Historically low rates get historically lower

October 08th, 2010

Following news from the Department of Labor, investors drove mortgage rates to all-time lows this morning. Federal Reserve re-entry into the securities markets is a strong possibility and anyone looking for a mortgage will be the beneficiary. Before you use the free on-line mortgage calculators find out what is happening in the economy that impacts mortgage rates and markets.

Jobs drive stocks and bonds

In its monthly employment report this morning, the U.S. Department of Labor had mixed news. Overall, 95,000 jobs were lost in September, the bulk of which were public sector jobs. Of the 76,000 jobs lost from local government 50,000 were teachers or other educators. In the private sector there was a new gain of 64,000 jobs. While not enough to spur the economy, the continuing gains in private sector jobs is certainly good news. Because of the weak private sector growth in jobs investors began buying stocks and bonds today betting on the Federal Reserve initiating action to keep rates low and encourage growth. Any action by the Fed will involve purchasing more government securities (bonds) which will keep rates low or drive them lower.

If you are using a refinance calculator to determine your monthly mortgage savings your timing great if you convert your calculations to a refinance mortgage application as rates hit all-time lows this morning.

Foreclosures halted

Recent news of lenders and servicers using “robo-signers” to sign foreclosure documents has created a fire-storm of reactions. The legality of a foreclosure undertaken with an unqualified signature is under question and homeowners currently in the process of being foreclosed upon, and those who lost homes to foreclosure, are wondering what their status is. Was the foreclosure legal? Can you get your home back? These are the basic questions that have lenders and servicers of mortgages concerned as to how courts and lawmakers will answer.

JP Morgan Chase, Ally Financial (GMAC’s parent corporation) and Bank of America have already suspended foreclosures in 23 states. Today Bank of America announced it is halting foreclosures nationwide until the issues are settled regarding robo-signings, foreclosure proceedings and the myriad of different state and federal regulations.

At risk for the banks are billions of dollars of assets tied up in non-paying mortgages on properties they cannot liquidate to cover losses. Moving forward housing markets will most likely see a great reduction in the number of bank owned properties put on the market. This will reduce supply and could aid in housing market recoveries.

Obama extends mortgage limits

Earlier this week President Obama signed a bill that would extend the conforming loan limits through 2011. The “high-balance” loan limits are $625,500 for single family residences, or $727,950 in high value areas. This extension of the current loan limits provides affordable mortgage rates for those seeking a conforming mortgage over $417,000 or an FHA mortgage over $271,050 and allows for stability in housing prices for those value ranges.

If you have been using a prequalification calculator to determine your purchasing power for a home over $425,000 this is good news as it ensures affordable mortgage rates for you into the future.

Purchase applications rise as rates drop

In their weekly surveys the Mortgage Bankers Association and Freddie Mac had positive news for the housing and mortgage markets. In its release Wednesday of the Weekly Applications Survey the MBA announced that while refinance applications for the week ending Oct. 1 declined 2.5 percent from the prior week, purchase applications climbed 9.3 percent. The MBA announced that the purchase mortgage index was the highest since May 7, 2010, led by a 17.2-percent surge in FHA applications. The FHA application increase is most attributed to homebuyers getting applications in before changes in FHA mortgage insurance increased on Oct. 1.

In its Weekly Primary Mortgage Market Survey Freddie Mac announced on Oct. 7 that the average 30-year fixed-rate mortgage with a cost of 0.70 origination points dropped to 4.27 percent, the lowest on record.

Mortgage rates are at historic lows and current economic conditions portend low rates into the future. Use the available on-line mortgage calculators to determine your refinance mortgage savings or purchasing power with a new home loan.

Posted By :
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.

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