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Your money: How to deal with mortgage-rate envy

by paulbr75 from Pixabay

Your money: How to deal with mortgage-rate envy

NEW YORK (Reuters) – Kristin Tassi spent last weekend happily settling into her new home in the Chicago area, but part of her brain was still obsessing over the mortgage rate she got for it.

“I don’t think we’ll ever not think about it,” said the 33-year-old public relations professional.

After watching friends who had bought houses over the past few years snag historically low rates, Tassi and her husband were shocked to find themselves looking at rates above 4 percent when they started house hunting in earnest in January.

They found a house they liked, but then it fell through. A few weeks later, when they were running the numbers on another prospective home, rate increases had already pushed up the payments by $100 a month.

They ended up having to pay points for a 4 percent rate, which raised their closing costs because they were paying a fee of several thousand dollars to lower the rate on their loan.

“It caused me so much anxiety,” Tassi said.

Mortgage shoppers and refinancers have been so accustomed to good news since rates started to slide below 4 percent in 2011 that the run-up in the past few months has been shocking.

While most housing-market experts do not expect rates to affect home affordability yet, the refinance market has already significantly declined; the total number of refis dropped 29 percent in 2017 from the prior year, according to Black Knight’s Mortgage Monitor Report.

Todd Jones, president of BBMC Mortgage, which is headquartered in Chicago, is training his brokers all over the country how to deliver bad news. Chief among his lessons is showing empathy to clients. While $100 a month might not sound like too much, it might adjust a client’s debt-to-loan ratio, which could push the size of a house they can afford down by $40,000 or $50,000.

“It’s not just a number to them, it’s looking at paying more for the house of their dreams,” Jones said.

At some point, rates increases could go up so much that people stop buying. Jones said he is already starting to see a pause in the market as rates approach 5 percent.

A survey from Redfin in February found 6 percent of homebuyers would cancel plans to buy if mortgage rates went above 5 percent, while 42 percent would start to hurry up.

While rates could be at that level later in 2018 or 2019, Zillow senior economist Skylar Olsen does not expect rates to cross above 6 percent until 2020. The good news is that Olsen does not expect rates to climb past that level, and certainly not just to keep ascending endlessly.

But the chance to go below 4 percent again?

“Not any time soon,” Olsen said.

ALTERNATIVES

Workarounds are few, since rates tend not to fluctuate too much between different companies. But shopping is always a good idea. Tassi went to three different mortgage brokers in her journey, and ended up working directly with the bank where she keeps most of her accounts.

George Burkley, a mortgage broker in northern Indiana, said he has been searching more aggressively for government-backed loans for his clients, especially VA loans, where rates may be lower and downpayment requirements less strict.

Jones said he has also been loosening up credit score minimums on some of these loans, down to 580 for VA loans, in particular.

The best thing for clients to do is shore up their finances and get educated on today’s rates.

Jones says much of what people see is outdated, since blog posts and advertisements do not just go away after a few weeks.

Another recalibration that buyers need to do pertains to their expectations of how much house they can afford. Nathan Pierce, a mortgage broker in the Salt Lake City area, has seen people who pre-qualified at one level have to go through the process again when rates go up.

One couple found a home at the top-end of their range and by the time they tried to lock a rate, the monthly payment had jumped several hundred dollars and the bank balked. They got their earnest money back, and went out looking again.

“The problem was, the prices on the homes they were looking at went up $10,000 in the meantime,” Pierce said. “It was very stressful for them.”

Editing by Bernadette Baum

Published at Tue, 03 Apr 2018 17:27:49 +0000

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Fannie Mae: Mortgage Serious Delinquency rate decreased slightly in February

Fannie Mae: Mortgage Serious Delinquency rate decreased slightly in February

by Bill McBride on 3/30/2018 04:23:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate decreased to 1.22% in February, down from 1.23% in January. The serious delinquency rate is up from 1.19% in February 2017.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent Rate

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (3% of portfolio), 3.35% are seriously delinquent. For loans made in 2005 through 2008 (6% of portfolio), 6.49% are seriously delinquent, For recent loans, originated in 2009 through 2017 (91% of portfolio), only 0.53% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

The recent increase in the delinquency rate was due to the hurricanes – no worries about the overall market (These are serious delinquencies, so it took three months late to be counted).

After the hurricane bump, maybe the rate will decline to 0.5 to 0.7 percent or so to a cycle bottom.

Read more at http://www.calculatedriskblog.com/2018/03/fannie-mae-mortgage-serious-delinquency.html#kZqTtyI39AgsfKi2.99

Published at Fri, 30 Mar 2018 20:23:00 +0000

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A Few Comments on February Existing Home Sales

A Few Comments on February Existing Home Sales

by Bill McBride on 3/21/2018 03:46:00 PM

Earlier: NAR: “Existing-Home Sales Rebound 3.0 Percent in February”

A few key points:

1) As usual, housing economist Tom Lawler’s forecast was closer to the NAR report than the consensus (although only slightly closer this month). See: Lawler: Early Read on Existing Home Sales in January.

2) Inventory is still very low and falling year-over-year (down 8.1% year-over-year in February). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.    This was the 33rd consecutive month with a year-over-year decline in inventory.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSA

Click on graph for larger image.

Sales NSA in February (319,000, red column) were above sales in February 2017 (315,000, NSA).

Sales NSA are always low in January and February, and we will have to wait until March – at the earliest – to draw any conclusions about the impact of higher interest rates and the new tax law on home sales.

Read more at http://www.calculatedriskblog.com/2018/03/a-few-comments-on-february-existing.html#XdbQmKuxwRmBLWCJ.99

Published at Wed, 21 Mar 2018 19:46:00 +0000

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CoreLogic: “2.5 million Homes still in negative equity” at end of Q4 2017

CoreLogic: “2.5 million Homes still in negative equity” at end of Q4 2017

by Bill McBride on 3/15/2018 12:54:00 PM

From CoreLogic: Homeowner Equity Q4 2017

CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63 percent of all properties) have seen their equity increase by a total of $908.4 billion since the fourth quarter 2016, an increase of 12.2 percent, year over year.

In the fourth quarter 2017, the total number of mortgaged residential properties with negative equity decreased 1 percent from the third quarter 2017 to 2.5 million homes, or 4.9 percent of all mortgaged properties. Compared to the fourth quarter 2016, negative equity decreased 21percent from 3.2 million homes, or 6.3 percent of all mortgaged properties.

Negative equity peaked at 26 percent of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009.
emphasis added

CR Note: A year ago, in Q4 2016, there were 3.2 million properties with negative equity – now there are 2.5 million.  A significant change.

Published at Thu, 15 Mar 2018 16:54:00 +0000

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The Housing Bubble, Mortgage Debt as Percent of GDP

The Housing Bubble, Mortgage Debt as Percent of GDP

by Bill McBride on 2/19/2018 12:09:00 PM

Last year on Presidents’ Day, I excerpted from a post I wrote in February 2005 (yes, 13 years ago).

In that 2005 post, I included a graph of household mortgage debt as a percent of GDP. Several readers asked if I could update the graph.

First, from 2005:

The following chart shows household mortgage debt as a % of GDP. Although mortgage debt has been increasing for years, the last four years have seen a tremendous increase in debt. Last year alone mortgage debt increased close to $800 Billion – almost 7% of GDP.
 


Source: Federal Reserve

 

Household Real Estate Assets Percent GDP

The second graph shows household mortgage debt as a percent of GDP through Q4 2017.  Yes, the graphs have improved!

Mortgage debt has declined by $0.7 trillion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).

The “bubble” is pretty obvious on this graph, and the sharp increase in mortgage debt was one of the warning signs.
Read more at http://www.calculatedriskblog.com/2018/02/the-housing-bubble-mortgage-debt-as.html#08U3QiQQ4SsRZORf.99

Published at Mon, 19 Feb 2018 17:09:00 +0000

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Fannie Mae: Mortgage Serious Delinquency rate increased in December due to Hurricanes

Fannie Mae: Mortgage Serious Delinquency rate increased in December due to Hurricanes

by Bill McBride on 1/31/2018 04:52:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate increased to 1.24% in December, up from 1.12% in November. The serious delinquency rate is up from 1.20% in December 2016.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent Rate

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (4% of portfolio), 3.28% are seriously delinquent. For loans made in 2005 through 2008 (6% of portfolio), 6.55% are seriously delinquent, For recent loans, originated in 2009 through 2017 (90% of portfolio), only 0.53% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

This increase in the delinquency rate was due to the hurricanes – no worries about the overall market – and we might see a further increase over the next month or so (These are serious delinquencies, so it takes three months late to be counted).

After the hurricane bump, maybe the rate will decline to 0.5 to 0.7 percent or so to a cycle bottom.

Note: Freddie Mac reported earlier.

Read more at http://www.calculatedriskblog.com/2018/01/fannie-mae-mortgage-serious-delinquency.html#mDyeTtLXHAQtkDKd.99

Published at Wed, 31 Jan 2018 21:52:00 +0000

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NAR: Pending Home Sales Index Increased 0.5% in December, Up 0.5% Year-over-year

NAR: Pending Home Sales Index Increased 0.5% in December, Up 0.5% Year-over-year

by Bill McBride on 1/31/2018 10:05:00 AM

From the NAR: Pending Home Sales Tick Up 0.5 Percent in December

Pending home sales were up slightly in December for the third consecutive month, according to the National Association of Realtors®. In 2018, existing-home sales and price growth are forecast to moderate, primarily because of the new tax law’s expected impact in high-cost housing markets.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, moved higher 0.5 percent to 110.1 in December from an upwardly revised 109.6 in November. With last month’s modest increase, the index is now 0.5 percent above a year ago.

The PHSI in the Northeast dipped 5.1 percent to 93.9 in December, and is now 2.7 percent below a year ago. In the Midwest the index decreased 0.3 percent to 105.0 in December, but is still 0.3 percent higher than December 2016.

Pending home sales in the South grew 2.6 percent to an index of 126.9 in December and are now 4.0 percent higher than last December. The index in the West rose 1.5 percent in December to 101.7, but is still 3.1 percent below a year ago.
emphasis added

This was close to expectations of a 0.4% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in January and February.

Read more at http://www.calculatedriskblog.com/2018/01/nar-pending-home-sales-index-increased.html#mtM3gTgl6DglwUXH.99
Published at Wed, 31 Jan 2018 15:05:00 +0000

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Wednesday: Existing Home Sales

 

Wednesday: Existing Home Sales

by Bill McBride on 1/23/2018 07:09:00 PM

From Matthew Graham at Mortgage News Daily: Small Reprieve For Recent Rate Spike

Mortgage rates finally managed to move lower in a small but meaningful way today–something they haven’t done in more than 2 weeks! … While it is indeed bigger than recent examples, many prospective borrowers will find it underwhelming. In isolated cases, it may get a loan quote down to the next .125% of a percent lower, but most quotes will simply have slightly lower upfront costs (while the rate itself remains unchanged). Looked at another way, we could say apart from yesterday, today’s rates are the highest in more than 9 months. [30YR FIXED – 4.25%] emphasis added

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 9:00 AM, FHFA House Price Index for November 2017. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, Existing Home Sal

Read more at http://www.calculatedriskblog.com/2018/01/wednesday-existing-home-sales.html#HHuz6zr0aos2MRVD.99

Published at Wed, 24 Jan 2018 00:09:00 +0000

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