Read and share of this what you will. It’s a bit of a synopsis of how mortgage rates got so low, why they’re recently going up and where they’re going in the near future. All personally written.
So, what’s going on with mortgage rates?
Rates have seen a very nice period of decline in the past 6 months. We’ve seen rates hit as low at 3.75% on a 30 year Fixed – truly at historically low levels.
Lenders have sustained very low rates (around 4%) for much of this entire period, up until the last 10 days.
In mid 2008, the Federal Reserve put together an “asset buying” program in the amount of $1.3 Trillion. Much of these funds were used to purchase the financial vehicle that has direct impact on long term mortgage rates –named Mortgage Backed Securities (MBS). Contrary to common belief, banks don’t control mortgage rates, the Fed doesn’t, mortgage companies don’t, the President doesn’t, etc. The only thing that impacts (par/base mortgage rates) is market demand (purchasing) of Mortgage Backed Securities (MBS).
This is what caused mortgage rates to significantly come down during much of the last 18 months.
As evidenced from this (above) two-year chart of Mortgage Backed Securities below (Green/Up is rates going lower. Red/down means rates going up). You can see how in November ’08, rates were falling fast. We went from rates being close to 6%, dropping down to 5% within a very short period.
So, needless to say, the $1.3 Trillion buying program worked. And it worked well.
You can see from this chart (left, same 2-year timeframe as previous chart), rates continued to decline once again in April of this year (2010). Poor economic news, stock selloffs, Foreign countries on the verge of going bankrupt (read Greece) were among the reasons for mortgage rates continued decline. 30 Year Fixed rates went from about 5.0% down to our unbelievably low levels of the upper 3’s% (3.75%)
This chart (above) is showing a shorter time-frame of the most recent 6 month time-frame. You can see designated Arrow 1, showing the start of the run up of demand of Mortgage Backed Securities (MBS) giving the low historical rates. This past 6 to 7 months sure have been a wild ride with rates coming down steadily.
Then note designated Arrow 2. This is at the top of the market (lowest rates), the date was November 4th.
From this day, for about the next 10 days, it has sent mortgage rates higher than we’ve seen in 3 to 4 months! Since the 4th of this month, mortgage rates have increased about .375% to .625% depending on the product. 30 Year Fixed Rates today are around 4.25% to 4.375%.
So, what happened on November 4th to cause rates to increase?
As you may have heard in the news, the Fed recently rolled out a NEW asset buying program called “Quantitative Easing 2” or also known as “QE2”. Remember the $1.3 Trillion buying program in mid 2008 I mentioned earlier? Yes, this is version two, with a few slight changes. Only this time, the Fed announced an amount of $600 Billion, which was a bit more than the market had expected – so it was received pretty well (for those that supported the influx of money into the system). The purpose of this injection of funds, among many things, is to basically increase the liquidity of money supply and further stabilize our financial markets. One by-product of doing this is that there will be additional purchasing of some Mortgage Backed Securities, to further stabilize or raise their prices and thereby lower long-term interest rates. The Fed sees the housing market being a foundation to continue an economic recovery and wants to keep rates low and not lose momentum with homebuyers.
But wait a minute…why did rates go up this time instead of rates going down like they did last time the Fed did this?
Great, great question, I’m glad you asked. Not to reduce the answer to one simple question, but it pretty much does the trick. One word: Inflation. (Well, more accurately – perceived inflation.) There hasn’t been any true hard data showing inflation – so at this point, it’s mainly with the concern of inflation, rather than factual reported data.
Poor economic news is generally (again generally) good for long term mortgage rates. Bad economic news, stock market falls, bonds (MBS) go up, mortgage rates go down. Just the opposite happens when good news is announced in the market. The one “bad news” that is the exception is, you guessed it: Inflation.
Mortgage Backed Securities (MBS), among other treasuries…hate…loathe inflation. Without going too far into inflation, it basically devalues the bond, making it worth less. Thus the market doesn’t want to buy them and this sends rates higher.
Inflation = higher mortgage rates!
During the previous $1.3 Trillion Fed stimulus program, there was as much talk about deflation as there was inflation (deflation of course is the opposite of inflation). So this pretty much balanced out the “inflation scare,” this time it’s different. Inflation, in the recent 10 days, has been a significant concern to the marketplace, thus causing a legitimate increase in mortgage rates. Yes, having the exact opposite effect the Fed intended.
So, where are rates going now?
Ahh, yes…the million dollar question.
If the new QE2 and natural market purchase Mortgage Backed Securities (MBS), we’ll see rates stabilize or go back down.
If we see improved market/economic news and QE2 not doing its’ job, we may not see them improve much at all. One interesting thing to add, yesterday morning, renowned investor Warren Buffet basically says he thinks there is a “Bond Bubble”. He says that buying bonds and treasuries (again, that included Mortgage Backed Securities) is a bad investment. He says, “I think short-term and long-term bonds are a very poor investment at the present time.” Of course, this is only one man’s comments, but a man that understands U.S. markets very well. These comments may end up moving the market and discouraging the purchasing of this product. You can read his full article here if you want to read more into it.
In the end, we need to encourage our buying clients that now is the time to buy. Rates are at a point now that many analysts are saying can’t go any lower. Encourage your clients to read this to give them an understanding that rates, at this point, are more likely to go higher, than go much lower.
Let us know if your clients need anything regarding lending or mortgage services. Please feel free to send this to your clients or other agents in your office. Also, we are scheduling office speaking times for next month – let us know if your office could benefit from it.
Our class is being held tomorrow (Tuesday from 1pm-4pm). We have a few seats left, please sign up today! 3 clock hours (WA State).
201 NE Park Plaza Drive
Suite 242 (Park Tower I)
Vancouver, WA 98684
RSVP to Dave or Steve at 360-713-9400.
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If my client files Bankruptcy, how long will he have to wait to eligible to get a mortgage again?
Do credit inquiries really affect my client’s credit score and by how much?
How do I know the difference between a Foreclosure vs. Bankruptcy vs. Short-Sale vs. Deed-in-Lieu and which should my client do?
Did you know?? Credit scores are fast to change, not slow. Credit scores can change 30 points in as little as one day!
If these questions or the topic of Credit is important to you, please sign up for our Washington State 3 Clock Hour class named “Credit: Facts and Fiction.” We’ve had great reviews and feedback on the class up to this point.
We will be revealing an exclusive Pinnacle Mortgage Planning tool that is allowing us to increase borrowers credit scores by 40 points or more in less than thirty days. It is saving borrowers thousands of dollars in interest and better yet, it is turning “non-deals” into actual closings. No gimmicks, just truly a valuable tool and usage of technology.
The class will be held Tuesday, July 20th from 1pm to 4pm. Space is limited, but we will be teaching again in August and September. Please either reply or give us a call to reserve a seat. If you’ve already taken the class, please feel free to forward to other Agents.
Cost: $25
Filed under Clock Hour Classes, Credit
Whether you’ve been laid off…or as a Real Estate Agent even worse – feel like you need to do something different…
I found this video extremely well done and motivating in that situation.
Marketer and Author Seth Godon in his book, The Dip, talks about “pressing through the hard times” like we’re experiencing in Real Estate or do yourself a favor and just get out of the business altogether.
If you choose the latter – I hope instead of “looking for a job” – you instead end up “doing something interesting.”
This is an amazing video.
Filed under Motivation, Realtor
If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies.
Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.
1. You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.
2. If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.
3. For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.
4. A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
5. The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.
6. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
7. The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.
8. No credit is available if the purchase price of the home exceeds $800,000.
9. The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
10. A dependent is not eligible to claim the credit.
You can source this from IRS by clicking here.
The Kilkenny-Valenta Lending Group at Pinnacle Mortgage Planning brings a combined experience of 26 years in the mortgage business to serve their clients. They have consistently been one of the top producing teams in Clark County in the past 8 years with over 900 completed transactions. As a group, they guarantee the highest level of trust, creativity and experience.
Steve Valenta and Dave Kilkenny| Mortgage Advisors
Direct (360) 576-1919 | Jennifer (360) 713-9404 | email jLee@pinnaclemp.com
201 NE Park Plaza Drive, Suite 242 | Vancouver, WA 98684
Filed under First Time Buyer, IRS, Uncategorized
Why have mortgage interest rates stayed so low this year?
Contrary to common belief, mortgage rates are not controlled by Banks, the Federal Reserve, the Government or even the President. They are dependant completely on market demand of long term mortgage bonds called “Mortgage Backed Securities” (MBS). When there is demand for Mortgage Backed Securities, this means the market is buying this instrument, thus causing mortgage rates to go down. When the market decides to sell these instruments (less demand), this causes mortgage rates to increase (go higher).
As part of the Federal Stimulus Package, the Federal Reserve pledged to purchase $1.25 Trillion (yes, Trillion) of these Mortgage Backed Securities (MBS), thus creating HUGE demand – causing mortgage rates to stay low for this extended period of time. Basically, through this “asset buying program” the Federal Reserve has artificially kept mortgage rates low to stimulate the housing markets.
The Fed announced today that it is about 85% through the program ($1.096 Trillion), planning to have the program completed by the end of the first quarter (March 2010). We’ve attached a chart of cumulative total for you to see.
What is going to happen to mortgage rates after the asset buying program is complete (March 2010)?
Undoubtedly, it is going to be a bumpy ride as we go through the transition from artificial Fed money to being replaced by natural market money buying Mortgage Backed Securities (MBS). One school of thought says that mortgage rates will likely rise since the amount of artificial Fed money was such a significant amount of the buying. The other school of thought says there is a tremendous amount of cash sitting on the sidelines waiting to get back into the market. Which scenario plays out will be the interesting part. Again, one thing we can count on is definite volatility.
So, where does this leave me and my clients today?
If at all possible, it would be a prudent decision not to wait for this transition period. Use information like this to get your “fence sitting” buyers off the fence and buy as soon as possible. With 30 Year Fixed mortgage rates at or under 4.875%, it is absolutely unlikely that rates to go much lower. Additionally, the $8,000 First Time Buyer Credit as well as the $6,500 Move-up Buyer Tax Credit expires April 30, 2010 (signed contract date). Buying a house during the first quarter of 2010 will be a great time to buy. Thursday’s Columbian Newspaper published, “…sales this year through November were up 11 percent and pending sales grew by 19.2 percent while new listings were down 23.4 percent.” Buyers in our marketplace need to know this. Sales are up, listings are down! This is great news for sellers and will encourage your buyers to not delay buying.
What are current closing times for us?
We continue to wow our referral partners with incredible service and market leading mortgage rates. As you may already know, our lending firm has “in-house” Underwriting, Processing and Doc Drawing – all in our branch locally here in Vancouver. We fund all of our mortgages in our own name, so we retain full control from Origination to Closing. Pinnacle Mortgage Planning offers our team the absolute top notch lending platform in the industry. We are closing all our purchase mortgages within 20-30 days total with no problem.
We work with high quality agents that desire a lending partner to enhance their buyer’s buying experience through integrity and reliable, direct communication. If you’re looking for a new lending team, give me or Dave a call or email us today.
Please feel free to send this to your clients or other agents in your office. In authoring this information, we just request that you please reference us . Also, we are scheduling office speaking times for January – let us know if your office could benefit from it.
The Kilkenny-Valenta Lending Group at Pinnacle Mortgage Planning brings a combined experience of 26 years in the mortgage business to serve their clients. They have consistently been one of the top producing teams in Clark County in the past 8 years with over 900 completed transactions. As a group, they guarantee the highest level of trust, creativity and experience.
Steve Valenta and Dave Kilkenny| Mortgage Advisors
Find us online: Blog | Facebook | Twitter | Apply Online
Direct (360) 576-1919 | Jennifer (360) 713-9404 | email jLee@pinnaclemp.com
201 NE Park Plaza Drive, Suite 242 | Vancouver, WA 98684
To close out summer, our firm has put together a promotion called “12 Days of Summer” campaign.
On FHA purchase transactions, we guarantee to close your client’s loan within 12 business days!! In a lending environment where lenders are struggling to close loans in 30 days, we’re rolling out an unprecedented fast close time. From application to funding, we’ll close your FHA purchase loan in 12 business days. This is perfect timing as the $8,000 Tax Credit expires in only 72 days!
How can we do this?
As a direct lender, we retain all the control of the loan process and package. The entire process of the transaction stays in-house, allowing for us to close loans with less hurdles to jump over. From origination, processing, underwriting, docs drawing and funding…all of these take place locally.
What about the appraisal?
Yes, even including the appraisal! We’ve partnered up with a local appraisal firm that will do the appraisal and return the report back to us within 5 days.
Do you have any clients that could benefit from this?
If you are interested in being eligible for yourself and/or your clients, please call or email us right away – don’t delay. Please feel free to forward this or pass the word around your offices. Of course, some restrictions apply.
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The Kilkenny-Valenta Lending Group at Pinnacle Mortgage Planning brings a combined experience of 26 years in the mortgage business to serve their clients. They have consistently been one of the top producing teams in Clark County in the past 8 years with over 900 completed transactions. As a group, they guarantee the highest level of trust, creativity and experience.
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Steve Valenta and Dave Kilkenny| Mortgage Advisors
Find us online: Blog | Facebook | Twitter | Apply Online
Direct (360) 576-1919 | Jennifer (360) 713-9404 | email jLee@pinnaclemp.com
201 NE Park Plaza Drive, Suite 242 | Vancouver, WA 98684
Filed under 12 Days of Summer, FHA
The unprecedented $8,000 First Time Buyer Tax Credit is definitely in the home stretch! Only 82 days left until the final close date of November 30th.
Now is the time for your buyers to write up offers – encourage them not to wait until the last minute!
We’ve attached a very valuable flyer that may clear up many of your client’s “unique scenario” questions regarding eligibility of the tax credit.
Did you know you can currently own a rental property…and STILL qualify for the tax credit??
Here are a few more examples:
Q. If a single person (Taxpayer A) qualifies as a first-time homebuyer at the time he/she purchases a home with someone (Taxpayer B) that is not a first-time homebuyer and then later that year they marry each other, is the credit still allowed?
Q. Taxpayer A is a single first-time home buyer. Taxpayer B (parent) cosigns for A and does not qualify. Both names are on the mortgage. Can Taxpayer A claim the credit and, if so, how much?
Q. A taxpayer owned her principal residence. Several years ago, she decided to relocate to a rented apartment, but did not sell the former residence. Instead, she rented it out to tenants. Now the taxpayer plans to buy another house and make it her new principal residence. Does she qualify for the first-time homebuyer credit?
This IRS link has the answers to these questions and whole lot more! It is well worth the read.
Feel free to forward on to your clients or other agents as well if you find it valuable.
Reminder: Our mortgage firm has in-house Underwriting, Processing, Doc Drawing…and we fund loans with our money!! We keep ALL the control of the loan. This allows us to close some loans in as little as 12 business days! Additionally, your client’s loan does not leave our office here in Vancouver. We do Conventional, FHA, VA, USDA and 203k Streamline’s as well.
Give us a call today if we can increase your confidence in your lending partner!
Thanks!
Steve Valenta
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The Kilkenny-Valenta Lending Group at Pinnacle Mortgage Planning brings a combined experience of 26 years in the mortgage business to serve their clients. They have consistently been one of the top producing teams in Clark County in the past 8 years with over 900 completed transactions. As a group, they guarantee the highest level of trust, creativity and experience.
Steve Valenta and Dave Kilkenny| Mortgage Advisors
Find us online: Blog | Facebook | Twitter | Apply Online
Direct (360) 576-1919 | Jennifer (360) 713-9404 | email jLee@pinnaclemp.com
201 NE Park Plaza Drive, Suite 242 | Vancouver, WA 98684
Filed under First Time Buyer, IRS
Just a quick little tip regarding the IRS $8,000 First Time Buyer Tax that we thought was worth sharing.
The first time buyer tax credit of $8,000 MUST be repaid if the house ceases to be your primary residence within 36 months from the date of purchase.
This should be made aware to all of your buyers to avoid potential issues down the road should they change residences.
Here’s the link and actual text from the IRS website: http://www.irs.gov/newsroom/article/0,,id=206293,00.html
Q: When must I pay back the credit for the home I purchased in 2009?
A: Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. The obligation to repay the credit on a home purchased in 2009 arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
Q. If I claim the first-time homebuyer credit for a purchase in 2009 and stop using the property as my principal residence before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it?
A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at that time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year’s tax return. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit.
– Please let us know if you have questions or need any help.
Have a great weekend!
Steve Valenta and Dave Kilkenny | Mortgage Advisors
Kilkenny Valenta Lending Group at Pinnacle Mortgage Planning
Direct (360) 576-1919 | Jennifer (360) 713-9404 | email jLee@pinnaclemp.com
201 NE Park Plaza Drive, Suite 242 | Vancouver, WA 98684
Filed under IRS
Taylor Bean & Whitaker is a very popular lender that is used by many brokers. They’ve just released an announcement ceasing all originations operations effective immediately (see below).
This is extremely important as you will want to check with any of your buyers or listing buyers to see if they have loans in process with this lender. If they do, the deal is not going to close and an alternative must be found immediately.
Please let us know how we can help with any transaction that may be a result of this lender failure. We underwrite, process and doc draw directly from our office here in Vancouver. We, as a lender, are in great shape funding loans daily.
Please give us a call or email if you need anything.
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Steve Valenta and Dave Kilkenny | Mortgage Advisors
Find us online: Blog | Facebook | Twitter | Apply Online
Kilkenny Valenta Lending Group at Pinnacle Mortgage Planning
Direct (360) 576-1919 | Jennifer (360) 713-9404 | email jLee@pinnaclemp.com
201 NE Park Plaza Drive, Suite 242 | Vancouver, WA 98684
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PRESS RELEASE
TAYLOR BEAN MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATETLY
Ocala, Florida – Taylor, Bean & Whitaker Mortgage Corp. (“TBW”) received notification on August 4, 2009 from the U.S Department of Housing and Urban Development, Freddie Mac and Ginnie Mae (the “Agencies”) that it was being terminated and/or suspended as an approved seller and/or servicer for each of those respective federal agencies. TBW has unsuccessfully sought to have the termination/suspension decisions of each of those agencies reversed. As a result of these actions, TBW must cease all origination operations effective immediately. Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline. TBW is cooperating with each of the Agencies with respect to its servicing operations and expects to continue to service mortgage loans as it restructures its business in the wake of these events. We understand that this could have a significant impact on our valued employees, customers and counterparties, and are very disappointed that a less drastic option is unavailable.
