Is Break in Rate Hikes Significant to Buyers?

For the second consecutive week, mortgage rates decreased as the 30-year fixed-rate mortgage fell two basis points to average 4.54 percent, Freddie Mac reports. Rates had been on a steady incline for weeks before breaking trend.

Freddie Mac reports the following national averages for the week ending June 7:

  • 30-year fixed-rate mortgages: averaged 4.54 percent, with an average 0.5 point, dropping from last week’s 4.56 percent average. Last year at this time, 30-year rates averaged 3.89 percent.
  • 15-year fixed-rate mortgages: averaged 4.01 percent, with an average 0.4 point, falling from last week’s 4.06 percent average. A year ago, 15-year rates averaged 3.16 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.74 percent, with an average 0.4 point, falling from last week’s 3.80 percent average. A year ago, 5-year ARMs averaged 3.11 percent.

Source: Freddie Mac

‘Nonprime’ Loans Expand Mortgage Options

Subprime mortgages—which were blamed for sparking the last housing crisis—are reappearing, this time being dubbed “nonprime” loans. This lending option, which carries new quality standards, is growing for buyers who have damaged credit.

California-based Carrington Mortgage Services is one company expanding its nonprime loan offerings. “We believe there is actually a market today for people who want to buy nonprime loans that have been properly underwritten,” saysRick Sharga, of Carrington Mortgage Holdings, told CNBC.

Carrington Mortgage Services, which plans to manually underwrite each loan, will qualify borrowers with FICO credit scores as low as 500. The lender also will qualify borrowers who’ve had recent problems reported on their credit histories, such as a foreclosure, bankruptcy, or a history of late payments. But borrowers who are at higher risks will be required to make a bigger down payment, and the interest rate on the loan will be higher.

Other lenders also are getting into the nonprime space, including Angel Oak and Caliber Home Loans; more than 80 percent of Angel Oak loans are nonprime.

Source: “Subprime Mortgagees Make a Comeback—With a New Name and Soaring Demand,” CNBC (April 12, 2018)

Consumers: Home Appraisals Still Falling Short

Appraisals continue to lag homeowners’ price expectations, according to the latest Quicken Loans’ National Home Price Perception Index, which compares homeowners’ initial estimates and appraiser’s opinions of home values. Appraised values were 1.35 percent lower than homeowners’ expectations in August. That has narrowed from a 1.55 percent difference in July.

Many homeowners are still not understanding their home’s current value, according to the analysis. The perceptions can vary quite a bit across the country, too. For example, home values are 3 percent higher than homeowners’ estimated values in the West, while they are 3 percent lower than expected in the Midwest and Northeast.

More interesting data and graphs at: quickenloans.com/press-room/2017/09/12/quicken-loans-study-shows-consumers-continue-to-be-too-optimistic-with-anticipated-home-value/

Home Loan Interest Rates Hit New Yearly Lows

Average mortgage rates moved lower this week, as the 30-year fixed-rate mortgage continues to sit well below 4 percent.

“The 10-year Treasury yield fell to a new 2017 low on Tuesday,” says Freddie Mac chief economist Sean Becketti. “In response, the 30-year mortgage rate dropped four basis points to 3.82 percent, reaching a new year-to-date low for the second consecutive week.”

Freddie Mac reports the following national averages for the most recent week through Aug. 31:

30-year fixed-rate mortgages: averaged 3.82 percent, with an average 0.5 point, falling from last week’s 3.86 percent average. Last year at this time, 30-year rates averaged 3.46 percent.
15-year fixed-rate mortgages: averaged 3.12 percent, with an average 0.5 point, falling from last week’s 3.16 percent average. A year ago, 15-year rates averaged 2.77 percent.

Source: Freddie Mac

This Could Boost Millions of Credit Scores

Equifax, Experian, and TransUnion announced they will soon remove tax lien and civil judgment data from some consumer credit records. The reason for this change is that many liens and most judgments fail to include vital pieces of information. Beginning on July 1, the public records data the firms use must include these data points: the consumer’s name, address, and either a social security number or a date of birth. Existing reports that fail to comply will be struck from the consumer’s credit record and new data that does not have that information will not be added.

Credit scores are weighed carefully by lenders in making decisions about loan terms and how much consumers can borrow, and can be very important in securing a sustainable mortgage. FICO estimates the changes will cause an improvement to about 12 million consumer scores; however the boost will be modest, likely less than 20 points.

In recent months, several lawsuits brought by states have been pushing credit reporting companies to remove some categories of negative data from credit score reports, such as information related to library fines or gym memberships. But some experts fear removing negative public record information could pose a greater risk to lenders.

Source: “Reporting Change Could Raise Credit Scores, Risk,” Mortgage News Daily (March 14, 2017)

Survey: Higher Rates Don’t Scare Buyers

Despite mortgage rates reaching a two-year high last week, home buyers say the increases aren’t scaring them away from their real estate search, according to a new Redfin survey. Only 2.6 percent of respondents say they have decided to postpone their search since rates rose above 4 percent.

Twenty-five percent of respondents say the rise in rates does not impact their homebuying decisions, and about 24 percent say they feel a greater sense of urgency to buy before rates go up further. However, 23 percent say the rate increases may prompt them to look in other areas or  buy a smaller home. About 26 percent of buyers say they might take more time with their search and see if rates go back down again.

Source: “Rising Mortgage Rates: Homebuyers Are More Resilient Than You Might Think,” Redfin Blog (Dec. 20, 2016)

Down Payment Gift? Better Watch Out!

Many first-time home buyers receive down payment assistance from a family member or close friend, but they may not realize there are specific guidelines they must follow when they take money from others for a home purchase.

Buyers will need a gift letter from the person or persons who gave them the money. The person who gifted your buyer the money will need to state on paper that he or she does not plan on asking for the money back in return and that it is, indeed, a gift.

“The gift letter is very serious,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.” “While it is doubtful that a lender would ever audit a file after the fact to see if the recipient is paying the donor back, if the transaction goes bad, you might very well find yourself with a subpoena in your hand.” Remember, you cannot lie on a mortgage application. It’s a felony.

Source: “Getting a Down Payment as a Gift? Avoid the Mistakes That Could Mess You Up,” realtor.com® (Nov. 28, 2016)

Why a Weaker Economy Shouldn’t Scare You

A disappointing jobs report last week revealed that new jobs hit a five-year low in May. While that’s no reason for celebration, there is a silver-lining for the housing market.

It’s likely that the Federal Reserve will not raise interest rates later this month. In fact, the Fed may not raise rates for a while now, which could be a boon for home shoppers looking to lock in historically low mortgage rates.

“The real beneficiaries are people who are in the process of buying a home this spring or summer,” says Jonathan Smoke, realtor.com®’s chief economist. “They can buy more of a home with the same amount of payment, or they have an easier time qualifying” for a loan.

Source: “Why a Weaker Economy Could Be Good for Home Buyers and Owners,” realtor.com® (June 3, 2016)

Calif. Weighs Bill to ‘Help Widows Stay in Homes’

A new bill introduced in the California state senate aims to help widowed spouses and children stay in their homes even after the primary mortgage holder’s death. The Homeowner Survivor Bill of Rights would protect surviving spouses and children against foreclosure.

The bill, Senate Bill 1150, would expand California Home Owners’ Bill of Rights — which took effect in 2012 — and also provides some safeguards to home owners against foreclosure, such as preventing a lender from foreclosing on a home while owners are simultaneously seeking a loan modification.

“Unfortunately, servicers argue that surviving family members who are not named on the loan are not covered by HBOR,” note Calif. State Senators Mark Leno and Cathleen Galgiani in a statement. “These survivors report that lenders refuse to communicate with them or fail to provide factual information about loan details and foreclosure avoidance programs. As a result, many families have endured unnecessary foreclosures.”

Source: “California Considering Bill That Would Help Widowed Spouses Keep Their Homes,” HousingWire (Feb. 26, 2016)

FHA Fee Cuts Likely to Help More Home Buyers Qualify

Last week, the Federal Housing Administration announced it will cut its annual mortgage insurance premiums, likely resulting in about $900 in savings for borrowers and potentially opening the door to thousands of new buyers. But there are no further FHA fee reductions under consideration, Julian Castro, secretary of the U.S. Department of Housing & Urban Development, told a crowd at the National Press Club on Tuesday. The FHA decided to reduce its annual mortgage insurance premium fees from 1.35 percent to 0.85 percent because its Mutual Mortgage Insurance Fund for single-family programs was “back in the black.” In his speech, Castro cited National Association of REALTORS® research that estimated that nearly 400,000 creditworthy borrowers were being priced out of the housing market in 2013 due to the high premiums. “We expect our premium reduction to help more than 2 million borrowers save an average of $900 annually over the next three years,” Castro told the crowd. “It will also encourage nearly a quarter-million new borrowers to purchase their first home.” Source: “Castro: No Further FHA Fee Reductions Under Consideration,” HousingWire (Jan. 13, 2015)