The week that was: By the end of the week mortgage rates and treasury rates were basically unchanged. Now looking for mortgage rates to hold between 5.00% and 5.37% for the near term, that said, the technicals are now slightly bearish. Estimates for Loan Volume for 2010 & 2011 - The MBA is out with their revised estimates for loan volume next year and the next; the estimates have been revised lower. In 2010 the new estimate is $1.556T frm $1.62T previously thought; in 2011 to $1.482T frm $1.608T. Economy News - Weekly…continue reading →
If you are planning to buy a Condo in San Jose or other parts of the Bay Area and planning to get an FHA loan keep reading. FHA has made some major changes to their condo guidelines and they go into effect as of Nov 2nd, 2009. Some of the highlights:
- Currently lots of condominium projects in the bay area is approved by FHA. However, any project approved prior to October 1, 2008 loses it's pre-approval and must re-apply.To find a list of approved projects, visit the HUD linkhttps://entp.hud.gov/idapp/html/condlook.cfm. Make sure under approval method pick the option - "HRAP/DELRAP". Thats the new HUD review and approval process.
- Spot approvals, where a project could be approved for an FHA loan even if the entire project was not approved by FHA, is not allowed anymore. And though some lenders will have the authority to do so, because of the enormous liability attached most likely they would refrain from doing it. Which means all project approvals will have to go to FHA directly.
- No more than 30% of the units can have FHA financing
- >50% of the units must be owner-occupied.
- No single entity may own more than 10% of the units in a project
- No more than 15% of owners can be delinquent on their HOA dues.Also, no pending litigation against the HOA, it's officers or directors is allowed.
- The HOA must also provide evidence of the project's appropriate hazard, liability and flood insurance.
- For new constructions, at least 50% of the units in the project must have been sold.
- But in my opinion the deal breaker could be this condition - A current reserve study must be performed to assure the HOA has adequate funds available for the funding of capital expenditure and maintenance. With so many HOAs running into capital reserve issues recently, this condition alone could be the #1 reason why a lot of projects may not get approved.
The week that was: Everything was ticking along fine in the bond and mortgage markets until Thursday afternoon when the 30 yr bond auction results saw much less demand than was expected. The first time in a few weeks the markets were slapped down on the belief there was no end in sight for demand of US treasuries. Mortgages however held their ground on Thursday but Friday the mortgage market was slammed hard, as always following the lead of the treasury markets; mortgage prices fell 29/32 by the end of the day Friday; the yield on mortgages spiked back over 5.00%. Freddie Mac's weekly Primary Mortgage Market Survey® reported 30-year fixed-rate mortgage (FRM) averaged 4.87 percent with an average 0.7 point for the week ending October 8, 2009, down from last week when it averaged 4.94 percent. Last year at this time, the 30-year FRM averaged 5.94 percent. The last time the 30-year FRM was lower was the week ending May 21, 2009, when it averaged 4.82 percent. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.35 percent this week, with an average 0.5 point, down from last week when it averaged 4.42 percent. A year ago, the 5-year ARM averaged 5.90 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in 2005. (more…)
Fannie Mae will change underwriting guidelines for conforming loans for San Jose and rest of the Bay Area. They are doing this to reduce their overall risk. Some of the changes announced recently and going into effect on the weekend of December 12, 2009 further tightens some of the guidelines. Here are the highlights: Credit Score: All Fannie Mae loans whether underwritten electronically or manually will now require a 620 credit score minimum. There are very few exceptions. Mortgage Insurance coverage: Borrowers loan-to-value exceed 80 percent of the property value now…continue reading →
The week that was: A volatile but good week for the rate markets. Mortgage rates fell to their lowest levels since last April. Treasuries continue in demand from foreign central banks and domestic investors; likely some of the buying is associated with new concerns that the economy isn't on the fast track of recovery as markets were expecting recently. Economic data flowing last week were generally worse than estimates, shaking the confidence that the V shaped economic bottom may be more a W shaped recovery. Unemployment nationwide rose to 9.8 percent in September from 9.7 percent the previous month. That's a 26-year high. Freddie Mac's Primary Mortgage Market Survey® reported that 30-year fixed-rate mortgage (FRM) averaged 4.94 percent with an average 0.7 point for the week ending October 1, 2009, down from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.10 percent. The last time the 30-year FRM was below 5 percent was the week ending May 28, 2009, when it averaged 4.91 percent. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.42 percent this week, with an average 0.6 point, down from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.00 percent. Note that these rates are for conforming loan amount up to $417,000. Loan amounts higher than that typically have higher interest rates. (more…)
The week that was: FNMA 4.5% coupon went up 53 bps for the week, improving mortgage rates. August durable goods orders fell 2.4%, largest decline for this series since January. Existing home sales dropped 2.7% in August on a seasonally-adjusted basis the first decline in five months; but the University of Michigan final index of consumer sentiment increased to 73.5 in September, the highest level since January 2008.
FOMC Policy Statement: Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.Treasury successfully sold $112B of notes with relatively strong demand. Demand for US securities, particularly US Treasuries, is the global bet the economies of the world are on the recovery path. No one is completely sure; so the best bet in uncertain times based on historic thinking is to park money in the safest conceivable place; US bond markets. (more…)
In it's announcement on Friday, FHA tightened the credit standards for it's Streamline Refinancing Program. So if you currently have an FHA loan on a San Jose home and want to refinance into another FHA loan, you will be subjected to new parameters starting January 1, 2010. Below are the highlights per FHA mortgagee letter issued on 9/18/2009. A.Seasoning At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced. B.Payment History 1)For mortgages with less than a 12 months payment history, the…continue reading →
Data Quick reported that Bay Area home sales bucked the seasonal norm and fell last month from July, though they remained higher than a year ago for the 12th consecutive month. The region overall median sale price also declined as a greater portion of sales occurred in more lower priced areas. A total of 7,518 new and resale houses and condos closed escrow in the nine-county Bay Area last month. That was down 14.3 percent from 8,771 in July and up 4.0 percent from 7,232 in August 2008, according to MDA DataQuick of…continue reading →
The week that was: Markets were treated to comments all through the week that the recession is over; Bernanke and Warren Buffet got the ball rolling at mid-week and added more conviction that worst is behind the economy. Even though Bernanke and many others have repeatedly said growth will be slow and likely the "new normal" will keep unemployment high for the next couple of years. Freddie Mac weekly results of its Primary Mortgage Market Survey® reported that 30-year fixed-rate mortgage (FRM) averaged 5.04 percent with an average 0.7 point for the week…continue reading →
FHA is implementing HVCC for San Jose & rest of the Bay Area loans. Yes, it's finally happening. When I received the mortgagee letter yesterday from HUD, I must say I was stunned. Only few weeks back FHA commissioner had mentioned that he had no intention of implementing HVCC for FHA insured mortgages. But of all the changes that were announced to tighten the credit standards I personally think that this change is most critical and far-reaching. Here are the highlights:
- Mortgage brokers and commission based lender staff are prohibited from ordering appraisals. FHA does not require the use of Appraisal Management Companies or other third party providers, but does require that lenders take responsibility to assure appraiser independence. Irrespective of whether they call it HVCC or not in letter, in spirit it's exactly that.
- FHA appraisers are to be compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. AMC's can add management fees to appraiser's compensation. If I understand this correctly, this is good news for Appraisers since they will be not be compensated less. However, the borrowers will end up paying higher since they will also have to cover for AMC's management fees on top of appraiser's fees. (more…)