Mortgage Rates Rise to 3-Week Highs
Mortgage rates rose moderately
today, bringing them to their highest levels since September 23rd. Though the recent move higher has happened very gradually, it's also been fairly determined with none of the past five sessions seeing a move lower. Today's incremental dose of weakness was notable in that it was finally enough to unequivocally nudge 30yr fixed best-execution
back up to 4.375%, though buying down to 4.25% continues to make sense for some scenarios depending on personal preference.
Last week, we'd increasingly noted that rates had no incentive to move any lower without market participants getting their hands on the important Employment Situation Report--the most important piece of economic data each month and recently postponed due to the shutdown. Despite the lack of motivation to move lower, rates held their ground fairly well--remaining in a new range that was distinctly separate from that which characterizes most of the July-September time frame.
At current levels, we're beginning to blur the lines between these two zones of recent rate levels. The outlook will remain blurry until the shutdown ends and the important economic data is flowing again. It continues to be the case that we can't expect a meaningful move lower without a downbeat jobs report.
Mortgage interest rates have been falling over the past month back to the best levels of the year. This drop in mortgage rates has happened despite a strong rally in the stock market. Usually when stocks rally, mortgage rates get worse.
Many analysts think that the stock market is overbought and will sell off soon. If that were to happen then we could see mortgage rates move even lower. One thing working against mortgage rates is the Federal Reserve beginning to wind down their purchase of Mortgage Backed Securities (MBS). This program was started at the beginning of the year in an effort to tighten the spread on MBS and bring mortgage rates down. Originally the Fed was going to use $1.25 trillion dollars to buy mortgage backed securities by the end of this year. On Wednesday the Fed announced that instead of spending all $1.25 trillion by the end of this year, they would be slowing their daily purchases of MBS so that the funds are not gone until the end of March 2010. As the Fed buys less MBS each day in order to make the $1.25 trillion last longer and gradually exit the market, mortgage rates could begin to go up.
It is always hard to predict where mortgage rates are headed. In the current times it is even more difficult because of the unprecedented Fed involvement and the uncertainty about how much rates will increase up when the Fed exits the market.
The Obama Administration unveiled the final details of its "Making Home Affordable Program," which is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future. One of the initiatives in this program is aimed at helping responsible homeowners "refinance" their loans to take advantage of historically low interest rates. Here are some common Questions and Answers about the Refinancing Initiative in the program.
Am I required to pay PMI if I have less than 20% equity in my home? If your original loan had 20% equity and/or you do not currently pay PMI, then you are not required to obtain PMI under the new refinance initiative. In other words, you are eligible to refinance up to 105% of the value of your home and not be required to pay monthly PMI payments. If your current mortgage has PMI or was at 80% or greater than the value of the home, then you will still be required to pay PMI. This initiative provides a solution for borrowers with LTV's above 80% who currently may not be able to refinance because of mortgage insurance (PMI) requirements.
REFINANCING INITIATIVE Who is eligible? You may be eligible if: You own and currently occupy a one- to four-unit home. Your mortgage is owned or controlled by Fannie Mae or Freddie Mac. You are current on your mortgage payments. The amount you owe on your first mortgage is about the same or slightly less than the current value of your house. And, you have a stable income sufficient to support the new mortgage payments.
How do I know if my loan is owned or controlled by Fannie Mae or Freddie Mac? Simply call or email us. We'll help you determine if your mortgage is backed by Fannie Mae or Freddie Mac.
I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program? Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less, you may qualify. The current value of your property will be determined after you apply to refinance.
If I am delinquent on my mortgage, do I still qualify for the Refinance Initiative? No. But the good news is, you may qualify for the Modification Initiative. Contact us to discuss your situation and review your options.
I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable? As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for the Refinance Initiative.
Will refinancing lower my payments? That depends. If your interest rate is much higher than the current market rate, you would likely see an immediate reduction in your payment amount. However, if you are paying interest only on your mortgage, you may not see your payment go down. BUT... you will be able to avoid future mortgage payment increases and may save a great deal over the life of the loan.
Will refinancing reduce the amount that I owe on my loan? No. Refinancing will not reduce the principal amount you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
Can I get cash out to pay other debts? No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.
How do I apply for the Refinance Initiative? Call or email us today to discuss your specific situation and to examine your options. If this plan is right for you, we can begin working on your refinance immediately. As part of the discussion, we may need to look at the following information: Recent pay stubs to help determine your gross (before tax) household income. Your most recent income tax return. Information about any second mortgage on your house. Account balances and minimum monthly payments due on all of your credit cards. Account balances and monthly payments on all other debts, such as student loans and car loans.
As always, if you have any questions or would like to discuss how this may specifically impact you, we'd be happy to sit down with you. Just call or email us to set up an appointment.