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Mortgage rates down again
By Jim Woodard

As we move into September, fixed-rate mortgage rates have dipped to yet another record low, while the 5-year adjustable rate is remaining steady at its low level, according to a survey conducted by Freddie Mac.
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Other Mortgage Stories:

Relief for "underwater" mortgage borrowers
Delinquencies and foreclosures decreasing
Liability of refinance mortgage borrowers
Evolving Trends in Homeownership
Time allowed for change-of-mind borrowers
Slow housing recovery
High-end homes more salable
Residential rents dropping
Status of the rural housing finance program
Home price reductions increasing
Licensing of all mortgage brokers coming
Housing program for families with special- needs kids
Most popular refinance mortgages

Mortgage rates dip to new lows

As we move into September, fixed-rate mortgage rates have dipped to yet another record low, while the 5-year adjustable rate is remaining steady at its low level, according to a survey conducted by Freddie Mac.

The 30-year fixed-rate mortgage (FRM) averages 4.36 percent with an average 0.7 point. The 15-year FRM averages a record low of 3.86 percent with an average 0.6 point. A year ago at this time, the 15-year FRM averaged 4.58 percent.

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Effective September 7, homeowners with "underwater" mortgages may have some real relief coming, according to the Department of Housing and Urban Development (HUD). In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, HUD has provided details on the adjustment to its refinance program that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth.

The Federal Housing Administration (FHA) will offer certain "underwater" non-FHA borrowers the opportunity to qualify for a new FHA-insured mortgage. These are borrowers who are current on their existing mortgage and whose lenders agree to write off at least 10 percent of the unpaid principle balance of the first mortgage.

The "FHA Short Refinance" option is targeted to help people who owe more on their mortgage than their home is worth – or "underwater" – because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012, HUD reported.

"We're throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined," said FHA Commissioner David Stevens. "This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product."

Participation in FHA's refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500.

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Home delinquencies and foreclosure starts are decreasing. The delinquency rate for mortgage loans on one-to-four-unit residential properties dropped to a seasonally adjusted rate of 9.85 percent of all loans outstanding as of the end of the second quarter of 2010. That shows a decrease of 21 basis points from the first quarter of 2010, and an increase of 61 basis points from one year ago, according to the Mortgage Bankers Association's National Delinquency Survey.

The non-seasonally adjusted delinquency rate increased two basis points to 9.40 percent in the second quarter from 9.38 percent in the first quarter. The percentage of loans on which foreclosure actions were started during the second quarter was 1.11 percent, down 12 basis points from last quarter and down 25 basis points from one year ago.

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In California, where many national trends begin, the State Assembly recently approved a new law (SB 1178) extending anti-deficiency protection for consumers who have refinanced their original mortgage loans and now are facing foreclosure.

Under existing law, if a homeowner defaults on a mortgage used to purchase a home — commonly referred to as a "purchase money mortgage" — the homeowner's liability on the mortgage is limited to the property itself. However, homeowners who refinanced the original purchase debt, even if only to obtain a lower interest rate, were not extended the same protections.

The new law corrects this unfairness and extends the same protections to consumers who refinance their home loans. "Cash-out" debt for home improvement or consumer expenses is not protected by the law. Similarly, additional new debt secured by the home, such as a home improvement loan, is not protected-only original acquisition debt.

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Owning a home is still the goal and dream of most Americans, it was revealed in a recent survey. About 72 percent of consumers say homeownership is an important part of their personal dream. While this is a decline from 77 percent of adults six months ago, the result shows that the dream of homeownership is still alive, according to Trulia.com and its American Dream survey on attitudes toward home ownership.

Most experts agree that consumer interest in buying homes is an essential element of a healthy real estate market. However, 27 percent of renters indicated that they do not plan to buy a home. Of those renters who do plan to buy, 68 percent said it would be more than two years before they do, according to the survey. Other trends were revealed in the survey. For example, Americans are veering away from the "McMansions" that had grown popular before the recession.

Consumers are showing a preference for smaller homes, with only 9 percent saying their ideal home size is more than 3,200 square feet — the same number who said they'd like their home to be between 800 and 1,400 square feet.

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The Federal Reserve recently released a proposal to give mortgage applicants three days to change their minds, according to reports by Bankrate.com. The proposal was part of a 930-page document that clarifies and finalizes the new financial reform law. The Fed's document says that for closed-end loans secured by real property or a dwelling, a creditor must refund any appraisal or other fees paid by the consumer (other than a credit report fee).

Also, the lender would have to disclose the right to a refund of fees to consumers before they apply for a closed-end mortgage loan. The Fed says this proposal will make it easier and cheaper for consumers to comparison shop. It also acknowledged that borrowers who want to close a transaction in a hurry would be handicapped because most lenders will delay sending out an appraiser for a few days.

Other proposals affecting homebuyers included a ban on yield-spread premiums, which encourage mortgage brokers to push buyers toward more profitable mortgages. And it includes a requirement for lenders to tell borrowers when their mortgage is sold or transferred. Many mortgage professionals support such consumer protection actions.

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Most economists, as indicated in a recent survey, believe it would take at least five years for average home prices to climb back to the levels they commanded in 2006. This year, some hard-hit areas may see another dip, but properties values will most likely rise, and in fact are already doing so in some markets.

"Softness in the summer months will be followed by firming conditions and momentum as the year unfolds and the economy strengthens," says Robert Denk, an economist for the National Association of Home Builders.

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Luxury home sales are becoming more salable in today's market, due in part to favorable financing opportunities. Interest rates on large mortgage loans, including "jumbo mortgages" – those needed to finance high-end residential properties — are at historically low rates and are readily available to qualified home buyers. However, the larger loans require larger down payments and carry higher mortgage interest rates and borrowers must have high credit scores.

One notable statistic is the average percent financed by price category, it was noted in Housing Intelligence Pro report. For homes under $500,000, buyers finance 88 percent of the total purchase amount, on average. For homes between $500,000 and $750,000, that falls to 75 percent. From $750,000 to $1 million it drops again to 69 percent of the home's purchase price. From $1 million to 1.5 million, it comes in at 65 percent, and on homes priced more than $1.5 million the average amount financed falls to only 60 percent.

When home buyers can provide a larger down payment, the bank suffers less risk in case of default, the report pointed out. With a 40 percent down payment, it's highly likely a bank would be able to regain the principle loan amount even if the homeowners defaulted.

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Certain indicators point to a drop in rental rates. With rental vacancy rates on the rise for the first half of 2010, it's a relief to landlords that these rates are starting to stabilize and even drop, according to a spokesperson for Rent.com.

"To identify and provide insight on what property management companies are experiencing this year as compared to the previous 12 months, we surveyed property owners representing more than 4,000 communities and approximately 1,000,000 rental units, said a Rent.com spokesperson. "According to the study, real estate markets across the country are just now beginning to see an uptick in renters. About 42 percent of property owners are experiencing lower vacancy rates compared to just one year ago."

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Congress recently passed legislation to restore funding to the single-family rural housing program. The legislation will increase the guarantee fee for borrowers but still allow it to be financed. This will make the program self-sufficient, according to reports from the National Association of Realtors and Mortgage News Daily.

The legislation also increases the commitment authority so Rural Housing Service can formally guarantee loans for which they had been providing conditional commitments.

The Rural Housing program had run through its $13.1 billion funding by early this year. Many buyers hoping to finance home purchases using home buyer tax credits were unable to close their loans. Depleted funding has been a nearly annual occurrence for the program that guarantees loans for single-family homes in designated rural areas.

The new legislation will end the annual uncertainty by putting the program on a self-funding basis through enacting a 3.5 percent guarantee fee paid by the borrower. The fee can be included in the total amount financed.

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The number of price-reduced homes increased by 5 percent in July, with a median price cut of about $19,000, according to a survey conducted by Zip Realty. The number of price-reduced homes on the market increased 5.3 percent in July as compared to June, the report revealed. Although the number of price-reduced homes increased in July, the median price reduction across the 4,500 cities and communities in 26 markets surveyed slightly declined from June, to $18,949.

More than 45 percent of "for sale" homes included at least one price reduction in July — an increase of 2.67 percent compared to June.

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The licensing of all mortgage brokers is a high priority for the current administration. Mortgage brokers must now be licensed in many states, but not all. The licensing of all brokers and more stringent qualification requirements are strongly supported by most mortgage professionals as well as consumer advocacy groups.

The uniqueness of the mortgage licensing laws of each state is expressed in the diversity of the laws, rules and regulations that each state adopts. The states differ on whether a mortgage broker even needs a mortgage license, whether the mortgage broker can loan on both 1st and 2nd mortgages, or whether a physical office in the state is required.

As business over the internet increases, the mortgage licensing laws are becoming more lenient on this physical office requirement. States also differ on how much continuing education they require of mortgage brokers. The various mortgage licensing laws also pertain to the employees of the mortgage brokers, and whether they, too, need a mortgage license.

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (Safe Act), is aimed at increasing consumer protection and reducing fraud. It sets minimum standards for state licensing and registration of mortgage-loan originators, including education requirements, and mandates criminal background checks for those who originate mortgages, it was noted in a Wall Street Journal report. The deadline for Safe Act compliance was the end of July. That was extended for some states to get licensing and registration processes in place. But by early next year, all are expected to be in compliance.

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Across the U.S., thousands of children live in foster care or are at risk of being placed with other families simply because their parents cannot afford a home. The U.S. Department of Housing and Urban Development (HUD) recently announced $20 million in funding to local housing authorities to help more than 2,500 families stay together. It's estimated that the rental vouchers awarded will reunite nearly 5,000 children with their parents or prevent them from entering foster care in the first place, HUD reported.

"The foster care system is an important safety net for children when there's no alternative, but not having the means to obtain affordable housing is hardly a good reason for families to be divided," said HUD Secretary Shaun Donovan. "Thankfully these vouchers will keep thousands of families together under one roof."

HUD's Family Unification Program will make 2,543 Housing Choice Vouchers available for families whose inadequate housing is the primary cause of their separation or near separation from their children. In addition, 20 percent of these vouchers will provide stable housing for approximately 750 young adults (ages 18-22) who are aging out of the foster care system, preventing them from becoming homeless.

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Currently, most homeowners are opting for a shorter-term, fixed-rate mortgage, according to a report from Freddie Mac. Applications for 15-year and 20-year refi loans are at the highest level since 2004.

Borrowers are overwhelmingly choosing fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate. While 30-year fixed-rate mortgages are still the most preferred product chosen for the new loan, 15-year fixed-rate mortgages gained favor among refinancers who previously held 30-year fixed-rate mortgages, balloon mortgages and ARMs. Overall, fixed-rate loans account for more than 95 percent of refinance loans.

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