Rate Update 1/26/12

From Our Friends at Mortgage News Daily (they are spot on today):


Mortgages Rates over the past two days have done much to make ground lost leading up to Yesterday's FOMC Announcement. After further improvements today, rates further solidified their reentry into 3.875% 30yr Fixed Best Execution levels. The rounded average of various lenders' Best-Ex rates had moved up to 4.0%, and more than a few lenders are still well-priced there, but a majority are once again offering 3.875% with attractive borrowing costs.

Yesterday's FOMC Announcement (Federal Open Market Committee or simply "The Fed") which surprised some market participants with it's inclusion of new verbiage describing how long the Fed anticipated that it would keep its "Fed Funds Rate" at so-called "exceptionally low levels," continues to be the primary driver of the bond market rally. When the broader bond markets are rallying like this, MBS (the "mortgage backed securities" that most directly affect mortgage rates) tend to rally as well. Most of the overnight news out of Europe as well as domestic economic reports garnered much less-than-standard levels of attention as markets continued adjusting to the new realities of the Fed's shift in verbiage from "mid-2013," to "late-2014."

We said yesterday that, while the FOMC Announcement definitely helped rates break recent trends at 4.0% Best-Ex, it would be up to the rest of the week to solidify the rebound. Cross the first half of that task off the list... 4.0% Best-Ex is increasingly looking like an outlying exception to a broader trend at 3.875%. (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be this low, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

Today's BEST-EXECUTION Rates

30YR FIXED - 3.875% mostly, with a few lenders at 4.0% still

FHA/VA -3.75%

15 YEAR FIXED - 3.375% and more 3.25's

5 YEAR ARMS - 2.625-3.25% depending on the lender

Ongoing Lock/Float Considerations

• Rates and costs continue to operate near all time best levels


• Current levels have experienced increasing resistance in improving much from here
  There are technical reasons for that as well as fundamental reasons


• Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.


• While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating, But that will always be the case when rates operating near historic lows
  

Call us if you need anything~

Crystal Clear Mortgage

888-634-6911

Investor Cash Adding Downward Pressure on Home Prices

Cash buyers, principally investors, may be putting downward pressure on home prices according to the Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey released Monday. The survey found that investors with cash in hand are able to offer something that homeowners dependent on mortgage financing cannot, a guaranteed sale with a quick closing timeline. This seems to offset the desirability of a higher bid with a mortgage contingency.

The Housing Pulse survey found that the trade-off between price and speed is particularly true with offers on distressed properties because the lenders and servicers liquidating the properties generally prefer transactions that can settle within 30 days. The Campbell report states, "While investor bids may not be the first offers accepted, they often end up winning properties after other homebuyers are eliminated because of mortgage approval or timeline problems.
Appraisals below the contracted price are a common reason for mortgage denials. Most mortgage financing timelines are now in excess of 30 days."

The survey reports that 33.2 percent of home buyers in December were cash buyers, up from 29.6 percent in December 2010. However, 74 percent of investors came to the table with cash. This is especially striking as the survey found that investors accounted for 22.8 percent of home purchases in December, changed only slightly from 22.2 percent in November. But, Campbell says, "Despite their relatively small share among homebuyers, investors have an outsize effect on home prices because their bids bring down market prices."

Real estate agents responding to the survey commented on the low bids they are seeing from investors. Campbell quoted anecdotal information from a few agents indicating they are seeing investor bids 10-20 percent below list prices, but with quick closings.

The total share of distressed properties in the housing market in December continued at a three-month moving average of 47.2 percent, the 24th consecutive month that the HousePulse Distressed Property Index (DPI) was over 40 percent.The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves approximately 2,500 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.

Crystal Clear Mortgage LLC
www.CrystalClearMortgage.com

Appraisers Say "Don't Shoot the Messenger."

by Jann Swanson

Appraisers say "Don't Blame the Messenger" for Low Home Prices
Jan 17 2012, 1:58PM

The Appraisal Institute has apparently had enough and has decided to fight back against what it perceives as unwarranted blame for depressed home prices. In a press release the Institute says, " Don't blame the real estate appraiser if it turns out that house you're trying to sell or buy isn't worth what you thought it was."

Speaking for the Institute, its president Sara W. Stephens, MAI said that real estate agents, homebuilders and others have placed blame for the market's distressed condition on appraisers who produce opinions of value that don't match a home's listing, contract or sales price, delaying a recovery in the housing market and called that accusation "nonsense."

"The fact is that appraisers are undertaking the same thorough research and thoughtful analysis that they always have in order to continue producing reliable, credible opinions of value," Stephens said. "Don't shoot the messenger."

It is unclear why the Institute decided to refute the claims about appraisers at this time. We did a search and found a number of articles with the blame appraisers theme, but none that were more recent than last summer except for charges from the National Association of Realtors that low appraisals are among the reasons for recent high levels of sales contract cancellations. NAR, however, has been complaining about low appraisals since at least the spring of 2009.

Noting that buyers and sellers often have emotional value attached to a home or are unaware of the market, Stephens pointed out that appraisals completed for mortgage transactions are used to assist lenders, who are the clients, not buyers or sellers, in making lending decisions - and are not intended to confirm a listing, contract or sales price. There's no reason to assume the contract price is the "correct" price simply because it's higher than the appraisal, she said.

As to the claim that appraisers are using distressed sales as comps for market rate properties, Stevens said that qualified appraisers know how to handle adjustments for distressed properties and added that in some markets, distressed sales are so prevalent that it would be improper not to use them as comparables.

The Institute also released two handouts. The first explains the process of conducting an appraisal in a declining market and includes a discussion of how an appraiser discounts a distressed comp. The second handout attempts to explain what an appraisers job really is, making the points that:

-Appraisals aren't intended to confirm a home's sales price.
-Appraisers don't set the real estate market; they reflect what's happening in the market.
-Appraisers work not for buyers or sellers, but for lenders.
-Appraisers are independent, third-party experts with no motive to be biased.
-Appraisals sometimes are assigned to the least qualified, least competent appraisers, but especially in a distressed market, competent and qualified appraisers - such as designated members of the Appraisal Institute - should be hired for difficult assignments.
-Appraisers know how to use distressed sales as comparables


Crystal Clear Mortgage
www.CrystalClearMortgage.com
888-634-6911

Homeownership costs set to skyrocket with new fees, loss of tax write-offs

January 13, 2012 12:45PM
By Kenneth R. Harney

Though its demise drew little attention because of the partisan year-end brawl over the payroll tax cut extension in Congress, a key mortgage financing benefit disappeared at the end of December: The ability of large numbers of homebuyers and owners to write off the premiums they pay for mortgage insurance.

The loss of that tax deduction — plus mandatory new fees imposed by Congress on all new conventional and Federal Housing Administration loans — could effectively ratchet up the costs of homeownership this year.

The expiration of mortgage insurance deductibility will hit many low-down payment conventional loans originated since 2007, plus virtually all new mortgages closed this year where the down payment is less than 20 percent. Though industry experts do not have precise numbers, their estimates range into the millions of existing owners and new purchasers potentially touched by the deductibility termination. Borrowers using guaranteed veterans and rural housing loans, where down payments can drop to zero, also are affected.

The change in the law took effect last month, along with the expiration of 58 other tax code benefits that Congress failed to renew, such as credits for home energy improvements, credits for builders of energy-efficient new houses and deductions for state and local sales tax payments. They were all components of what would have been an annual “tax extenders” bill authorizing continuation of relatively noncontroversial expiring benefits for another year or more.

Congress could still reauthorize all or some of the write-offs retroactively this year, but the current poisonous political atmosphere on Capitol Hill raises doubts about the timing of that scenario.

The mortgage insurance premium deduction dates to legislation enacted in 2006. It allows purchasers and refinancers who use either private mortgage insurance or federal insurance or guarantees, and who itemize on their federal tax returns, to write off their premiums. Borrowers who are single or married and filing jointly with adjusted gross incomes of $100,000 or less can write off 100 percent of their annual mortgage insurance premiums. Married homeowners filing singly can write off 50 percent of premiums. Borrowers with incomes above $100,000 may qualify for partial deductions on a sliding scale.

In many cases, the post-tax savings for these borrowers are significant. New buyers with an income around $100,000 and a mortgage of $200,000 would save between $600 and $1,000 a year, depending on their credit score and loan-to-value ratio, according to MGIC, one of the largest private mortgage insurers in the country. For households with lower incomes, the impact would be less, depending on their marginal federal tax brackets.

David Stevens, who served as FHA commissioner and is now CEO of the Mortgage Bankers Association, said the loss of deductibility of mortgage insurance “hits a segment [of consumers] — middle-income and first-time buyers — where affordability is especially important.”

But mortgage insurance was not the only housing-related casualty of the pre-Christmas skirmishing. As part of the temporary extension of the payroll tax cut, negotiators tacked an unusual provision that raises fees on the majority of conventional mortgages — those originated for sale to or guarantee by Fannie Mae and Freddie Mac. Starting in April, Fannie and Freddie will impose a surtax on the guarantee fees they charge private lenders equal to one-tenth of 1 percent. Lenders are virtually certain to pass those fees to consumers in the form of a higher note rate or loan charges up front. Industry estimates suggest the surtax could add an eighth of a percentage point to rates and raise costs to borrowers over the life of the loan by more than $4,000 on a $200,000 mortgage.

Unlike standard guarantee fees, which are used by Fannie and Freddie to defray loan-default expenses, the new funds will be sent directly to the Treasury to help pay for the $36 billion cost of the temporary payroll tax cut. FHA loans also will be hit with a fee increase by the payroll bill, raising the annual premiums it charges new borrowers by one-tenth of a point.

At a time when the Federal Reserve is warning that there can be no broad economic improvement until housing recovers, it may strike you as odd public policy to raise costs for homebuyers and refinancers in order to fund unrelated, temporary tax relief. But that’s not the way they saw it on Capitol Hill in the rush to holiday recess.

Bottom line: The mortgage insurance deductibility problem may disappear if mortgage insurance gets included in an election-year “extender” package. But the fee hikes on most new mortgages are here for the foreseeable future, so buyers should factor them into their housing budgets.

Crystal Clear Mortgage LLC
adam@crystalclearmortgage.com

Bridging the Divide between Home Buyers and Sellers

By Kenneth R. Harney

January 1, 2012

With mortgage rates below 4% and prices near bottom in many markets, it's a good time to buy a house. But many owners won't sell because they can't get the price they want.

Where do you side in the great real estate buy-sell divide of 2012? If you're a homeowner considering selling sometime in the new year, are you apprehensive that you won't get the price you need or want, and therefore it's possible you won't even try to sell?

If you're a buyer, do you agree that with 30-year fixed mortgage rates now below 4% and home prices near cyclical bottom in many areas, 2012 offers extraordinary opportunities, even if listings are fewer than you might prefer?

A new study by the Research Institute for Housing America, the think tank affiliate of the Mortgage Bankers Assn., documents a profound market fissure caused by owners' fears and hesitation — what researchers call "negative selling sentiment."

Nearly 80% of consumers in the study's survey think this is a great time to buy a house, but more than 92% of homeowners think it's not a great time to sell.

The study was conducted by Syracuse University economist Gary Engelhardt using extensive data from the University of Michigan's Survey Research Center, which is generally recognized as an authoritative source on consumer attitudes.

Engelhardt said that compared with earlier post-recession periods, owners have been more deeply shocked by the extent and severe side effects of foreclosures, short sales and unemployment. In the aftermath of earlier recessions, such as in the early 1990s, 40% to 60% of homeowners remained relatively positive about their prospects if they chose to sell — far higher than the tiny sliver who see it that way today.

Many owners "have not adjusted their price expectations downward" to keep pace with local declines in property values after the mortgage bust, Engelhardt said, thereby contributing to the sharp divergence in their real estate visions compared with those of buyers.

This is consistent with the results of a study conducted in mid-2011 by Zillow, the online real estate and mortgage information company.

Zillow found that sellers nationwide were having trouble coming to grips with what market forces had done to their property values. They knew prices had declined, but they didn't necessarily think those devaluations applied to their houses.

For example, people who had purchased their homes in 2007 or later thought their homes were worth about 14% more than their actual sales value. People who bought homes before 2002 were slightly more realistic, but still overvalued their houses by about 12%.

How are such seller perceptions affecting local real estate market dynamics today? For one thing, they are keeping owners out of the game. But they also are bringing more motivated and committed sellers to the fore. Glenn Kelman, chief executive of Redfin, a national realty brokerage in Seattle, said the shortages of listings in some markets are the product of owners "waiting for better times to sell."

But owners who believe they need to sell now — they're downsizing, moving to a new area or getting divorced — turn out to be "more reasonable" in general, Kelman said. "Some are even resigned" to the reality that despite their unfortunate timing, they will definitely sell provided that they price the house realistically.

David Howell, executive vice president of McEnearney Associates, a large realty firm active in the Washington, D.C., area, said the absence of substantial numbers of people who would otherwise be sellers may also be a healthy development.

With listing inventories lower than typical for this time of the year, there are fewer houses for buyers to choose from. This, in turn, exerts a slight upward pressure on prices.

What about sellers who refuse to believe their properties won't command the prices they expect or require? Mike Litzner, broker-owner of Century 21 American Homes on New York's Long Island, said, "It's all about educating them. We try to show them the comparables" — the recent selling prices of similar houses in the area. "If sellers really want to sell," he said, "they adjust their expectations to the changed realities."

If they adamantly refuse, Litzner said, his agents often decline the listing rather than waste weeks or months trying to market an overpriced piece of real estate.

Howell said his firm's agents sometimes walk away from unreasonable listing price demands, but they also use a technique that seeks to bridge the seller-buyer divide: pre-authorized price reduction clauses in the listing contract that ratchet down the asking number. The initial reduction kicks in within the first two to three weeks if the house fails to attract buyer interest.

"It works," Howell said. "And both sides stand to benefit."

Adam Simmons
Crystal Clear Mortgage
adam@crystalclearmortgage.com
888-634-6911

A Message from a Mortgage Company CEO regarding the new fees inacted by Pres. Obama

Sorry to post a second message today, as i do not like to send out too many updates. That being said this is a major issue and it needs to be tackled as soon as possible. This letter is very well written and sums things up very well. Please call us with any questions:

On December 23, 2011, Congress and President Obama gave all homeowners and home buyers an ironic "present" in the form of a 10 bp increase in g-fees for all mortgage loan products offered by Fannie Mae and Freddie Mac, in order to fund a two-month extension of a 33% payroll tax cut. This shift in tax burden to homeowners and home buyers will remain in effect until October 2021 (a period of almost 10 years), and will cost this already stressed group of Americans approximately .45% of any amount they subsequently borrow to purchase a home, or refinance an existing home loan.

As you can imagine, I think this is an absurd and irresponsible way to finance a two-month tax cut, and I encourage everyone to protest loudly to any politician in your district or state. While there's little chance this law will be changed, it is nevertheless very important that we be heard, because this unprecedented use of credit guarantee fees for general Treasury purposes cannot be repeated. If Congress somehow begins to perceive credit guarantee fees to be some sort of readily available "cookie jar" that can be used for whatever whim politicians believe appropriate, then this country's housing finance system will be in a world of real hurt. The payroll tax extension will now expire on March 1, 2012; and you can be certain that efforts will be made to extend the tax cut through the November 2012 general election. If it costs 10 bps to fund an extension for two months, just imagine what it would do to guarantee fees if they were used to fund a full year!

Please see the attached announcement from the Federal Housing Finance Agency regarding this matter. It is very likely that this change in law will impact some lock-in expiration dates; we're now reviewing our pipeline and will be providing guidance soon regarding impacted loans, as well as when you might expect to see the cost of this increase reflected in our daily pricing.
Thank you for your business in 2011, and we look forward to expanding our mutually beneficial relationship in 2012!

Sincerely,
Jon K. Baymiller, CFA
President & CEO
NYCB Mortgage Company, LLC

Tax Cut Extension Now Officially raising Mortagge rates!!

As part of the temporary resolution to the recent battle over the Tax Cut Extension that took place in the last weeks of December, Congress decided that mortgage borrowers should foot part of the bill. Technically, Congress increased the "Guaranty Fees" that Fannie Mae and Freddie Mac charge to lenders that securitize MBS (Mortgage-Backed-Securities) with the Agencies, but ultimately, this cost must either be absorbed by lenders, passed on to consumers, or some combination of the two.

From the official release on 12/29/11:

"On Dec. 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011. Among its provisions, this new law directs the Federal Housing Finance Agency (FHFA) to increase guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises) by no less than 10 basis points from the average guarantee fees charged by these companies in 2011 on single-family mortgage-backed securities. This requirement is effective immediately, meaning that the average guarantee fees charged in2012 need be at least 10 basis points greater than the average guarantee fees charged in 2011."

The first official effects of these measures were seen today when BB&T distributed information to it's brokers and correspondents regarding the impacts of the fee increase. In the announcement, BB&T explains that the 10 basis point increase in the Guaranty Fee or "G-Fee" as it's called, equates to a pricing difference of 30-40 basis points in terms of cost/rebate or roughly 0.125% in rate.

The announcement tacitly warns that other lenders will soon follow suit by saying that BB&T is executing this change now "a few days before all their competitors do the same." While similar announcements are indeed, to be expected, some originators in MND's MBS Live Community have noted recent erratic behavior in lender pricing above and beyond what they'd expect for the usual holiday fluctuations. The implication is that some lenders may already be in the process of pricing these increased costs into rate sheets and could forego formal announcements and simply spread the increased costs out over a longer period.

MBS Live! community member, Victor Burek stated in live chat: "I think some other lenders have added it already. One of my most frequently used lenders is about 30bps off in price despite unchanged MBS prices. Granted, there are other factors that could be driving this, but they could also be pricing in some of the expected costs of the Tax-Cut Extension."Either way, mortgage borrowers end up footing the bill for the Tax Cut Extension.

Despite the April 1st implementation, the letter of the new law states that the average G-Fees in 2012 must be 10 basis points higher than those in 2011.

The bottom line is that rates must move higher on average and if lenders aren't building the fee increase into their rates now, they'll have to do so to a greater extent in the future to meet the "on average" guideline set forth by Congress