Mortgage markets worsened last week, moving U.S. mortgage rates higher on the whole.
Like prior weeks, market action was sharp. Rates climbed 0.25 percentage points Wednesday afternoon, which shocked thousands of unprepared mortgage rate shoppers. Markets made small improvements over the remainder of the week, but couldn't undo the damage.
Mortgage rates have been volatile since last quarter. So, what can buyers and refinancing households expect to see this week. What will mortgage rates do next?
Freddie Mac : 30-Year Fixed Rate At 4.22%
According to government-backed Freddie Mac, last week, the average 30-year fixed rate mortgage rate slipped 13 basis points to 4.22% nationwide; with the rate available to prime borrowers willing to pay 0.7 discount points at closing.
0.7 discount points carries a cost equal to 0.7% of your loan size.
A borrower in Boston, Massachusetts, therefore, whose loan size is equal to the local Freddie Mac mortgage loan limit of $417,000 would pay $2,919 at closing in order to lock a 4.22% mortgage rate. A borrower in Orange County, California with a loan size at the local limit of $625,500 would pay $4,379.
Borrowers opting out of discount points will pay slightly higher rates.
Freddie Mac reported rates for 15-year fixed rate mortgages lower, too. The group's survey of more than 100 mortgage lenders showed the average 15-year fixed rate mortgage rate down eight basis points to 3.27% nationwide.
Like its 30-year counterpart, the 15-year rate requires 0.7 points to be paid at closing.
There is now a 0.95 percentage point difference between the published rates of a 30-year and 15-year fixed rate mortgage -- among the largest spreads in recorded mortgage history. Borrowers using a 15-year mortgage now pay close to 70% less to own their own home than via a 30-year loan.
Read more: http://themortgagereports.com/14022/mortgage-rate-analysis-and-prediction-how-will-u-s-mortgage-rates-move-this-week
The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting a decrease of 2.3% in the group’s seasonally adjusted composite index, following a drop of 1.8% for the previous week. Mortgage loan rates increased slightly on two loan types while one was unchanged and the fourth fell slightly.
Changes in both applications and mortgage rates continue to be relatively small. In the past couple of years, refinancing often picked up the slack in mortgage lending, but with the lending market coming off record lows, homeowners who were going to refinance have already done so, and the rest are either waiting for rates to fall or for their homes to increase in value enough to make a refinance worth it.
The seasonally adjusted purchase index increased by 6% from last week’s report. On an unadjusted basis, the composite index decreased by 13% week-over-week. The unadjusted purchase index decreased by 8% for the week, and is 3% lower year-over-year. This marks the eighth week in a row that the year-over-year unadjusted purchase index is lower than or equal to its level of a year ago.
The MBA’s refinance index decreased by 7% after dropping by 2% in the previous week. The share of refinancings fell by two points, totaling 64% of all applications. Adjustable rate mortgage loans account for 7% of all applications, unchanged from the prior week.
The average mortgage loan rate for a conforming 30-year fixed-rate mortgage increased from 4.44% to 4.46%. The rate for a jumbo 30-year fixed-rate mortgage fell from 4.48% to 4.47%. The average interest rate for a 15-year fixed-rate mortgage remained unchanged at 3.52%.
The contract interest rate for a 5/1 adjustable rate mortgage loan rose from 3.11% to 3.12%.
WJBK) - January 2014 is bringing some significant changes to the housing industry.
Here today to tell us what's going on and how these changes are going to impact homebuyers is Hale Walker, the co-founder and senior vice president of Port Huron-based Michigan Mutual, Inc.
1. What are the looming changes that could impact the mortgage environment?
The Consumer Financial Protection Bureau (CFPB), the regulatory agency that was established in 2010 by the Dodd-Frank Act after the housing crisis, is implementing new rules on January 10, 2014 that are designed to protect homebuyers from risky mortgages and ensure they are getting the best, most fair mortgage loans.
While these changes overall are a huge step in the right direction, there will be some shifts on the horizon for both lenders and homebuyers.
2. The new rules:
The major new regulation is the Qualified Mortgage rule.
In order for Freddie Mac or Fannie Mae to purchase the mortgage from a bank or lender, it must be a Qualified Mortgage.
In order to be deemed a Qualified Mortgage, the loan has to meet a rigorous set of standards set forth by the Bureau, and must not include risky or harmful features that have been built into loans in years past.
There will be no excessive upfront points and fees during the processing and closing time periods.
For most loans, the points and fees charged will not be allowed to exceed 3% of the total loan amount.
There will also be no toxic loan features, such as interest-only payments, no balloon loans and no terms greater than 30 years.
This is all designed to protect the homebuyer and ensure they are getting safe, responsible and transparent mortgage loans.
3. Lenders will also need to take a close look at a homebuyer's ability to repay the mortgage loan.
Under homebuyer to determine whether the loan they are applying for is the right fit for them. These include:
Income and assets
Debt obligations, including things like alimony or child support if applicable.
These are all standard items that lenders have already been closely examining, but there is a new part of this rule that will change the process and impact what loans homebuyers qualify for.
Debt-to-income ratio, the amount of money you make each month in relation to the amount of debts you must pay off each month, will pay a large role in the process.
Under the new rule, a homebuyer's total debt cannot exceed 43% of their total income.
This is designed to prevent homebuyers from taking on mortgage loans they cannot afford.
4. What does this all mean for consumers?
It's going to have a major impact on homebuyers.
For some income brackets, or for those with unstable employment history, qualifying for a mortgage may become a little trickier in 2014.
This is why homebuyers should seek out a certified, trusted mortgage partner to help navigate them through the process. It will be something that individuals will need to be educated about to ensure they are making the right decision for their goals.
Lenders have been preparing for these new rules for nearly a year, and are well-versed in all of the complexities, and what it takes to help homebuyers qualify for the loan they want and get them into their dream home.
A great mortgage partner will work with you to get your records in order and get you the best loan possible.
Mortgage rates ticked higher for the second straight week following consecutive weeks of decline, according to new data released Thursday by Freddie Mac.
The 30-year fixed-rate average surged from 4.16 percent to 4.35 percent, with an average 0.7 point. It is up from 3.34 percent at this point last year and has remained about 4 percent since the end of June.
The 15-year average edged up more modestly, from 3.27 percent last week to 3.35 percent, also with an average 0.7 point. One year ago, those mortgages averaged 2.65 percent.
The five-year hybrid adjustable-rate average rounded out the increases, sliding up to 3.01 percent from 2.96 percent. The one-year hybrids held steady last week at an average of 2.61 percent, and both hybrid averages are up marginally compared to this time last year.
Frank E. Nothaft, Freddie Mac’s vice president and chief economist, pinned the rise to better-than-expected employment numbers for October.
“Fixed mortgage rates increased this week following stronger than expected economic data releases,” he said in a statement. “Nonfarm payrolls increased by 204,000 in October, above the consensus forecast. In addition, revisions added 60,000 additional jobs to the prior two month releases.”
Nothaft noted that the Department of Commerce’s preliminary GDP growth estimates for the third quarter also topped expectations, signaling a strengthening economy and pushing the rates slightly higher.
On Wednesday, meanwhile, the Mortgage Bankers Association reported that the number of mortgage applications slid last week, down 1.8 percent from last week. That is the second straight week of decline, though last week’s tumble was revised from a 7.0-percent drop to a more modest 2.8-percent drop.
MBA’s Refinance Index also decreased 2 percent from the previous week, while its Purchase Index inched down 1 percent.
Rich homebuyers can now get mortgages cheaper than pretty much everyone else.
In an unusual twist, lenders are offering rates on jumbo mortgages that are more than a quarter of a percentage point lower than those on the conforming loans backed by Fannie Mae and Freddie Mac. The government-run agencies require conforming loans to be below $417,000, unless they are for homes in high-cost areas like New York or Los Angeles,where the limit is $625,500.
Jumbo loans exceed those dollar limits and, historically, banks charge higher rates on them -- about 0.25 percentage points more -- than they do for conforming loans, according to the Mortgage Bankers Association. But over the past couple of months, the tables have turned.
This week, Wells Fargo (WFC, Fortune 500) advertised a 30-year jumbo mortgage at a rate of 4.125%, significantly lower than the 4.5% rate it is offering for a 30-year, fixed-rate conforming loan. US Bank (USB, Fortune 500) is offering a jumbo for 3.875% this week compared with 4.25% for a conforming loan. And Chase's (JPM, Fortune 500) jumbos have been running a quarter of a percentage point below conventional mortgages, as have TD Bank's (TD).
"Never in my memory have jumbos been such a bargain," said Peter Grabel, a loan officer at Luxury Mortgage Corp. in Stamford, Ct., with 13 years on the job.
One big reason jumbo rates are so low is because lenders want to attract wealthy clients and hang on to them, said Malcolm Hollensteiner, head of consumer lending for TD Bank. Once clients sign up for a mortgage, the bank can "cross sell them other products, like brokerage services," he said.
That works especially well in these days of strict underwriting standards, according to Keith Gumbinger, a mortgage expert with HSH.com.
"Borrowers have to open up their whole financial picture to lenders," he said. "They can see where there's value, which they might be able to sell against."
Once a wealthy client takes out one of these low-rate loans, they are likely to stick around. "With rates as low as they are, borrowers are never going to refinance the loans. Those affluent clients will stay on the bank's books forever," said Gumbinger.
Jumbo loans have also gotten comparatively cheaper. As the Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie, seeks to boost the two agencies' reserves against losses from mortgage defaults, it has raised fees and other costs for borrowers, according to Terry Francisco, a Bank of America spokesman.
Since Fannie and Freddie don't back jumbo mortgages, those fees don't apply and therefore aren't passed on to borrowers.
Read More: http://money.cnn.com/2013/11/12/real_estate/jumbo-mortgages/