The Fed’s decision to continue its economic stimulus program unabated has sent fixed mortgage rates plunging to their lowest level in two months, according to Freddie Mac’s weekly survey, with the 30-year loan averaging 4.32%, down from 4.5% a week earlier.

Lenders were offering 15-year fixed mortgages to solid borrowers at 3.37% early this week, down from 3.54% last week. Initial rates for variable mortgages fell as well, Freddie Mac said Thursday.

The Fed announced last week that the economy was still not strong enough to allow the central bank to cut back on its $85 billion a month in purchases of Treasury securities and bonds backed by mortgages. The effect is to push down interest rates, stimulating the economy by making it cheaper to borrow.

The low rates should “somewhat” offset recent increases in home prices, improving housing affordability, Freddie Mac chief economist Frank Nothaft said.

Freddie Mac, which buys and guarantees home loans, asks lenders each Monday through Wednesday about the terms they are offering to borrowers with good credit, 20% down payments or home equity, and sufficient income to handle payments on home loans.

The borrowers in the latest survey would have paid an average of 0.7% of the loan balance in upfront lender fees and discount points to obtain the fixed mortgages.

source http://www.latimes.com/business/money/la-fi-mo-freddie-mac-mortgage-rates-20130926,0,1931567.story

Retirement just got tougher, with forthcoming new rules that will make it more difficult for senior borrowers to draw down on their home equity through the use of reverse mortgages, writes “Nerd Wallet” columnist Mike Anderson this week.




Pointing to the September 30 cutoff for the former program rules, the changes are “bad news” for seniors, Anderson writes, making the program less attractive. 




The column details the changes from a limit on the initial draw borrowers can receive to a decrease in the percentage of a home’s value its owner can access under the program starting October 1. 




“The changes are intended to make people more careful about how they fund their retirement,” the column writes. “The FHA wants borrowers to take out only what they need and what they can afford. The program strives to be less a safety net for financial emergencies and more a longer-term financial planning tool.”




Yet the outcome is ultimately an additional expense for an already costly process of faring financially in retirement, Anderson writes. 




“Of course, these changes present additional challenges to the already expensive process of retirement.”




View the column at Nerd Wallet.




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 On Wednesday, when it was widely expected that the Federal Reserve would announce plans to start reducing its purchases of mortgage backed securities (MBS)* this month, it surprised the market by announcing that the start of the slow down - the taper - would be delayed. The result was a drop of about 1/4% in mortgage rates.

When the Federal Reserve announced back in May that it would, at some point in the future, slow its purchases of MBS, the fixed income market responded with a sell off that increased the yield on the 10 year Treasury from its May low of 1.66% all the way to the early September peak of 2.98%. Mortgage rates, which are tied to the 10 year Treasury yield, jumped by about 1.25%.

Here's a table showing the yield on the 10 year Treasury and the 30 year mortgage rate for different times this year. Note that Freddie Mac published its mortgage rate on Wednesday, before the impact of the Fed's decision was felt. By today the 30 year mortgage rate was down to 4.375%.

<a href="http://oliverreports.com/wp-content/uploads/2013/09/10-year-and-mortgage-rates.png"><img alt="10 year and mortgage rates" src="http://oliverreports.com/wp-content/uploads/2013/09/10-year-and-mortgage-rates.png" width="293" height="262" /></a>

&nbsp;

I think it is pretty obvious that the US economy is doing ok, but no more. The unemployment rate is down, not because more people are working but because fewer are looking for work. Inflation remains below the Fed's target of 2% and there are any number of uncertainties on the near-term plate, not the least being the forthcoming ritual debt ceiling angst.

Against that background, raising interest rates too early risks choking off whatever recovery has occurred.

It is interesting that at 4.375% mortgage rates are not far off the year end forecast made at the end of 2012 by the Mortgage Bankers Association.

So, with a few zigs and zags along the way, we may end up the year close to the MBA's forecast. What we should all hope for is an economy that is growing fast enough to create new jobs, give reason to those who have given up the search for a job to return, and increase average earnings. That in turn would produce increased consumer spending and increased demand in the economy. Some time after all that is achieved, a rise in interest rates would be a positive indication that the economy is growing strongly.

Mr. Bernanke has just found out that, in the meanwhile, the economy continues to need all the help it can get just to bobble along at plus or minus 2%.

*When a bank issues a conventional mortgage it sells the loan to Fannie Mae or Freddie Mac, who pool the loans and sell interests in the pools to financial institutions as mortgage backed securities. The Fed’s goal in buying MBS is to drive down the yield on such pools and hence drive down the mortgage rate to borrowers.




source: http://www.wickedlocal.com/mansfield/blogs/mobileghmne/x1131090895/Mortgage-rates-drop-as-Fed-blinks




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RATES DECLINE: Average U.S. rates on fixed mortgages fell this week amid signs that the economic recovery is slowing.




THE NUMBERS: Mortgage buyer Freddie Mac says that the average rate on the 30-year loan fell to 4.50 percent from 4.57 percent last week. The average on the 15-year fixed mortgage dipped to 3.54 percent from 3.59 percent last week.




FED HOLDS OFF: Many economists had expected the Fed would to decide this week to scale back bond purchases that have kept long-term rates extremely low. The central bank voted on Wednesday to continue the program at current levels.




Source: http://www.washingtonpost.com/business/news-summary-average-us-rate-on-30-year-mortgages-slips-to-450-pct/2013/09/19/05147336-2169-11e3-ad1a-1a919f2ed890_story.html




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 Something very unusual happened with mortgage interest rates this week. The interest rate on jumbo mortgages actually fell below the interest rate of the conventional 30-year fixed-rate loan.




Mortgage experts were quick to point out that this latest quirk of the housing recovery had never happened before.




Conventional mortgages are 15-year and 30-year fixed rate mortgages up to $417,000. According to the latest Freddie Mac Primary Mortgage Market Survey (PMMS), interest rates on the 30-year fixed rate mortgage averaged 4.57 percent. Typically, borrowers pay .07 percent in fees if they have at least 20 percent in cash to put down on their purchase.




Jumbo loans are those from $417,001 to around $750,000 (some banks only price jumbo loans to $650,000 and others go higher). Traditionally, borrowers who needed a home loan bigger than a conventional mortgage would pay more for it, sometimes a half percentage or more.




So if a conventional 30-year fixed-rate mortgage carried a 4.57 percent interest rate, you could easily expect to pay over 5 percent for a larger jumbo mortgage. (Loans in excess of $1 million are typically priced on an individual basis.)




But not now. Mortgage experts say that jumbo loans are now carrying a lower interest rate than conventional, which seems to be unprecedented. No one can remember this happening before. But the real question is why?




One theory is the ever so slowly but surely improving economy, which is pushing all interest rates higher.




"Mortgage rates edged up this week on signs of a stronger economic recovery. Real GDP was revised upwards to 2.5 percent growth in the second quarter of this year. In addition, residential construction spending rose for a ninth consecutive month in July. Lastly, the manufacturing industry expanded at the fastest pace in August since June 2011," noted Frank Nothaft, vice president and chief economist at Freddie Mac.




While interest rates have jumped significantly from the lows, they are still at historic lows. The positive economic news means more home buyers are willing to stretch to buy bigger properties to leverage current interest rates.




Twenty years ago, higher interest rates (more than 6 percent) and lower wages meant relatively few people could afford a $650,000 loan on an $800,000 house. Today, a couple earning between $160,000 and $200,000 in annual income, with good credit and a solid down payment, would likely be approved for the loan.




With higher demand for jumbo loans, more lenders have jumped back into the mix. The competition from lenders is certainly having an impact; jumbo borrowers are seeing more offerings with reduced fees. The price disparity is even greater with adjustable rate mortgages, those fixed for five to seven years before converting into a one-year ARM.




Does the flip-flopping of interest rate norms herald a new era for housing? Or are we just seeing too many borrowers spend more than they should to buy property. It's hard to say. There's an economic theory says that the more you buy of something, the greater the discount you should receive. Here's how that works: If you buy two pairs of shoes, the retailer might offer you a 25 percent discount. But if you buy three pairs, you'll get 33 percent off on your entire purchase.




If you apply that to mortgages, it makes sense that a mortgage for $750,000 would be cheaper than one for $417,000 or less.




Except that no one can ever remember it happening before.




Source: http://www.newsday.com/classifieds/real-estate/jumbo-mortgage-rate-s-fall-explained-by-simple-economics-1.6083974




The Jim Clooney Mortgage Blog

The average rate on a 30-year mortgage was unchanged this week in metro Atlanta, while rates for shorter-term loans and loans for high-priced homes rose noticeably.

The overall trend of higher mortgage rates continued, both locally and nationally. All eyes will be on Federal Reserve policymakers when they meet next Tuesday and Wednesday. Their decisions on whether further economic stimulation is needed may affect the direction of rates for long-term loans.

Polyana da Costa, a senior mortgage analyst at Bankrate.com, which tracks rates, said she is not seeing signs that homebuyers are having a harder time getting loans because of rising rates. But higher rates could affecthow much home a buyer can afford, especially in high-cost areas.

Da Costa saidprospective buyers should shop around for loans. “I always recommend applying at one national lender, a regional lender and a mortgage brokerage,” she said.

The average for a 15-year fixed-rate mortgage in metro Atlanta rose to 3.66 percent from 3.55 percent last week, Bankrate reported. The benchmark hybrid 5/1 adjustable-rate mortgage rose to 3.52 percent from 3.46 percent. The hybrid mortgage carries a fixed rate for a specific period, in this case five years, and an adjustable rate for the remainder of the loan.

The average rate for a 30-year jumbo mortgage for homebuyers in the market for high-priced homes also rose this week, to 4.8 percent from 4.77 percent.

The average rate for a 30-year mortgage remained at 5.8 percent.

Discount and origination points, which are prepaid expenses on the mortgage, rose to an average total of 0.65, from 0.6 last week.

Not only are metro homebuyers being hit with higher mortgage rates, home prices and closing costs are also on the rise in a market where there is a shortage of homes for sale. The squeeze is also putting pressure on apartment rents.

source: http://www.ajc.com/news/business/some-mortgage-rates-climb-fed-meets-next-week/nZwb6/

With interest rates rising, it's getting harder to find a great deal on a home loan these days -- unless you're rich enough to be looking for a jumbo mortgage.




Mortgage rates rose early this week, Freddie Mac said in its latest report, with lenders offering a 30-year fixed home loan to solid borrowers at an average of 4.57% -- up from 4.51% last week and a full percentage point higher than a year ago. 




Rates for 15-year fixed mortgages and adjustable loans also edged higher, a trend Freddie Mac chief economist Frank Nothaft attributed to a healthier-looking economy. He pointed to stronger growth in the gross domestic product and other indicators.




Additional positive economic reports Thursday drove the yield on the 10-year Treasury note -- a benchmark for fixed mortgage rates -- to nearly 3%. That was its highest level since July 2011, and home lending rates were volatile but continuing to move higher, mortgage professionals said.

Freddie Mac asks lenders each week about the terms they are offering to people with good credit, enough income to cover payments and 20% down payments. The borrowers in the latest survey would have paid lenders an average of 0.7% in upfront discount points and fees to obtain the quoted rates.




Quiz: test your knowledge of all things gold




The improving economy also has contributed to another trend -- heavy competition among lenders to make jumbo mortgages. The outsize loans, too big to be backed by Freddie Mac or its sister finance company, Fannie Mae, are written mainly for affluent residents of the East and West coasts, where home prices have risen rapidly over the past year.




The Mortgage Bankers Assn. says jumbo loan rates are now lower than those for smaller, so-called conforming mortgages that can be sold to or guaranteed by Freddie and Fannie. It's a trend that Brad Blackwell, executive vice president of No. 1 mortgage lender Wells Fargo Home Mortgage, called "unprecedented."




"This is a new phenomenon -- something we've never seen before," Blackwell said in an interview.




Fannie and Freddie guidelines cap conforming loans at $417,000, with higher limits in areas where home prices are high. Los Angeles and Orange counties are among the places with the highest limits -- currently $625,500, although pressures are building in Washington to lower the cap.




Blackwell said Wells Fargo was making jumbo loans with no upfront costs to borrowers at 4.75% on Thursday, compared with conforming loans at 5%.




The difference in rates was even greater for loans that are fixed for seven or 10 years before becoming adjustable, he said.




Source: http://www.latimes.com/business/money/la-fi-mo-freddie-mac-mortgage-rates-20130905,0,1603884.story




Jim Clooney Online

The New York Times is reporting that reverse mortgages are about to change again and it means less money for new borrowers and as a result, fewer will qualify. 




Under the new rules, which are set to go into place Oct. 1st, borrowers will typically receive about 15% less than they do today and have restrictions on how they can utilize the money.




“The changes really put the product on track as a long-term financial planning tool as opposed to a crisis management tool,” said Ramsey Alwin, senior director of economic security at the National Council on Aging during an interview with the NY Times. 




The Federal Housing Administration, the agency that insures the majority of reverse mortgages today hopes the changes will encourage people to utilize their equity at a slower rate and enable them to age in place. 




“What regulators are trying to do is shift behavior so that people are more thoughtful and methodical about how they draw the money,” said Peter H. Bell, president of the National Reverse Mortgage Lenders Association, the industry trade group during an interview. “The changes are intended to put the program back on track and encourage people to take what they need and no more.”




source: http://reversemortgagedaily.com/2013/09/09/ny-times-reverse-mortgages-about-to-change-again/




Jim Clooney Online

The plunge in mortgage applications has slowed as consumers faced oscillating rates, according to data released Wednesday morning.




Gauges of mortgage applications to buy and refinance a home have fluctuated in recent weeks, following several months of fairly steady drops, according to the Mortgage Bankers Association. Separate data show that the average rate for a 30-year fixed-rate mortgage was about 4.4% in mid-August. The following week the rate jumped to 4.58%, and then declined to 4.51% by the end of the month, according to federally controlled mortgage buyer Freddie Mac FMCC . 




The recent interest- rate gyration illustrates a point of frustration for borrowers: it’s tough to time the market. Spurred by uncertainty and rising rates, there’s evidence that some buyers are rushing into the market for fear that their dream home will become even pricier if they wait to buy.




Markets have been trying to figure out when the Federal Reserve could start tapering its massive bond-buying program that has supported low rates, and economists say an announcement could come as early as this month. But central bankers are looking at both positive and negative reports, making it tough to figure out whether the Fed will see conditions as healthy enough to start contracting its program.




While a trend in layoffs is near the lowest level in almost six years, sales of new homes recently slumped to the slowest pace since 2012. The country’s key jobs report for August will be released Friday, and economists polled by MarketWatch expect the U.S. Department of Labor to report that employers added 170,000 to nonfarm payrolls, slightly up from 162,000 in July.




While housing is expected to continue to add to economic growth this year, officials are carefully watching for any indications that rising mortgage rates are taking an unexpectedly large toll on the market.




Although mortgage applications haven’t moved much in recent weeks, they are still far below levels in early May, when rates started rising. Since early May, the average rate for a 30-year fixed-rate mortgage has increased almost 1.2 points. Over that period, applications to refinance a home dropped 63%, while mortgage applications for a home purchase declined 15%.




source: http://blogs.marketwatch.com/capitolreport/2013/09/04/plunge-in-mortgage-applications-slows/?mod=MW_latest_news




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