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Even though its effective date is April 1, 2009, mortgage applicants should start seeing Fannie Mae’s new fee structure from lenders beginning this Monday, January 12.

The reason why Fannie Mae’s mandatory loan fees are hitting lender pricing so far in advance is because lenders can take up to 30 days to package and sell a loan to Fannie Mae post-closing.  In effect, this moves the April 1 start date to March 1.

Then, figuring that March 1 is roughly 45 days from now and that 45 days is a normal window on which to close on a home or on a refinance, the start date again pushes back, this time to January 15.

Given lenders’ typical timeframe to close, fund, and sell a loan to Fannie Mae, in other words, it’s normal that pricing reflects the fee changes two-and-a-half months in advance.  Homebuyers and would-be refinancers would do well to take notice.

If you are floating a mortgage rate today — or shopping for one — consider locking it in before the close of business.  Effective Monday, any number of traits in your home loan could increase your closing costs:

• Your credit score
• Your downpayment / equity percentage
• Your home’s property type
• Your reason for wanting a mortgage
• Your loan type

For a complete look at Fannie Mae’s new, mandated loan fees, visit the Fannie Mae web site.  If you have trouble interpreting the worksheet, call or email me and we can talk about it together.

In late-November, the Federal Reserve pledged $600 billion to buy mortgage-backed securities.  The announcement drove down mortgage rates and started the Refi Boom.

Then, the Federal Reserve made a second series of statements after its scheduled meeting last Tuesday, causing mortgage rates to plunge again.  This started the Refi Boom’s second wave.

Because of the surge in refinance activity, mortgage lenders are “backed up”; initial file reviews are taking up to 12 business days in some cases. 

Typically, this process takes 2 days.

Underwriting delays are problem for refinancing Americans because when a mortgage rate is locked, it’s most often locked for 30 calendar days — the standard Rate Lock Agreement contract length.  If the mortgage doesn’t close within those 30 days, the applicant must either pay an “extension fee” to preserve the lock, or risk losing the rate altogether.

30 days may seem like a long time, but let’s consider a few external variables:

• December 24, 25, and 26 plus January 1 and 2 are lost to holiday
• December 27, 28 plus January 3, 4, 10, 11, 17, and 18 are lost to weekends
• January 19 is lost to federal holiday
• 3 days are lost to the Right To Cancel clause

This leaves 13 days to get from Application to Closing, and of those 13 days, 12 of them are being spent on the initial review.  30-day rate locks, therefore, may be inadequate with some mortgage lenders.  A 45-day agreement may be required instead.

Typically, 45-day rate locks carry higher rates or higher fees, versus their 30-day counterparts.  This amounts to a “tax” on borrowers, a result of the nation’s rush to refinance en masse.  It also may preclude a homebuyer’s ability to close in 30 days.

As always, the best way to preserve a rate lock is to be as responsive as possible to the process.  Return paperwork when asked, schedule appraisals immediately, and arrange to signing closing paperwork on the first available day.

With mortgage rates low, application volume — and underwriting turntimes — should remain high into early-2009.

The Federal Open Market Committee voted to cut the Fed Funds Rate by at least three-quarters percent on Decmber 16, 2008.  The benchmark rate now rests in a range of 0.000-0.250 percent.

In its press release, the FOMC identified three key economic sectors in which activity has weakened since October. The FOMC noted that:

1. The U.S. job market is deteriorating
2. Consumer spending levels are falling
3. Business investment is contracting nationwide

The Fed intends its rate cut to provide stimulate to each of these areas.

In addition, the voting members of the FOMC singled out inflation as a diminishing threat to the economy.  This is an important admission because it’s well-known that cuts to the Fed Funds Rate can spark inflation.  Rapidly falling oil prices and commodity costs, therefore, likely paved the way for today’s historic cut.

In its announcement to markets, the Fed gave The People what they wanted — a reassurance that the policy-making group would “employ all available tools” to help turnaround the economy.  Lowering the Fed Funds Rate to an all-time low is one such step; its plan to purchase mortgage-backed debt in the open market is another.

How the markets react over the long term is a different issue as the Fed loses a powerful tool when the rates get this low. Their ability to provide additional stimulus n this manner.

Source
Parsing the Fed Statement
The Wall Street Journal Online
December 16, 2008
https://online.wsj.com/internal/mdc/info-fedparse0812.html

A mortgage is a contract between a lender and borrower, defining the terms by which a home loan must be repaid. 

The paperwork, signed by both parties, includes provisions for things like:

• The interest rate
• The length of the loan
• The amount of money to be borrowed

But, like all loans, a mortgage loan can be paid off at any time.  So, when market interest rates fall, homeowners will often exercise their right to an “early payoff” by securing a new loan that pays off the old one.

This process is most commonly known as a refinance.

A refinance is the changing of the loan terms against a property, often for a better interest rate or a lower monthly payment.  When the refinance process is complete, the original lender’s loan is paid in full using the money from the new lender’s loan and the former’s relationship is officially terminated.

There’s no rule against how many times a person can refinance, nor is there an easy way to determine whether or not a refinance makes sense.  In general, if you can reduce your monthly payment while limiting your closing costs, to refinance is a smart decision. 

However, there are other reasons to refinance, too, including:

1. To convert from an ARM into a fixed rate mortgage (or vice versa)
2. To extract equity for paying off third-party debts or for cash
3. To extend a loan from 15 years to 30 year for payment relief

Because there are fewer third-parties involved with a refinance, it’s often simpler and less expensive than a comparable purchase transaction.  The paperwork stack is often smaller, too.

When choosing a room’s paint colors, Interior Designers follow the 60-30-10 Rule.

The 60-30-10 Rule says that color usage in a space should be based on percentages:

• 60% of the room should be a dominant color
• 30% of the room should be a secondary color
• 10% of the room should be an accent color

It’s a design method used by the world’s top designers and featured in countless design magazines.  But, you don’t have to spend money on a professional to get your color combinations right.

Courtesy of HGTV, the Choose Color tool shows 39 off-the-shelf palettes and uses them to apply the 60-30-10 Rule to actual rooms in a house.  The interactive tool also features in-line design tips to make the most of your space and budget.

Visit HGTV to color your rooms and learn more about good design.

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Photo curtesy of Creativecommons.org

CENTURY 21 Advantage Gold Maple Glen Office will run toy and food drive Saturday, December 20, 2008 12-4pm.

Toys collected from the drive will benefit the local Toys for Tots program; all donations must be new and unwrapped. All food collected will benefit a local charity.

Bring your camera family and pets for a photo opportunity with Santa Clause and local U.S. Marines. Donations can be brought to the Maple Glen office located at 860 Welsh Rd. Maple Glen, PA 19002. Please contact (215) 643-6870 for more information.

For the 78 consecutive days, gas prices fell nationwide through December 3rd.  At $1.81 per gallon, the average price at the pump is less than half what it was at its peak in July.

And although gas prices vary by locale, the cost of a fill-up is worthy of national news.

The main reason why national gas prices matter is because of something called the Wealth Effect — people’s tendency to spend more money when they have a perceived feeling of being worth more.

Low gas prices can amplify the Wealth Effect, leading to higher levels of consumer spending nationwide — the primary driver of the U.S. economy.

But more important than the Wealth Effect is the reverse Wealth Effect.  That’s when consumers have a perceived feeling of being worth less and their spending reflects it.  This past summer is a terrific example of it.

Soaring gas prices, Wall Street troubles, and negative campaigning constantly reminded Americans of what was wrong with the economy.  It follows, therefore, that retail sales figures plunged in September and October.  Once the election passed, however, and gas prices fell, a gentle optimism returned.

Not surprisingly, consumer confidence rose in November.

All of this matters to real estate because as Americans regain their confidence and feel more “wealthy”, they will be more likely to make “move up” purchase, buy new home appliances, and take other actions that propel the economy forward.

Oh, and mortgage rates trolling at 3-year lows certainly helps, too.

(Image courtesy: GasBuddy.com)

According to the government, American businesses are cutting staff at an accelerated pace, most recently paring 533,000 jobs this past November.

It’s the largest one-month decline since December 1974 and raises the year-to-date job losses to 1.9 million workers.

However, there is a silver lining in the data for all Americans — both employed and unemployed.

With each piece of negative news about the economy, Washington is more likely to pass new stimulus packages to the benefit of household budgets.

On one front, Federal Reserve Chairman Ben Bernanke has already alluded to further Fed Funds Rate cuts at the Fed‘s two-day meeting starting December 15.  Because the Fed Funds Rate is directly tied to Prime Rate, any cut in the benchmark lending rate would lead “floating” interest rates lower on home equity credit lines and other revolving debt.

And this talk from the Fed also comes on the heels of its $500 billion pledge to buy mortgage-backed bonds.  That demand-shifting move was announced last week and drove mortgage rates lower.  It also marked the official start of the refinancing boom.

And, lastly, Capitol Hill is already responding to the jobs data with calls for “urgent” action.  It’s a vague term, to be sure, but history has shown that Congress could pass any number of measures, each meant to put more money into household budgets nationwide.

The U.S. is in a verified recession and Washington is throwing the kitchen sink at it.

The end result is that today’s job data is a non-event of sorts for active home buyers.  Mortgage markets expected a poor reading and they got it.  Normally, data like this would cause mortgage rates to spike but this is not a normal market.

Now, with markets expecting additional stimulus, mortgage rates are edging lower today with hopes of an economic rebound.

Source
Employers cut 533,000 jobs in Nov., most since 1974
Barbara Hagenbaugh
December 5, 2008, USA Today

As the weather turns cooler and home heating systems get fired, it’s important to safeguard your home from carbon monoxide gas. Often called the “slient killer”, the odorless and colorless gas accidentally poisons about 170 Americans each year.

The video above from CBS News tells the story of 2 such deaths.

Throughout the 5-minute piece (and after the commercial), note the mother talking about headaches, fatigue and nausea. Because carbon monoxide poisoning shows similar symptoms to the flu, many people confuse the two — sometimes with fatal consequences.

Experts say to outfit each room in your home with a carbon monoxide monitor. The recommended monitor from the video is available at Amazon.com for $10 off.

The Sky is Falling!
Yesterday, I received a call from a Seller who has been trying to sell his home with another real estate firm for the past 250 days. His listing contract with the other firm had expired and he received a post card from my office announcing that we sold a home on his street. He purchased his home in mid 2006. In late 2007, his employer laid him off. He has since found work in his profession, however he is now earning less money. He is struggling to pay the mortgage for his home that was once affordable. He did what many other sellers in similar situations do. He listed the home for sale with a real estate agent at a price that, if realized, would be sufficient to pay off the mortgage and the expenses associated with the sale.

Demand is Not Dictated By a Seller’s Needs
The Seller was upset at his previous real estate agent for not delivering a sale. While I agree that the agent may have been able to better advise his client, I explained to the Seller that I have never met a seller’s agent that possessed the ability to overcome demand limitations. If better purchase options exist in your area, buyers will likely pass on your home to move in a different direction. Buyers are simply looking for their best option. 250 days later, still no buyer.

Could His Agent Have Done More?
While his previous Agent may have been well intentioned, he did not identify a very strong option for this Seller, a Short Sale. A Short Sale occurs when a homeowner owes more on their property than the property is presently worth, however their mortgage company agrees to accept less than what is owed as payment in full, in an effort to avoid the foreclosure process. Avoiding a foreclosure will greatly minimize the damage to a seller’s credit.

Why Don’t We See More Successful Short Sales?
Many real estate agents do not understand short sales and therefore are either reluctant to get involved or deterred by the high number of failed short sale attempts. Agents may have difficulty “qualifying their seller” for the short sale process. Not all sellers will qualify. In addition, mortgage companies are often overwhelmed by the growing number of distressed property sales and may be slow to communicate internal requirements. Time is of the essence and there is little room for a learning curve that has evolved.

The Silver Lining
There are real estate agents that have started to specialize in this growing niche market. There is additional training that may improve their success. As with hiring any real estate professional, you want to ensure that the agent is qualified to handle this niche. Ask for references and additional qualifications that might set the agent apart form other real estate licensees. Please visit this link for additional useful information on Short Sales.