John Topa, FHA Mortgage Specialist

In an effort to provide "the most market support possible", Fannie Mae is cutting one of its mandatory loan fees by 0.250 percent, effective immediately.

Fannie Mae introduced the Adverse Market Delivery Charge in December 2007 to offset foreclosure and delinquency losses. The initial fee was a quarter-percent of the amount borrowed.

Then, as market conditions worsened, Fannie Mae doubled its across-the-board loan fee to 0.500 percent in August of this year.

As of today, the fee is back to its starting point.

Since the start of the 2008, Fannie Mae has made separate changes to its mortgage guidelines. Most have been detrimental to borrowers, increasing the difficulty, or the cost, of qualifying for a conforming home loan.

Today's change is among the few that are beneficial.

This morning, mortgage pricing is edging higher because of the looming Congressional vote and Wall Street's reaction to the weak jobs report. The good news is that price changes could have been worse.

Fannie Mae's Adverse Market Delivery Charge flip-flip is keeping rates from rising as high as they might have otherwise risen today.

www.firstsunrisemortgage.com

Mortgage markets improved last week on Hurricane Gustav's less-than-expected damages and a strengthening U.S. dollar.

Even factoring in Friday's 0.125 percent run-up on most mortgage products, rates improved overall.

It's the second straight week in which mortgage rates improved.

But for all the news that we could dissect from last week, it should be the news from this week that proves most interesting.

This is because on Sunday, the U.S. government assumed control of Fannie Mae and Freddie Mac.

So far, the papers have done a terrific job talking about the political perspective of the takeover, and the economic perspective of the takeover, but very few have addressed the key news for homeowners -- mortgage rates are plummeting.

Mortgage rates are improved this morning because of Fannie Mae and Freddie Mac's collective role in the U.S. mortgage market.

1. They guarantee about half of the nation's $12.1 trillion in mortgages
2. They purchased and securitized four-fifths of the nation's home loans as recently as six months ago

See, earlier this year, Wall Street punished Fannie Mae and Freddie Mac for their weak balance sheets and increasing number of mortgage delinquencies. This led to Wall Street to raise the borrowing costs for the two firms across the board which, in turn, led to higher mortgage rates for Americans.

But today, with their balance sheets backed by the U.S. government, Fannie and Freddie are now viewed as "safe" by the eyes of Wall Street. Their borrowing costs have been lowered, therefore, and mortgage rates are falling in response.

This week is light on economic data but it shouldn't really matter. Mortgage rates should close the week lower than where they started for the four-fifths of the country that uses Fannie or Freddie's conventional mortgages.

For everyone else, keep an eye on the U.S. dollar. Its strength continues to have positive consequences on the mortgage markets.

www.FirstSunriseMortgage.com

Three weeks after adjourning, Federal Reserve officials release detailed minutes of their most recent meeting.

The April 30, 2008 minutes were released Wednesday and it affirmed traders' beliefs that the Federal Reserve will not be in a hurry to lower the Fed Funds Rate again.

This is bad news for two groups of people whose borrowing costs are tied to Prime Rate, the interest rate that is 3 percentage points higher than the Fed Funds Rate:

1. Homeowners with home equity lines of credit
2. Americans with credit card debt

Because Prime Rate moves in lock-step with the Fed Funds Rate, it, too, has fallen by 3.25 percent since September and now rests at 5.000 percent.

With the release of the April FOMC Minutes, though, it appears that Prime Rate is more likely to increase than to decrease moving forward.

If your home equity line of credit offers a "convert-to-fixed-rate" option, now may be a good time to consider switching over. Be sure to talk with your loan officer first, though -- he/she may have alternate options for you.

(Image courtesy: The Wall Street Journal Online)

John Topa, First Sunrise Mortgage, Northeast PA Mortgage Advisor. www.FirstSunriseMortgage.com

Loan-to-value is a math formula that represents the relationship between how much a home is "worth" and how much money is borrowed against it.

Loan-to-value is often abbreviated as "LTV" and is one of the many factors that lenders consider when underwriting a mortgage application.

The math formula is straightforward:

In the LTV equation, Loan Size is the amount of money borrowed from the bank and Home Value is the lower of the home's purchase price or appraised value.

Home loans with low loan-to-value ratios are usually less risky for banks. This is one reason why mortgage rates tend to be more favorable for home buyers and homeowners when their respective LTVs are low.

Typically, a "low" LTV loan is one in which the loan-to-value is 80 percent or less. In some instances, however, 70 percent is considered "low". The cut-off point depends on the mortgage lender and the mortgage product.

On a home purchase, the one way to lower LTV is to make a larger downpayment, thereby reducing the LTV equation's numerator. Buying a home for below-market value would not reduce LTV, for example, because the purchase price would be used as the equation's denominator.

On a home loan refinance, the denominator is always the home's appraised value.

John Topa, First Sunrise Mortgage, Northeast PA Mortgage Advisor. www.FirstSunriseMortgage.com

Yesterday, several mortgage lenders issued three separate "rate sheets" in response to the changing mortgage market.

It was the fourth time in the last 6 trading days that mortgage lenders issued multiple rate sheets in a day, and continued the trend that started in mid-January.

The yo-yo nature of mortgage rates underscores the importance of making mortgage rate comparisons within a limited time frame.

Multiple quotes should be gathered with an hour of each other and, even then, it's prudent to ask your lender: "Has there been a mortgage rate reprice in the last hour?"

The current market volatility is in contrast to the "normal" environment of one-rate-sheet-per-day to which mortgage rate shoppers have been accustomed. But with the changing economy, we all have to adapt.

Mortgage rate quotes from this morning won't necessarily be valid this afternoon so if you're in the market for a home loan, be sure to do your shopping in a limited timeframe and don't forget to ask about the reprice.