More Home Owners Tap Into Equity, ‘Conservatively’

As home values rise, more home owners are tapping into their equity with cash-out mortgage refinances. But they’re not taking out nearly as much as they did in the past.

The average amount taken out by owners was more than $60,000. According to Black Knight Financial Services, the average loan-to-value ratio after the refinance was 67 percent – the lowest level ever. On average, borrowers then left 33 percent of equity still in the home after the cash-out refinance.

Forty-two percent of mortgage refinances last fall had borrowers who took cash out of their homes and did not refinance just to get a lower interest rate – the highest share since 2008, CNBC points out.

Source: “Owners Cautiously Taking Cash Out of Homes,” CNBC (Feb. 1, 2016)

What Generation Faces the Most Financial Hurdles?

A recent Experian study finds that, among millennials (ages 19-34), generation Xers (35-49), and baby boomers, and the greatest generation (ages 50-87), generation Y has the biggest job ahead of them in terms of repairing their credit. They also have the worst credit scores of all groups combined.

“Given the significance millennials play in financial services and the credit marketplace, it is crucial to understand this influential consumer segment and how they use credit as a tool,” says Michele Raneri, vice president of analytics and business development at Experian. “While this generation may not look like they are on the right track financially, it’s important to keep in mind that credit scores are built on credit experiences, and while this generation has been slower to use credit, they have plenty of opportunities to build a positive credit history.”

Source: Experian

 

A Cost-Saving Move for 7.1M Home Owners

As of February 2015, there were about 7.1 million potential refinance candidates. In February 2014, about 4.1 million borrowers were found to be able to benefit from refinancing their mortgage, according to Black Knight Financial Services’ research.

“Through a combination of declining interest rates and increased equity among borrowers driven by home price increases, an additional three million borrowers now meet the same broad-based eligibility criteria as compared to one year prior,” says Trey Barnes, Black Knight’s senior vice president of Loan Data Products. “Of course, this population is rate-sensitive; in fact, it was largely the decline of 60 basis points in the prevailing 30-year interest rate that resulted in the year-over-year increase in potential refinance candidates.

Researchers also found that lower credit score borrowers – those with credit scores below 620 – are refinancing at the lowest level on record. “As a result, the average loan age for this group is 98 months, as compared to just 38 months and less for borrowers with credit scores of 750 and above,” the report notes.

Source: Black Knight Financial Services

30-Year Mortgage Rate Sinks to 4.19% This Week

Mortgage rates are falling, despite the cuts to the Federal Reserve’s monthly bond purchases that were expected to send long-term rates higher.  The 30-year fixed-rate mortgage, the most popular choice among home buyers, averaged 4.19 percent this week, down from a 4.53 percent average at the start of the year, Freddie Mac reports in its weekly mortgage market survey.

Freddie Mac reports the following national averages for the week ending Oct. 2:

  • 30-year fixed-rate mortgages: averaged 4.19 percent, with an average 0.4 point, dropping from last week’s 4.20 percent average. Last year at this time, 30-year rates averaged 4.22 percent.
  • 15-year fixed-rate mortgages: averaged 3.36 percent, with an average 0.5 point, holding the same average as last week. A year ago, 15-year rates averaged 3.29 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.06 percent, with an average 0.5 point, dropping from last week’s 3.08 percent average. Last year at this time, 5-year ARMs averaged 3.05 percent.

Source: Freddie Mac (Oct. 2, 2014)

Poor Credit Makes Homeowners Insurance Higher

Home owners who have poor credit pay 91 percent more for homeowners insurance than those who have stellar credit, according to a new report from Brankrate.com and insuranceQuotes.com.

Home owners with a fair or median credit score may pay 29 percent more for homeowners insurance than someone with stellar credit, according to the report.

“This is another example of why credit is such an important part of your financial life,” Laura Adams, senior analyst with insuranceQuotes.com, told CNBC. “Maintaining a good credit history suggests that you’re a less risky customer and can lead to several hundred dollars in annual homeowner’s insurance savings.”

How insurance companies weigh a person’s credit score can vary greatly from company to company and even state to state. There is no standard for how insurers figure credit into insurance costs, per the report. (California bans the use of credit in setting rates.)

“I’m pretty shocked that even with a so-called fair credit score, you could still wind up paying 50 percent more than someone in the excellent category,” says Bob Hunter, former Texas insurance commissioner and current director of insurance at the Washington, D.C.-based Consumer Federation of America.  Your comments?

Source: “If You Have Poor Credit, You May Pay Nearly Double for Home Insurance,” InsuranceQuotes.com (Aug. 14, 2014) and “How Poor Credit Costs You on Homeowners Insurance,” CNBC (Aug. 14, 2014)

 

Mortgage Rates Roll Back to Yearly Low

Mortgage rates continue on a low streak this week, with the 30-year fixed-rate mortgage averaging its low for the year, 4.12 percent. It’s the same low the 30-year rate mortgage reached in May as well as during a week in July, Freddie Mac reports in its weekly mortgage market survey.

Fixed-rate mortgage started the year at 4.5 percent, and have countered many forecasters expectations so far by not rising, but instead dropping.

Freddie Mac reports the following national averages for the week ending Aug. 14:

  • 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.6 point, dropping from last week’s 4.14 percent average. Last year at this time, 30-year rates averaged 4.40 percent.
  • 15-year fixed-rate mortgages: averaged 3.24 percent, with an average 0.6 point, falling from last week’s 3.27 percent average. A year ago, 15-year rates averaged 3.44 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.97 percent, with an average 0.5 point, falling from last week’s 2.98 percent average. Last year at this time, 5-year ARMs averaged 3.23 percent.

Source: Freddie Mac and “Mortgage Rates at Low for Year; 30-Year Averages 4.12%,” Los Angeles Times (Aug. 14, 2014)

You Don’t Need That Much of a Down Payment

Consumers often overestimating  the down payment needed to buy a home, according to Christina Boyle, vice president and head of single-family sales at Freddie Mac.

Consumers believe they need 11 percent to 15 percent in order for lenders to approve them for a loan, according to a survey of renters and non-home-owners conducted by Zelman & Associates in New York. Thirty-nine percent say they need at least 15 percent of the purchase price in order to qualify for financing. Only 28 percent of respondents say they would even qualify for a mortgage.

But in reality, home buyers often can qualify for a conforming, conventional mortgage with a down payment of as little as 5 percent — and sometimes even 3 percent — Boyle writes.  So far in 2014, more than one in five borrowers who took out conforming, conventional mortgages put down 10 percent or less.

Boyle says that buyers should also be encouraged by the abundant down-payment assistance programs that exist to help break into home ownership. Every state in the U.S., as well as many cities and counties, offer down-payment assistance programs for qualified borrowers, such as the American Dream Downpayment Initiative and HOME Investment Partnerships Program.

Source: “Down Payments: Today’s Most Persistent Misconception About Mortgages,” Freddie Mac (June 16, 2014)

Fannie Mae Announces Expansion of HomePath for Short Sales Website

Fannie Mae (FNMA/OTC) today announced the expansion of the HomePath® for Short Sales website, a communication tool created to help real estate professionals efficiently complete short sales and resolve challenges directly with Fannie Mae.  The new functionality will allow agents to contact Fannie Mae sooner in the short sale process and preempt potential challenges, decreasing the need to escalate concerns further down the road. The website is open to any real estate professional working on a short sale involving a Fannie Mae-owned loan.

Through the expanded HomePath Short Sale Portal, listing agents can work directly with Fannie Mae to:

  • Request list price guidance prior to listing a property
  • View the status of submitted cases
  • Negotiate and receive first lien approval on a short sale directly from Fannie Mae (This feature will be rolled out over the next few months through individual servicers.)

“This is an important step in continuing to build a strong relationship with the real estate community, which will ultimately contribute to the stabilization of neighborhoods,” said Tim McCallum, Vice President for Short Sales, Fannie Mae. “Allowing real estate professionals to negotiate an offer directly with Fannie Mae is the next step in streamlining the short sale process. Our goal is to provide transparency throughout these transactions and arrive at an agreement that benefits all parties involved.”

Source http://www.fanniemae.com/portal/about-us/media/corporate-news/2014/6126.html

Credit Counseling to Lower FHA Borrowers’ Payments

Federal Housing Administration borrowers may be able to lower their mortgage insurance premiums if they agree to undergo housing counseling.

FHA announced a new program – Homeowners Armed with Knowledge (HAWK) – earlier this month that would allow FHA borrowers who complete counseling before closing to receive a 0.5 percentage point reduction in their upfront insurance premium. They will also see an annual premium drop by 0.1 percentage points.

Borrowers may also qualify for more savings too. Borrowers who take part in post-closing counseling and show a record of on-time payments for two years can receive an additional 0.15 percentage point reduction.

On an FHA loan with an average loan balance of $180,000, borrowers who go through counseling would be able to decrease their payments by nearly $325 a year in insurance costs – or $9,800 over the life of a 30-year loan, according to FHA.

To be eligible for the reduced rates, FHA borrowers must undergo a Department of Housing and Urban Development-approved counseling class. The changes are expected to roll out this fall as part of a four-year pilot program.

Source: “FHA Loans Get Better with Credit Counseling,” The New York Times (May 22, 2014)

 

Mortgage Rates to Enter New Year ‘Mostly Flat’

Fixed-rate mortgages changed little this week heading into the end of the year, Freddie Mac reports in its weekly mortgage market survey.

Freddie Mac reports the following mortgage rates for the week ending Dec. 26:

  • 30-year fixed-rate mortgages averaged 4.48 percent, with an average 0.7 point, rising from last week’s 4.47 percent average. Last year at this time, 30-year fixed-rate mortgages averaged 3.35 percent.
  • 15-year fixed-rate mortgages averaged 3.52 percent, with an average 0.7 point, increasing slightly from last week’s 3.51 percent average. Last year at this time, 15-year rates averaged 2.65 percent.
  • 5-year hybrid adjustable-rate mortgages (ARMs) averaged 3 percent, with an average 0.4 point, rising from last week’s 2.96 percent average. A year ago, 5-year ARMs averaged 2.7 percent.

Source: Freddie Mac