Saturday, April 14, 2012

MORTGAGE & FINANCE: Mortgage Rates Remain Steady As Consumers Prep for Changes

Mortgage applications were down for the week ending March 23rd according to The Mortgage Banker's Association Weekly Mortgage Applications Survey. 

This does not seem unusual as consumer prep for the numerous changes that are taking place with FHA mortgages and conforming mortgage refinances. It is the intent that some of these changes will finally be helpful to borrowers who have been want, but unable, to refinance to low mortgage rates.

Harp 2.0 is the updated refinancing program for underwater borrowers who have mortgages that are held by Fannie Mae and Freddie Mac. In most cases, an appraisal is not required and full documentation is waived. This is the best way for borrowers, who owe more on their mortgage than their property is worth, to refinance to the record low mortgage rates that are available today. Mortgage rates for
 Harp 2.0 mortgage refinances can vary from lender to lender, so it is necessary for borrowers to do their homework to make sure that they are getting the best's survey of wholesale and direct lenders shows that all mortgage rates remained steady this past week. Current conforming 30 year fixed mortgage rates are at 3.750%, 15 year fixed mortgage rates are at 3.000% and 5/1 adjustable mortgage rates are at 2.375%. These low mortgage rates are available with 0.7 to 1% origination fee for borrowers who have a consistent history of good credit. For purchases and regular refinances, full and detailed documents for employment, income and assets are required. The latest change for conforming mortgages is the Harp 2.0 program which became widely available on March 18 through automated systems.

Although FHA mortgage rates have remained the same, the latest news for FHA is the increase of the upfront and annual mortgage insurance premiums. FHA 30 year fixed mortgage rates are at 3.375%, FHA 15 year fixed mortgage rates are at 2.875% and FHA 5/1 ARM loan rates are at 2.875%. No one knows how much of an impact these fees will have on the use of FHA mortgages at this time. FHA mortgages still offer lower down payment options than conforming mortgages, although for high mortgage amounts, the upfront mortgage insurance premium of 1.75% could become an obstacle. FHA closing costs (APR) are higher because of this upfront mortgage insurance premium and other FHA fees, but as long as the loan to value remains intact, these fees can be rolled into the mortgage. Another change this month for FHA involves the credit qualifying with disputed and collection accounts. If the total of any of these accounts combined equal $1,000 or more, they will now need to be paid off, have payment agreements in place or have documentation, such as police reports, in the event of theft.

Since payment agreements must show three months of consistent payments, borrowers will have to take care of these issues prior to even making an FHA mortgage application. On a positive note, FHA streamline refinance with no cash out will be available in June. This updated program will have reduced upfront and annual mortgage insurance premiums for borrowers who
have mortgages that were FHA insured prior to June 1, 2009. Between now and June, FHA will probably see a major decrease in mortgage refinance applications as borrowers wait for this new change to be rolled out.

Current jumbo 30 year fixed mortgage rates are at 4.500%, jumbo 15 year fixed mortgage rates are at 3.375% and jumbo adjustable mortgage rates are at 2.500%. Jumbo mortgage borrowers must have excellent credit in order to receive these lowest jumbo mortgage rates with 0.7 to 1% origination fee. Even though FHA has higher loan limits with the intention to help borrowers in high cost areas, the latest increase in FHA upfront and annual mortgage insurance premiums may have borrowers turning back to classic jumbo mortgages. With all the necessary documentation and the right qualifications, borrowers may find that jumbo mortgages are the cheaper outcome. The biggest obstacle is meeting lender guidelines which are generally stricter. With many jumbo mortgage lenders out there and each one setting their own stipulations, obtaining several quotes is probably the best way to the most advantageous deal.
MBS prices did not see enough change last week to cause any mortgage rate movements. 

Mortgage rates, which are affected by MBS prices, move in the opposite direction. Reports this week included February Durable Orders which rose 2.2 from January. Even though weekly jobless claims came in higher than expected, Consumer Sentiment increased for the month of March. The February Core PCE price index increased 0.1%, Chicago PMI Manufacturing decreased to 62.2 and Personal Income rose 0.2%. The ISM Manufacturing Index for March came in above forecase, but construction spending for February declined by 1.1%. European economic issues continue to be a concern, as well as, the rising price of oil, both of which can affect any economic recovery. According to The Mortgage Banker's Association Weekly Mortgage Applications Survey, mortgage applications fell 2.7% on a seasonally adjusted basis for the week ending March 23rd. While purchase applications increased 3.3%, refinance applications decreased 4.6% with government refinances having the largest drop. surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.

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