Mortgage News 3/12/09

Good Morning

Here is a mortgage update from Jeff Hancock, Senior Loan Officer, Lake Oconee Community Bank.

5 Nuggets of Good News

The stock market staged its biggest rally of the year yesterday with the DOW up over 370 points! Normally, a rally like this pulls investors out of the bond market and pushes mortgage rates higher. But this did not happen yesterday as mortgage rates stayed flat. This is an indication that new money came into the market, which is good news!

More good news to report as the Fed continues to purchase huge chunks of Mortgage-Backed Securities, which is keeping conforming mortgage rates under 5%!

Also, consumer credit rose in January, to the surprise of economists who had predicted a decline of $6.6 billion. Although Americans increased their borrowing activity only by a modest $1.76 billion, bringing the month's volume to $2.564 trillion, the figure reversed a downward pattern that has dogged consumer credit for four out of the previous five months.

In addition, the retail industry reported its first monthly gain in February since sales began declining last September. Discount chains like Wal-Mart were the biggest beneficiaries. Wal-Mart recorded its best sales performance in nine months. Falling gas prices have moderately contributed to increased consumer spending as consumers had $14 billion more to spend elsewhere in 2009 than in 2008.

And, finally, first-time home buyers all over the country are calling in to mortgage companies to find out more details about the $8000 tax incentive plan (see attachment for more info) and to find out for how much they qualify. There is no doubt this will lead to some solid real estate sales in the Spring and Summer.

Maybe we our slowly turning the corner....

The Year of Appraisal Changes

There are a lot of changes going on in the residential real estate industry right now, but when we look back on 2009, we will probably remember this as the year of the appraisal changes. As a reaction to a growing problem with fraudulent appraisal practices, the NY Attorney General threatened to sue Fannie Mae and Freddie Mac. After literally over a year of negotiations, a new policy that we all must adhere to has been released called the 'Home Valuation Code of Conduct'. This policy becomes effective on May 1st and its main objective is to "enhance the independence of appraisers in order to protect the integrity of the appraisal process." It requires lenders to engage in selecting appraisal professionals via independent and impartial processes. The code covers a lot of ground but the major stipulation that you need to be aware of is that a lender's loan production staff will be forbidden from selecting, retaining, or recommending particular appraisers. Lenders will no longer be able to use appraisals that have been selected by loan officers, real estate agents, or other third parties. As a solution, many of the big banks are moving to national appraiser firms. Talk about a disaster waiting to happen! The service levels of these firms is not high to say the least, and they also drive up the appraisal cost. Mortgage brokers are also going to be extremely affected as well as they will have to rely on the lender to who they are brokering to order the appraisal. Again, mortgage brokers will not be able to order appraisals on the front end of a transaction! Talk about a loss of control and a delay in their turn-around times! Smaller mortgage companies are busy trying to find creative ways to comply. At Fairfield Mortgage, our plan is to keep our existing list of appraisers intact and to allow a computer to assign the appraisers on a rotating basis. We are confident that we will not miss a beat in our level of service through our plan!

Financial Stability Plan

More details of the Financial Stability Plan were released last week. The program is designed to assist home owners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, whose payments are current, and who have loan amounts no more than 105% of the value of the home. Lenders are still trying to figure out how the program will work and how best to implement the new plan. This should help a lot of people and lenders should be in a position to begin implementing this plan as early as next week. A website (www.financialstability.gov) has been established to help home owners determine if their loan is owned or guaranteed by Fannie or Freddie and whether they will qualify under this program.

Win $1000!
This year, in conjunction with our parent company, Shelter Mortgage, we are once again celebrating the "madness" of college basketball's NCAA tournament with our "Slammin Challenge." You should have already received one e-mail already and you will continue to get a few more prompting you to go online and pick the winners of this year's tournament games. The tournament bracket will be released this Sunday afternoon and you will have between Mar 15th and Mar 19th to make your picks. There is no entry fee and the winner takes home $1000 cash! Also, we will be giving away $500 for 2nd place, $250 for 3rd place, and an iPod Shuffle for last place! How can you afford not to play?

Rate Update

Conforming mortgage rates are holding steady under 5%:

	Conforming	Non-Conforming	FHA	VA
Loan Amount	< $417,000	> $417,000	< $320,850	< $1,000,000
30 Year Fixed	4.999%	7.500%	5.500%	5.500%
15 Year Fixed	4.625%	7.250%	5.000%	5.000%
7 Year ARM		6.250%
5 Year ARM		6.750%
3 Year ARM		7.000%

The above rates are for purchase loans and are intended to give you an overall idea of how rates are changing from week to week. Other factors such as credit score, down payment, and number of days the rate is locked all contribute to the exact rate, which is subject to change at any time and without notification. The Conforming rates above apply to purchase loan sizes $150,000 - $417,000 and carry zero discount points. Rates for lower loan amounts are slightly higher. Lower rates are also available for all programs with discount points. Qualification is subject to credit and property approval and other restrictions may apply.



Looking Ahead

The Economic Calendar has a light schedule this week. Thursday's Retail Sales report will be the primary economic data. Retail Sales account for about 70% of economic activity. Import Prices, Consumer Sentiment, and the Trade Balance will also be released on Friday. Treasury auctions and new information on government programs will also have an ongoing impact this week.

As Alway if I can help with any real estate needs in the Lake Oconee or Lake Sinclair areas please let me know or visit my website at www.BeAtTheLake.com.