Palmdale Mortgage News

Major Changes include:

• No underwater limits: Borrowers will now be able to refinance regardless of how far their homes have fallen in value. Previous loan-to-value limits were set at 125 percent.
• Eliminating appraisals and underwriting: Most homeowners will not have to get an appraisal or have their loan underwritten, making their refinance process smoother and faster.
• Modified fees: Certain risk-based fees for borrowers who refi into shorter-term loans will either be eliminated or modified.
• Extended deadline: The end date to get a HARP refinance has been extended to Dec. 31, 2013.

Important Dates:

• Oct. 24, 2011: President Obama is expected to announce the changes to the HARP program at 5:30 p.m. EDT
• Nov. 15, 2011: Fannie Mae and Freddie Mac will start sending operational instructions to lenders.
• Dec. 1, 2011: Some lenders will begin to take mortgage applications, but it could take additional time for all lenders to incorporate the modified program into their systems.
• Q1 2012: Homeowners with a loan-to-value balance of greater than 125 percent should start to be able to refinance.

Eligibility Criteria:

• The existing mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to: http://www.FannieMae.com/loanlookup/ or calling 800-7FANNIE (8 a.m. to 8 p.m. ET) https://ww3.FreddieMac.com/corporate/or 800-FREDDIE (8 a.m. to 8 p.m. ET)
• The program will continue to be available for loans with LTVs above 80 percent.
• Borrowers must be current on their mortgage payments with no late payment in the past six months and no more than one late payment in the past 12 months.

If you live in Lancaster, Palmdale, Acton, Agua Dulce, Valencia, Santa Clarita be sure to take advantage of this upcoming proram. Call today to get your application started and be first inline for this program when it rolls out in Early December.

(661) 526-1399

Ryan.Morrow@spm1.com

National Home Price Index Rises:

The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.

According to FHFA, their national Housing Price Index for purchases rose 0.9% and is the third consecutive month of home price increases and shows that the housing market does have some real fundamental "bright spots".

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -40 basis points last week which helped to move mortgage rates higher from last Friday to the prior Friday. We had enjoyed a string of four consecutive weeks of mortgage rate declines until last week. Mortgage backed securities pulled back from their highs in reaction to a very good week for the stock market and lower than average demand for our country's debt in the form of Treasury bond sales.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Courtesy: Flagstar Bank

Recently, I have been told by more than one person that they have gotten a notice in the mail from their lender informing them that their mortgage payment was increasing and it was a result of an adjustment with their escrow account.

One homeowner even had their mortgage payment go up by $60/month due to this “adjustment” in their escrow account. Which leads to the question:

Why does your escrow account go up (or down) and is there anything you can do about it?

When you get a mortgage, most of the time your lender will require you to have an escrow account. In simple terms, an escrow account is a third-party account that hold funds that you will deposit to pay property taxes and monthly homeowners insurance. Also, by rolling an escrow payment into a monthly mortgage payment, a homeowner only has to worry about one monthly bill rather than a separate bill for a principal and interest payment, a taxes payment and a homeowners insurance payment.

When you first get your mortgage, the lender will generally require you to deposit 12-14 months payments of homeowners insurance and 6-12 months payments of property taxes into the escrow account and also require you to pay monthly into the escrow account as well.

Escrow Accounts: Most Common Reason for a Shortage

The most common reason for a significant increase in a required payment into an escrow account is due to property taxes increasing or being mis-calculated when you originally got your mortgage. Property taxes go up (rarely down, but sometimes) and as property taxes go up, so will your required payment into your escrow account.

For example,  suppose you bought a newly built house in 2011. The tax assessment on the property may only take into consideration the land value. But, when the property is assessed again, it will take into consideration the land value, plus the value of your home, which will increase your property taxes and, as a result, increase your escrow payment.

Other Possible Reasons for Escrow Shortages

Other possible reasons for having a shortage in your escrow account include a rise in homeowners insurance fees (usually small) and a miscalculation of your escrow payment when you originally took out your loan (this could be big or small depending on the error).

Regardless of whether or not your escrow adjustment is large or small, you are obligated to pay the increase because they are bills that you as a homeowner owe; the lender has simply agreed to pay them on your behalf and then collect the money from you as a courtesy.

Does your escrow payment ever go down?

Yes, but not nearly as often as they go up.

The most common reason for a decrease in your escrow payment each month also has to do with taxes. When your property is assessed at a lower value due to decreased property values, your lender will notify you that your property tax bill went down and, as a result, your escrow payment decreased.

So in the event that you receive a notice from your lender that your monthly mortgage payment is increasing due to a rise in your escrow payment, chances are that it is related directly to the assessed tax value of your property – and yes, it is something that you are obligated to pay.

It reminds me of the old saying:

“Nothing in life is certain except for death and taxes …”

Which can lead to a direct increase in your monthly escrow payment.

Courtesy of Justin McHood WWW.ZILLOW.COM

Pending Home Sales Surge Ahead:
Rebound in May, Up 8.2%

The National Association of Realtors' Pending Home Sales Index increased 8.2 percent to 88.8, bouncing back from April's seven-month low. Pending homes sales lead existing homes sales by a month or two. Economists had expected home resale contracts to rise only 3.8 percent after a previously reported 11.6 percent drop. Pending home sales increased in all four regions, with the Midwest and West notching double-digit gains. In the 12 months to May, pending home sales rose 13.4 percent.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -172 basis points last week which helped to move mortgage rates much higher from last Friday to the prior Friday.  Traders dumped MBS and Treasuries as the massive Quantitative Easing (QE II) program ended which removed the single largest purchaser of U.S. Treasuries from the market place.  MBS also sold off on the much stronger than expected economic news.  We saw some good growth in the Chicago PMI and the ISM Manufacturing data, both measure true economic expansion by monitoring our manufacturing sector.  We also got a very nice surprise with the Pending Home Sales data.

What to Watch Out For This Week:
The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

Home Sales Better Than Expected:
Average New Home Price Also Increases, Inventory Decreases.

Sales of new U.S. single family homes fell for the first time in three months in May, but inventories of new homes for sale reached record lows and the median sales price rose slightly, a government report showed on Thursday. The Commerce Department said May new home sales fell 2.1 percent to a seasonally adjusted annual rate of 319,000. Analysts polled by Reuters were expecting a slightly slower pace of 310,000 for the month.

May's new home sales were 13.5 percent above the May 2010 level.

The Commerce Department report showed that the median new home sales price rose to $222,600 in May from $217,000 in April, marking the first increase since December last year. U.S. housing starts rose more than expected and permits for future construction touched a five month high in May, a government report showed on Thursday. The Commerce Department said housing starts rose 3.5 percent to a seasonally adjusted annual rate of 560,000 units, retracing almost half of April's steep decline. April's starts were revised up to a 541,000 unit pace, which was previously reported as a 523,000 unit rate. At May's sales pace, the supply of homes on the market dropped to 6.2 months' worth, the lowest since April 2010.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +59 basis points last week which helped to move mortgage rates lower from last Friday to the prior Friday. But it was a wild ride with MBS selling off and mortgage rates rising in the beginning of the week and then MBS reversed course for some big gains after the Federal Reserve lowered their economic growth forecasts and amid continued concerns that Greece would not be able to pay off their debt (even with bailout).

***Courtesy of Flagstar Bank***

Temporary Conforming Loan Limits to Change
Close the jumbos while you can!

If you live in a high-cost area, keep an eye on your calendar. Effective October 1, 2011, temporary conforming loan limits will be lowered nationwide. Perhaps by as much as 14 percent.

These limits range up to $729,750 currently.

“Temporary loan limits” were enacted as part of the government’s 2008 economic stimulus package. At the time, the financial sector was entering its crisis and private mortgage lending had all but disappeared. Financing was scarce for both homeowners and home buyers for whom loan sizes exceeded Fannie Mae and Freddie Mac’s national $417,000 limit — even for those with excellent credit and income.

The issue was exacerbated in places like New York City where local home prices routinely topped $1 million. Buyers unable or unwilling to bring a substantial down payment to closing (i.e. $600,000 or more) found themselves without financing.

The February 2008 package addressed this issue, using a math formula to change loan limits in Blue Ridge, Blairsville and even nationwide. The government assigned to each U.S. metropolitan area a temporary, new loan size limit equal to 25% greater than its respective median home sale price, not to fall below $417,000, and not to exceed $729,750.

Then, later that same year, the Housing and Recovery Act made “high-cost areas” permanent, but with a reduced 15% increase to median home prices, and loan sizes not to exceed $625,500.

These new limits take effect October 1, 2011 — one day after the temporary limits expire.

If you live in a high-cost area, therefore, take note. Mortgage rates may be low, but the amount of loan for which you qualify may be less than you expect, and you may find yourself ineligible.

Whether you’re planning a refinance or a purchase, keep an eye on the calendar.

The complete list of high-cost areas is available online.

WSJ's Mitra Kalita reports the nation's weak housing market will likely keep the government in the mortgage business for a long time to come. U.S. taxpayers are currently on the hook for $138 billion. AP photo.

A weak start to the spring housing season, which could be underscored later this week by reports on sales of new and previously owned homes, is raising the prospect that the U.S. government will dominate the mortgage market for a long time.

The fragile housing market is complicating Washington's stated goal of dialing back its support after it has reduced stakes in the financial-services and auto industries. The slide in home prices in turn is weighing on the economic recovery, and it threatens to hamper a bipartisan push to unwind the emergency support policymakers enacted three years ago.

View Full Image

Falling prices are eroding consumer confidence and hindering job mobility by leaving millions of borrowers trapped in homes worth less than what they owe. A glut of bank-owned foreclosures has slowed residential construction, damping a major source of job growth. In some markets, the share of buyers paying in cash for homes has hit its highest levels in years, a red flag that prices could fall below "fair value" due to a lack of credit.

Fannie Mae and Freddie Mac, government-sponsored entities intended to foster mortgage lending, face a hard balancing act. They are trying to restore sound lending standards without choking off access to mortgages.

"We're not going to get a recovery in housing until the average borrower can get a mortgage," says Kenneth Rosen, a housing economist at the University of California, Berkeley.

The government took over Fannie and Freddie in 2008 to prop up the housing sector, and taxpayers are on the hook for $138 billion. The government can't walk away from those losses unless it's willing to sacrifice confidence in U.S. investments and risk even bigger losses for the housing market.

Together with the Federal Housing Administration and federal agencies, Fannie and Freddie are behind nine in 10 new mortgages. The firms don't make loans; instead, they buy them from lenders, repackage them for sale to investors as securities, and offer guarantees to make investors whole if borrowers default.

Getty Images

A glut of bank-owned foreclosures has slowed residential construction, damping a major source of job growth.

Congress has boosted the size of loans that the firms can buy, making it easier for borrowers in more expensive coastal housing markets to qualify for loans. But those steps have crowded out the private sector, leaving investors with fewer loans to buy and either hold or pool into securities that don't have government guarantees.

The Obama administration and Republican lawmakers have embraced efforts to encourage private investors into the mortgage market by curbing the government's role. Officials want to increase the fees that Fannie and Freddie charge lenders and reduce the maximum loan sizes eligible for government backing. The limits are set to decline modestly at the end of September to roughly $625,500 from the current $729,750 maximum in high-cost areas such as New York and Los Angeles.

But market advantages for government entities are only part of the problem. Stable housing prices, more than anything else, would make it easier for private lending to return.

Moreover, the economics of securitization don't work right now. Interest rates are low and investors are demanding high returns, which mean that mortgage-bond deals have made little if any profit for the firms that arrange them. Tight underwriting standards for "jumbo" mortgages—ones too large for government backing—have prompted banks to keep those relatively safe and profitable loans on their books.

"There's a misunderstanding in the market, an irrational belief that says private capital will emerge" if government-supported mortgage lending looks too expensive, says David Stevens, chief executive of the Mortgage Bankers Association who headed the FHA for two years until March.

Trying to "crowd-in" private money could be dicey if there aren't broader structural changes to rebuild confidence, so investors don't have to price in a hefty "uncertainty premium."

 "I'm sort of the champion of private capital, but I'm also not naïve," says Lewis Ranieri, the pioneer of the home-mortgage-bond market.  "At this point, it really just doesn't work because we don't have those certain fundamental issues resolved…. The damage done to the institutional and retail investor in this crisis was massive, and it was on many levels."

Amid the continuing gloom in the U.S. housing market, you can find small pockets of home-price stability -- communities that are actually recovering from the housing bust. WSJ's David Crook talks with Kelsey Hubbard about what those communities can teach today's home buyers and sellers.

To be sure, some academics say Fannie and Freddie should more aggressively reduce their role in supporting housing markets and test whether private investors will pick up the slack without substantially shocking housing markets.

Historically, most mortgages that weren't held on bank balance sheets were issued as securities and backed by Fannie, Freddie, or the FHA. During the past decade, investment and mortgage banks jumped in and began issuing their own mortgage-backed securities. These private-label bonds, issued by the likes of Bear Stearns and Countrywide Financial, comprised riskier loans.

Because the banking sector isn't large enough to hold more mortgages without expanding its deposit base, securitization markets are an integral part of any lending expansion. The private-label market seized up four years ago as investors faced big losses on investments that turned out to be far riskier than advertised. Just two new privately issued mortgage-bond deals have come to market since, one in April 2010 and another in February, and both consisted of mortgages to extremely qualified borrowers.

"Investors are on strike," says Joshua Rosner of investment-research firm Graham Fisher & Co. "The very basic blocking and tackling that needs to happen for a private market to come back hasn't been addressed." The mortgage market's paralysis stands in contrast to other securitization markets such as those for credit cards, auto loans and even commercial mortgages where deal volume has rebounded.

Investors are looking for standardized contracts that govern private-label deals, better loan disclosures and easily enforceable provisions to kick back loans that don't meet agreed upon standards. They also want to eliminate conflicts of interest in the collection of loan payments, known as mortgage servicing.

Lawsuits between bond insurers, investors and issuers over the soundness of the underlying mortgages, and disputes over whether ownership of mortgages was properly assigned, further underscore the market breakdown. "There's pretty much nobody that's not being sued," said Ryan Stark, a director at Deutsche Bank Securities, at an industry seminar last month.Regulators have addressed some of those problems with a flurry of rules, but some of them could also complicate a revival.

Policymakers are right to worry over indefinite government stewardship of the mortgage market, which makes laying the foundation for a functioning market all the more pressing. If it's lacking, housing won't exit a destructive cycle: one where prices fall because credit isn't flowing, and where credit doesn't flow because housing is weak.

*Courtesy of NICK TIMIRAOS  WSJ Online*