San Jose FHA Loans, Mortgage Rates and Real Estate Blog

on March 29, 2010

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The Government said last week it would offer principal reductions for borrowers who are underwater (owe more than their homes are worth.)

The FHA plan is targeted at investors who currently own these underwater mortgages (see Negative Equity Share Chart below - source American Core Logic). Under the plan, the 1st mortgage holders would write down the principal of a first mortgage at least 10%. The loans would then be refinanced into FHA-insured mortgages as long as the loan to property value ratio is 97.75%.

For borrowers with second mortgages, total mortgage debt would have to be written down to a maximum of 115% of the home’s current value. The government would pay the holder of the second lien, but they are not mandated to do this.

To qualify, homeowners must be current on their loan, occupy the home as a primary residence, fully document their income and have at least a 500 credit score. However, expect the lenders to have a much higher credit score requirements - possibly 620.

Diana Farrell, a senior White House economic adviser, said the programs couldn’t be expected to prevent the majority of expected foreclosures. “The purpose is to deal with just enough of the overhang…where we have a real chance of changing the dynamic,” she said.

The agency would take on more risk by refinancing underwater borrowers and that risk would grow if the program grows more successful. The Government said it would steer $14 billion in Troubled Asset Relief Program (TARP) funds that had already been allocated for foreclosure prevention to cover costs.

Note that it may take several months before it becomes available to borrowers. For more details - Read the Press Release and Consumer FAQs.

Bay Area Mortgage Rates set to go up because of Fed actions

on January 27, 2010

in Mortgage Rates

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The Fed’s statement today does not augur well for Bay Area Mortgage Rates. The Fed’s policy-setting committee stuck to a plan to end its purchases of mortgage securities by the end of March.

Background - The program to purchase agency mortgage-backed securities (agency MBS) was announced by the Federal Reserve on November 25, 2008. On Wednesday, March 18, the FOMC announced the expansion of the Federal Reserve’s program to purchase agency MBS up to $1.25 trillion by the end of the year. On September 23, 2009, the FOMC announced that the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and gradually slow the pace of these purchases, anticipating they will be executed by the end of the first quarter of 2010.

The purchases have helped to drive down mortgage interest rates (refer chart below for Mortgage Rates in the last decade. Source - Freddie Mac), providing an important boost to U.S. housing and financial markets. When the Fed stops buying, rates on mortgages could turn higher. According to Fannie Mae chief economist Doug Duncan Mortgage Rates can go up by 30 to 50 basis points if Fed stops buying Mortgage Backed Securities. In fact, immediately after Federal Open Market Committee (FOMC) Statement today, most of the lenders issued a repricing for worse. For a $500,000 an increase in 50 bps in rate means an increase of $155 a month on a San Jose home mortgage payment.

In its meeting in December, some Fed officials argued the housing market might not be ready for an end to the MBS purchase plan and suggested keeping it in place for a longer period or even expanding it. With Fed now saying the economy had “continued to strengthen” and business spending was “picking up” ; it is trying to gradually pull back from the many programs initiated between 2007 and 2009 to stabilize the financial system and lift the economy.

So if you were planning to take a mortgage either to refinance or buy a home, time could be running out for low mortgage rates. Call me today at 408.905.6261 or email me at shashank@arcuslending.com and let me shop 100+ lenders for you to get you the best Bay Area Mortgage Rates.

Mortgage Rates go up sharply for Bay Area Homes

on December 27, 2009

in Mortgage Rates

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In last 3 weeks, 30 year fixed mortgage rates have gone up 34 basis points for San Francisco (SF) Bay Area homes.

In the latest results of its Primary Mortgage Market Survey® Freddie Mac reported 30-year fixed-rate mortgage averaged 5.05 percent with an average 0.7 point for the week ending December 24, 2009. The 15-year Fixed Rate this week averaged 4.45 percent with an average 0.6 point. The 5-year adjustable-rate mortgage (ARM) averaged 4.40 percent this week.

These rates are for conforming loan amount $417,000 and lower. Higher loan amounts come with higher interest rates.

average_mortgage_rates

The rates through 2009 have been artificially kept lower by Fed by buying Mortgage Backed Securities (MBS). Fed is planning to stop buying MBS in March 2010 and if they actually decide to do so, mortgage rates could go up 25 bps to 50 bps almost overnight. No surprise that the average rates are projected to go beyond 6% by the end of the year.

If you are still on the fence to refinance your Bay Area Home Mortgage, the window for low rates could be short. If you are looking for a Bay Area Mortgage Broker who could shop more than 100 lenders to get you the best mortgage interest rate, call me at 408.905.6261.

Existing Home Sales Jumps 10.1%

on November 23, 2009

in Real Estate Trends

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Home sales jumped in October, rising far more than expected as First Time Home Buyer Tax Credit offset fears about joblessness.

Sales of existing homes increased by 10.1% to a 6.10 million annual rate from 5.54 million in September, the National Association of Realtors (NAR) said Monday.

Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from an 8.0-month supply in September.

“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,” NAR chief economist Lawrence Yun said.

Even though the US unemployment rate is at 10.2% and rising, the tax credit, low prices and mortgage rates have drawn in buyers. The median price for an existing home continued to take a dip last month. It was $173,100, down 7.1% from $186,400 in October 2008. The average 30-year mortgage rate was 4.95% in October, down from 5.06% in September, Freddie Mac data showed.

Where do you think the real estate market in your area heading? Feel free to post your comments below.

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New changes to Conforming Loans for San Jose

on October 4, 2009

in First Time Home Buyer and Mortgage Rates

. 1 Comment

fannie_mae_logo Fannie Mae will change underwriting guidelines for conforming loans for San Jose and rest of the Bay Area. They are doing this to reduce their overall risk. Some of the changes announced recently and going into effect on the weekend of December 12, 2009 further tightens some of the guidelines. Here are the highlights:

Credit Score: All Fannie Mae loans — whether underwritten electronically or manually — will now require a 620 credit score minimum. There are very few exceptions.

Mortgage Insurance coverage: Borrowers loan-to-value exceed 80 percent of the property value now have a choice:

Accept higher mortgage insurance premiums month-after-month
Accept a one-time fee paid at closing to compensate for higher risk

Both options pass higher costs to consumers.

Debt-to-Income Ratio: Fannie Mae will no longer approve Debt-to-Income Ratio exceeding 45 percent except with very strong assets and credit to back it up. In no case can Debt-to-Income Ratio exceed 50 percent. Debt-to-income ratio is defined as the ratio between a borrower’s monthly payment obligations divided by his or her gross monthly income.

Other changes: Fannie Mae is retiring Biweekly Mortgage Loans because of lack of demand and there will be new risk-based pricing on “expanded level” approvals.

To read the entire announcement from Fannie Mae click here

FHA announces changes to Streamline Refinancing for San Jose Homes

on September 21, 2009

. 2 Comments

In it’s announcement on Friday, FHA tightened the credit standards for it’s Streamline Refinancing Program. So if you currently have an FHA loan on a San Jose home and want to refinance into another FHA loan, you will be subjected to new parameters starting January 1, 2010. Below are the highlights per FHA mortgagee letter issued on 9/18/2009.

A. Seasoning

At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced.

B. Payment History

1) For mortgages with less than a 12 months payment history, the borrower must have made all mortgage payments within the month due.

2) For mortgages with a 12 months payment history or greater, the borrower must have:

a) Experienced no more than one 30 day late payment in the preceding 12 months,

AND

b) Made all mortgage payments within the month due for the three months prior to the date of loan application.

First HVCC, then MDIA & now DRASTIC changes to FHA Guidelines

on September 20, 2009

. 2 Comments

Federal Housing Administration (FHA), which insures lenders against losses on home mortgages, announced a series of changes that will have far-reaching impact on the housing market of San Jose, the entire San Francisco Bay Area and rest of the country.

Background -

The agency confirmed that, as of Sept. 30, it would fall short of a legal requirement that it maintain supplementary reserves of 2% of the loans it insures. Those reserves supplement a fund that provides for projected claims over the next 30 years. The extra capital cushion last year was about 3%, down from 6.4% in 2007. Falling reserves are because of higher claims that the FHA has been subjected to in last couple of years. The higher claims has come because of more defaults/delinquency on FHA Insured mortgages. The FHA earlier reported that in July 7.8% of the single-family mortgages it insured were 90 days or more overdue or in the foreclosure process, up from 6.6% a year earlier. For the second quarter, about 8% of all home mortgages were 90 days or more past due or in foreclosure, according to a survey by the Mortgage Bankers Association.

To ensure that FHA rebuilds the cushion of 2% or higher, Commissioner David H. Stevens on Friday announced plans to implement a set of credit policy changes that will enhance the agency’s risk management functions. Stevens also announced his intention to hire a Chief Risk Officer for the first time in the FHA’s 75-year history.

Commissioner Stevens said “To be clear, the fund’s reserves are sufficient to cover our future losses, so the FHA will not require taxpayer assistance or new Congressional action. That said, given the size and scope of the FHA and its importance to today’s market, these risk management and credit policy changes are important steps in strengthening the FHA fund, by ensuring that lenders have proper and sufficient protections.”

Good News for First Time Buyers - Mr. Stevens said tighter credit standards would suffice to rebuild the cushion to 2% or more, and that the FHA wouldn’t need to raise the premiums borrowers pay or seek an increase in its minimum down-payment requirement of 3.5%.

FHA Streamline Refinance for Bay Area Residents

on August 9, 2009

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How to get FHA to FHA refinance with no Appraisal, Income or Credit verification

shutterstock_8501056 If you live in the San Francisco Bay Area or rest of California state and if you currently have an FHA loan, you may be eligible for an FHA streamline refinance. This can help you lower your mortgage payment and mortgage rate. It could also help you move into a 30 year fixed loan from an Adjustable Rate Mortgage (ARM). And unlike a typical refinance, an FHA Streamline Loan doesn’t require Appraisal, Income or Credit verification. This is arguably the easiest loan process out there.

So how do you qualify for and what are the requirements for an FHA Streamline Refinance?

Your current mortgage must be an FHA Loan. Else your options are limited to going through a standard refinance which requires Income, Asset, Credit verificationn and also an appraisal.
Maximum Loan Amount is based on the lower of:

Original Principal Balance, or
The sum of existing mortgage balance (FHA Insured), Closing Cost, Pre-Paids to establish the impound account minus any up front mortgage insurance premium refund

Stated Income Jumbo Loans now available for Contra Costa, San Mateo & San Francisco counties

on June 14, 2009

in Others

. 1 Comment

homebuyers Great news for homeowners and buyers in Contra Costa, San Mateo and San Francisco counties. Stated Income loans are now available for borrowers in these counties. This type of loan could specially be very useful for Self-Employed borrowers who find it difficult to document their “real” income via Tax Returns. Also, commissioned employees who have wide swings in their income could benefit from a program like this. Below are the highlights of the program:

Low mortgage rates gone already for Bay Area?