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Mortgage Rates Hit New Lows in Two Weekly Surveys
Mortgage rates dropped again this week, setting new records in two weekly surveys, the result of investor flight from European investments. The Freddie Mac weekly survey put the average rate for a 30-year fixed-rate mortgage (FRM) at 4.84% with a 0.7 origination point for the week ending May 20, down from last week’s average of 4.93%. A year ago, the 30-year FRM averaged 4.82%. The 25-year-old Bankrate.com weekly survey of large banks and thrifts put the average rate for a 30-year FRM at 4.96% with a 0.5 origination point, the lowest in the history of the survey.
Despite the end of the Federal Reserve mortgage-backed securities (MBS) purchase program, mortgage rates are at their lowest point all year. As Europe responds to the Greek debt crisis, the euro is plummeting compared to the dollar. Investors are turning to American investments that, for the moment, seem safer. However, some argue that debt levels in the US are also as risky as in Europe. “People rush to us for ‘safety,’ although we’re Greece — we just haven’t gotten there yet,” Anthony Sanders, distinguished professor of real estate finance at George Mason University, told Bankrate.com. Sanders added US interest rates will rise once European and Chinese economies recover. Freddie said the 15-year FRM averaged 4.24% with an average 0.7 point, down from last week’s average of 4.3% and a year ago, when the average was 4.5%. Freddie said the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.91% with a 0.6 point, down from last week’s average of 3.95% and a year ago, when it averaged 4.79%. It’s the lowest average rate for the product since October 2004, when it averaged 3.96%.
Senate Passes Finance Bill
The Senate on Thursday approved the most extensive overhaul of financial-sector regulation since the 1930s, hoping to avoid a repeat of the financial crisis that hit the U.S. economy starting in 2007. The legislation passed the Senate 59 to 39 and must now be reconciled with a similar bill passed by the House of Representatives in December, before it can be sent to President Barack Obama to be signed into law. The controversial measure, supported by the Obama administration, sets up new regulatory bodies and restricts the actions of banks and other financial firms. It is designed to try to make order of the cascading regulatory chaos that ensued in 2008 when mammoth banks and some unregulated financial firms collapsed, and public funds were used to save them.
Among other things, the legislation would: a)Establish a new council of “systemic risk” regulators to monitor growing risks in the financial system, with the goal of preventing companies from becoming too big to fail. (b) Create a new consumer protection division within the Federal Reserve charged with writing and enforcing new rules that target abusive practices in businesses such as mortgage lending and credit-card issuance. (c) Empower the Federal Reserve to supervise the largest, most complex financial companies to ensure that the government understands the risks and complexities of firms that could pose a risk to the broader economy. (d) Allow the government in extreme cases to seize and liquidate a failing financial company in a way that protects taxpayers from future bailouts. (e) Give regulators new powers to oversee the giant derivatives market, increasing transparency by forcing most contracts to be traded through third-parties instead of only between banks and their customers. “It will inevitably contract credit,” said Sen. Judd Gregg (R., N.H.), who says the Senate bill “is probably undermining the system, probably making for a weaker system.”
Sen. Gregg was one of 37 Republicans to vote against the 1,500-page bill. Now Congress will need to reconcile the Senate bill with a companion House package adopted in December on a 223-202 vote, with 27 Democrats joining unanimous Republican opposition. The outlines of the two bills are largely the same. But there are more than a dozen notable differences that will need to be reconciled during negotiations that are expected to start within days. Despite the differences, the Senate passage virtually ensures that some type of financial regulatory reform will be finalized by this summer.
Diana Olick – US Housing Prices to Rise Slightly in 2010: Poll
“U.S. house prices will manage a small gain in 2010 after the worst crash since the Great Depression but gains in coming years are likely to come slowly, a Reuters poll found. Home sales and prices may retreat in the near-term after government tax credits to homebuyers as large as $8,000 ended on April 30, economists and property market analysts said. But that trend will be countered by historically low mortgage rates and the fact that housing affordability is now near the best it has ever been, likely putting prices back on a slow upward path.
Three-quarters of the economists polled May 14-19 said it was possible that average house prices would return to where they were in 2006 before the crash — which would require a rise of more than 40 percent — but that it would take a long time. Home prices as measured by the Standard & Poor’s/Case-Shiller 20-city index should rise 1.4 percent this year and 3 percent next year, breaking three years of sharp declines, according to the median forecast. “The recovery is likely to be longer and more arduous than many expect,” said John Silvia, economist at Wells Fargo. The homebuyer credit, which the government expanded and broadened to include repeat as well as first-time buyers, stole many future sales as buyers rushed to lock in deals before the April 30 deadline.
Buyers put away their checkbooks in the first weeks after the credits of $6,500 for repeat buyers and $8,000 for first-time purchasers expired. But there are reasons to be optimistic. Most economists say the recovery now can be sustained without government help and that home prices are fairly valued. But banks still need to put the record supply of repossessed houses on the market, which will keep prices from recovering very quickly. “A toxic combination of weak demand and high supply will generate a double-dip in prices now that the tax credit has expired,” said Paul Dales, U.S. economist at Capital Economics, who expects a 4 percent fall in prices next year.”
What’s in the Wall Street Bill
The Senate’s final version of Wall Street reform runs close to 1,600 pages. It takes a broad swipe at the rules that govern the financial sector. It aims to prevent future financial crises. It establishes a new consumer regulatory agency. It throws down new rules on complex financial products and creates a new way for the government to take over failing financial firms. The bill, which the Senate passed Thursday night, must now be reconciled with a similar measure the House approved last December. Here’s a breakdown of key measures in the Senate legislation. Among others, the bill creates a new process for unwinding big financial firms. Banks would be taxed to pay for unwinding banks after a collapse. Also, the Federal Reserve would be able to make emergency loans only to banks that are otherwise healthy and just need credit to get by. The bill gives regulators strengthened powers to break up financial companies that have grown too big and threaten to destabilize the financial system.
According to the bill, an independent Consumer Financial Protection Bureau housed inside the Federal Reserve will be established. Bank fees fund the agency, which would set rules to curb unfair practices in consumer loans and credit cards. It attempts to control complex financial products called derivatives that many blame for bringing down American International Group and Lehman Brothers. It supposedly limits the size and scope of banks’ investment activities, barring banks from trading on their own accounts, though it gives regulators the power to modify the ban. Banks are also prevented from trading derivatives, even for their clients’ accounts. Banks would be forced to spin off their swaps desks that make these trades. Now Congress is allowed to order a one-time Government Accountability Office review of Fed activities, including loans made during the financial crisis.
With this, the President gets new powers to appoint the head of the New York Fed. Currently, banking sector leaders play a big role in choosing who runs the New York Fed. Shareholders get to have a say in curbing executive pay packages, and makes it easier for investors to have a say in choosing who is on the ballot to run for the board of a publicly-traded company. It also adds that agencies that rate securities must disclose their methodologies. The Securities and Exchange Commission would appoint a panel to figure out how to independently match ratings agencies with firms that need securities rated. Now ‘liar loans’ get banned as lenders would have to document a borrower’s income before originating a mortgage and verify a borrower’s ability to repay the loan. The bill also forces ‘skin in the game,’ by forcing firms that sell mortgage-backed securities to keep at least 5% of the credit risk, unless the underlying loans meet new standards that reduce risk.
DSNews.com – Survey: 59% of Borrowers Would Not Walk Away if Underwater
A survey released Thursday by Trulia.com and RealtyTrac shows that only 1 percent of homeowners with a mortgage say walking away would be their first choice if they were unable to make their payments. If their mortgage were to go underwater – meaning the property value drops below the amount still owed on the loan – 41 percent would at least consider a strategic default, while 59 percent would not consider walking away no matter how much their mortgage was underwater. Pete Flint, Trulia’s co-founder and CEO, says the new survey results show that,
“While it may not make the most sense to keep paying for this undervalued asset, many homeowners, at least for now, are holding on.”
He says only 5 percent of those surveyed say they would opt for a short sale as their first choice, while 69 percent would pursue a loan modification to save their home. The study conducted by the two California-based companies also found that while the stigma around owning a foreclosure has subsided, interest in purchasing a foreclosure is significantly down compared to a year ago. Currently, 45 percent of U.S. adults age 18 and above are at least somewhat likely to consider purchasing a foreclosed home in the future, compared to 55 percent this time last year, the survey results showed. “For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes,” said Flint. “It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble,” leading to a larger number of foreclosed homes on the market, he explained. “We anticipate that there will be an increased number of both REO purchases and short sales throughout the rest of the year as the most active buying segments – first-time homebuyers and investors – continue to look for bargains,” said said Rick Sharga, SVP for RealtyTrac.
NAR Offers Congress Ideas to Strengthen a Successful VA Home Loan Program
The National Association of Realtors® offered some suggestions to Congress today toward making a good Veterans Affairs Home Loan Guaranty Program even better. Testifying before the House Subcommittee on Economic Opportunity, NAR First Vice President Moe Veissi, broker-owner of Veissi & Associates Inc., Miami, praised the VA program that encourages private lenders to offer favorable home loan terms to qualified veterans. “The program is most effective when it provides veterans who are unable to qualify for a conventional loan with favorable loan terms,” Veissi said. “VA’s strong, yet flexible, underwriting helps veterans purchase a home of their own without depleting their savings.”
To date, VA has guaranteed almost 19 million loans to American veterans, with a total value of more than $1 trillion in guaranteed loans. Eighty percent of veterans are homeowners, which is significantly higher than the national average at 67.2 percent. More than 90 percent of VA home loan borrowers have used the zero-downpayment option, Veissi said. “And their track record is fantastic – the default rate and delinquency rate for VA loans are far better than subprime, better than FHA, and even better than prime. Despite all the talk these days of ‘skin in the game,’ this program shows that solid underwriting is the key to sustainable homeownership,” Veissi said. He also noted that the VA has never guaranteed subprime loans. As a result of the subcommittee’s work and the passage of the Veterans’ Benefits Improvement Act of 2009, veterans have been able to refinance their distressed non-VA loans into safe, affordable VA loans.
NAR believes that VA should give borrowers the flexibility to negotiate fees as a normal part of home purchase transactions. Veissi pointed out that, while NAR supports VA efforts to limit fees paid by veterans, a high percentage of sales in his home state of Florida are foreclosures or short sales. “Since there is no seller to pay the fees, veterans are completely shut out of this market, which often includes the most affordable homes,” he said. To step up its efforts to educate Realtors® about the program’s value, NAR partnered last year with the VA to produce “Unlocking the Future,” a VA toolkit for Realtors® and homeowners that is comprehensive and informational.
Now on to our real estate investing education section …
Friday File: 15 Minute Resolution…Finding Killer Kindle Apps for Real Estate Agents & Investors
According to Amazon.com, Kindle remains the most wished for item on the website since the original release. For those that have been searching for a reason to purchase a Kindle but can’t justify the purchase as a business write-off…here’s a bit of a good news. These killer Kindle applications combined with the cost effective purchase of business books and syndicated news make the newest Kindle a “must have” gadget well within your price range.
Best Business Books on Kindle
Kindle makes ordering business books simple; one quick click and the newest release is instantly ordered and loaded…usually for $9.99 or less. Older books, public domain, classics and limited-time promotions are often free making the Kindle a great way to go green and save money at the same time. Currently the top three real estate investing books on Amazon include:
Investing in Real Estate by Gary W. Eldred
Rich Dad’s Advisors-: The ABC’s of Real Estate Investing: The Secrets of Finding Hidden Profits Most Investors Miss by Ken McElroy
The Complete Guide to Investing in Real Estate Tax Liens & Deeds: How to Earn High Rates of Return – Safely by Jamaine Burrell
Most Heavily Highlighted
Ever wonder what really makes an impact on people while they are reading? Searching for emerging trends to capture attention? Now you can find out with this great little tool. Simply click on the following link to find out what books are grabbing attention with the most highlighted passages:
http://kindle.amazon.com/popular_highlights/books
For those that are curious, this week’s most heavily highlighted books include:
Switch: How to Change Things When Change Is Hard by Chip Heath, Dan Heath
The 4-Hour Workweek, Expanded and Updated: Expanded and Updated,
With Over 100 New Pages of Cutting-Edge Content by Timothy Ferriss
Rather know the actual passages rather than the book? Visit
http://kindle.amazon.com/popular_highlights/highlights
This week’s passages include:
…the more money they made the next day on the streets. Those three things—autonomy, complexity, and a connection between effort and reward—are, most people agree, the three qualities that work has to have if it is to be satisfying. It is not how much money we make that ultimately makes us happy between nine and five. It’s whether our work fulfills us.
Outliers: The Story of Success by Malcolm Gladwell
No matter what the setting, there are five discrete stages that we go through as we deal with our work. We (1) collect things that command our attention; (2) process what they mean and what to do about them; and (3) organize the results, which we (4) review as options for what we choose to (5) do. This constitutes the management of the “horizontal” aspect of our lives—incorporating everything that has our attention at any time.
Getting Things Done by David Allen
See you at the top!
Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2009.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
400 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
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