Soon not now but Soon ......So they say......

First American CoreLogic estimates that the typical US homeowner who is in negative equity will not experience positive equity until late 2015 to early 2016. In severely depressed markets, the typical borrower in negative equity may not experience positive equity until 2020 or later.

CoreLogic projects more than 11.3m — or 24% — of all residential properties with mortgages had negative equity at the end of the Q409. While the largest decreases in home prices appear to have already happened, it remains to be seen when borrowers will return to positive equity.

To predict how much long borrowers will remain in negative equity, CoreLogic projected future home values and unpaid principal balances for a selected set of Core Based Statistical Areas (CBSAs) to gauge how long it will take for the average underwater borrower to return to positive equity.

The chart above projects the amount of negative equity using CoreLogic short-term forecasts and a baseline view of long-term price trends nationally through 2020. It also takes into account the amortization assumptions described below for ten markets.

According to the projections, it will take the typical borrower until late 2015 or early 2016 for negative equity to disappear. But in severely depressed markets, like Detroit, negative equity won’t dissipate even by 2020, because of its depressed economy. Negative equity is widely considered a trigger to strategic default, and a Treasury Department program announced Friday attempts to address the problem by pushing lenders and servicers to offer borrowers principal reductions on their mortgages.

And although house price appreciation will, over time, offset negative equity, amortization — the paying down of loan balances — will in most cases be a more significant remedy to negative equity, a research note from CoreLogic economists states. Over the next 10 years, the average loan balance will decrease by an annual rate of 3.3%; meanwhile home price are expected to increase at a 3% annual rate over the next decade, they claim.

Of the ten markets CoreLogic studied, the Washington-Arlington-Alexandria CBSA is expected to reach positive equity by 2015; Atlanta-Sandy Springs-Marietta, Dallas-Plano-Irving and Riverside-San Bernardino-Ontario are projected for 2016; Boston-Quincy by 2017; and Cape Coral-Fort Myers, Pittsburgh, Las Vegas-Paradise and Lancaster, PA by 2020. It is estimated that Detroit will not reach positive equity until after 2020.

The projections are based on a 3% annual home price appreciation. An alternative scenario of 5% annual price appreciation would put the first markets recovering by 2013, but CoreLogic said 5% appreciation would be much higher than historical appreciation, especially given today’s low inflation environment. Conversely, a 1.5% annual appreciation, which would be fairly low relative to history, would push back the point of positive equity to at least 2017.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Rates stay down

Mortgage rates inched up a bit this week, but remain near historic lows, according to mortgage financier Freddie Mac.

The popular 30-year fixed averaged 4.99 percent during the week ending March 25, up from 4.96 percent last week and 4.85 percent a year ago.

The less popular 15-year fixed climbed a single basis point to 4.34 percent, but is still below the 4.58 percent average seen a year earlier.

“Mortgage rates inched up slightly this week as bond yields rose even further,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. (Why mortgage rates move)

“Interest rates on 30-year fixed mortgages, however, were still below 5 percent for the fourth consecutive week.

Adjustable-rate mortgages displayed similar movement, with the five-year ARM rising to 4.14 percent from 4.09 percent and the one-year climbing to 4.20 percent from 4.12 percent.

A year ago, the five-year averaged 4.96 percent and the one-year stood at 4.85 percent.

The mortgage rates above are good for conforming loans at 80 percent loan to value; pricing adjustments for things such as credit score may raise or lower your actual rate.

Jumbo loans continue to price a percentage point or so higher than conforming loans.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Bank of America Wants You to Earn Principal Forgiveness

Bank of America announced a new strategy today to tackle the pesky underwater mortgages on its books, many acquired via its merger with Countrywide.

The so-called “earned principal forgiveness” initiative will target borrowers with subprime loans, option ARMs, and prime two-year hybrid ARMs.

For loans at least 60 days delinquent with current loan-to-value ratios of 120 percent or higher, the bank will offer an interest-free forbearance of principal that the homeowner can turn into reduced principal over five years if they stay current on payments.

“In our experience with Home Affordable Modification Program and National Homeownership Retention Program modifications, Bank of America has found that many homeowners who owe considerably more on their mortgages than their homes are worth are reluctant to accept a solution that addresses only the amount of the payment without an accompanying reduction in the balance due on the loan,” said Barbara Desoer, president of Bank of America Home Loans.

Bank of America said it will make principal reduction the initial consideration toward reaching HAMP’s 31 percent debt-to-income ratio target when modifying the aforementioned loan types.

Certain holders of option arms may also receive a HAMP modification that eliminates the negative amortization feature and results in the forgiveness of all or part of the negative amortization amount to reduce principal to as low as 95 percent loan to value.

Of course that means the borrower will no longer have the ability to make ultra-low monthly mortgage payments, but BofA hopes the equity reward will be enough to avoid strategic default and foreclosure.

The bank estimates it will be able to offer principal reduction solutions to 45,000 borrowers, representing $3 billion in total reduced principal.

Bank of America is also extending its National Homeownership Retention Program (its own loan modification program) for an additional six months to December 31, 2012.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Wise Man speaks.....

March 26 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates.

Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television.

“I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.”

The yield on 10-year Treasury notes was 3.86 percent at 12:19 p.m. in New York, little changed from late yesterday and up from 3.69 percent at the end of last week.

U.S. interest-rate swap spreads declined to the lowest levels on record this week, reflecting investor concerns about the ability of nations to finance rising fiscal deficits.

The rate to exchange floating- for fixed-interest payments for 10 years fell below the comparable-maturity Treasury yield for the first time on March 23. The swap spread reached as low as negative 10.19 basis points yesterday before reaching negative 7.63 basis points.

Record Deficit

The U.S. budget deficit reached a record $1.4 trillion for the fiscal year that ended Sept. 30 amid falling tax revenue from the recession, a bailout of the banking and auto industries, and the $787 billion economic stimulus package.

“I don’t like American politics and what’s happening,” Greenspan said.

Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” he said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”

Greenspan said in an interview last year that a consumption tax was a likely response to a widening budget deficit. That may not be sufficient when the gap is caused by a failure to cut spending, he said today.

“I’m not convinced by any means that we can succeed in stabilizing this long-term outlook strictly from a value-added tax,” Greenspan said.

Stock Rally

The former Fed chairman said the U.S. economic recovery has been driven “to a very large extent” by a resurgence of stock prices. The Standard & Poor’s 500 Index has jumped 73 percent since its low on March 9, 2009. The index rose 0.5 percent to 1,171.24 at 12:19 p.m. in New York.

“You can see the whole blossoming of finance,” Greenspan said. “As these stock prices have gone up, debt became far more valuable, and you can see this huge issuance, especially of junk bonds.”

A continued rally in share prices could help sustain the expansion, Greenspan said. Still, the unemployment rate could remain “not terribly far from where it is” at 9.7 percent as people re-enter the labor force to take advantage of job openings in a growing economy.

The U.S. economy expanded at a 5.6 percent annual rate in the fourth quarter of 2009, and corporate profits climbed, figures from the Commerce Department showed today in Washington. Company earnings increased 8 percent, capping the biggest year- over-year gain in a quarter century.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Mortgage Rates Increase as Fed MBS Purchase Program Nears End

With just one week left before the end of March — and the end of the Federal Reserve’s $1.25trn mortgage-backed securities (MBS) purchase program — mortgage rates were up in two weekly surveys.

Freddie Mac (FRE: 1.30 +1.56%) said the average rate for a 30-year fixed-rate mortgage (FRM) was 4.99% with an average 0.6 origination point for the week ending March 25, up from last week’s average of 4.96%. A year ago, the rate average was 4.85%.

The Bankrate.com survey of large banks and thrifts put the average rate for a 30-year FRM at 5.11% with an average 0.41 origination point, up from last week’s average of 5.07%, but down from last year’s average of 5.19%.

“Mortgage rates inched up slightly this week as bond yields rose even further,” said Freddie Mac vice president and chief economist Frank Nothaft. “Interest rates on 30-year fixed mortgages, however, were still below 5% for the fourth consecutive week.

Freddie said the 15-year FRM averaged 4.34% with an average 0.6 point, up from last week when it averaged 4.33%. A year ago at this time, the 15-year FRM averaged 4.58%. Bankrate.com said the 15-year FRM averaged 4.47% with an average 0.41 origination point, up from last week’s average of 4.45%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.14% with an average 0.6 point, Freddie said, up from last week when it averaged 4.09%, but down from last year’s average of 4.98%. Bankrate.com put the five-year ARM at 4.49% with an average 0.41 point, up from last week’s average of 4.46%.

Freddie also said the one-year Treasury-indexed ARM averaged 4.2% with an average 0.6 point, up from last week when it averaged 4.12% and down from last year’s average of 4.85%.


Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.


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Refinance Share Lowest Since October

Mortgage demand slipped week-to-week thanks to lackluster refinance activity, the Mortgage Bankers Association said today.

The home loan application index fell 4.2 percent on a seasonally adjusted basis (-3.9% unadjusted) for the week ending March 19.

Refinances were off 7.1 percent compared with the previous week, while the seasonally adjusted purchase index climbed 2.7 percent.

The unadjusted purchase index rose 2.8 percent, but was still 15 percent lower than the same period a year ago.

Meanwhile, the refinance share of applications fell to 65 percent from 67.3 percent, the lowest point since October 2009, despite interest rates hovering near record lows.

The uber-popular 30-year fixed-rate mortgage jumped up to 5.01 percent from 4.91 percent during the week, while the 15-year fixed increased to 4.33 percent from 4.24 percent.

The one-year adjustable-rate mortgage stood unchanged at 6.75 percent, while the ARM-share of total applications increased to 4.8 percent from 4.6 percent.

The rates are good for loans at 80 percent loan to value with a loan origination fee of around 0.75 percent for the fixed loans and 0.32 percent for ARMs.

The MBA’s weekly survey covers more than half of all retail, residential loan applications, but does not factor out multiple or declined apps, which have surely risen since the mortgage crisis got underway.


Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.


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Rates GO d to the own

Mortgage rates fell for a second consecutive week, albeit by very little, according to mortgage financier Freddie Mac.

The popular 30-year fixed averaged 4.95 percent during the week ending March 11, down from 4.97 percent a week ago and 5.03 percent last year.

The 15-year fixed fell a single basis point to 4.32 percent, and is still lower than the 4.64 percent seen a year earlier.

The five-year adjustable-rate mortgage averaged 4.05 percent, down from 4.11 percent last week and 4.99 percent last year.

Finally, the one-year ARM slipped to 4.22 percent from 4.27 percent, and is well below the 4.80 percent average seen in early March 2009.

“During a light week of mixed economic reports, mortgage rates eased somewhat,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. (Why mortgage rates are going down)

“Pending existing home sales fell 7.6 percent in January, well below the market consensus of a 1 percent gain. Meanwhile, the economy lost only 36,000 jobs in February, fewer than market forecasts, and the unemployment rate held steady at 9.7 percent.”

The interest rates above are good for conforming loan amounts at a loan to value of 80 percent; pricing adjustments may raise or lower your actual rate.

Jumbo loans continue to price one percent or higher than conforming loans.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Short Sales R Us

It appears 2010 will indeed be the year of the short sale, according to a report from the New York Times.

Apparently the Treasury is planning to add another weapon to its growing foreclosure prevention arsenal, though this latest one involves the loss of the home.

Come April 5, a streamlined and standardized short sale process will emerge – lenders will rely on real estate agents to determine the value of a home and the corresponding minimum offer to accept (hmm).

The homeowner won’t know the figure, but if an offer comes in that meets or exceeds it, the bank or lender must take it.

Similar to programs already in place, participants will receive incentive payments; the servicing bank will get $1,000, and another $1,000 will go towards a second mortgage if one exists.

Additionally, the homeowner would receive $1,500 for relocation costs if they participated.

The aim of the program is to reduce the large number of vacant homes and minimize losses for banks that would otherwise face costly foreclosure-related expenses.

And former homeowners wouldn’t have to worry about the bank coming after them for the unpaid mortgage balance.

However, skeptics are concerned that short sales have a high propensity for fraud and could lead to intentional default and shady dealings.

Short sales continue to be used sparingly, as they are time consuming and complicated, though government mortgage financier Fannie Mae saw them triple in 2009.

There’s always the option of a short refinance as well, but those come with the risk of re-default, which could end up extending the crisis.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Saving the Homes

Speaking at today’s 2010 Multicultural Real Estate and Policy Conference in Washington, DC, Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair went on a charm offensive by defending the Home Affordable Modification Program (HAMP) against criticism that the program regulary fails to reach its goals and is destined to fail.

“It’s still too soon to know how successful it will ultimately be,” said Bair, at the conference. “It is true that the numbers of trial and permanent modifications have lagged behind program projections. But at the same time, we saw a slowdown in the pace of new foreclosures in the second half of last year.”

“This suggests that servicers were at least looking for alternatives that could minimize their losses and keep people in their homes,” she adds.

Bair said the administration now recognizes that problems in the mortgages industry continue to evolve. “Now we’re dealing with underwater mortgages,” she said. “That’s why we’re actively looking at principal write-downs within our loss share agreements and other failed bank programs.”

Bair added that such extreme measures may be necessary to prevent strategic defaults, especially in homes with mortgages that are currently at 150% LTV or more. Getting it down to 100% LTV may be vital to preventing homeowners from walking away.

In terms of improving mortgage financing, the FDIC chair promoted securitization as a solution. But this will only happen after regulatory reform and the clearing-up of bank balance sheets.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.





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Below the Fizzzzive

Mortgage rates were down in two weekly surveys, and in Freddie Mac’s (FRE: 1.2205 +1.71%) index, rates dipped below 5%.

Freddie Mac said the average interest for a 30-year fixed-rate mortgage was 4.97% with a 0.7 origination point for the week ending March 4, down from 5.05% one week ago. Last year at this time, the 30-year FRM averaged 5.15%.

Bankrate.com’s weekly survey of large banks and thrifts put the 30-year FRM at 5.12% with a 0.39 origination point, down from last week, when it was 5.15%.

“30-year fixed mortgages fell below 5% to match levels seen two weeks ago and are helping to maintain affordable home-purchase conditions,” said Frank Nothaft, Freddie Mac vice president and chief economist.

“In fact, monthly principal and interest mortgage payments for a typical family buying a median-priced home of $163,800 were just $709 in January, the lowest amount since February 1998, according to the National Association of Realtors,” he added. “For first-time homebuyers, the fourth quarter of 2009 was the third most affordable quarter since 1981 behind the first and second quarter of 2009.”

Freddie said the average rate for a 30-year FRM was 4.33% with an average 0.7 point, down from last week’s average of 4.4% and a year ago, when the average was 4.72%. Bankrate.com said 15-year FRMs were average at 4.46% with a 0.39 point, down from 4.52% last week.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.11% with an average 0.6 point, down from last week’s average of 4.16% and a year ago, when the five-year ARM averaged 5.08%. Bankrate.com said the five-year ARM average was 4.46% with a 0.39 point, down from last week, when it was 4.53%.

Freddie said the one-year ARM averaged 4.27% with an average 0.6 point, up from last week when it averaged 4.15%, but down from last year, when it was 4.86%.


Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Are you Above the 6?

We all know mortgage rates have been flirting with records over the past year and change, but many have still not taken advantage, or can’t, according to a piece in the WSJ.

Despite the en vogue 30-year fixed floating around five percent, 37 percent of borrowers with the popular mortgage have mortgage rates of six percent or higher, per Credit Suisse analysts.

The group of borrowers represents a collective $1.2 trillion in home loans, and billions in lost savings, whether by choice or necessity.

Apparently more than half could lower their rate by nearly three-quarters of a percentage point, and many could shave off a full point, assuming they qualified.

So why are refinance numbers so low? Is it the bad weather, stringent underwriting guidelines, or perhaps another reason?

Well, we found out last week that a staggering 11.3 million, or 24 percent, of all residential properties with a mortgage in the United States are underwater, meaning more is owed on the mortgage(s) than the property is worth.

That’s enough to dampen refinance numbers, though there are options for borrowers looking to refinance with negative equity.

Mortgage bankers have also argued that costs and fees associated with refinancing have risen to the point where it’s unattractive for many homeowners.

Things like mortgage insurance must also be factored into refinance costs for those with little equity.

All in all, it appears that those who need it least are receiving much of the benefits of the low rates, as refinances only seem to be going to the most creditworthy borrowers.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Are you Ready to Refi?

The Home Affordable Refinance Program (HARP) has been extended until June 30, 2011, according to the Federal Housing Finance Agency (FHFA).

“FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed,” said FHFA Acting Director Ed DeMarco, in a statement on its website.

“Accordingly, to support and promote market stability, and to encourage lenders and other mortgage market participants to fully adopt the HARP program, including the implementation of the October 2009 expansion of loan-to-value ratios (LTVs) to 125 percent, FHFA is authorizing the extension of HARP until June 30, 2011.”

The program is one portion of the government’s Making Home Affordable Program, which also includes the Home Affordable Modification Program (HAMP).

It began in April 2009 and was set to expire on June 10 of this year; HAMP is expected to run until December 31, 2012.

Apparently things are worse than anticipated, what with more than 11.3 million, or 24 percent, of all residential properties with mortgages in the United States underwater as of year-end.

Of the more than four million refinanced mortgages purchased or guaranteed by Fannie Mae and Freddie Mac in 2009, 190,180 were HARP refinances with loan-to-value ratios between 80 percent and 125 percent.

If you’re looking to refinance with negative equity, this is your ticket.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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Home Prices D to the rop....

The rate at which home prices are dropping may be slowly coming to a halt across the United States, with analysts at Barclays Capital predicting only a 4 or 5% dip left to go before stabilization. But the rate of appreciation on the back side of that bottoming out is likely to “muddle along for the next few years,” they say in a weekly letter to investors.

This conclusion is based on expected aftershocks of the “smoothed-out” housing supply model, where millions of potential foreclosures are being averted temporarily with government-backed programs or by suppliers slowing the rate in which foreclosures hit the market. On the positive side, they say this effort actually prevented home prices from falling considerably more.

But the smoothed-out method, while successful on the supply side, is coming at a cost: “The overhang of distressed inventory is a huge negative technical – it suggests that any price rise will probably be met by increased distressed sales,” say the securitization analysts in their Residential Credit Strategy report.

“Meanwhile, home prices do seem a little cheap, using fundamental metrics like price/rent and price/income ratios, but not extremely so,” they add. “Thus, a meaningful rise in prices would need big changes on both the technical and fundamental fronts.”

Home prices dipped only slightly in December, according to Standard & Poor’s Case Shiller US National Home Price Index. However, it is the recent drop in new home sales, down 11.2% from December to January, that the analysts find “disappointing.”

And in added response to claims that housing is becoming more and more affordable in the United States, the report adds that “affordability indices are not good predictors of future moves in home prices.”

Again I look forward to becoming your Mortgage advisor and ultimately saving you money and time. Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.



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