It seemed like a good idea at the time...

According to reports from the IRS, via Housingwire.com, the total bill for the first time homebuyer tax credit is $16.2 billion through July.  An additional $7.3 billion was spent on interest-free loans and other related stimulus.

The Government Accountability Office estimates that when it is all said and done, we will spend $22 billion on the homebuyer tax credits.

I suppose this naturally leads to the question of whether or not the expenditure was worth it.  I am of the opinion that it was not.  According to the Brooking Institute, only 15 percent of people who took advantage of the tax credit said it was their primary motivator for purchasing a home.  A Zillow survey from 2009 found 18 percent of respondents saying the credit was their primary motivator.  We could infer that upward of 80 percent of those who claimed the credit would have made a purchase anyway, the credit simply accelerated their purchases.  Even if you do not buy into these numbers, we can conservatively estimate that a substantial portion of those claiming the credit would’ve eventually made a purchase in its absence.

If you do buy into the 80 percent figure, we spent more than $40,000 on every home that would not have sold without the tax credit.  To me this is a vastly inefficient use of taxpayer money.  Additionally, housing prices have resumed falling after being briefly buoyed by the tax credit.  Many analysts expect to see housing prices fall between 5 and 20 percent over the next few years.  If one of the goals of the stimulus was to stabilize the housing market, that goal was not achieved.

In short, we spent at least $16 billion to temporarily lift the market.  We did not reduce the overall housing supply (which is steadily increasing), and we stole demand from the fall and summer in order for a short-term gain in the spring.  The whole thing was bad policy that was clearly politically-motivated.  With any luck it will not return.

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Conforming limit can differ from location to location, for most parts of the nation $417,000 is the conforming limit. High cost areas such as the Westchester, NY Los Angeles, CA  has a conforming limit up to $729,750. Any loan amounts higher than these are considered jumbo loans.

The criteria for getting a jumbo loan is more stringent than conventional mortgage loans, because of the higher loan amount as well as the risks related to it. A higher down payment of at least 20 percent, high credit score, and monthly mortgage payment not to be higher than 38 percent of the income before taxes are some of the requirements to get a jumbo mortgage loan.

Total Mortgage has some of the lowest jumbo mortgage rates in the nation. At Total Mortgage a 30 year fixed jumbo mortgage is available at 4.875% (5.098% APR) and a 15 year fixed jumbo mortgage rate is available at 4.000% (4.349% APR). If you have been thinking of buying that vacation home or a beach house lock these low rates before they are gone.

You can also check the conforming loan limit for your area with our Conforming Loan Limit Mortgage Calculator. For more information on jumbo mortgage rates and other mortgage products please call 877-868-2503 to speak with a licensed mortgage professional.

Mortgage rates are always changing, jumbo mortgage rates above are quoted at 11:30 A.M., on September 3, 2010.

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Fannie and Freddie were seized by federal regulators in 2008 to avoid their insolvency.  Since that time, $150,000,000,000 of taxpayer money has been used to keep the mortgage lenders afloat.  The Obama Administration has pledged and unlimited amount of capital to backstop the losses of the GSEs.  Total estimates for the cost of the bailout of Fannie and Freddie range between $400 billion and $1 trillion dollars.

The goals are as follows:

The benchmarks for the four single-family goals are (as expressed as a percentage of mortgages acquired by the GSEs):

• 27 percent for the low-income home purchase goal
• 8 percent for the very low-income family home purchase goal
• A percentage to be set annually by FHFA for the low-income/high minority/disaster areas home purchase goal (with a subgoal of 13 percent to measure acquisitions in low-income/high minority areas only); and
• 21 percent for the low-income family refinance goal.

The final multifamily goals reflect the current market conditions and are lower than those proposed initially:

• Fannie Mae’ s goal is to acquire mortgages that finance at least 177,750 low-income rental units and 42,750 very low-income rental units.
• Freddie Mac’s goal is to acquire mortgages that finance at least 161,250 low-income rental units and 21,000 very low-income rental units.
• The Enterprises must also report on their acquisition of mortgages involving low-income units in small (5- to 50-unit) multifamily properties.

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Using a mortgage qualification calculator or a mortgage payment calculator is an easy way to determine your monthly payments and find if you qualify for a mortgage. Use a mortgage payment calculator.

Competition between banks and slight improvements in the credit markets are prompting looser standards for qualifying for mortgages and other loans, say regulators at the Office of the Comptroller of the Currency. They expect lending terms to continue to loosen next year.

Out of the banks participating in the OCC’s annual Survey of Credit Underwriting Practices 59 percent said their underwriting standards, or their mortgage qualification requirements, had tightened. That’s a large drop from last year when 73% said their mortgage requirements tightened. Plus, 5 percent said their mortgage qualification requirements got easier. In the previous two years, no banks said their mortgage terms got looser.

Home equity lending requirements also eased slightly. Fewer banks increased their home equity underwriting standards and some loosened their home equity loan requirements. The OCC said 60 percent of banks tightened home equity requirements, compared to 78 percent last year, and 5 percent loosed terms, compared to zero last year.

“Credit performance remains a concern despite several years of tightening,” said Deputy Comptroller for Credit and Market Risk Dave Wilson. “We are beginning to see some recent signs that standards may be loosening. That’s good for credit markets as long as bankers remember to stick to sound underwriting principals and do not compromise standards because of competitive pressures or the assumption that loans will be sold to third parties.”

Falling mortgage interest rates have made qualifying for mortgages easier for both home buyers and home owners refinancing. View low mortgage rates.

To complete the survey, OCC compiled bank examiner observations and survey 51 of the largest national banks over 12-month period. The total of loans involved in the study was $4 trillion, representing over 93 percent of all outstanding loans in the national banking system.

If you have a question about qualifying for a mortgage loan, please contact one of our qualified mortgage bankers at 1-877-868-2503.

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Homeownership for animals is probably not a viable way to deal with excess housing supply.

According to a report on CNN.com, the number of first time mortgage delinquencies is increasing.  3.51 percent of borrowers were 30 days delinquent in the Q210, up from 3.31 percent in Q110.  This could be the first signal that there is another wave of foreclosures on the way.

The first wave of foreclosures appears to be receding.  The delinquency rate dropped to 9.85 percent in the second quarter, down from 10.06 percent in the first quarter.  Seriously delinquent mortgages (90+ days late) fell to 9.11 percent in Q210 from 9.54 percent in Q110.  While REO property is accumulating at lenders, fewer homeowners are entering into the foreclosure process- for now.  It remains to be seen whether or not this trend will continue.

Fairly obviously, the main cause of foreclosure (and delinquency) is loss of income.  Unemployment remains high (currently U-3 unemployment is at 9.6 percent and the broader U-6 measure is at 16.7 percent).  Nothing in the current models suggests that the labor market will see significant improvements in the near future.  This month’s non-farms payroll report was not particularly encouraging.

One of the other major causes of foreclosure is when homeowners owe more on their mortgage than their home is worth (this condition is known as being underwater).  There is reason to believe that many more homeowners may be on the verge of becoming underwater.  Demand for homes has dissipated since the expiration of the first time homebuyer tax credit at the end of April.  At the same time, the supply of homes has steadily increased, to the point where we have a 12.5 month supply of excess homes (a normal market has about 6 months), a number that is increasing due to mounting REO property.  There are also estimates that a “shadow inventory” (distressed homes that are in severe danger of foreclosure) of 3 to 4 million homes may exist.  This confluence of low demand and high supply against a backdrop of unemployment means that significant downward pressure on housing prices will persist in many parts of the country.

Decreasing home values means that many homeowners will lose equity in their homes.  Those that lose enough equity to go underwater are far more likely to default on their mortgage, either intentionally or unintentionally.  If we see a large decrease in home values, we are likely to see an increasing number of foreclosures and delinquencies.  Many analysts are predicting a decline in home values of 5 to 20 percent over the next couple of years, assuming other conditions stay the same.

How would a decline in home values effect you?  Let me know in the comments section below.

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Title insurance is a type of indemnity insurance that protects homeowners from losses due to inaccuracies in real estate titles or issues stemming from property liens.  Title insurance is generally purchase when a borrowers buys a new home.

From the article:

“The latest market share analysis reflects an on-going recession in the housing market, with further downward pressure on home prices,” said Pfotenhauer. “While an abundance of affordable homes and low interest rates make the market attractive, people need jobs to obtain credit and purchase homes.”

This decline in title insurance premiums is just another symptom of the weak housing market.  While near record low mortgage rates have encouraged many people to refinance their mortgages, they have not prompted many people to purchase new homes.  Part of this is due to tighter credit conditions and underwriting standards, and part of it is due to the ongoing weak economy and soft labor market.

It appears that it will be some time before the housing market recovers, as there is still a massive overhang of housing supply as well as weak demand for houses.  We should probably expect to see further declines in housing prices before the housing market truly hits bottom sometime in the next two years or so.

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No matter how skinny or wide the house, Total Mortgage would like to help you finance your mortgage.

Friday has finally arrived!  Before you go away for the long weekend, take a look at the record low mortgage rates that are available at Total Mortgage today.

Mortgage rates are right near all time lows, and many saavy borrowers are taking advantage of the opportunity to lock in some of the best rates in 50 years. If you are paying more than one point above the current mortgage rate, it may behoove you to think about refinancing your mortgage.  You might be able to save thousands of dollars in interest payments over the course of your loan, lower your monthly payment, or possibly reduce the term of your loan so you could own your house outright more quickly.

Are you a prospective first time homebuyer?  Amongst your options, you may want to look into the possibility of getting an FHA mortgage.  FHA mortgages can be ideal for first time home buyers because they only require down payments of 3.5 percent and are insured by the Federal Housing Administration.  For qualified borrowers we are offering 30 year fixed FHA mortgages at 4.000 percent with a 4.349 percent APR.

Possibly you would like the stability of consistent monthly payments.  If so, a fixed rate mortgage is likely the way to go. Total Mortgage has among the best fixed rate mortgages in the country.  A 30 year fixed rate mortgage is available to a qualified buyer at 4.125 percent with a 4.323 percent APR.  For those with a little extra income who would like to retire their mortgage debt more quickly, 15 year fixed rate mortgages are available at 3.625 percent with an APR of 3.972 percent.

In addition to fixed rate mortgages, Total Mortgage has excellent deals on adjustable rate mortgages (ARM). Adjustable rate mortgages are not the best choice for everybody. There is some interest rate risk with an ARM, so they work best for those who follow the markets closely and have some idea where mortgage rates may go. They are also good choices for those who do not intend to spend a long period of time in their homes.

Some of the most popular ARM’s are 5/1 conforming and 5/1 jumbo ARMs. A 5/1 conforming ARM is available with a 2.875 percent mortgage rate and a 2.638 percent APR. A 5/1 jumbo ARM has a slightly higher mortgage rate of 3.625 percent and a 3.657 percent APR.

If you are purchasing a house that costs more than the Fannie Mae conforming limit ($417,000 to $729,750 depending upon your locality), you will need to get a jumbo mortgage. Since rates have come down, a 30 year fixed jumbo mortgage is available at Total Mortgage with a mortgage rate of 4.875 percent and an APR of 5.098 percent.

Mortgage rates are always on the move.  These mortgage rates were quoted at 9:01 a.m. on September 3, 2010.

For a complete list of Total Mortgage’s current mortgage rates and mortgages products call 877-868-2503 immediately, to speak with a licensed mortgage professional.

*All rates shown are for 30 day rate locks. Longer locks available. The APR for conventional loan amounts is calculated using a loan amount of $417,000, 2 points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for jumbo loan amounts is calculated using a loan amount of $500,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for FHA loan amounts is calculated using a loan amount of $295,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. Some rates and fees may vary by state. All interest rates listed are for qualified applicants and are subject to mortgage approval. All rates are subject to change without notice.

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Let’s take a look at the quotes in the release from Lawrence Yun, NAR’s chief economist:

Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

Yun added, “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy. The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.”

I don’t take issue with much of what Yun is saying here.  The recovery is going to take a long time, and many people will not recoup the money they put into their homes for many years (analysts predict home values in the sand states will not get back to peak levels until 2025).

I do have an issue with the statement about affordability.  While prices are down significantly from their peak in 2006-7, they are still high compared to income on a historical basis, which is really what we should be looking at.  It is likely that home prices still have further fall, with many analysts predicting somewhere between 5 and 20 percent based upon locality.  I believe the idea that affordability is at a generational high is incorrect, unless you define a “generation” as the last seven-ten years or so.  It’s also worth noting that the NAR has a record of somewhat dubious predictions when it comes to housing, as can be noted here, here, here, and here.

As always, you need to take these types of metrics with a grain of salt, and make purchase decisions that best fit your present needs and personal situation at this moment.

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Homeowners also typically have no regrets about buying their home despite the increasing number of foreclosures and drop in housing values. Only 9 percent of homeowners in the poll said they regret buying their current home, compared to 90 percent who had no regrets.

Of those who had regrets, 31 percent said they felt unhappy because they could not sell their home, and 22 percent said they couldn’t afford their monthly mortgage payments. Others said they were unhappy because their home’s value had dropped, or they didn’t like their home’s location, or because of other reasons, according to the poll done by Princeton Survey Research Associates.

Blacks were far more likely to feel sorry about buying their home and were more likely to report difficulty meeting monthly mortgage payments. They were also slightly more likely to have an adjustable-rate mortgage or an option ARM.

Not surprisingly, fixed-rate mortgages have become more popular, the survey indicates. Almost 80 percent of homeowners said they have fixed-rate mortgages, compared to about 65 percent in 2008. Wealthy homeowners were more likely to have fixed-rate mortgages. Roughly 85 percent of households with income of more than $75,000 opted for a fixed-rate, compared to 70 percent of households with income under $30,000.

A survey by Fannie Mae earlier this year agreed that people generally see homeownership as a good choice. The Fannie Mae survey found that about two-thirds of Americans want to own a home, despite the economic slowdown and decline in home prices. Safety and quality schools were top reasons for wanting to buy a home.

“Despite the recent downturn in the housing sector, Americans continue to value homeownership and think about their homes in ways that go much deeper than the financial investment,” said Mike Williams, president and CEO, Fannie Mae.

The public is more cautious, however. For instance, almost a quarter of renters said were postponing buying a home despite low mortgage rates.

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Total Mortgage is currently offering some of the lowest mortgage rates in Newark, New Jersey.

Fixed mortgage rates are popular among borrowers because the terms of the loan remain constant over the period of the loan. There are a number of fixed mortgage products available at Total Mortgage. A 30 year fixed conventional mortgage is available at 4.125% interest rate with a 4.323% APR. A 20 year fixed conventional and a 15 year fixed conventional mortgages are offered at a rate of 4.000% (4.273% APR), and 3.625% (3.972% APR) respectively.

Other popular fixed mortgage rates are 30 year fixed FHA mortgage, 30 year fixed jumbo mortgage and 15 year fixed jumbo mortgage.

If you want to grab one of these best mortgage interest rates available in NJ or would like a complete list of our mortgage products, please call 877-868-2509 and speak with a licensed mortgage professional today.

Mortgage rates constantly change, rates are quoted at 10:30 A.M., September 02, 2010.

*All rates shown are for 30 day rate locks. Longer locks available. The APR for conventional loan amounts is calculated using a loan amount of $417,000, 2 points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for jumbo loan amounts is calculated using a loan amount of $500,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for FHA loan amounts is calculated using a loan amount of $295,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. Some rates and fees may vary by state. All interest rates listed are for qualified applicants and are subject to mortgage approval. All rates are subject to change without notice.

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