

"Our company was 55 percent purchase and 45 percent refi through the end of the year," Hunter said. "We are now at 85 percent purchase and 15 percent refi."

Some independent lenders, such as Starkey Mortgage, said they chose to stay focused on home-purchase mortgages.

"Refi is never a long-term market. There is always a refi boom," said Anthony Lebermann, sales manager in Denver with the Texas lender.

Likewise, Colorado State Bank and Trust chose to keep its focus on purchase mortgages when it expanded into mortgage lending in 2009.

"This change will cleanse out the system of people who are focused just on refinances," said Ryan Bennett, regional manager for the bank's mortgage group.

Larger lenders, however, didn't have as much flexibility. When existing customers came asking for a refinance, they had to respond or risk losing them.

Lenders said strong home sales this summer have supported the purchase side of the business and that the Home Affordable Refinancing Program is still generating demand for refinancings from people trapped at rates above what the market is offering.

Refinances also have a steady volume of business from people dealing with divorces and other life changes, as well as those looking to shorten the length of their loans, said Tony Julianelle, area sales manager for Denver at Wells Fargo Home Mortgage.

Rates on 15-year and 10-year mortgages remain below 4 percent.

But there is a sense among lenders that there is no going back.

Since 1981, lenders and borrowers have become accustomed to boom-and-bust cycles in refinancing activity. Every time rates rose, the sense was that the long-term trend was lower. A drop would bail everyone out by setting off another surge of refinancing.

Employment counts in the just-ended refi wave don't seem to have gotten out of hand, in part because lenders knew the surge was artificial. But there is a growing sense that the refi boom that ended in May may have been the last one for a long time.

"This liquidity isn't ever coming back," Julianelle said.

source: http://www.denverpost.com/realestatenews/ci_23880510/mortgage-refinance-market-drying-up

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Retirees get creative with reverse mortgages

8/19/2013

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According to banking-industry estimates, roughly 600,000 Americans over the age of 62 currently have a reverse mortgage – essentially, a loan that converts their home equity into a line of credit that doesn’t have to be repaid until they move out, sell the home or die. In most cases, such loans are a sign that the borrower is in dire straits, with no other means to cover expenses. But as Kelly Greene writes this week in The Wall Street Journal, some financial advisers think that even relatively affluent retirees could benefit from reverse mortgages—using them as an income stream that could help them lower their tax bills or avoid ill-timed sales of other investments.

The strategies that Greene describes fall into two main categories. The first involves using reverse mortgages as a cash cushion when stock or bond markets are depressed. Retirees whose income strategies involve regularly scheduled liquidations of parts of their portfolios can take a disproportionate hit if they have to sell during a down market, as many found out the hard way during the 2008-09 crash; falling back on a reverse mortgage could help them maintain a steady cash flow without selling assets at a discount.

The other strategy involves using a reverse mortgage to avoid rising into a higher tax bracket. Withdrawals from traditional IRAs are taxable, but tapping a home for income could allow some retirees to make smaller withdrawals; it could also keep their taxable income below the threshold at which Uncle Sam takes a bite out of Social Security benefits. (One counter-intuitive approach that an adviser describes to Greene: using a reverse mortgage to make payments on one’s mortgage, to avoid withdrawing nest-egg money for that purpose.)

Most large banks no longer offer reverse mortgages, and consumer advocates have accused some brokers in the field of fraud and high-pressure sales tactics; as Greene notes, anyone pursuing these strategies should tread carefully and skeptically.

Source: http://blogs.marketwatch.com/encore/2013/08/19/retirees-get-creative-with-reverse-mortgages/?mod=MW_latest_news
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Mortgage rates level up for loans big and small

8/15/2013

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 While overall mortgage rates have been rising, a curious thing has been happening within the mortgage market itself. The difference between the cost of a conforming loan ($417,000 and under, except for certain high-cost markets) and a jumbo loan (above $417,000) has shrunk to nearly nothing.

The average rate on the 30-year fixed mortgage last week was 4.56 percent; the average rate on the jumbo was 4.57 percent, according to the Mortgage Bankers Association.

"It's a confluence of events, really, and all of them help the spread between jumbo and conventional loans," said Matthew Graham, COO of Mortgage News Daily.

"Nonagency jumbo lenders began dipping their toes in the water as early as 2011, and even more so into the end of 2012. Strong loan quality due to tight underwriting combined with competition between large banks and securitzers has led to relatively increased demand. Wells and Chase are keen to compete with securitizers like Redwood or Sequoia in order to capture potential income streams from jumbo clients' bank business." 

 In addition, Fannie Mae and Freddie Mac, which back and bundle two-thirds of conventional loans, have been raising the fees they charge to banks, so-called guarantee fees, mostly to protect themselves against default. Guarantee fees have nearly doubled in just the past year.

"As G-fees move higher, this increase gets added into conforming mortgage rates," said Guy Cecala of Inside Mortgage Finance. "It's a factor, but not the biggest one, allowing portfolio jumbo lenders to match or undercut conforming mortgage rates."

The bigger factor, said Cecala, is that 92 percent of jumbo mortgages are made by banks that fund the loans with their deposits and then hold them in a portfolio. Given that the interest paid on consumer deposits in banks is still incredibly low, lenders can still make a profit on mortgages priced at 4 percent or less if they want to. In fact, jumbo loans, by some lenders, can actually cost less than conforming. 

 The shrinking spread, or increasing cost to banks of doing business with Fannie Mae and Freddie Mac, is slowly opening the door again to private investors in mortgages. That is by design.

"The FHFA (Fannie Mae and Freddie Mac's regulator) has been clear that it will continue to raise them [G-fees] in order to decrease the agencies' footprint in the industry—hopefully drawing in private capital," noted Graham.

So far, however, that is only happening for the highest-quality loans, warned David Stevens, CEO of the MBA. The spreads are only close for loans with at least a 20 percent down payment made by borrowers with stellar credit.

"For private-label securities investors, there will definitely be an equal competing bid opportunity to buy mortgages that are within the conforming loan limits but only for borrowers with big down payments," noted Stevens.

More risky loans will still go to Fannie and Freddie. "Clearly the private sector can fill in that space and take these mortgages and likely will. You've already seen it with some of the large banks." 

 While the pricing may benefit investors now, it is not like they are all rushing back in. For one thing, investors don't get the revenue from mortgage servicing that banks do, because they just buy the MBS. Overseas investors are now only buying AAA-rated securities, and in the United States there is still tremendous distrust of the ratings agencies.

 "When the bottom fell out of the private-label securities markets in the third quarter of 2007, you had an absolute aversion to buying anything MBS-related that didn't come guaranteed. Now this will require a much higher level of confidence," said Stevens.

There are also new risk-retention rules in place for banks that securitize loans, some of which have not been finalized. That market uncertainty continues to hold investors back, but the door is definitely inching open. 

source: http://www.cnbc.com/id/100962728
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Government regulation, improving market help popularity of reverse mortgage

8/13/2013

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Earlier this year, Cecil and Ann White found themselves facing a difficult decision. The home they were renting was up for sale, and they had to either buy it or find a new place to live.

Worried about repeating their situation, they didn't want to rent again, but a traditional mortgage was not an option because they did not meet all the requirements.

When their financial consultant, Tracy Bush, suggested a reverse mortgage, it opened up the opportunity to own a home and save money without a 30-year mortgage.

“My wife said, 'That sounds too good to be true,'” said Cecil White, but “I've tried to see any negatives from it and I don't see any.”

Thanks to increased government regulations and involvement, reverse mortgages have become an increasingly viable option for seniors, Bush said. He rarely recommended them until recently, but sees much less risk involved now.

“They have evolved a lot in the last five years,” said Bush. “It's a lot better process than it ever has been.”

And as the housing market in Frederick County shows strong signs of recovery, higher home values are driving more seniors to seek reverse mortgages, said housing counselor Joseph Baldi, of the Frederick Community Action Agency.

“With the economy having taken the hit that it took a couple years ago with equity falling, the reverse mortgages were much more difficult to do,” Baldi said. “It started to come back, so now we're seeing a few more calls on HECMs.”

A HECM, or Home Equity Conversion Mortgage, is the most common type of reverse mortgage.

HECMs are federally insured, backed by the U.S. Dept. of Housing and Urban Development, and account for most of the reverse mortgages in the United States. In order to qualify for a HECM, applicants must be at least 62 years old, live at the collateral property as a primary residence and meet with a department-approved counselor, such as Baldi.

While applicants must have a sufficient financial standing with the federal government, there is currently no credit requirement.

Conditions of the HECM are likely to change, however, because the Federal Housing Administration recently got congressional approval to alter the programs. One possible change is the addition of a required financial assessment.

Reverse mortgages are essentially what they sound like — they take the money that someone has already spent or will spend to pay off their home, and gives it back to them, creating a new loan. In most situations, the borrower can wait to pay back the loan until they no longer live in their home.

If done right, a reverse mortgage provides needed income for the senior, who can fully pay back the loan upon selling the house. Under a federally insured HECM, the owners are protected from paying back more than the house is worth at the time of repayment.

“It cannot be a detriment at all,” White said.

All he has to do is continue paying property taxes, homeowners insurance and homeowners association fees, which cost less than he was previously paying for rent.

Minimizing risk

While the popularity of reverse mortgages is increasing, they are still not as mainstream as some other loan and retirement planning options.

Paula Blundell, of the Frederick County Senior Recreation Council, said she surveyed 90 council members and none of them said they had a reverse mortgage.

As for herself, Blundell said she had never even considered the option, having heard stories about people who got trapped in their reverse mortgage or left heirs with debt.

“Right now, it doesn't sound too promising with what we know about it,” she said.

But with a federally insured HECM, Baldi said, those risks should not exist. Even with the protections, however, the program is not without its costs.

If a senior wants to leave heirs with a large estate, a reverse mortgage may not be the best plan. Since the value of the home is used as equity on the loan, the borrower, or the heir if the borrower has died, would have to pay off the loan to keep the property, or sell the house.

"A best-case scenario is that the property sells in excess of the reverse mortgage lien (or conventional lien) on the property," said Angela Dredden, a HECM retirement specialist for Security1 Lending. This would allow the borrower or heir to have some money left after paying off the loan and related fees.

Borrowers also need some capital up front to even get the loan. For an HECM, they must pay a loan origination fee, which can be expensive, Baldi said.

In a case such as the Whites, who purchased a house using a reverse mortgage, the applicant also needs enough money to make a down payment. Baldi has advised customers who chose this path to homeownership, he said.

“Just be really sure it's the right program for you,” he said, “because it is expensive, but it can be an excellent program.”

So far, the Whites are happy with their financial decision and their 3,000-square-foot home in Frederick.

“It's very pleasant,” Cecil White said. “We're set now, we don't have to worry about the rent.”

Source: http://www.fredericknewspost.com/news/economy_and_business/business_topics/personal_finance/article_a84714f8-5768-508a-8343-5474cd18472f.html

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