Housing Activity Improves as Low Mortgage Rates Continue

Housing activity has shown some improvement as low mortgage rates continue at historic levels. Even though reports for home sales are mixed, the numbers are coming in higher than a year ago. This past week, the National Association of Realtors reported that existing home sales fell in May by 1.5%, but were 10% higher than May, 2011.

On the other hand, new home sales were up 7.6% and hit their highest level in two years and 20% higher than last year, according to the U.S. Census bureau and the U.S. Department of Housing and Urban Development. These agencies also reported that building permits for privately owned residential construction increased 7.9% in May which is the highest level since 2008. On the down side, Housing Starts were reported as decreasing in May by 5%.

FreeRateUpdate.com's survey of wholesale and direct lenders shows that 30 year fixed mortgage rates are at 3.375%, 15 year fixed mortgage rates are at 2.750% and 5/1 adjustable mortgage rates are at 2.125%, all available with 0.7 to 1% origination fee for well qualified borrowers. Home affordability is still at its highest level, although U.S. home prices rose 0.8% in April and 3.0% over the past 12 months, according to the Federal Housing Finance Agency.

While mortgage applications fell back slightly, the Mortgage Banker's Association reported that mortgage refinance applications surged with refinance activity accounting for 81% of all applications. Refinancing through HARP (Home Affordable Refinance Program) has been very popular with underwater borrowers who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. If denied for HARP, it is important that borrowers keep looking for a lender to assist them since every lender is different.

A HARP denial is not the end of the road since what one lender turns down, another lender will welcome. The best place for obtaining a successful HARPmortgage is online where multiple lenders can be found in one place with a simple inquiry.

This week, FHA rescinded the stricter policy regarding credit defaults and collections after putting it on hold in April. This news is great especially for first time home buyers. With FHA mortgage rates remaining at the same low levels, FHA refinances are surging with the expanded FHA Streamline Refinance. Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage rates are at 2.625% and FHA 5/1 adjustable mortgage rates are at 2.625%.

The FHA Streamline Refinance is now being offered for existing FHA mortgages, that were endorsed prior to June 1, 2009, with extremely low upfront and annual mortgage insurance premiums. While this program is in effect until the end of 2013 and does not allow for cash out, it also does not require an appraisal and the ordinary verifications.

Prior to this offer of lower mortgage insurance fees, borrowers did not use the FHA streamline refinance often because FHA has higher closing costs (APR) due to the upfront mortgage insurance premium and various FHA fees. Many lenders are putting limits on the FHA streamline and extending it only to their own customers. All eligible FHA borrowers can still obtain the streamline refinance through an online inquiry where many participating lenders are readily available.

Current jumbo 30 year fixed mortgage rates are at 4.250%, jumbo 15 year fixed mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rates are at 2.250%. Since jumbo mortgages have stricter guidelines, borrowers must have excellent credit in order to receive these low jumbo mortgage rates with 0.7 to 1% origination fee. Jumbo mortgages are not as popular as other mortgage programs, but are still necessary for higher priced homes that are above the conforming and FHA loan limits. While requirements may be tougher, these restrictions differ from lender to lender since these loans are generally held within the lender's portfolio.

As global economic growth continues to be a major concern, MBS prices (mortgage backed securities) fluctuated this week depending on the updates coming out of Europe and the U.S. Federal Reserve. Mortgage rates are affected by MBS prices and move in the opposite direction.

The Feds extended Operation Twist until the end of the year and also acknowledged that economic data has been disappointing, although they did not commit to any further quantitative easing. They again stated that the economy is expanding moderately, but employment growth has slowed in recent months. The four week average for jobless claims came in higher which was a disappointment for investors.

Europe's wide financial problems continue to be a roadblock in the global recovery. While Greece formed a coalition government after the conservative party won the election, nothing has really changed. Now Spain has requested help for its banks and Cyprus stated that it would also seek help from the Euro zone bailout funds. These issues are continuing to keep investors cautious which is ultimately keeping mortgage rates down.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.

Written by Ed Ferrara
June 27, 2012 Published by Realty Times

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