Danny Salas
FHA Increasing Mortgage Insurance Costs
HUGE FHA Announcement
The Federal Housing Administration (FHA) has announced that they are close to meeting their maximum capital ratios. Since there are no other real alternatives to Fannie Mae and Freddie Mac financing options, other than FHA loans, they now contribute to approximately thirty percent of the market share of new loans. Therefore, FHA has announced that they will be increasing their mortgage insurance requirements. Currently, the Mortgage Insurance Premium (financed into the loan amount) is 1.75% of the loan amount. This will increase to 2.25%. Also, the currently monthly Mortgage Insurance calculation is 0.55% of the loan amount, divided by 12 months. This fee will increase, as well, however, that factor is being negotiated. Also, any borrower, with an FICO score less than 580, will have to put 10% down.
More to Come…
Chico, CA Interest Rates Market Report – Economic Influences – January 20, 2010
Who Will Win...Bears or Bulls?
Who Will Win...Bears or Bulls?
Push Me-Pull You
Remember the Push Me-Pull You in Dr. Dolittle? I’d imagine that it struggled with what direction to take. That’s what’s happening with interest rates, right now. We are moving back and forth above and below the 200-Day Moving Average. Yesterday, we managed to climb above this very important level, to only end the day below it. Remember, when bond values move down, yields, and therefore rates, move up. Today, we’ve managed to climb above this trend line, but it will be interesting to see where we end up. It we can muster enough strength to stay above this line, it could set the state for lower rates, over the next couple of weeks.
CPI Helps Rates
The Core Producer Price Index (PPI) came in at expectations at a reading of 0.0%. The PPI came in at 0.2%, a little hotter than expected. This would generally move rates slightly higher, however, since the readings were far below November’s readings of 1.8%, the bond traders took this news quite kindly.
Housing Starts / Permits
Housing starts came in at 557,000. For the year, housing starts dropped 38.8%, however, the future signs look promising, as new housing permits came in a 653,000 and were only expected to come in at 580,000. This is the highest New Housing Permits number since October of 2008.
HUGE FHA Announcement
The Federal Housing Administration (FHA) has announced that they are close to meeting their maximum capital ratios. Since there are no other real alternatives to Fannie Mae and Freddie Mac financing options, other than FHA loans, they now contribute to approximately thirty percent of the market share of new loans. Therefore, FHA has announced that they will be increasing their mortgage insurance requirements. Currently, the Mortgage Insurance Premium (financed into the loan amount) is 1.75% of the loan amount. This will increase to 2.25%. Also, the currently monthly Mortgage Insurance calculation is 0.55% of the loan amount, divided by 12 months. This fee will increase, as well, however, that factor is being negotiated. Also, any borrower, with an FICO score less than 580, will have to put 10% down.
Locking Advice
Today, we ride it out! There’s food at both sides of the Push Me-Pull You, so let’s play it out, to see which side wins! It could be a nice opportunity. If the “bear” side starts to win, and rates start to move under the 200-Day Moving Average. It might be a nice opportunity to lock in…
Related Must Reads
Moving Averages and Trend Lines…Why They’re Important
How FHA Loans Work
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Chico, CA Interest Rates Market Report – Economic Influences – November 10, 2009
We Bounced Right Off The 25-Day Moving Average
President Obama Signs Extension of Loan Limits
Conforming loan limits, as well as FHA loan limits, will remain at their higher levels through 2010. This will help keep some liquidity in the markets as Fannie Mae and Freddie Mac may still purchase loans with amounts up to $417,000 in most areas of the United States. Other “high cost” areas will allow the Guaranteed Security Enterprises to purchase loans with amounts up to $725, 750.00. And FHA loan limits will remain at $400,000 in Butte County.
$40 Billion 3-Year Treasury Note Auction
Wow…$40 Billion! The Auction fared quite well, actually. It helped keep rates really low. My concern would be with the longer termed Treasuries and the riskier investment those can pose. It will be interesting to see how the rest of the Auction throughout the week will fare. Foreign participation has been fairly respectable. It’s understood that the more the foreign market participates, the stronger the dollar will remain. The stronger the dollar, the more we can purchase foreigners’ exports.
Locking Advice
It’s a great time to lock. We’ve seen Mortgage-Backed Securities touch the 25-Day Moving Average. Actually, later this morning, we were above that level of resistance, however, we come back down and are sitting on it, as I write this blog. If you don’t lock, and float into the week, you had better be prepared to lock, quickly. I don’t see a lot of economic data that will push us up, over this 25-Day Moving Average level of resistance.
Related Must Reads
What Lead To Higher Conforming and FHA Loan Limits?
Why Be Leery of Yesterday’s Treasury Auction
How Levels of Resistance Effect Rates
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New FHA Record: 36% of Market Share
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In news that should come as no surprise to anyone, the Mortgage Bankers Association is reporting that in June government-insured loans – meaning FHA and VA financing, but mostly FHA loans – represented 36 percent of all loan applications, the largest market penetration since 1990. In comparison, the lowest recorded market share was 5.8 percent in August 2005. “A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans,” said Orawin Velz, MBA’s Associate Vice President of Economic Forecasting. “In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance.” Applications UpThe government-insured (FHA and VA loans) share of mortgage applications was 35.9 percent in June 2009, the highest level since November 1990, according to the Mortgage Bankers Association. Based on data from MBA’s Weekly Mortgage Applications Survey, the government-insured share jumped from 25.7 percent a month earlier and 27.0 percent in June 2008. Since the MBA survey’s inception in January 1990, the lowest recorded share was 5.8 percent in August 2005. The government-insured share of purchase applications in June was 38.6 percent, up from 27.8 percent one year ago. The government-insured share of purchase applications has averaged 36.6 percent to date in 2009, compared to an average of 21.8 percent during the same period in 2008. The low point was in August 2005 when it was 6.8 percent. “A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans,” said Orawin Velz, MBA’s Associate Vice President of Economic Forecasting. “In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance.” “While the government-insured share of purchase applications has remained elevated, the government-insured share of refinance applications has been volatile. The share hit a record high of 38.4 percent in October 2008. As mortgage rates fell sharply between mid-November through early May, refinance activity surged for conventional loans. This surge in conventional refinance applications dominated the market, causing the share of FHA refinance applications to fall below 20 percent for most of this year. Recent increases in mortgage rates have caused conventional refinance activity to drop much more sharply than government-insured refinance activity due to a combination of credit and LTV requirements. As a result, the government-insured share of refinance applications climbed to 33.6 percent in June,” Velz said.
FHA vs. Convnentional: Realtors you make the call!Many banks have tightened up standards on their mortgage loans in the current lending enviorment. We are seeing a record number of homebuyers coming to us that sought us out because their bank turned them down and did not offer FHA financing options. Did you know that an FHA loan can be obtained with a credit score as low as 620? Many banks are not lending borrowers with a credit score under 680 and some even require a 740 credit score, certainly for the best terms. FHA offers great rates with reduced monthly mortgage insurance, more liberal debt to income allowance, only a 3.50% down payment requirement and up to a 6.0% seller contribution toward your buyers closing costs. This is why we are confident that FHA is the way to go if your buyer is putting down less than 20%, even if they have excellent credit score. Today, many banks are not offering conventional loans with private mortgage insurance for borrowers under 740 with less than 20% available for the down payment. This makes FHA Insured loans loans the only alternative for a homebuyer to obtain financing. Below is a comparison of FHA and Conventional financing requirements for a $300,000 sale price on a single family residence in Butte County, California.
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Daniel C. Salas CA DRE License #: 01167493 Access Real Estate Lending is a dba of American Pacific Mortgage Corporation CA DRE License #: 01215943 An Equal Housing Lender