Tom Griffey's Real Estate Market Watch and Beyond: December 2014

Monday, December 29, 2014

Sunday, December 28, 2014

The average 30-year fixed rate mortgage (FRM) and the 15-year fixed rate mortgage (FRM) rates dropped during the week ending December 5, 2014. The 30-year FRM rate averaged 3.82% and the 15-year FRM rate averaged 3.03%, the lowest they’ve been in over a year. FRM rates are expected to remain around their current level for several months, then increase with bond rates in anticipation of rising short-term interest rates engineered by the Federal Reserve, likely towards the end of 2015 or later.

The 10-year Treasury Note rate dipped just slightly, closing at 2.24% on December 4, 2014. Lenders use the 10-year T-Note to determine a homebuyer’s mortgage rate. The difference between the note rate and the 10-year T-Note rate represents the lender’s risk premium, which covers potential losses due to mortgage default. Today’s spread between the 10-year T-Note and 30-year FRM rate is 1.68%, well above the historical difference of 1.4%. Thus, though mortgage rates have dropped, the elevated spread indicates homebuyers are still overpaying for mortgages while lenders rake in the profits from increased risk premiums.

As of November 2014, the average ARM rate increased to 2.75%, above its low point experienced in May 2013. ARM rates will rise when the Federal Reserve raises key interest rates. ARM-use has already risen due to increased FRM rates and home prices rising faster than the rate of inflation (driven by speculation), causing buyers to take on more risk to extend their purchasing power.

Saturday, December 27, 2014

5 Simple DIY Home Fixes

Tuesday, December 23, 2014

3% Down Payments May Be Game Changer

REALTOR MAGAZXINE | DAILY REAL ESTATE NEWS | TUESDAY, DECEMBER 09, 2014

Mortgage giants Fannie Mae and Freddie Mac announced Monday that first-time home buyers can now qualify for loans with down payments as low as 3 percent. That will expand credit for qualified home shoppers who may have been sidelined the last few years because of higher down-payment requirements, housing analysts say.

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Freddie Mac launched Home Possible Advantage, a conventional mortgage with a 3 percent down-payment requirement geared to low- and moderate-income borrowers. It's a conforming conventional mortgage with a maximum loan-to-value ratio of 97 percent. To qualify, first-time home buyers are required to participate in a borrower education program.

With Fannie Mae's 3 percent down-payment offering, borrowers must still meet standard eligibility requirements, including underwriting, income documentation, and risk management standards. Any buyer can take advantage of Fannie's loans as long as at least one co-borrower is a first-time buyer. The loans will require private mortgage insurance.

"Our goal is to help additional qualified borrowers gain access to mortgages," says Andrew Bon Salle, Fannie Mae executive vice president for single-family underwriting, pricing, and capital markets. "This option alone will not solve all the challenges around access to credit. Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage."

The National Association of REALTORS® applauds the move by the Federal Housing Finance Agency, which oversees Fannie and Freddie.

NAR said in a statement that the action by FHFA demonstrates its "commitment to home ownership by serving creditworthy borrowers who lack the resources for substantial down payments, plus closing costs, with a new 3 percent down-payment program that mitigates risk with strong underwriting. The new program ensures that responsible home buyers will have access to safe, affordable mortgage credit."

Source: Fannie Mae and Freddie Mac