Those jumbo loans that came with lower interest rates and smaller down payments may disappear any day now.

The Federal Housing Administration, Fannie Mae and Freddie Mac earlier this year announced eased underwriting standards for so-called “conforming jumbo loans” of up to $729,750 through December 31, 2008, thanks to a mandate by the Economic Stimulus Act of 2008.

Recently, however, all three agencies said they would roll back that temporary limit to $625,500 in 2009.

Many lenders won’t wait for 2009 to roll back the limit, but will soon start, if they haven’t already, to apply eased underwriting standards only to the new, lower loan level. Eased underwriting standards included lower interest rates and smaller down payments than those typically associated with so called “jumbo loans” before the stimulus act.

Beginning in January, the FHA will insure single-family home mortgages up to $271,050 in low cost areas and up to a maximum of $625,500 in high cost areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

The new $625,500 maximum, however, represents a significant increase over the $362,790 limit that was in effect prior to the stimulus package, according to the U.S. Department of Housing and Urban Affairs (HUD) .

According to the Federal Housing Finance Agency (formerly the Office of Federal Housing Enterprise Oversight — OFHEO), Fannie Mae and Freddie Mac will retain their $417,000 conforming loan limit for conventional loans, lower the temporary conforming jumbo limit of $729,750 to $625,500 for certain higher cost cities and counties and a set the maximum loan limit to $721,050, but only for Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

On the endangered species list in the mortgage world, $729,750 “conforming jumbo loans” experienced mixed reviews from risk averse lenders who never fully embraced the loans. Lenders buried under foreclosures, barely opened the doors to offer the loans until months after they were available. The larger the loan the greater the risk. The riskier the loan, the tougher it is for a home buyer to get the mortgage approved.

It wasn’t until months after they were allowed, Fannie Mae and Freddie Mac announced they would purchase the larger conforming loans with the same requirements they use to purchase loans at the old conforming loan level.

Fannie Mae and Freddie Mac had also reduced down payment requirements on some loans to as little as 3 percent down. And new FHA loan plans with higher limits also helped put more big loan mortgage money on the market.

But as the economy sank into recession, the jumbo conforming loan at the $729,750 level never really managed a strong toehold.

“In today’s environment where access to credit is being restricted, we need to make mortgage loans readily available to households throughout the country, and especially in high-cost areas,” said HUD spokesman Steve Preston.

“These new loan limits will ensure FHA can to continue help struggling homeowners refinance into safe, affordable government-insured loans, and allow many first-time buyers take advantage of today’s buyers market,” he added.

Written by Broderick Perkins

In Freddie Mac’s results of its Primary Mortgage Market Survey the 30-year fixed-rate mortgage (FRM) averaged 5.14 percent with an average 0.8 point for the week ending December 24, 2008, down from the previous week when it averaged 5.19 percent. Last year at this time, the 30-year FRM averaged 6.17 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

The 15-year FRM averaged 4.91 percent with an average 0.7 point, down from the previous week when it averaged 4.92 percent. A year ago at this time, the 15-year FRM averaged 5.79 percent. The 15-year FRM has not been lower since April 1, 2004, when it averaged 4.84 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.49 percent, with an average 0.6 point, down from the previous week when it averaged 5.60 percent. A year ago, the 5-year ARM averaged 5.90 percent.

One-year Treasury-indexed ARMs averaged 4.95 percent with an average 0.6 point, up slightly from the previous week when it averaged 4.94 percent. At this time last year, the 1-year ARM averaged 5.53 percent.

“Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac’s survey began in 1971,”said Frank Nothaft, Freddie Mac vice president and chief economist. “Real GDP growth fell 0.5 percent in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980. The market consensus calls for an even larger decline in the last three months of the year.

“The housing market, meanwhile, continues to contract. Existing home sales (excluding condominiums and co-ops) fell 8.6 percent in November to 4.0 million houses (annualized) in November, representing the slowest pace since July 1997. Moreover, the median sales price fell 12.8 percent from November 2007, the largest 12-month decline since records began in January 1968, according to the National Association of Realtors®.”

Written by Realty Times Staff

The National Association of Home Builders (NAHB) is spearheading Fix Housing First, one of the largest coalitions of housing advocates ever assembled in the United States, to push for a housing recovery plan that will revive the economy.

  “If we are going to successfully pull our nation out of recession, we must address housing first,” said NAHB President and CEO Jerry Howard.  

Fix Housing First, which consists of more than 600 organizations, home building companies and manufacturers continues to add new members on a daily basis, is pressing for a major stimulus package to stem the decline in home values, stabilize financial markets and reignite consumer demand. To get the economy moving again, the coalition is urging Congress to support enhancements to the home buyer tax credit and provide below-market 30-year fixed-rate mortgages for home purchases.

  “If Congress enacts a meaningful tax credit, coupled with an aggressive interest rate buy-down program, we are confident that these measures will help to stabilize home prices, prevent future foreclosures, restore consumer confidence and start creating jobs,” said Howard.  

The coalition cites a similar plan that worked in 1975, when the nation was also in the midst of a recession. Congress then passed a short-term $2,000 tax credit for all new homes ($12,000 adjusted for today’s median home prices) along with subsidized mortgage rates. The stimulus jump started the depressed economy and the effects continued long after the measure expired.  

“Entering this holiday season, we saw a sobering loss of more than half a million jobs in November, and major job cutbacks among the nation’s top employers are being announced daily,” said Howard. “We need to put a stop to this dangerous erosion on Main Street before it grows out of control.”  

Enzo Perfetto, a third-generation home builder from Cleveland, has gone from constructing 20-to-30 homes annually to just one this year as a result of the economic downturn. The situation is critical and getting worse, he said. “Home building generates American jobs. You can’t outsource the construction of a home. But these jobs won’t return until the credit freeze ends and our government addresses the housing crisis.”  

“We are leaving no stone unturned in conveying to our government and the public the message that a housing stimulus is urgently needed, and that restoring demand for housing is the fastest and most effective way of reviving the economy,” Howard said.  

The housing stimulus proponents are calling for significant enhancements to the current $7,500 tax credit for first-time home buyers. Among the improvements:  

  One holiday Blue Light Special appears to be working. Interest rates are as low as they been since Freddie Mac started tracking them, refinancing applications are soaring and home buys are on the move.

Freddie Mac on Christmas Eve said the 30-year fixed-rate mortgage (FRM) averaged 5.14 percent for the week ending Dec. 24, 2008. That’s the lowest the rate has been since Freddie Mac started the Primary Mortgage Market Survey in 1971.

The 15-year rate averaged 4.91 percent.

Five year hybrid adjustable rate mortgages (ARMs) were higher at 5.49 percent, but 1-year ARMs were below 5 percent at 4.95 percent nationwide and even lower 4.75 in the Northeast and Southwest.

With all the money you’ve been saving on reduced holiday spending and gasoline conservation, and all those motivated sellers out there twisting in the frigid wind, it’s a good time to be thinking about refinancing or better yet, “Buy A Home — Now!”

Forget settling down for a long winter’s nap. It’s obviously time to put on your refinance thinking cap or your buy-a-home lid, not that go-to-sleep winter topper. Either way, you won’t be alone. Jack Frost can’t hold a candle to housing consumers who feel the heat.

On Dec. 24, the Mortgage Bankers Association’s composite index of mortgage applications to buy a home or refinance a mortgage rose to 1,245.4, the highest since 2003, from 841.4 a week earlier. The group’s refinancing gauge rose 63 percent and purchases gained 11 percent.

Low rates have you looking to refinance?

The average rates are so low, refinancing can benefit even those who purchased a home a year or two ago, even if they had a small equity stake in their home and used an ARM to buy. The key, say the experts, is to examine your options.

Here’s some potentially good news for investors from the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.

James Lockhart, who runs the agency, says there’s been some “re-thinking” underway on the controversial limits on the numbers of rental properties investors can own if they’re seeking new financing.

Both Fannie Mae and Freddie Mac have imposed a four-unit limit, reversing their previous investor maximum of ten units.

The rationale for the change, according to the agencies, was their belief that investors who own higher numbers of rental condos and houses pose a greater risk of default, foreclosure and loss for the companies.

The restriction effectively shut out many small investors from Fannie’s and Freddie’s standard programs — and pushed them into much higher-cost financing from so-called “hard money” lenders.

In a letter to Charles McMillan, president of the National Association of Realtors, Lockhart said, “While no final decisions have been made, I can share with you the fact that the issue of raising the selling guide ceiling on investors loans is under active consideration at one of the (corporations), and reflects an appreciation of the role for investors in the housing recovery.”

Realty Times obtained a copy of Lockhart’s letter to McMillan, which was intended to respond to issues raised at the Realtors’ annual convention in Orlando in November, where Lockhart spoke to two sessions. Lockhart did not disclose which company may soften its rule, but when one changes its standards, the other typically follows suit.

Lockhart addressed another issue of concern to investors and other buyers of condo units: The negative impacts of growing numbers of foreclosed units and bank-owned REO in condo projects.

Under current rules, Fannie and Freddie generally avoid loans in condominium developments where less than 51 percent of the units are owner-occupied. The problem is that both companies define REO and foreclosed units as non-owner-occupied, even though they are temporarily vacant and not owned by investors.

Lockhart said in his letter that “at least one” of the two corporations — either Fannie or Freddie — “is considering a clarification of the 51 percent (rule) that would exclude REO units from being counted as investor units … in the owner-occupancy ratio.”

Lockhart offered no timetables for either of these key potential policy improvements, but investors may well see one or both changes within weeks.

At the very least, it’s good news that the top executive regulating Fannie and Freddie recognizes the significant roles investors can play in helping the industry dig out of the current mortgage mess.

Written by Kenneth R. Harney

In Freddie Mac’s results of its Primary Mortgage Market Survey the 30-year fixed-rate mortgage averaged 5.97 percent with an average 0.7 point for the week ending November 26, 2008, down from the previous week when it averaged 6.04 percent. Last year at this time, the 30-year FRM averaged 6.10 percent. The 30-year FRM has not been this low since October 9, 2008, when it was 5.94 percent.

The 15-year FRM this week averaged 5.74 percent with an average 0.7 point, up slightly from the previous week when it averaged 5.73 percent. A year ago at this time, the 15-year FRM averaged 5.73 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.86 percent, with an average 0.6 point, down slightly from the previous week when it averaged 5.87 percent. A year ago, the 5-year ARM averaged 5.86 percent.

One-year Treasury-indexed ARMs averaged 5.18 percent with an average 0.5 point, down from the previous week when it averaged 5.29 percent. At this time last year, the 1-year ARM averaged 5.43 percent.

“Interest rates for 30-year fixed-rate mortgages fell for the fourth consecutive week as signs the overall economy is flagging lowered most interest rates market-wide,” said Frank Nothaft, Freddie Mac vice president and chief economist. “And economic growth in the third quarter was revised downward this week, led by the first decline in consumer spending since the fourth quarter of 1991 and the largest drop since the second quarter of 1980.

“However, declining house prices and low mortgage rates have raised housing affordability in September to the highest level since February of this year, according to the National Association of Realtors®.”

Buyers With Great Credit Scores in Driver’s Seat

Potential home buyers with great credit scores, enough cash for a 20 percent down payment, and some determination can get a very good deal right now.

“There are a lot of hungry mortgage originators, so great credit-quality borrowers are in the driver’s seat,” says Keith T. Gumbinger, vice-president of HSH, a mortgage market analyst.

Borrowers need a credit score of at least 750 to get the best deals. Keeping credit-card balances below 35 percent of their credit line is very important, but 20 percent is the maximum allowed for a top score.

Buyers in a strong-enough position can ask sellers to agree to a contingency clause that gives them an out if they can’t get the best interest rate on a mortgage.

Tax Credits Give Solar Power a Boost

A series of tax credits for wind, solar, geothermal, tidal energy and others was among the tenets of the October congressional financial rescue legislation.

The law increased the investment credit for solar from $2,000 to $7,500 for a buyer who spends $25,000 to install solar panels on his roof.

In states like California, Connecticut, and New Jersey, where the cost of power is considerable, the pretax compound rate of return on a typical home solar system will be greater than 15 percent per year, says Andy Black, CEO of OnGrid Solar, an industry research firm.

Home builders, including some of the biggest, such as Centex, Lennar, Pulte Homes, and Woodside Homes, are seeing advantages to including solar. All are developing successful communities where all of the homes have solar panels capable of making most if not all power.

More First-Time Buyers Entering the Market

The 2008 National Association of REALTORS® Profile of Home Buyers and Sellers reveals that the number of first-time buyers have risen as a percentage of the market share and they plan to own their homes longer than buyers in the past.

Lawrence Yun, NAR chief economist, said a higher share of first-time buyers makes perfect sense, and it’s a trend he expects to grow.

“First-time buyers are much more flexible in entering the market because they aren’t concerned about selling an existing home,” he said. “Given low home prices, plentiful supply, and affordable interest rates, it’s been an optimal time for entry-level buyers with a long-term view.

“Considering the temporary first-time buyer tax credit and improvements to the FHA loan program, we expect stronger entry-level activity as the flow of credit improves – that, in turn, should free more existing owners to make a trade in 2009.”

The number of first-time buyers rose to 41 percent from 39 percent of transactions in last year’s survey and 36 percent in 2006. “Although modest, this is a meaningful gain for the 12-month period ending at the close of June, and more recent independent data show a stronger uptrend in first-time buyers who are helping to reduce excess inventory,” Yun said.

According to the NAR study, the median age of first-time buyers was 30, down from 31 in 2007, and the median income was $60,600. The typical first-time buyer purchased a home costing $165,000 and plans to stay in that home for 10 years, up from seven years in 2007.

The median down payment by first-time buyers was 4 percent, up from 2 percent in 2007; the number purchasing with no money down fell from 45 percent in 2007 to 34 percent in the current survey.

“The study covers transactions through the middle of 2008, so we can assume the down payment numbers have shifted recently because credit tightened and no-down payment loans all but disappeared around the close of the survey,” Yun explained.

Of first-time buyers who made a down payment, 69 percent used savings and 26 percent received a gift from a friend or relative, typically from their parents. Another 7 percent received a loan from a relative or friend, while 16 percent tapped into a 401(k) fund, stocks or bonds. Ninety-two percent chose a fixed-rate mortgage.

Written by Realty Times Staff

The country’s top housing official has an urgent message for potential home buyers: You may have heard that the credit markets were “frozen,” but FHA has been open for business throughout the credit squeeze, and so are Fannie Mae and Freddie Mac. In fact, FHA’s volume has tripled and the agency is now insuring well over a hundred thousand new loans a month.

In an exclusive one-on-one interview with Realty Times, Housing and Urban Development Secretary Steve Preston said that FHA, Fannie and Freddie — who account for a combined 90 percent plus share of the entire U.S. mortgage market — “have kept liquidity alive” for home buyers — and have virtually unlimited funds for new mortgages.

“There is no credit crisis” for individual home buyers who have at least three percent to put down, documentable employment, and at least a moderately good credit record, said Preston.

Business loans and various other types of credit may have been more difficult to obtain in recent weeks, Preston told Realty Times, but thanks to the government’s backing of the three biggest sources of mortgages, buyers and refinancers of houses have had no unusual problems.

Preston and HUD are playing key roles in the $700 billion financial system bailout plan now getting underway. Preston is one of just five members of the Financial Stability Oversight Board that oversees the entire effort. HUD’s main task in the weeks ahead, he said, will be to either refinance or help work out thousands of delinquent subprime and underwater homes financed by private lenders during the boom years.

The agency’s new “Hope for Homeowners” program, which started October 1, allows it to cut the principal debt, monthly payments and interest rates of delinquent loans through refinancings into fixed-rate FHA mortgages.

In the interview, Preston emphasized the importance of a new, $3.9 billion program that has received virtually no attention in the press, but which could have huge positive impacts on neighborhoods and communities struggling with large numbers of foreclosures.

Congress authorized HUD to provide funds and other assistance to local governments to buy, fix up, resell or rent out foreclosed houses that are dragging down local property values.

Known as the Neighborhood Stabilization program, it offers not only roles for local governments to fight housing blight, but also provides opportunities for alert realty agents, rehab contractors, builders and investors to be involved — profitably — in the turnaround efforts.

If you’re interested, talk to your city or county housing and community development officials for details. Though HUD will be providing the funds, local officials will be calling the shots.

Written by Kenneth R. Harney

In Freddie Mac’s results of its Primary Mortgage Market Survey (PMMS) the 30-year fixed-rate mortgage (FRM) averaged 6.46 percent with an average 0.7 point for the week ending October 30, 2008, up from the previous week when it averaged 6.04 percent. Last year at this time, the 30-year FRM averaged 6.26 percent.

The 15-year FRM this week averaged 6.19 percent with an average 0.7 point, up from the previous week when it averaged 5.72 percent. A year ago at this time, the 15-year FRM averaged 5.91 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.36 percent this week, with an average 0.7 point, up from the previous week when it averaged 6.06 percent. A year ago, the 5-year ARM averaged 5.98 percent.

One-year Treasury-indexed ARMs averaged 5.38 percent this week with an average 0.6 point, up from the previous week when it averaged 5.23 percent. At this time last year, the 1-year ARM averaged 5.57 percent.

“Long-term mortgage rates followed long-term Treasury bond yields higher this week, pushing fixed-rate mortgages up to levels of two weeks ago,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The Federal Reserve’s 0.50 percentage point cut in the discount rate and federal funds target rate on Wednesday was widely anticipated in the financial markets and is likely to keep short-term interest rates low; consequently, initial interest rates on ARMs, which tend to be set relative to other short-term rates, may remain near current levels.

“In other news, house-price declines in many markets have improved housing affordability and stimulated home sales. In September, sales of existing homes rose 5.5 percent while sales of new homes were up 2.7 percent, at a seasonally-adjusted annual rate.”

Written by Realty Times Staff

In Freddie Mac’s results of its Primary Mortgage Market Survey (PMMS) the 30-year fixed-rate mortgage (FRM) averaged 6.09 percent with an average 0.7 point for the week ending September 25, 2008, up from the previous week when it averaged 5.78 percent. Last year at this time, the 30-year FRM averaged 6.42 percent.

The 15-year FRM averaged 5.77 percent with an average 0.6 point, up from the previous week when it averaged 5.35 percent. A year ago at this time, the 15-year FRM averaged 6.09 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.02 percent, with an average 0.6 point, up from the previous week when it averaged 5.67 percent. A year ago, the 5-year ARM averaged 6.15 percent.

One-year Treasury-indexed ARMs averaged 5.16 percent with an average 0.5 point, up from the previous week when it averaged 5.03 percent. At this time last year, the 1-year ARM averaged 5.60 percent.

"Mortgage rates followed Treasury bond yields higher this week amid market uncertainty over the current state of the economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Compared with last week, 10-year Treasury yields are up about 0.3 percentage points, and 30-year fixed-rate loans moved up about the same amount. And while up, interest rates for 30-year FRMs are still more than 0.5 percentage points below this year’s peak of 6.63 percent set the week of July 24th.

"The latest housing information for the third quarter continues to show some softness in prices and sales activity. House prices fell 5.3 percent over the twelve months ending in July – weaker than the market consensus – according to the Federal Housing Finance Agency’s purchase-only house price index. During August, the median sales price of existing single-family homes (excluding condominiums and co-ops) fell 9.7 percent in August over August 2007, the largest 12-month drop since records began in 1968, according the National Association of Realtors (NAR). Overall resales dipped by 2.2 percent between July and August, on a seasonally-adjusted basis."

Where Are Lenders Getting Credit Scores??

Consumers often mistakenly believe that mortgage lenders use only credit scores from Equifax, Experian, TransUnion, and Fair Isaac’s myfico.com to gauge creditworthiness.

However, Consumer Reports recently found that lenders also use NextGen FICO scores, FICO Expansion Scores, and Industry Option FICO scores — which take car loans into consideration — as well as custom formulas.

Given that these credit scores or scoring models are not available to consumers, experts say that consumers should not rely solely on available credit scores to determine their likelihood of getting a loan. They would be wise to make timely bill payments, make more than the minimum payment, hold down credit card balances, and retain old accounts.

Additionally, experts say it might be worth keeping tabls on other credit scores, such as Experian’s PLUS scores, which are not yet sold to lenders but could be in the future.

Buyers Crave Green More Than Extra Space

Buyers of custom homes are increasingly interested in money-saving features like extra insulation and energy-efficient furnaces, rather than game rooms and space for in-laws, according to a Home Design Trend Survey by the American Institute of Architects.

Sixty-eight percent of the survey’s respondents said customers were requesting extra insulation in the attic compared with 56 percent a year ago.

Two-thirds of respondents said green products such as tankless water heaters, double or triple-glazed windows, and sustainable flooring products such as bamboo or cork were gaining in popularity.

Only 8 percent of the survey’s respondents said game rooms were increasingly popular among their customers, down from 23 percent last year. Home offices also declined in popularity even though they remain the most requested specialty room. Last year, 61 percent of custom home buyers wanted them; this year only 41 percent made the request.

8 Ways to Make a Home Sell Faster

Simple fixes and staging practices can focus buyers’ attention in the right places and keep them from getting sidetracked by personal items in the home.

Here are some staging suggestions from Deborah Ehrlich-Layne of Staging Plus in Tampa, Fla., Handyman Matters, and HGTV’s The Stagers.

McLEAN, VA — Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.10 percent with an average 0.6 point for the week ending October 2, 2008, up from last week when it averaged 6.09 percent. Last year at this time, the 30-year FRM averaged 6.37 percent.

The 15-year FRM this week averaged 5.78 percent with an average 0.6 point, up from last week when it averaged 5.77 percent. A year ago at this time, the 15-year FRM averaged 6.03 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.00 percent this week, with an average 0.6 point, down from last week when it averaged 6.02 percent. A year ago, the 5-year ARM averaged 6.11 percent.

One-year Treasury-indexed ARMs averaged 5.12 percent this week with an average 0.5 point, down from last week when it averaged 5.16 percent. At this time last year, the 1-year ARM averaged 5.58 percent.

"Average mortgage rates were nearly unchanged during the past week, leaving rates above the levels of two weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist. "Reflecting the rate uptick from two weeks ago, the Mortgage Bankers Association reported that loan applications were down 23 percent last week."

"The Institute for Supply Management’s manufacturing index dropped from August’s 49.9 to 43.5 in September, indicating further erosion in new orders, a decline in order backlog, and lessened production, suggesting further cutbacks in manufacturing activity in coming weeks. Consumers are feeling the effects of the slowing economy as well. For example, consumer spending was unchanged in August and revised downward for the month of July."