Mortgage applications surge amid record-low rates
NEW YORK (CNNMoney) — Mortgage loan applications surged 23% last week, according to the Mortgage Bankers Association, as record-low interest rates convinced many homeowners it was time to refinance into lower-cost loans.
Refinancing activity climbed 26.4% during the week ending January 13, to its highest level since early August, the MBA reported. Meanwhile applications for new mortgages climbed 10.3% week-over-week.
The heightened activity comes as mortgage rates test new bottoms. Last week, rates on both the 30-year and 15-year fixed loans fell to new records, at 3.89% and 3.16%, respectively, according to Freddie Mac.
The vast majority of the applications — 82.2% — were to refinance existing loans rather than purchase new ones, the MBA said.
The fact that purchase applications significantly lagged those for refinancings underscored a truism about low mortgage rates, said Doug Duncan, chief economist for Fannie Mae (FNMA, Fortune 500). “[Home] sales are a lot less interest-rate sensitive than people think,” he said.
Home sales during boom worse than thought
Even with ultra-low rates, existing homes sales languished in November at an annualized rate of 4.4 million, according to the National Association of Realtors. That’s well below the “normal” rate of between 5 million and 6 million.
Duncan pointed out that low and declining interest rates may cause homebuyers to hesitate: They may expect them to fall even further.
On the other hand, rising rates, which often accompany an improving economy, can give potential homebuyers a reason to act — before rates and prices become less affordable.
Low rates have had a positive impact on the housing market in at least two important ways, said Keith Gumbinger of HSH Associates. First, there are those borrowers who were able to avoid foreclosure by refinancing and lowering their monthly payments.
Then there are the tens of thousands of homeowners with risky adjustable-rate mortgages who have avoided potential disaster. These borrowers could have been hit hard had rates been higher when their loans reset. But instead, they are saving money, he said.
Adjustable-rate mortgages reset under a formula that involves a margin, specified in the contract, and an index, usually the one-year London Inter-Bank Offerer Rate (LIBOR). Margins on option ARMs range between 1.625% and 2.5%, and the current LIBOR rate is around 1.1%. That combines for a very affordable rate of 2.7% to 3.6%.
“For anyone with the guts to hang on, ARM borrowing has been very favorable,” said Gumbinger. “If you took the risk, you could be enjoying the results right now.”
However, the days of record low rates may be ending — thanks to a recent action by Congress.
To pay for the extension of payroll tax cuts, Congress mandated an increase in fees for Fannie Mae and Freddie Mac loans. That could mean an increase in upfront costs for borrowers of about half a point, starting April 1.
The average fee borrowers pay now is about 0.7% of the mortgage balance for a 30-year and 0.8% for a 15-year, according to Freddie, or about $700 or $800 for every $100,000 borrowed. The new fee would add $500 for every $100,000 in principal.
Instead of paying upfront, borrowers could pay the fee as a higher interest rate. Gumbinger said it would mean an additional one-eighth of a point to their rate.
That may not sound like much, but adding an eighth of a point to interest rates comes to an extra $225 a year or so on a $250,000 mortgage, according to Scott Sheldon, a loan officer with W.J. Bradley Mortgage in California.
“I’m telling all my clients that they need to get a lock immediately,” he said. 
TexasLending.com to Discuss Obama Housing Tax, HARP 2 Loans & Tim Tebow …
ShareThis 
Kevin Miller, CEO TexasLending.com
After many consumer responses to the TexasLending.com Tim Tebow commercial we shared our stance on the subject matter. We wish everyone a great January moving forward.
Dallas, Texas (PRWEB) January 17, 2012
Kevin Miller, CEO and president of TexasLending.com, a Texas home loan and mortgage company specializing in Texas refinance loans and Texas home equity loans, and his co-hosts addressed the impact of the Obama Housing Tax for all Fannie Mae and Freddie Mac loans closed over the next ten years on The TexasLending.com Mortgage Hour on KLIF radio in Dallas on Saturday January 14th, 2011. They also discussed the onboarding of the HARP 2 loans which will come into effect in the next 45 days. Finally, the last thing covered was a discussion of one of TexasLending.com’s commercials where they did the Tim Tebow move at the end of the commercial.
In Dallas/Fort Worth the TexasLending.com Mortgage Hour radio show airs on Saturdays on AM 570 KLIF from 1:00 p.m. to 2:00 p.m.
“After many consumer responses to the TexasLending.com Tim Tebow commercial we shared our stance on the subject matter. We wish everyone a great January moving forward” commented Kevin Miller.
TexasLending.com has been on the air for over 10 years to educate the consumer about home loans in Texas. Listen in each week as the CEO of TexasLending.com, Kevin Miller, and his co-hosts, discuss the behind the scenes information about the mortgage industry that will help you in making an informed decision about your home loan now and in the future.
About TexasLending.com:
TexasLending.com provides expert service in the field of residential mortgages. Headquartered in Dallas, TexasLending.com specializes in loans throughout the states of Texas, Oklahoma, Florida, Missouri and Colorado. TexasLending.com is a mortgage Banker with virtually unlimited options available for conventional, FHA, VA, Texas home equity loans, refinance loans, reverse mortgages, Dallas home loans, Houston home loans and Austin home loans. To find out more about Texas Lending’s home loan and mortgage programs, visit http://www.TexasLending.com.
###
House Republicans got discounted mortgage loans
(AP)
WASHINGTON – Two veteran House Republicans received discounted mortgage loans from the now-defunct Countrywide Financial Corp. under a VIP program, a congressional official said Friday.
The discounts went to Reps. Howard McKeon and Elton Gallegly of California, said the official, who was not authorized to speak publicly about the loans and requested anonymity. Their identities were first reported by The Wall Street Journal.
The House Oversight and Government Reform Committee has been investigating whether members of Congress received VIP discounts. The Associated Press reported previously that four House members had received the discounts. One of the four remains unidentified publicly.
Records show that Rep. Edolphus Towns, D-N.Y, also received discounts. Towns told the AP previously that he was not aware of receiving any discounts. McKeon and Gallegly told the Journal that they also were not aware of receiving discounted loans and did not know their mortgages were processed by the VIP unit.
The Journal said the 1998 loan to McKean, who is chairman of the Armed Services Committee, totaled $315,000. Gallegly’s 2005 loan totaled $77,000 in 2005.
Rep. Darrell Issa, R-Calif., chairman of the oversight committee, informed both lawmakers that documents received from Bank of America it bought Countrywide showed they went through the special unit.
Issa has sent the information to the House Ethics Committee, which determines whether House members violated standards of conduct. A discounted loan could be considered a gift. Gifts are virtually banned under House rules.
None of the lawmakers has been accused by the ethics panel of any wrongdoing, and may never be if they convince investigators they had no knowledge of the discounts.
Countrywide was the nation’s largest mortgage company and played a major role in the U.S. financial crisis by issuing subprime loans. The company also had its VIP program, with some of the favored customers known as “Friends of Angelo” a reference to chief executive Angelo Mozilo.
Mozilo in 2010 agreed to more than $67 million in penalties in a settlement with the Securities and Exchange Commission.
Shopping for the Best Rates
Mortgage lenders adjust their rates based on perceptions of risk, so unless you can show you’re a low-risk borrower, you are unlikely to qualify for a rate that matches those seen in all the advertisements or headlines.
The rates quoted by Freddie Mac and others are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them. As its base line, for instance, the Brooklyn Cooperative Federal Credit Union uses rates posted on the Credit Union National Association Web site for New York, according to Daniel Alejandro González, the credit union’s director of lending. Others, like Chase Mortgage, use markers like Treasury yields and agency mortgage-backed securities issued by Fannie Mae.
Consumers who want to try for the lowest rates available need to consider these basic factors.
CREDIT SCORE The ideal borrower has a FICO score of 740 or higher, said Thasunda Brown Duckett, the senior vice president of Chase Mortgage’s East Region. “That puts you in the best place for pricing,” said Ms. Duckett, whose office is based in Manhattan. According to MyFICO.com, borrowers in New York with scores of 760 to 850 could qualify for an annual percentage rate of 3.95 percent on a $500,000 30-year fixed-rate mortgage, while those with scores of 620 to 639 qualify for 5.53 percent.
POINTS The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. “You need to buy points in order to get the best rates at many banks,” Mr. González said. In Freddie Mac’s weekly survey on mortgage rates, points have averaged 0.7 percent on loans in the last year. Points might make sense depending on your financial situation and how long you expect to stay in a home. So ask for a zero point quote, too, and compare.
PROPERTY TYPES If you’re buying a duplex or a four-unit building, your rate will almost certainly be higher. Condominiums may also have a rate premium, especially if they are newer or your down payment is below 25 percent. Lenders charge more if you are not planning to live in the home. Commercial properties like apartment buildings have the highest rates, as they are considered riskier, Mr. González said.
DOWN PAYMENT Ms. Duckett says that borrowers who put down at least 25 percent are more likely to obtain “attractive pricing” at Chase. Lenders offer different breaks on rates if equity is higher, so you should ask what is available.
LOAN LENGTH A lot depends on how long you plan to live in a home. If you’re likely to move in a few years, an adjustable-rate loan with a low interest rate fixed for, say, three to five years, and adjusted afterward, might work best. Also, rates on 15-year fixed-rate loans are lower than those on the 30-year — 0.77 percentage points, on average, last year, according to Freddie Mac. “Some people may not need a 30-year mortgage,” said Jed Kolko, the chief economist of Trulia, the real estate information Web site.
Borrowers may also be able to reduce their mortgage rate when they enter into a “lock-in” agreement with a lender.
“Lenders typically offer a lower rate for a shorter lock period,” Mr. Kolko said.
Lenders typically agree not to change an offered interest rate for 60 days, but borrowers confident of a quick closing may be willing to accept a 45-day rate guarantee, or even a 30-day lock, in exchange for a small discount, because the transaction’s speed helps the lender reduce its risk.
Borrowers must make sure, too, that they consider the entire cost of a home, looking carefully at monthly payment calculations. According to Mr. Kolko, about a third of homeownership costs are in addition to the mortgage — among them property taxes, insurance, maintenance and repairs.
U.S. Bank Sues to Stop Sale Related to Mortgage Loan on Hawaii Hotel
U.S. Bank N.A., a unit of U.S.
Bancorp (USB), filed a lawsuit in New York seeking to stop a sale
related to a mortgage loan on a Honolulu hotel.
The $70 million senior loan is secured by a leasehold
mortgage covering the Aston Waikiki Beach Hotel in Honolulu,
which is part of a $1.05 billion pool of commercial real estate
loans that were securitized and sold to investors as bonds,
according to court papers filed today in New York State Supreme
Court in Manhattan.
The defendant, Petra CRE CDO 2007-1, which is incorporated
in George Town, Grand Cayman, holds a $34.9 million mezzanine
loan that is secured by the membership interests in the borrower
under the $70 million senior loan, according to the lawsuit.
The mezzanine loan is in default and Petra is scheduled to
sell the membership interests on Feb. 15, according to the suit,
which is seeking an injunction preventing the sale. U.S. Bank
National Association holds the title to the senior loan and is
represented in the suit by Wells Fargo Bank NA.
Petra CRE CDO 2007-1 is overseen by Petra Capital
Management LLC, the New York-based investment firm led by
commercial-mortgage-bond pioneer Andrew Stone.
Stone declined to comment on the lawsuit.
The suit seeks damages to be determined at trial.
The case is U.S. Bank National Association v. Petra CRE CDO
2007-1, Ltd., 650077/2012, New York State Supreme Court
(Manhattan).
To contact the reporter on this story:
Chris Dolmetsch in New York at
cdolmetsch@bloomberg.net.
To contact the editor responsible for this story:
Michael Hytha at mhytha@bloomberg.net.
<!—->
