2012-11-21 — ml-implode.com
Housing data has been the one bright spot of encouragement lately in the economy. While most data has flip-flopped, housing has been much more consistent. Continuous improvements in housing data is a result of low mortgage rates since consumers have decided to take action as affordable borrowing options are available. Although lending remains tight, many consumers have taken steps to improve their personal financial status. Even as the peak home buyer season is over, the National Association of Realtors reported that existing home sales increased 2.1% on a seasonally adjusted basis in October. This rise is 10.9% higher than in October of 2011 with single family homes up 9.6% above a year ago and condo and co-ops up 21.3% higher than the same time 2011. The National Association of Builders (NAHB) reported that builder confidence increased to the highest level since May of 2006. The NAHB/Wells Fargo Housing Market Index jumped 5 points to 46, the seventh consecutive monthly gain. Housing Starts increased in October by 3.6% to a seasonally adjusted annual rate of 894,000 units which is the highest since July, 2008 and 41.9% higher than last year at this time, according to the Commerce Department. On the other hand, heading into the winter months, the U.S. Census Bureau and the Department of Housing and Urban Development reported that resident construction permits fell 2.7% in October, but were still 29.8% higher than a year ago. Last week it was reported that the Mortgage Bankers Association's Weekly Mortgage Applications Survey showed improvements for the week ending November 9th. Application volume increased 12.6% on a seasonally adjusted basis. The Refinance Index rose 13% and the seasonally adjusted Purchase Index rose 11%. The refinancing share of total mortgage applications rose to 81%. Mortgage refinances have been popular this year as historically low mortgage rates have remained available. HARP 2.0 has also been popular and continues to help underwater borrowers refinance to lower mortgage rates without the need of an appraisal in most cases. Unfortunately, HARP 2.0 is not for everyone, but is available for those who have loans that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009.
What will happen with FHA mortgage volume in the coming year is anyone's guess. On Friday, FHA announced that the annual mortgage insurance premium will be increasing by 10 basis points or 0.1%. This amount will increase the monthly mortgage payment for the average borrower by $13. In the same announcement, FHA will not longer allow mortgage premium payments to be canceled which means that borrowers will be making these payments for the entire life of the loan. There's no doubt that many borrowers will refinance to conforming mortgages as soon as they are able to in order to rid themselves of this additional expense. These changes are being made in order to shore up the agency's insurance fund which has been seriously affected since the beginning of the housing crisis. Homeowners that are refinancing through the FHA streamline refinance at this time will not see these changes. FHA has been offering the streamline program with reduced upfront and annual mortgage insurance premiums to borrowers who have FHA loans that were endorsed prior to June 1, 2009. This special offer will continue until the end of 2013, but borrowers will have the benefit of the reduced fees for the life of the loan. Since this program requires a full year of on time mortgage payments, any borrower who is interested in obtaining this must make preparations now if they have had any late payments this year and as recent as October or November.
While housing is improving, the coming fiscal cliff could turn everything around if a compromise is not reached by the end of the year. With no agreement, taxes will increase which can result in an added burden on homeowners. The Mortgage Interest Deduction is included in this, as well as, the Mortgage Forgiveness Debt Relief Act which expires on December 31st. In the weeks ahead, everyone will be watching to see what progress, if any, has been made to avoid these events from happening. Fed Chairman Ben Bernanke stated that failure to address the fiscal cliff is a major threat that may send the country back into a recession while solving it could point to a very good year.
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