Will mortgage rates rise or fall?

It depends.

Since the proposed bailout of Wall Street was announced over a week ago, I've been inundated by calls with people wanting to refinance because they heard mortgage rates would be falling. Every news cast reported that this move would free the mortgage markets and rates would fall. And, they did – but for a short period of time.

After the government took over Fannie Mae & Freddie Mac, mortgage rates did come down. In fact, across the country mortgage interest rates for a 30 year fixed rate mortgage fell (on average) between .25% and .50%. And, on the Monday after the Secretary of the Treasury, Henry Paulson, announced his plan to purchase about $700 Billion in mortgages, rates fell even further.

So, I guess they were right – rates are better and everyone can refinance, right?

Well, back in March 2008, I wrote the article, “Is now a good time to buy?” which gave three reasons why it was a good time to purchase a home. The third reason I gave really applies here. Nobody can predict the future, and underwriting guidlines have become much tighter, and loan-level price adjustments (LLPAs) have increased. All of these mean that when you find a rate that works for you, lock it. Only a few of the people who called me last week actually locked their rates. Many of them were hoping rates would fall even more. Many of them did not qualify for the best available rates due to the stricter underwriting guidelines and LLPAs (See ”Credit Score Affects Interest Rates Even More”) for more information).

Since then, the markets have been on a roller coaster, and interest rates have gone back up, but are still at historically low levels. So, rates did fall but, as happens all too often, many people got greedy and waited too long to get the lowest possible rates. And, others were not eligible for these rock-bottom rates due to their credit scores and loan to value.

So John, how can we keep up with the changing rates and get the best-possible deal?

Here is my advice: Give me a call ay (708) 473-7688 so we can discuss your specific situation. We can determine what's the best possible plan for you and your family. We can determine if now is the right time to refinance for you... or not. If not, we can develop a plan and set a target interest rate that would make sense at which to refinance. In the meantime, we can work to make sure you are in the best possible position to take advantage of the best available rates when they ARE available. Give me a call – there's no obligation – EVER!

---

Beware of Foreclosure Scams

With so many people out there unable to make their mortgage payments and fearing foreclosure, scam artists abound. They prey on your fears and use public information to find people who are vulnerable.

While many competent companies exist to help those facing foreclosure, many scam companies exist as well. This video from FreddieMac gives a quick overview of what to watch for.

If you're worried about making your mortgage payments, call your lender immediately and try to work out an arrangement. Most lenders will offer you special payment options, or even forbearance options that allow you to move missed payments to the end of your loan.

You can also speak to your mortgage broker about refinancing your existing loan. Rates are pretty low right now and many of my customers are looking to take advantage of these low rates to prevent any future problems by lowering their payments today.

Whatever you do, don't let yourself become a victim. Get information from trusted professionals and be wary of people using public information and scare tactics to coax you into signing any agreement. And as always, consult your attorney with any questions about any contract you sign.

---

ACT NOW to Help the Housing Market

When most people talk about first time home buyer programs or home buyer assistance programs they are almost always talking about Down Payment Assistance Programs (DPAs). DPAs have been around for over a decade and have helped hundreds of thousands of families purchase a home who would have otherwise not been able to. For more specifics on how these programs work please see my blog article “Down Payment Assistance Programs.”

On July 30, 2008 the Housing and Economic Recovery Act of 2008 has banned these programs effective October 1, 2008. At a time when the government should be doing everything they can to help qualified homebuyers purchase a home, they are taking away a valuable tool in helping these people aford a home. The down payment is the last obstacle for many families who are otherwise qualfied to purchase a home and responsibly make their mortgage payments. Instead of reforming the use of the programs and creating rules to make them less risky, Cogress decided to ban them all together.

This is going to have a huge adverse effect on the housing market. By some estimates, as many as 40% of all FHA home buyers use DPAs for their down payment. By taking this huge group of homebuyers out of the market, Congress may make the housing crisis even worse or, at least, make it last even longer.

Whether or not you are in the market to buy or sell a home or not, this issue should concern you. If you watch the news or read a newspaper, you hear about the huge financial institutions that seem to be failing every week – Fannie Mae, Freddie Mac, Bear Stearns, Lehman Brothers – the list seems to go on and on. In almost all of the news reports, these companies failures can be at least indirectly attributed to the housing crisis. In order to get the economy back on track, the housing market has to come back.

YOU CAN HELP!

We all need to make our voices heard to our Congressmen and Senators that we believe that the housing market is way too important to the overall health of the economy to elimate this huge group of homebuyers from the market. We need to let them know that we are all in favor of the responsible use of these programs and the implementation of rules to make these programs safer for FHA and the US economy. But we must let them know that we definitely support the continuation of these programs.

Please go to http://rallyforhomeownership.org/ for more information and an easy way to contact your Congressman and Senator. Time is almost up and we cannot afford to wait until the pool of potential home buyers shrinks before we act.

U.S. Government takes over Fannie Mae & Freddie Mac

Today, the US Treasury took control of home mortgage giants Fannie Mae & Freddie Mac. This is the latest fallout from the ongoing housing and mortgage crisis facing the nation and slowing the economy. According to Henry Paulson, US Secretary of the Treasury, it was a necessary step to keep these companies from failing and stabilizing the beleaguered secondary mortgage market.

Under this government takeover, the companies will be run by the government and their CEOs will be replaced Monday. They will be placed under conservatorship – which means they will run as independent companies under the supervision of the Federal Home Finance Agency (FHFA).

James Lockhart, the head of the FHFA, said, “As house prices, earnings and capital have continued to deteriorate, Fannie and Freddie's ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt.”




In addition, an audit of Fannie Mae & Freddie Mac conducted by Morgan Stanley was ordered by Paulson. Apparently, this audit has revealed very troubling information that led Paulson to believe that this was the only option to save these companies and prevent and even larger crisis in the national and global credit markets. Paulson characterized this action as a “time out” that should help these companies to stabilize.

Parts of the plan call for Fannie Mae & Freddie Mac to actually increase their mortgage holdings in the short term to help further stabilize the mortgage and housing markets. In the long term, though, they will have to reduce their holdings in order to minimize future risk for the companies. Congress will ultimately have to decide the future of these companies.

Federal Reserve Chairman Ben Bernanke said that he fully supported the government takeover. "These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets," Bernanke said.

Although this all seems like horrible news for the mortgage and housing markets (as well as the broader economy) there are some positives to this move. First, this prevents the failure of the mortgage giants and possible the entire mortgage system as we know it. Second, with the government guaranteeing the debt of Fannie and Freddie, many people believe we could actually see rates go down and mortgage become easier to get. Bother of these could help to end the housing crisis and downward spiraling home values across the nation.

We will learn more as the markets open Monday and I will provide updates as I learn more.

Save Down Payment Assistance Programs!

One of the negative provisions of the Housing and Economic Recovery Act of 2008 is the elimination of seller-funded down payment assistance programs (DPAs) effective October 1, 2008. DPAs have helped hundreds of thousands of families purchase a home by providing for a gift for the down payment. Studies suggest that tens of thousands of families who are otherwise qualified for a mortgage are unable to purchase a home due to being unable to save for a downpayment. For more information on DPAs, please see my post, Down Payment Assistance Programs posted on February 16, 2007.

Help Support HR 6694

Al Green (D-TX) – along with Gary Miller (R-CA), Maxine Waters (D-CA), and Christopher Shays (R-CT) – have presented a law that will save DPAs and at the same time reforming them to make them less risky. The reason for the elimination of DPAs is that FHA mortgages that utitlize DPAs for downpayments have a higher default rate than FHA mortgages withouts DPAs. However, by eliminating DPAs altogether, the government will prevent thousands of people from purchaing a home that are qualified for a mortgage except for the downpayment.

HR 6694 not only saves DPAs, it also reforms them to lessen the riskiness of these loans. It establishes minimum credit scores to make sure the borrowers are credit-worthy, and eliminates the moratorium on risk-based premiums for FHA loans to enable increased premiums for FHA mortgages with DPAs.

These changes to the Housing and Economic Recovery Act of 2008 will help reduce the number of defaults and foreclosures without further hurting housing sales which are affecting all areas of the US economy.

What can we do?

For the next 5 weeks, Congress is out of session. This means they are much more acceissble at their local offices to the people who they serve. Please pick up the phone, write a letter, or send an e-mail to your Congressmen and Senators to support HR 6694. Senators have been more negative on DPAs in the past so we really need to work on contacting them.

Here are links to two websites that make contacting your Congressman easy:
http://rallyforhomeownership.org/ and http://capwiz.com/nehemia/issues/alert/?alertid=11709431. These sites provide information on the act as well as talking points to use when contacting your Senators and Representatives. They will also help you find and contact your Congressmen.

Act today before we see housing sales decrease further.