CNN Money – The Federal Housing Finance Agency will decide this month whether Fannie Mae and Freddie Mac should allow write downs on the balances of borrowers who owe more than their homes are worth.

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New York Times – Mortgage rates are near historic lows, but they are rising, leading some borrowers to consider locking in their rate.  When borrowers lock in their interest rate, it freezes the terms of the loan while it is being processed, potentially saving borrowers thousands of dollars over the life of the mortgage.

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• Locking in a rate may be especially important for those who are refinancing, where even a quarter of a percentage point could skew a borrower’s calculations and make a refinancing less financially desirable.

• Rate locks can provide buyers with some peace of mind, not to mention one less thing to think about in an otherwise onerous application process.

• Lenders typically will give loan rate guarantee agreements when a borrower has a purchase agreement, but a few will provide them to those who are preapproved for a mortgage.

• The cost of reserving an interest rate depends both on the duration of the lock and the amount of the loan.  The longer the lock, the more costly it is.  Most locks are for 30, 45, or 60 days, but some lenders will go as long as six months.

• Most lenders offer some version of a free lock, though it may be only for 30 days. Others charge points – or fractions thereof – based on the loan size, which could amount to several hundred dollars.  One point is equal to 1 percent of the loan amount.  Sometimes these charges are refundable at closing.

• Borrowers may want to skip a rate lock, or delay taking one, if they are unsure when their home purchase will close.

• Knowing how long to lock in a rate requires a clear picture of the mortgage process, and a good estimate from the lender on how long it will take to approve the loan and complete all the paperwork and other requirements. For some lenders handling refinancing, this can be 15 or 20 days; others take longer.

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Wall Street Journal – Loans closed by banks and mortgage lenders in February had borrowers with a credit score of 750, up from 740 six months earlier, and an average loan-to-value ratio of 76 percent.  The average denied loan had a credit score of 699 and a loan-to-value ratio of 83 percent.

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CNN Money – Even as some mortgage standards have eased, hitting a needed appraisal value is proving a frustrating blocker for buyers and sellers and those looking to refinance.

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New York Times – Homeowners considering finding a new job and refinancing a house may be wondering which task to take on first.  According to mortgage experts, homeowners should complete their refinancing before making any major career changes, especially if they are planning to start their own business or become an independent contractor, in which case, income may fluctuate.

Making sense of the story

• During the refinancing process, homeowners may find that actively looking to leave their current job may impact how the bank views giving them a mortgage.  The search will raise a question mark about their future employment and their ability to pay the mortgage.

• In addition to checking employment at the start of the application process, many lenders will verify such information as late as the last 72 hours before mortgage closing.  If they learn a borrower is starting a new job in the very near future, the mortgage can be delayed or even derailed.  And borrowers who withhold such information could be committing income fraud.  Other lenders, however, say they make loans based on a moment-in-time snapshot of a borrower’s finances.

• An advantage to refinancing first is that the borrowers are freeing up additional cash flow by reducing their monthly payment.

• All that said, however, there are advantages to refinancing later, especially for those who might have to relocate when they change jobs.

• A person may get a new job with more income, which may help him or her qualify for a larger mortgage, or even better terms.

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REALTY TIMES - In Freddie Mac’s results of its Primary Mortgage Market Survey® (PMMS®), fixed-rate mortgages are at or near their 60-year lows helping to drive record high homebuyer affordability. The 15-year fixed, a popular choice among refinance borrowers, averaged a new all-time record low of 3.13 percent.  

30-year fixed-rate mortgage (FRM) averaged 3.88 percent with an average 0.8 point for the week ending March 8, 2012, down from last week when it averaged 3.90 percent. Last year at this time, the 30-year FRM averaged 4.88 percent. 

15-year FRM this week averaged 3.13 percent with an average 0.8 point, down from last week when it averaged 3.17 percent. A year ago at this time, the 15-year FRM averaged 4.15 percent. 

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.81 percent this week, with an average 0.7 point, down from last week when it averaged 2.83 percent. A year ago, the 5-year ARM averaged 3.73 percent.

1-year Treasury-indexed ARM averaged 2.73 percent this week with an average 0.6 point, up from last week when it averaged 2.72 percent. At this time last year, the 1-year ARM averaged 3.21 percent
According to Frank Nothaft, vice president and chief economist, Freddie Mac:

“With these historically low rates and declining house prices, the typical family had more than double the income needed to purchase a median-priced home in January, according to the National Association of Realtors® Housing Affordability Index which registered the highest reading since records began in 1970.  In fact, the Corelogic® National Home Price Index fell for the sixth consecutive month in January to the lowest level since January 2003. This high level of affordability likely contributed to the recent two-week rise ending March 2nd in mortgage applications for home purchases.”

WALL STREET JOURNAL - Mortgage rates in the U.S. declined over the past week as rates continued to hold near record lows, according to Freddie Mac’s weekly survey of mortgage rates. For the week ended Thursday, the 30-year fixed-rate mortgage averaged 3.88%, compared with 3.9% the previous week and 4.88% a year ago.

Rates on 15-year fixed-rate mortgages averaged 3.13%, compared with 3.17% a week earlier and 4.15% a year ago. This shorter-term mortgage is a popular option for refinancing, and the latest rate marks a new record low in the survey, which has tracked the 15-year fixed since 1991.

Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARMs, averaged 2.81%, compared with 2.83% the prior week and 3.73% a year ago.

To obtain the rates, 30-year and 15-year fixed-rate mortgages required an average 0.8 point payment. Five-year and one-year adjustable rate mortgages required an average 0.7 point and 0.6 point payment, respectively. A point is 1% of the mortgage amount, charged as prepaid interest.

New York Times – The guarantee fee – a hidden fee inside the interest rate quoted on a home mortgage – has been mandated by Congress to increase this spring, and other increases are likely later to take place later this year and next.

Making sense of the story

• The guarantee fee has been charged by government sponsored entities like Fannie Mae and Freddie Mac for more than three decades.  The fee does not show up in borrowers’ mortgage documents or good-faith estimates, and it is little known outside the industry.  According to a Fannie Mae spokesman, the fee “gets incorporated into the underlying rate the borrower pays.”

• An interest rate is usually made of up three parts: The largest goes to the bank or the investors who buy the loan; the smaller portion is for the mortgage servicer that collects monthly payments; and then there’s the guarantee fee.  Fannie and Freddie charge guarantee fees as a form of insurance against default for the loans they acquire and resell to investors.

• The guarantee fee will rise 10 basis points on April 1; the increase was included in the two-month extension of the payroll tax reduction last December.  A basis point is equal to one one-hundredth of 1 percent, or 0.01 percent.

• One way to avoid the guarantee fee is to use a lender that does not sell off its loans – for instance, a community bank or a credit union.

• In addition to offsetting risks, the fees provide a primary source of revenue for Fannie Mae and Freddie Mac.  Both organizations started raising fee rates in 2008 during the housing crisis, as foreclosure costs rose.

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Michael DiVita publishes a weekly mortgage report which is updated every Tuesday. How is this affecting the San Francisco real estate market? Read our weekly and monthly market reports. Here’s what Michael says:

Consumer confidence escalated to pre-recession heights amid rising stock and jobs markets, but will spiraling gas prices de-energize it? We hope not, as more jobs, income and spending are expected to fuel the sluggish housing market later this year. Meanwhile, investors snap up California real estate fired by foreclosures, short sales, low prices and interest.

Real estate is a traditional, long term investment. Here is an opportunity to get your family into a home, at low prices, phenomenal interest and higher value once the market rebounds. Call Michael anytime for a free loan consultation and credit report.

In the Los Angeles area, tune in to Toni Patillo, KTLK Radio 1150 AM, Saturdays at 3pm for a full hour of real estate discussion by professionals. We partner with the show to provide informed data on market conditions and loan solutions.

Michael G. DiVita
CA Department of Real Estate 01372066
NMLS ID # 241655

Los Angeles Times – The Standard & Poor’s/Case Shiller index of 20 American cities fell 1.1 percent from November to December and 4 percent from December 2010.

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