California Current

on December 25, 2008

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As mortgage rates continue to fall in California, mortgage application activity has soared through the roof. According to the Mortgage Bankers Association, the number of applications shot up 48 percent. Refinance applications saw an increase of 62.6 percent, while purchase applications rose 17.7%. But, as 30 year fixed mortgages near the 5 percent marker, consumers ought to be careful when they go mortgage hunting.

Here are three ways you can protect your credit [FICO score] while trying to take advantage of these historically low mortgage rates.

Limit the Amount of Mortgage Credit Inquiries

Although it’s smart to shop around for your mortgage, it’s best not to pass around your social security number as freely. Aside from identity theft issues, providing your social security number to too many people could result in having your credit history pulled more than you like. Unfortunately, the credit bureaus take notice of these multiple inquiries and often ding consumer’s credit scores by a few points.

Shop Around in a Timely Fashion

Different mortgage lenders and different mortgage brokers operate in their own ways, but one common practice is that they’ll ask to pull your credit history. Aside from your social security number, you’ll want to keep your eye on the calendar and keep track of your mortgage timeline. Credit bureaus are likely to excuse multiple inquiries if they are within a reasonable time period (2 to 4 weeks). As an example, having four credit inquires in one month is preferable to having one credit inquiry each month for four months.

Get a Copy of Your Credit Report

To avoid the hassles of sharing your social security number and multiple inquires; get a hold of your credit report as soon as you can. Most lenders and brokers are interested in seeing your recent credit score on paper. With your own credit report on hand, you can provide them this information without having to deal with another credit inquiry. Keep in mind that when you finally choose your mortgage lender, they’ll likely have to pull their own credit report for authentication purposes.

While mortgage rates are certainly attractive, keep these tips in mind because keeping your credit in tact is more important than ever.

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Three Things to Consider Before Refinancing

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on December 22, 2008

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As mortgage rates reach all time lows here in California, many homeowners are considering a refinance of their existing home loans. While dropping mortgage rates may be music to the ears, there are a few things to consider before refinancing.

1. How Long To Recoup The Costs of Refinancing
Closing costs and fees are a part of any refinance transaction, so it’s important you factor these costs into your savings strategy. In most cases, your mortgage broker or lender should detail your estimated monthly savings as well as the estimated closing costs and fees. A simple calculation will let you know how many months, or years, it will take to recoup the costs of refinancing. Think about your short term and long term plans for your home, and determine if the costs of refinancing makes sense. Ideally, your refinance should pay for itself within a few years, and even less if you are planning to sell or move.

2. Do You Have Enough Time To Refinance?
Refinancing could just be the best Christmas present you give yourself this year, but keep in mind the refinancing process could put a damper on your holiday season. In general, for single family owner occupied homes, the refinancing process lasts anywhere from three to six weeks. If you foresee any extenuating circumstances such as poor credit, insufficient documented income, or sliding home equity, don’t be surprised if the process takes even longer. The credit market in California is still quite fragile, and it’s not uncommon for many homeowners these days to face trouble when refinancing. But, if these mortgage rates are just too good for you to pass up, just be sure to set enough time during this holiday season.

3. Evaluate Your Home’s Equity And Then Consider Your Options
In California, the most troubling obstacle for homeowners has been the widespread freefall of home values. During the refinance process, lenders require an appraisal of your home and then evaluate your home’s loan to value ratio. Before considering all your mortgage options, make sure your home has enough value to qualify for a refinance. Although select lenders may make special exceptions, most will like to see at least twenty percent equity in your home. If refinancing to a cheaper mortgage is your top priority, pay special attention as a lower risked home will qualify for better mortgage rates.

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California Mortgage Rate Weekly News Roundup

Published

on December 19, 2008

Find More Tips About Refinancing Your Mortgage in This Market

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Mortgage Interest Rates Drop To Record Levels
Interest rates on 30 year fixed home loans finally sunk below the five percent barrier; with some lenders offering rates as competitive near 4.5 percent. Even at such levels, analysts and brokers still expect slight improvements in the near future. As the Fed aims to restore confidence in mortgage backed securities, homeowners around the nation have been seeing record declines as 30 year fixed mortgages were close to 6 percent only a few months ago.

Rates Draw In Surge of Homeowners Looking to Refinance
As homeowners continue to hear of the recent decline in mortgage rates, a sector that has taken the backseat during this housing crisis has begun to emerge. While purchase activity and short sales have been prevalent, homeowners looking to refinance have not had much incentive given the stricter loan requirements. But as rates improve considerably, homeowners around the nation and in California have been lighting up the phones of mortgage brokers and lenders. As rates continue to improve, many homeowners have been seeing this as a great opportunity for monthly savings.

Troubled Homeowners in California Still Struggling
Recent findings have shown that troubled homeowners in California who have managed to avoid defaulting still remain at risk. Although laws were passed in California to properly notify those in default, and programs were setup to modify troubled home loans, the findings show that many homeowners only stall the default process. While they manage to avoid foreclosure for a short period, many of these homeowners end up in the same position down the road.

Now, for home values and market confidence, this is certainly disappointing news. But, from a logical standpoint, many of the troubled homeowners have been the folks who took advantage of loose lending and toxic mortgages. If we can agree that lending in the past few years was too lose, it’s almost expected to see a portion of these “homeowners” getting filtered out.

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How Did The Historical Fed Rate Cut Affect Your Mortgage?

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on December 17, 2008

in Home equity

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For a while it seemed like the Federal Funds target rate had no where to go but up. Well, after today’s move to slash the target rate to a historically low zero to .25 percent, we’ve really hit a bottom. (And no, as crazy as things may seem, the Fed Rate cannot go into negative territory)

Cheaper Home Equity Loans and Traditional Mortgages
Normally, when the Federal Reserve makes a change to this target rate, the most popular interest rates to be affected are on home equity loans, auto loans, and credit card loans. But given this historical rate cut was everything but ordinary, the effect it had on the mortgage market followed suit. As stocks soared after the news of this of rate cut, interest rates on traditional 30 year fixed mortgages also improved significantly.

Furthermore, as the interest rates on mortgage rates continue to improve, analysts still see more room for improvement on lender’s rate sheets. The end result has been borrowers and potential homeowners lighting up their mortgage broker and lender’s phone lines.

Mortgage Backed Securities Improve After Fed Statements
After a statement to purchase “large quantities of agency debt and mortgage backed securities“, the Fed also added that it would continue such actions as long as the conditions called for this response. For those of you keeping a close eye on mortgage rates, mortgage backed securities are one of the many followed indicators to evaluate trends and predictions for future mortgage rates.

If you’re unsure how the Fed’s Target Rate affects your mortgages, you can view this post which explains the correlation to interest rates on home equity lines of credit. As for traditional mortgages, the effect is usually not as direct, but today, homeowners were fortunate to see an improvement in rates quite quickly.

If you’re considering a home equity loan because of this recent rate drop, here are some resources that should help you shop around for a HELOC

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Mortgage Rates Continue To Drop, Individuals Still On The Sidelines

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on December 14, 2008

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For the sixth week in a row, mortgage rates on 30 year fixed loans improved as interest rates continued to fall below the 5.5% marker. About two months ago in October, homeowners were looking at about 6.5% for a similar 30 year fixed mortgage. Many are wondering if lower mortgage rates will be the cure for this struggling housing market, but over the past few days, and interesting effect has occurred. As homeowners welcome these lower mortgage rates, individuals are actually staying on the sideline and putting their mortgage plans on hold just in case rates drop even further.

One issue that has been heavily speculated is the possibility of conforming loans from Fannie and Freddie dropping below the 5% mark. This move would certainly stir up mortgage activity, but the recent anticipation has ironically slowed down current mortgage activity.

As potential homebuyers sit on the edge of their seats, waiting for these heavily discounted mortgage rates, many have put ongoing deals on hold in hopes of getting a better deal. Although many might be willing to wait a week to see if mortgage rates drop by almost a full percentage point, it’s important that you don’t lose sight of time and the deal in front of you.

Then there’s also news of a 4% mortgage rate from James Lockhart himself-of course, no specific timeline was given. Although nothing has happened yet, the anticipation is torturing many homeowners who are currently on the fence with their mortgage decisions. One issue worth noting is that it is currently unclear whether these lowered mortgage rates will be offered strictly to new purchases, or to both purchases and existing mortgage refinances. Purchases below $417,000 should see the most benefit as they meet the confirming guidelines of Fannie and Freddie. With homebuilders and banks stuck with large inventory of homes, the incentive to discount purchase interest rates has taken top priority.

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Mortgage Tip - Keep An Eye On Unemployment Trends Around Your Home

Published

on December 11, 2008

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So far, many of the mortgage problems that we’ve been facing have been related to weak lending and toxic mortgages. Unfortunately, one of the issues emerging as the new catalyst for housing troubles is the rising unemployment rates.

Last week, the U.S. Labor Department released its monthly report showing “the worst monthly job losses in a generation“. One of the serious concerns is that these unemployment rates could trigger the next foreclosure wave to occur.

California Unemployment Rates - 8.2 Percent in October
In California, we’re facing two serious issues. First of all, the statewide unemployment rate rose to 8.2 percent last month, compared to last year’s 5.4 percent. Secondly, California continues to have serious budget issues which threaten the future outlook of many state employees.

Inside the report, the jobless rates for college-educated individuals rose from 2.2 percent to 3.1 percent. In addition, the jobless rate for individuals with technical backgrounds also rose from 3.3 percent to 5.5 percent. In a SacBee column, the chief economist for the Mortgage Bankers Association correctly noted that these are the folks most likely to own a home.

Home Buying Tip for Bargain Hunters
For those of you considering a home in this market, I’m sure that most of you have shifted to some degree of the bargain-hunting mode. One of the serious concerns for these bargain hunters has been timing the market and finding the best deals on the surplus of discounted homes. With these current unemployment rates and future expectations, it’s a worthwhile consideration to examine the unemployment trends surrounding your home’s area.

As more and more of these Prime and Alt-A mortgage holders face problems, it’s not just the low-income housing neighborhoods that will face more foreclosures. As for timing the market, be wary of any neighborhoods that seemed to have leveled off. With the recession expected to get worse, it wouldn’t be surprising if there was a momentary pause as we shift from troubled toxic mortgages to more serious issues involving the problems of unemployment.

On a side note, keep in mind that today’s mortgage lenders will be looking for job stability. In addition to stricter mortgage guidelines, prospective homeowners need to ensure their employment history remains in tact. In general, most mortgage lenders like to see you with your current employer for at least 2 years; and the same goes for your income. If you’ve changed jobs within the last two years or have had inconsistent income, reinforcing your other mortgage qualifications would be a good move. Compensating factors such as the size of your down payment or the amount of assets you hold could help convince your mortgage lender that you are credit worthy.

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Pending Home Sales Decline, Analysts Interpret Data as Semi-Stable

Published

on December 10, 2008

The Full Report from the National Association of Realtors can be seen here.

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National Index of Pending Home Sales Numbers Decline
This Tuesday, the National Association of Realtors released their report of pending home sales statistics for October. According to the index, the numbers posted a .7% decline compared to September’s results, and a 1% decline compared to last year’s October.

Even with the slight decline in home sales activity, analysts commented that the results were actually “remarkably stable…despite the turmoil in the economy”. Remember, just a few months ago in August, there was a momentary spike in activity as mortgage conditions slightly improved. With speculation of mortgage interest rate deductions, we may just see another spike in home sales activity quite soon.

California, Western Regions, and Select Areas Post Positive Numbers
Despite the decline in overall statistics, a few areas posted positive numbers in this October’s report. The Western Region actually showed a 17.4% improvement compared to the activity levels of last October. Specifically, the association made note of these healthy gains in areas such as California, Las Vegas, and also Florida.

While the numbers may show stability and healthy gains, it’s also important to remember what’s driving these activity levels. In parts of California for example, we’re home to some of the steepest price declines throughout the nation. As a result, it’s no wonder that bargain hunters and investors are coming from every angle to pick up some of these properties throughout California. So while these numbers show positive gains in terms of sales transactions and activity, it’s also worth noting the correlation between these “gains” and the hardest-hit markets in terms of price declines.

”¹The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.”

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Could Lower Mortgage Rates Be In the Future For California’s Homeowners?

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on December 8, 2008

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Lower 30 Year Fixed Rates
If the Treasury Department follows through on expectations to buy additional mortgage backed securities from Fannie and Freddie, analysts are expecting mortgage rates to drop a full percentage point. This would mean that the interest rate for a 30 year fixed mortgage could near the 4.5 percent levels - a possibility that would certainly increase mortgage loan activity.

The anticipation is based on the idea that the Treasury is hoping to restore confidence back in mortgage backed securities, which would lead to the plunge in mortgage interest rates. As banks would feel more confident in making more loans, more consumers would also reap the benefits of the government’s help. If you’ve been following the recent $700 billion government bailout, you’ll understand why so many consumers have been outraged that most of the help has been directed to the financial companies.

California Homes and Jumbo Financing
For residents and potential homeowners in California, one thing to remember is that not everyone will be able to reap the benefits. Due to Fannie and Freddie’s loan limits, the two numbers to keep in mind are $417,000 and $625,500. These will be the conforming and jumbo loan limit restrictions during 2009 respectively. Currently, the max loan limit may still be $729,750 for some lenders, but that will soon expire on December 31^st. These loan limits determine whether or not your mortgage can be guaranteed by Fannie and Freddie. For those above the limits, it may be harder to find financing at such discounted mortgage rates.

A Word of Caution
I know 4.5 percent mortgage rates will be enticing, but it’s also important to make sure you don’t get overexcited. While the rate and payment savings would be hard to ignore, a significant problem that we are seeing today are people stuck with homes that couldn’t afford in the first place.

In general however, lower mortgage rates will be a welcomed change as it would help stir up activity in our slumping housing economy. The decision is expected to come out soon, and many homeowners and potential buyers have already held back on their housing decisions. The change won’t cure market overnights, but it will bring more of the government “bailout” directly to Main Street - a move that’s been long awaited by anxious consumers.

If you need more information regarding some of these interest rate changes, try out our mortgage broker directory to find an agent in your area.

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Latest California Mortgage Statistics: Fraud and Delinquencies Increase as Home Prices Decrease

Published

on December 5, 2008

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Mortgage Fraud Increases as Lending Standards Tighten
According to the latest report from the Mortgage Asset Research Institute, California trailed right behind Florida when it came to mortgage fraud. As mortgage lenders tighten up qualifications, many individuals have resorted to fraudulent acts and other methods to get by. Compared to last year, the number of mortgage fraud related incidents has increased by about 42 percent according to the report. The most common cases of fraud involved the misrepresentation of the borrower’s name, income, employment history, and assets.

A Few Tips to Help You Avoid Mortgage Fraud

- Be wary of lenders or mortgage brokers who promise results which sound too good to be true. These individuals could either be over promising you results to simply draw in your business, or may resort to fraudulent methods to deliver on these promises.
- Ask your mortgage lender what the qualifications are needed for the specific loan scenario; compare these requirements to your loan application and see if they match up.
- Don’t get talked into committing mortgage fraud. Don’t let your mortgage broker convince you it’s OK-more importantly, don’t let yourself convince you it’s OK.

Late Payments and Delinquencies Rise Throughout the Nation
According to the Transunion credit reporting agency, the amount of individuals late on their mortgage by at least 60 days shot up considerably in this third quarter compared to last year. Meanwhile, the statistics for California showed a 5.8 percent delinquency rate-the third highest in the nation (Florida and Nevada hold the top two spots respectively).

California Home to Some of Biggest Price Declines in Nation
Here is an excerpt of the top 10 areas with the steepest price declines (4 out of 10 spots belong to California):

#1) Oakland-Fremont-Hayward, CA -29.07%
#2) Riverside-San Bernardino-Ontario, CA -28.56%
#3) Los Angeles-Long Beach-Glendale, CA -28.46%
#7) San Diego-Carlsbad-San Marcos, CA -24.90%
The full list can be seen here.

Although California is home to some of the largest price declines, we can’t forget that it also held some of the most inflated “bubble” prices seen in years. In the same manner, the delinquencies that we’re seeing are the combination of loose lending and anxious buyers who couldn’t really afford a home in the first place. As for the mortgage fraud, mortgage lenders and banks have tightened up their guidelines so much that individuals are more desperate than ever-but still certainly no excuse.

I know it must seem like all bad news, but something to consider is that all of this was expected in one way or another. On a positive note, the shift we’ve taken towards tighter lending guidelines may make it harder to refinance or purchase a home, but in the end, it will preserve homeownership to those who can actually afford it. As for the steep price declines in California, it’s unfortunate for current homeowners who have borrowed within their means, but it’s been a necessary move if we expect to return back to the realistic home prices of before.

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Say It Ain’t So - Are Prime Borrowers Not Immune To The Housing Crisis?

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