Today’s Boston Globe highlights a challenge these days which underscores why all of my offers go in with a contingency regarding the bank appraisal.“Surprising buyers and sellers, appraisers increasingly are setting home values lower than an agreed upon sales price or the amount required for a homeowner to refinance.”
The Boston Globe reports some good news on the real estate market at long last, courtesy of the National Association of Realtors.
Otis & Ahearn (Closed and Pending) General Brokerage as of YTD as of 4/24/09 and comparisons to 2007 and 2008
Deals
Sales
Average
2009
94
$71,056,525
$755,920
2008
222
$164,444,372
$740,740
2007
176
$156,131,350
$887,110
Mortgage Market Update by Kevin Kuechler
March 22, 2009
The US government continues to manipulate the mortgage market in the hopes of driving rates down for everyone, causing confusion about options available to borrowers. While the market is extremely volatile with program details changing often without notice, here is a snapshot of what is going on:
• Conforming rates for A-credit borrowers remain low. Rates for the 30-year fixed have been hovering around 5 percent, a bit below or above, depending on your specific situation. Rates in the fours are available for everyone, if you are willing to pay closing costs and, in some cases, additional points.
• The US government plans to continue buying mortgage-backed securities. This activity has lowered 30-year conforming rates. The recent government action reduced rates by about 0.25% last week, and then rates went back up as the industry exceeded processing capacity.
• Jumbo rates are drifting lower, but remain well above conforming rates. The government is NOT buying mortgage-backed securities that are composed of jumbo mortgages. There are few banks offering competitive jumbo fixed and ARM programs.
• “Conforming jumbo” limits are going back up to $523,750 for the Boston area.
“Conforming jumbo” rates apply to loan amounts between $417,000 and $523,750, and are higher than conforming rates but lower than regular jumbo rates.
• First-time homebuyers are eligible for an $8,000 tax credit until December 1, 2009. There are several restrictions regarding eligibility.
• Details for the Home Affordable mortgage program have been released. The intent of this program is to help borrowers who are facing foreclosure and/or those who cannot refinance because their homes have dropped in value. The program is extremely complicated, which means that it might not be implemented on a large scale. Stay tuned for more information.
• Fannie Mae is considering allowing refinances without appraisals. This is a different proposal than “Home Affordable.” If implemented, some borrowers will be allowed to refinance without an appraisal, helping those who haven’t been able to refinance because their homes have lost too much value. Like Home Affordable, there are some complications. Stay tuned for more information.
• Underwriting requirements continue to tighten. Underwriting guidelines are even more strict about documenting income and assets. If you own a condo or a multi-family or have a second mortgage, you are now subject to additional underwriting scrutiny that goes above and beyond the standard guidelines.
• Private mortgage insurance is more difficult to qualify for. The mortgage insurance companies now have their own underwriting guidelines, which can be far stricter than those of Fannie Mae and Freddie Mac. There are many situations wherein a borrower can qualify for a mortgage, but not the required mortgage insurance.
The Bottom Line: While the government has been trying to introduce programs to help drive rates down and to stimulate the economy, the reality is that the best rates are available to an ever-shrinking pool of qualified borrowers. The fact that the government’s message conflicts with the reality in the mortgage market has caused many to wait for a better deal. My advice is not to wait – if there is a good deal available to you now that makes you better off, take it. Please contact me to review your current situation and to develop a mortgage strategy that works best for you.
Kevin Kuechler, Vice President
617.827.0297
kkuechler@MSAmortgage.com
When your mortgage application is rejected Nearly half of applicants turned down, but you can find ways to land a loan Bankrate.com March. 22, 2009 Don’t be surprised if your friendly lender, the one who invites you to sit down and apply for a mortgage, ushers you politely out the door empty-handed after you’ve chatted a bit. The sudden chill isn’t personal. The Mortgage Bankers Association, or MBA, in Washington, D.C., estimates that about half of all mortgage applicants are now being turned down. Though refinancing approvals remained static, the acceptance rate on mortgage applications suffered a 10 percentage-point drop, from 63 percent in the first half of 2007 to 53 percent in the first half of last year, according to mortgage data tracked semi-annually by the association. Since then, further tightening of credit standards means at least half of mortgage-seeking consumers can’t squeeze through to acceptance, says MBA spokeswoman Carolyn Kemp. Instead of yielding to shame, anger or any of the usual emotions associated with rejection, today’s consumers who are intent on buying or refinancing should adopt a pragmatic stance, since clear-eyed determination may eventually land them a loan. Here’s how: 1. Get a read on the reasonIf you’ve submitted a formal application, federal law dictates that you’re entitled to a formal rejection.
Expect an “adverse action” notice, spelling out the reasons for turning you down, which these days is likely to state that the loan amount you’re seeking is too large compared to the current appraised value of your home, says Joe Theisen, president of the Wisconsin Mortgage Professionals Association and branch manager of Fairway Independent Mortgage Corp. in Madison, Wis. If it’s not your home’s value that’s the issue, it may be your personal credentials, such as your creditworthiness, work history or debt load. When credit is the issue, an adverse-action notice is required, naming the credit reporting agency that provided the data on which the lender based its decision, according to Federal Trade Commission rules. You’re also entitled to a free credit report; see the FTC Web site for more information. Given the odds of acceptance, a lender may not require you to pay a few hundred dollars to submit a formal application, which includes the cost of a professional appraisal on the property. Instead, he may pull a credit score, and tell you what you’re likely eligible for, says Marc Savitt, president of the National Association of Mortgage Brokers. 2. Find a fixQualifying for a mortgage isn’t a black-and-white issue. Rather, different loans at varying rates may be available, depending on how risky a lender thinks a particular mortgage will be. If you don’t qualify at 5.5 percent, for instance, you may be able to get the nod for a loan at 6 percent or 6.5 percent.
However, many borrowers, especially those who are refinancing, need a certain rate to reach the monthly payment they want. Not only are rates higher for risky loans, but there are now upfront “point” charges dictated by Fannie Mae and Freddie Mac, the two big mortgage guarantors currently under government control, Savitt says. To get a good rate, some borrowers may be able to make changes — like lowering the amount of the loan they seek. When a borrower isn’t far from the qualifying mark, he may be able to reapply and be approved relatively quickly. For instance, if you’re within reach of a 740 credit score, which is usually required for the best rate, you might pay down a balance on a credit card and hit the target, Theisen says.
