Juicy Estates: Mortgage Blog

Archive for May, 2009

Mortgage Rates Jump ~ Should You Lock?

In one of the worst days the mortgage backed securities market has ever witnessed the price of the Fannie Mae and Ginnie Mae 4.5% coupons dropped off a cliff pushing mortgage rates to their highest levels since November of 2008.  Many lenders issued 4 or 5 rates sheets during the course of the day with each subsequent rate sheet indicating higher rates.  

This melt down may adversely effect the Fed’s effort to stabilize the housing market by artificially keep mortgage rates low but we need to let the dust settle before panic sets in.  The Fed has at it’s disposal several tools which it can employ to keep mortgage rates at current levels.

By the end of the day 30 year fixed rates for well qualified buyers were at about 5.25% with no points.  To keep things in perspective prior to the Fed’s buying program the historic low for 30 year fixed rates was 5.125% so we are still in very good shape. 

If you or one of your clients is buying or refinancing a home it will be very important to contact your mortgage banker who should  proactively be managing your rate lock.

Can The $8,000 First Time Buyer Tax Credit Be Used as Downpayment?

Under a decision announced last week, the U.S. Department of Housing and Urban Development (HUD) will allow eligible first-time home buyers to use the tax credit authorized under The American Recovery and Reinvestment Act of 2009 during the actual home purchasing process.   However this Mortgagee Letter 2009-15 issued on May 11th appears to have been rescinded effective May 13th.  So in short, as it stands currently first time home buyers may not use the $8,000 tax credit as part of their down payment.  

If mortgagee letter 2009-15 is to be reinstated buyers and real estate professionals need to be aware that loan programs that would accommodate this development will not be available immediately.  There are many considerations that need to be addressed such as FHA and Conventional underwriting guidelines, secondary market saleability and pricing issues just to mention a few.

For now the down payment will need to come from the buyers own funds and/or as a gift from a family member when underwriting guidelines permit.

What Do You Get For $11.5 Billion?

If you are desperate for something to do you could read the entire Monthly Treasury Statement or you could just flip to page 27 for the juicy bits.  On page 27 you will note that the Treasury spent $11.5 Billion on Agency eligible mortgage backed securities in April.  Sounds impressive but in fact this is the least the Treasury has spent in any one month since November of 2008.

Why does this matter and what does it mean for mortgage interest rates and buyers of homes in Miami and surrounding areas of South Florida?  Well, in short it means a whole lot.  What the Treasury and Fed have done over the past 8 months is nothing short of miraculous.  By dolling out tax payer dollars in a measured and steady pace they have managed to artificially keep 30 year fixed rates between 4.5% and 5.00%.  Compare this with the historic low prior to the liquidity crisis of 5.25% and it is easy to see what effect this effort has had on both the mortgage and housing markets.  Of course some would argue that that tax payer dollars should not be used in this manner but I assure you that the alternative is far more painful. 

The historically low interest rates we are currently offering for both conforming and Jumbo mortgages in the Miami mortgage market have had and will continue to have a positive effect on the local housing market and economy as a whole.