A number of Realtors® responding to the Realtors® Confidence Index March Survey indicated continued tight credit conditions: in a number of cases prospective home buyers had difficulty in qualifying for a loan. A comparison of FICO scores for loan transactions as reported by Realtors® responding to the RCI over the February and March time span compared with FICO scores reported by Fannie Mae’s “Acquisition Profile by Key Product Features”—showing mortgage lending and refinancing conditions in the pre-boom normal housing markets of a few years ago– shows that credit availability to lower scoring applicants appears to have declined. Realtors® provided FICO information based on their understanding of the credit situation; in some cases the information for clients was estimated. However, overall the data seem to substantiate relatively tight credit conditions.
Credit Scores in Current Markets (Variety of Buyers and Lenders) vs. Fannie Mae Credit Mix of 2001-04.
Fannie Mae and Freddie Mac: the mere mention of them arouses passionate anger in many people. Rightly so. These two entities, which had taxpayer guarantees, ran their businesses as if they were privately owned. Fannie and Freddie made huge bets on the housing market. If it had been their money and their loss, then there would be no problem. But their mistakes took taxpayers down as well.
On April 9th, the FHA made another round of changes to the mortgage insurance premiums that it charges. The FHA has increased its premiums as a means of shoring up its books in light of high delinquency and foreclosure rates on legacy lending programs. While the increases to the MIPs are small on their face, combined with the recent expiration of the deduction on mortgage insurance, they add up to not-so-small amounts.
Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage applications.
Based on the latest Corelogic report on negative equity, 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011.
The FHA made an important change to its refinance program Tuesday, March 6th.[1] The FHA lowered the premiums on refinances for some homeowners who originally purchased with an FHA loan. However, the FHA put certain limitations on this opportunity, limitations that may prevent a substantial group of homeowners from taking advantage of today’s low rates.
Mortgage rates will be starting to rise from this week on. From the 3.9 to 4.0 percent average rate in the past five months on a 30-year fixed mortgage, the new rates will soon be in the range of 4.3 to 4.6 percent. Usually the initial phase of rising rates can quicken the decision to sign on the dotted line as consumers do not want to face even higher mortgage rates later on. However, a prolonged increase will shrink the pool of eligible home buyers.
The Federal Reserve has released the conclusions of its “Comprehensive Capital Analysis and Review” (CCAR), also known as the “stress test.” The Fed tested whether the major banks have enough cash and liquidity to withstand catastrophic losses in a financial crisis. The Fed concluded that 15 of the 19 bank holding companies would be in relatively good shape.
Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage purchase applications.
The French Election & US Mortgage Rates
With a win by the socialist party in France’s presidential election, bond investors will be shifting money into U.S., U.K. and Germany. That means lower mortgage rates, at least temporarily, for U.S. consumers.
The 10-year borrowing rate for German bonds fell and now stands at 1.58%. By contrast, the French government has to pay a 2.78% interest rate. The comparable U.S. and U.K. borrowing rates are 1.86% and 2.00%, respectively.
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