Monday, August 31, 2015

Average 30-year mortgage rate drops to 3.84% from 3.93%

WASHINGTON (AP) — Average long-term U.S. mortgage rates dropped this week to their lowest levels since May, in a week marked by turmoil in global markets that was stoked by economic developments in China.

Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage fell to 3.84% from 3.93% a week earlier. The benchmark rate hasn’t been that low since May 21.

The rate on 15-year fixed-rate mortgages declined this week to 3.06% from 3.15%.

The panic selling and extreme gyrations in stock markets sent investors to the safety of U.S. government bonds, raising their prices and dampening their rates. Mortgage rates often track the yield on the 10-year Treasury bond, which dipped below 2% on Monday, a day of epic losses and price swings on Wall Street. The yield recovered to 2.18% Wednesday. That compared with 2.22% last Wednesday.

On Monday, a brief 1,000-point plunge in the Dow Jones industrial average just minutes after stocks opened for trading sent shivers from Wall Street to Main Street. The average ended the day down 3.6%. The market staged a robust recovery Wednesday, clocking its best day in nearly four years as the Dow average gained 4%.

The recent economic jitters and stomach-churning markets have thrown into question whether the Federal Reserve will raise a key interest rate next month, as has been long anticipated. A rate hike by the Fed could bring higher rates for home loans. The Fed has kept its key short-term rate near zero since the financial crisis year 2008.

Steady U.S. job growth and low mortgage rates have improved home sales this year. Data issued Thursday by the National Association of Realtors showed that slightly more Americans signed contracts to buy homes in July, as pending sales edged up after dipping in June.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.

The average fee for a 30-year mortgage was unchanged from last week at 0.6 point. The fee for a 15-year loan also held steady at 0.6 point.

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Tuesday, August 25, 2015

Double-Edged Sword for Mortgages as Market Fears Drive Rates Down

The recent global market turmoil could be good news for banks and mortgage lenders if a further drop in long-term interest rates sparks another wave of refinancing.

It also could spell trouble for lenders that have not properly hedged the value of their servicing rights, however, and the benefits of lower rates are far from assured.

U.S. Treasury yields, which mortgage rates are tied to, slumped to a four-month low Monday, as investors remained anxious about China's woes and the slower pace of global growth and sought a safe haven in government bonds. The 10-year Treasury yield fell as low as 1.95% during the session, down six basis points from late Friday.

For now, mortgage rates would have to drop at least 25 basis points or more from recent levels to spark a major wave of refinancings.

"A big chunk of 2013 and 2014 loans are just out of the money to refinance," said Scott Buchta, head of fixed income strategy at Brean Capital.

The stock market plunge has some investors assuming that the U.S. economy is heading into a recession, with the potential for massive layoffs at manufacturing firms that could be crippled by lower commodity prices.

Ivy Zelman, the CEO of Zelman and Associates, a housing analytics firm, said the sell-off hitting homebuilders, mortgage insurers, title companies and financial stocks, is an overreaction. With yields on 10-year Treasury notes falling to 2%, the market is assuming much slower economic growth ahead, she said.

"It's more about slowing economic growth than about rates," Zelman said. "There's a lot of knee-jerk reactions."

The biggest concern is that manufacturers would start laying off employees, resulting in job losses.

"If people lose their jobs, they can't buy a house," Zelman said.

Uncertainty about whether the Federal Reserve will raise short-term rates in September or delay a rate hike until December or early next year has contributed to the market volatility.

Some nonbank mortgage servicers will be aggressive at soliciting borrowers to refinance. Since most banks and mortgage lenders are seeing a steady flow of home purchase and refinance volume, they may be loath to lower mortgage rates much further, since doing so would cut into profits.

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Tuesday, August 18, 2015

MBA: Mortgage Delinquencies, Foreclosures Continued To Fall In Q2

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 5.30% of all loans outstanding at the end of the second quarter - down 24 basis points from the first quarter and down 74 basis points from the second quarter of 2014, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

It was the lowest delinquency rate since the second quarter of 2007.

Meanwhile, about 2.09% of all loans were in some stage of foreclosure as of the end of the second quarter. That's down 13 basis points compared to the first quarter and down 40 basis points compared to the second quarter of 2014, the MBA reports.

It was the lowest foreclosure inventory rate since the fourth quarter of 2007.

The percentage of loans on which foreclosure actions were started during the second quarter was 0.40%, a decrease of five basis points compared to the first quarter but basically unchanged relative to the second quarter of 2014.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.95%, a decrease of 29 basis points from the previous quarter, and a decrease of 85 basis points from the second quarter of 2014. This was the lowest level since the fourth quarter of 2007.

Marina Walsh, vice president of industry analysis for the MBA, says "nearly every state in the nation reported declining foreclosure inventory rates over the second quarter."

"The overall delinquency rate for Federal Housing Administration [FHA] loans dropped to 9.01 percent in the second quarter from 9.10 percent, as the 90 day or more delinquent category declined," Walsh says in a statement. "However, the 30-day and 60-day delinquency rate was up by a combined 10 basis points from the previous quarter. In addition, the FHA foreclosure inventory rate rose to 2.68 percent in the second quarter, four basis points higher than the previous quarter but still 13 basis points lower than a year ago. As more recent loan vintages begin to age and as older vintages enter the foreclosure process, we may see volatility in FHA delinquency and foreclosure rates."

Walsh points out that although only 40% of all mortgage loans serviced are in judicial states, "these states account for a growing majority of loans in foreclosure."

"For states where the judicial process is more frequently used, 3.41 percent of loans serviced were in the foreclosure process, compared to 1.15 percent in non-judicial states," she says. "States that utilize both judicial and non-judicial foreclosure processes had a foreclosure inventory rate closer that of the non-judicial states at 1.36 percent."

New Jersey, New York, and Florida had the highest percentage of loans in foreclosure in the second quarter.

"Despite a 36 basis point decline in foreclosure inventory over the first quarter, New Jersey's foreclosure inventory rate was still 7.31 percent, while New York, which had a 20 basis point decline over the first quarter had the second highest foreclosure inventory rate at 5.31 percent," Walsh says. "Both states primarily use a judicial foreclosure process."

Although it is still lingering, the foreclosure inventory is shrinking faster than it was in a majority of the judicial states.

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Thursday, August 13, 2015

Mortgage applications land flat for week

Mortgage applications increased 0.1% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending August 7, 2015.

The Market Composite Index, a measure of mortgage loan application volume, increased 0.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1% compared with the previous week. The Refinance Index increased 3% from the previous week to its highest level since May 2015. The seasonally adjusted Purchase Index decreased 4% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week and was 20% higher than the same week one year ago.

The refinance share of mortgage activity increased to 53.1% of total applications from 51.3% the previous week. This is the highest refinance share since April 2015. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.8% of total applications.

The FHA share of total applications decreased to 13.3% from 13.8% the week prior. The VA share of total applications increased to 11.3% from 10.5% the week prior. The USDA share of total applications decreased to 0.7% from 0.8% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.13%, with points decreasing to 0.31 from 0.34 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) remained unchanged at 4.08%, with points increasing to 0.34 from 0.27 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

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Sunday, August 9, 2015

Ask an Attorney: Foreclosure of a second mortgage

Question: Back in 2009 when the economy tanked, I took a pay cut at my job and couldn’t afford to pay my mortgages. In 2013, I got a loan modification on my first mortgage and have been making payments on it for the past two years. Now, my second mortgage is threatening to foreclose. They tell me that unless I pay six years of past-due payments, they’re going to take my home. Can they do that? I thought second mortgages can’t foreclose. Please help!

Lenders that hold liens in second position, often referred to as second mortgages and/or HELOCs, typically have the right to foreclose on a home when the loan is in default. Collectively, all nonpriority liens placed after a first mortgage are called junior mortgages, and lien holders generally have the right to foreclose when the repayment terms are not met.

That said, it isn’t so much that junior lien holders can’t foreclose. A more accurate statement is that second lien holders typically don’t foreclose. The reasoning is simple.

NRS 40.462 explains how the proceeds of a foreclosure auction are distributed to various lien holders. Essentially, mortgage liens are paid in the order they were recorded on the property. The first mortgage is paid first, the second is paid second and so on. So, for example, if a first mortgage holder is owed $150,000 and the second mortgage holder is owed $50,000, there is no benefit for the second mortgage holder to foreclose unless the house will sell at auction for more than $150,000.

In other words, unless the sale price on the foreclosed property is higher than the first mortgage, the second mortgage holder won’t get any money, even if it were to foreclose.

Applying this to what happened recently in Nevada, lenders with second and third mortgages on properties that had values less than what was owed on the first mortgage wouldn’t foreclose. Instead, they waited until homeowners modified their first mortgages, often lowering the amounts owed on the homes, then waited until property values recovered enough that foreclosure would get them paid — at least in part. Now that home values have risen, junior mortgage foreclosure is becoming more common.

This isn’t the end of the world, though. Junior mortgages can be modified and/or reinstated. In some cases, it also is possible to settle the balance for pennies on the dollar or get them stripped entirely with zero cash out of pocket.

If you are going to pursue one of these alternatives, I’d urge you to act quickly before home values rise too far. The less your home is worth, the greater the chance to work something out with your junior lender.

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Thursday, August 6, 2015

J.P. Morgan Loosens Terms for Huge Mortgages

According to Market Watch J.P. Morgan Chase & Co. is slackening its endorsing criteria for major mortgages, as competition to grab a bigger share of the high-end housing market among lenders rapidly rise.

The nation's largest bank, J.P. Morgan Chase & Co., plans to release an announcement as soon as Tuesday that it is lowering the minimum credit score and down payment it will requires for mortgages as great as $3 million.

The move of the big New York firm is similar to the steps of firms like the Bank of America Corp, Wells Fargo & Co., and other banks for requirements on big mortgages, for example those that exceed $417,000 in most parts of the country or $625,500 in high-priced markets.  At the same time, the big banks are veering away from smaller loans where regulatory and litigation risks are higher.


Following the financial crisis, a recovery in the economy including the mortgage market has faced a lot of challenges, but the jumbo market, which is prevalent with wealthy borrowers, has rebounded along with sales of more expensive homes. In the second quarter, overall jumbo beginnings went up to an eight-year high that is at $93 billion, up by 58 percent from a year ago, according to an initial estimate from an industry newsletter Inside Mortgage Finance.

Furthermore, by dollar volume, big mortgages given out by moneylenders last year accounted for about 20 percent of all first-lien mortgages, used for the purpose of purchasing or refinancing a home, according to Inside Mortgage Finance. That is up from 5.5% in the year 2009. By record, the last time jumbo mortgages accounted for a larger share was way back in 2005.

J.P. Morgan Chase & Co (NYSE: JPM) is one of the oldest financial institutions in the United States with its head office located in New York City, New York.

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Sunday, August 2, 2015

The Risks of Refinancing Student Loans, Credit Cards and Mortgages

Refinancing high interest rate debt to a lower interest rate can be a great way to save money. While this strategy can make a lot of sense, there are some risks. Before signing on the dotted line, make sure you consider those risks carefully.

Student Loans

The student loan market has experienced dramatic growth, and Americans now owe a staggering $1.2 trillion, which is more than credit card debt. If you are making student loan payments today, your interest rate could be above 6%. The leaders in student loan refinancing offer variable interest rates as low as 1.90% and fixed rates as low as 3.50%. Refinancing to these rates could save borrowers more than $10,000.

But there are two big risks that you should consider before refinancing.

    If you have a federal loan, you will give up federal protections when refinancing to a private loan. The most important protection currently offered for federal loans is income-based repayment, which can cap your monthly payment to 15% of your discretionary income. If your income stays low, the federal programs even have principal forgiveness after 20 years.
    If you switch from a fixed interest rate to a variable interest rate, you will be taking significant interest rate risk. The last five years have made many of us believe that interest rates will always be low. However, history reminds us that rates can be a lot higher. Look for lenders that offer interest rate caps as a protection.

Refinancing private student loan debt makes a lot of sense. For federal student loan debt, you need to gauge the likelihood that your income could drop dramatically over the term of your loan. There are a number of lenders out there offering to refinance student loan debt, and you should shop around for the best deal. I keep an updated list of student loan refinance options, and interest rates, at my website MagnifyMoney.

Credit Cards

Americans still have a lot of credit card debt. According to NerdWallet, the average US household debt stands at $15,863. And the average interest rates on credit cards remain above 13%.

Marketplace lenders like Lending Club and Prosper are helping people refinance their credit card debt. On average, borrowers at Lending Club are receiving interest rates that are 31% lower than their credit card rate.

However, borrowers should consider two risks before proceeding.

    Most lenders charge an origination fee, which will not be reimbursed if you pay off your loan early. Although there are no prepayment penalties, the origination fee is a kind of prepayment penalty in disguise.

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