TIL - GFE - APR ... it's so much gibberish

If you're a real estate professional and you're just plain frustrated that the government decided to step in and make our industry even more complicated this year for your buyers, you are not alone. There have been a myriad of changes to the lending laws, disclosure requirements, and our ability to get these loans approved and closed.

First, barring a perfect file and property, loan closings in 30 days are basically a goner. The government stepped in and made appraisals harder and added time, and added more time to get disclosures out the customer and get the customer to the closing table. Look for 45 days a whole lot more this year.

I bumped into this good description of what an APR is, and will give kudos where they are due to Tom Marquis since I'm pointing my readers there ... hey come back after you read his article. The new Good Faith Estimate law is in full effect, and basically your clients are going to be shocked and scared, but nothing in these new documents helps your client or projects them. More do gooding from HUD and the Federal Government that will accomplish nothing. I'll do a full post on the GFE requirements this week. But to put it bluntly, we're all being treated like we're trying to hurt the customer ... more later.

Top 5 Reasons to buy a home now

I would always prefer to write answers to actual questions submitted by our readers, and in this case a perfect one for mid-January: QUESTION - Steve, I keep hearing you and others saying we should buy a home now, why? What's so key that we need to buy now instead of waiting until this summer?

ANSWER - I'd be happy to supply my thoughts in general, and yet I acknowledge up front that many of you have situations that are unique. Top 5 Reasons to BUY now!

• Interest Rates are not going to stay at or even just below 5% much longer. Even this morning as I took an early look at the mortgage bond markets and treasury bills, the credit markets are leaning back toward higher rates. (FNMA 30-year 4.5% $100.91 down 3bps or translated a slight move up in rate) The United States Government is borrowing billions of dollars ever week to pay for our current deficit spending, and as with any supply and demand market too much supply pushes down prices. In this case too much supply of debt instruments pushes down what investors are willing to pay and since prices and interest rates are inversely related, RATES go UP!
  

• One reason that rates have stayed in the low 5's (or even just under 5%) is that the Federal Government was paying a tax credit to first time real estate buyers. The original tax credit ran out in November, causing a lot of homes that would have been purchased in late November or December to be purchased instead in October and early November. An aberration in the demand therefore causing us to think real estate was recovering fast in the fall, when in actuality real estate is probably recovering slowly without market manipulations. In December due to the market manipulations, Existing home sales went down steeply. Back to the point, this means prices in January are softer than in the fall and many sellers motivated to get the deal done now!

• Here in Northwest Indiana the real estate market has been slowly but surely picking back up from the low point a year ago. We did not go as high as the coastal and resort markets, so we did not take as much time to rebound. If you are waiting for prices to go down further, you are probably waiting on something that won't happen. The steel mills have called back some employees, Ford Motor Company announced yesterday over 1,000 hires in Chicago and small businesses are slowly but surely dusting themselves off from the 2008 Recession. The real engine of job growth will be small business.
  

• January is typically slower, with weather being the dominant factor. Buying a home in a slow month will typically yield less competition and a more flexible seller. I would recommend working closely with the seller to gain assistance with closing costs (for the record every single title company in the region increased their closing costs on January 1st in response to more government requirements) and stay away from antagonistic battles with sellers. If you are willing to pay $100,000, contract for $100,000 ... don't use the home inspection as a second line of negotiations to beat the seller down even more. That's unethical and the REALTORs using that tactic aren't going to last as the market recovers.
  

• Many local communities are increasing rental registration fees, inspection fees, utility fees, storm water fees, and a whole host of fee income generation. Property taxes in the State of Indiana are capped at 1% for your owned home ... but 2% for a rental home. This means that your landlord is going to be hit with thousands of dollars in fees and higher taxes ... guess who pays those fees and taxes ... YOU! Your rent will most likely be increased at your next renewal. You may well be able to buy a home for the same or less than you will be paying at your next rent renewal. But due to the 4 above mentioned reasons, you better act now while prices are low, temperatures are cold, and rates are low.
  

Call me anytime if you need assistance in starting this process, a pre-qualification may be the first step: 219-465-8352

Steve

Mortgage rates benefiting from uncertainty

This has been one heck of a week, with mortgage interest rates falling back below 5% again, rates that many of us feel we may never see again once our nation has to pay the tab for the Stimulus Bill and deficits. Uncertainty though helped mortgage bonds, as investors pulled some money out of stocks and pushed it into credit markets.

Uncertainty rules though:

• The Treasury Secretary and the Federal Reserve Chair are both losing some clout in Washington DC right now, with some suggesting that President Obama isn't listening to them as much and may be looking to implement major changes. Though I try not to get too political on this site, leaving heavy duty politics to Northwest Indiana Politics, much of the uncertainty is in response to Stimulus not really working and fears that deficit spending is going to drown us all in debt we can't afford.
• More government regulation of automakers and energy and banking, is causing the stock market to react very poorly. More government in general is a negative to stocks, raising the cost of doing business and increasing costs to consumers.

From Mortgage Market Guide:

And speaking of the Stock market, prices continue to plunge following President Obama’s sketchy new proposals for the banking system. His announcement yesterday had few details, but are quickly coming under heavy criticism across political boundaries and around the world. NYC Mayor Michael Bloomberg has been very vocal, saying that these measures will cost many American jobs, and make American banks far less competitive in the global market.

Looking at the technical picture for Stocks, the Dow and the S&P have both fallen beneath their 50-day Moving Averages. This is very significant, as neither index has closed beneath their 50-day Moving Average since July of 2009. If Stocks are unable to regain their footing and move above this important Moving Average, we may see a continued slide lower in Stocks, which could benefit Bonds. And with no economic reports due for release today, much of the trading in Bonds will be driven by Stocks and technical action in both markets.

Also giving Stock investors some jitters today – the US Senate unexpectedly decided they will delay today’s confirmation vote for Federal Reserve Chairman Ben Bernanke’s second term. The Senate has said they need to further review the Fed’s role in the bailouts of the financial industry during the economic meltdown…which has the ring of wanting to be “politically correct”, in light of Obama’s most recent proposals on the financial and banking industries. If not confirmed, Bernanke may have to give his seat to Vice Chairman Donald Kohn – and there are only nine days left in Bernanke’s current term, so a vote will need to take place quickly. This delay is adding a great deal of unwelcome uncertainty to the already jittery Stock market, and many traders are voicing concerns that the political game playing has serious negative ramifications.

Quick look at mortgages in NW Indiana

I'm moving too quick to get out the door onto the icy roads, so can't post a full mortgage market update this morning, but a couple quick things to watch, give me a call if you need rates or have a pre-qual today.

• Initial jobless claims came in higher than expected, again this labor recovery is having a hard time getting started. This continues to dampen potential gains and makes us all realize that a whole lot of people are out of work. Sadly, this will help mortgage rates stay at the 5% or just under 5% rates we've been reporting for the last week. Overall, a record 12 million Americans received federal and state unemployment benefits on an unadjusted basis in the week ended Jan. 2, the latest period for which the data is available" (from marketwatch)

From the home building industry -Two other trends in home construction are contributing to the declining square footages: The prominence of first-time buyers in the housing market and the increasing number of households with members 55 and older who are buying homes.

First-time buyers, driven into the market in good part by the availability of an $8,000 tax credit, are more likely to compromise on home size in exchange for a lower price. And the 55+ crowd tends to purchase single-story homes, which generally are smaller because of the land costs that favor the more-efficient two-story plans.

"Barely over half of new homes today are built with two stories or more," Quint said. Two-story homes peaked at about 55% of the market in 2006.

For 2010, home builders say they will focus on lower-priced models and smaller homes. More than 95% of builders surveyed by NAHB in January said that was the way they saw their business evolving this year.

The penchant for smaller homes will necessitate some design changes. See the Top 10 must-have features that home buyers say they want in their houses today.

Builders, attempting to respond to those consumer demands as well as hold the line on prices, told the

NAHB surveyors that they were most likely to include these features as standard in their houses this year:

Northwest Indiana Real Estate - Mortgage Daily

Some quick glimpses into the markets this morning:

• Stocks opened lower by more than 100 points right away, typically a good indicator for mortgage rates going lower
• Treasuries opened with higher prices, resulting in lower rates, again good news.
• Government statistics again showed a slow or even benign recovery, with inflation numbers almost flat, good news for mortgage rates
• The Scott Brown win for United States Senate last nite may portend better fiscal restraint by the United States government. If this is the case we most certainly will see rates stay low.
• On a negative side:
  FHA changing rules for loans, making it even harder to get a loan for first time home buyers. One change will have little to no effect, that being the requirement that to get the 3.5% down payment you have to have a credit score of 580 ... most lenders are requiring 620 or better already anyway. The other though is an increase in the Mortgage Insurance Premium from 1.75% to 2.25% ... this will cost buyers more every month.
• Remember that in Northwest Indiana we have a much higher FHA loan limit, allowing a lot more buyers to make use of this program. Call me if you need details.

Week 3 2010 - mortgage briefs

This week was a bit of a wild ride, with the general climate favoring increases in mortgage rates but negative economic news holding rates down. It's my opinion that this holding level will not last long, that rates are going to start their climb ... I even went so far as to suggest they might go all the way to 7% in 2010.

The attached chart is from Marketwatch and shows the last two months for the 10 Year Treasury Bills, note the low in November when we were actually locking crystal clean borrowers with solid equity at 4.5%! Then up above 5% for those same borrowers last week, with a slight retreat closer to 5% this week.

Remember thought that there is no such thing as a rate quote in the current business. If you get a rate quote from a mortgage banker without reviewing a credit report, looking at assets and equity, then the rate quote isn't worth your time. All rates today and in the foreseeable future require a thorough review of the borrowers specific situation. Sorry, the world of interest rates got a lot more scientific following the credit crash of 2008.

I'm staying with my recommendations from last week, if you are in the market and have a property you're ready to buy ... DO IT ... get off the dime and buy before the property value goes up or the rates go up. If you have been postponing a refinance for months, for what reason I don't know, it's time. If you are thinking about getting out in the market, hearing that values have leveled off and you could miss the bottom, let's talk about pre-qualification and getting you ready to pull that trigger.

Steve Dalton
Senior Mortgage Banker - Northwest Indiana
Sierra Pacific Mortgage - Residential Mortgage Group
219-465-8352
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Northwest Indiana Homes - great reads

I was in a linking mood this morning, wondering what to read to get a feel for the market? (Already wrote my political links post too) and since rates won't be out till about 9 a.m. ... thought I'd put up some links and then talk rates once markets get rolling.

Do you have a facebook fanpage? Steiner Homes in Northwest Indiana does, and very few other home builders out there. What are you doing with yours?

Real Estate Professionals are using twitter (and other social media platforms of course) but few are really engaging and communicating. All too many seem to set up a profile and then send out a broadcast once in a while ... FAIL. Take time in 2010 to learn to engage, call me I'd love to plan with you. (note - twitter profile linked is a good example not a FAIL)

All of Indiana is watching as the state legislature looks at a constitutional cap on property taxes, a huge help to real estate. Is your legislator trying to play games and pretend to support while working behind the scenes to kill it?

More in two hours when bond markets really get heated up and we can talk interest rates ....

Mortgage Rates in Northwest Indiana

January 8, 2010 Edition: RATES OUT - down slightly still an ounce above 5%

Watch for mortgage rates to open level or even a bit lower due to negative news in the labor markets. It's a sad story, but when labor markets suffer mortgage rates stay low or move lower, but the opposite is also true, when the labor market and the economy in general improves all rates including mortgage rates ARE GOING UP! It's a good time to lock, I'm not with many other lenders who are suggesting holding out for 4.875% ... lock if you can get close to 5 with your credit and asset ratings.

If you are looking at a home, wanting to refinance or thinking about your housing options, let's talk today!

Stock markets are opening lower this morning as investors react negatively to reports that the unemployment rate and new job layoffs are still a big worry.

"U.S. job losses resumed in December after revisions showed payrolls rose in November for the first time in nearly two years, the Labor Department estimated Friday.

Nonfarm payrolls fell by a seasonally adjusted 85,000 in December following a revised 4,000 gain in November. During 2009, payrolls fell by 4.2 million.

The official unemployment rate remained at 10% in December. Read the full report on the Labor Department Web site."

Source: Marketwatch

Update: Treasury prices rising Friday, sending yields lower, as bond traders reacted to Labor Department data that showed the U.S. economy losing 85,000 jobs in December, results that came up short of the slight growth that had been expected. This is good news for rates today!

Today in mortgage rates - update 1

Update: Rates opened lower again today! This is good news, but I still think a momentary blip due to the housing sales numbers from December being a little lower than expectations. Be careful out there, lock if you are in the right time window.

As usual, I'll lead with disclaimers "the views expressed here are the opinion of the author, based on an understanding that quite often the market doesn't do what any of us expect."

Mortgage interest rates are continuing to hold in the low 5's. Yesterday we were able to lock some customers, with solid credit and down payments, at 5.25 or even better if the customers were interested in paying a point to obtain a better rate for the next year. We should have today's rates at around 10 a.m. this morning.

What's affecting the rates right now?

• Sales of homes in the latter part of 2009 were greatly affected by the rush to obtain the tax credit that originally was intended to run out by the end of November. That tax credit is not back in affect and will extend into April. But in the meantime there was a bit of a rush at the end of last year. I expect that due to this mirage affect, there will be a restatement of sales in December downward a bit. This is positive news for rates.

• The substantial amount of money being borrowed by the Federal Government to cover their historic and unsustainable deficits is putting a lot of pressure on both rates and inflation. So far rates have risen from 4.5% 30 days ago to where there are now at just over 5%. I expect rates to continue a slow increase month by month as recession problems fade, jobs begin to increase, and there is more focus on inflation. This is negative news for rates.
  

• Yesterday rates were actually better than expected, see I don't have a crystal ball, so there's always the strong possibility that today we get a correction day. See the 10 Year Treasury Chart yesterday, where rates did come down a bit, slightly yesterday.
  

• As always, if you want a quick personal update at 10:00 a.m. this morning when rates come out please email me and I'll personally send you a quick update when they are in my hands. Sierra Pacific Mortgage - Residential Mortgage Group - Northwest Indiana Email

Image from Marketwatch

Agent Genius - Google Mortgage Page Thoughts

I commented on the original post, and will here as well, I don't think it's that big a deal. If consumers want more information on rates, good for them, that will keep everyone accountable.

clipped from agentgenius.com Google’s Mortgage Marketplace Looks a Lot Like Zillow’s Way back in June 2008, it was reported that Google had begun it’s online version of loan comparison shopping in the U.K. with very little word on when or if it would make a play in the U.S. and in October 2009, it finally launched in the States. Although this is not bleeding edge news, the news is that it’s made it’s way to Texas and was dead on accurate in discovering our location and presenting rates. Any search regarding mortgages will bring up a sponsored result with comparative rates allowing would be refis and buyers to compete and shop rates taking aim directly at Zillows Mortgage Marketplace (ZMM).

Good posts from NW Indiana Professionals

Northwest Indiana Professionals - Worth Meeting from Northwest Indiana Bloggers

Our team of professionals spotlighting one another in a New Years Week Series:

• Northwest Indiana Insurance Quotes

• Kathy Sipple - Northwest Indiana Social Media Coach

• Nate Findling - Inbound marketing consultant

• Evelyn Johnston - Elkhart Indiana Real Estate
  

• Sierra Pacific Mortgage and Me - Northwest Indiana Mortgage Banker

• Jeff Eriks - Northwest Indiana Commercial Contractor

• Scott Swinford - Credit Repair Specialist in NW Indiana

• Richard Orelup - Web and Applications Development

• Josh Walker - audio engineer in NW Indiana

• Chris Buckley - Northwest Indiana attorney

• Dave Woodson - LaPorte and Michigan City Mortgages in Indiana

I like this team, do you need credit repair or a mortgage ... how about a professional real estate provider to help you find a home? Let's talk, it's time to move ahead in this New Year

Happy New Year Northwest Indiana!