You can’t get your mortgage rates from the newspaper. Last week proved it. Again.
Friday morning, headlines and around the country read that mortgage rates were down 0.04 percent, on average, since the week prior.
A sampling of said headlines includes:
The story behind the headline was sourced from the Freddie Mac Primary Mortgage Market Survey, am industry-wide mortgage rate poll of more than 100 lenders. The PMMS has reported mortgage rate data to markets since 1971 and is the largest of its kind.
Unfortunately, rate shoppers can’t rely on it.
See, unlike governments and private-sector firms, when consumers are in need mortgage rate information, they need the information delivered in real-time; for making decisions on-the-spot. Consumers need to know what rates are doing right now.
The Freddie Mac survey can’t offer that.
According to Freddie Mac, the survey’s methodology is to collect mortgage rates from lenders between Monday and Wednesday and to publish that data Thursday morning. The survey results are an average of all reported mortgage rates. The problem is that mortgage rates change all day, every day. The PMMS results are skewed, therefore, by methodology.
And, meanwhile, the issue was compounded last week because mortgage rates shot higher Wednesday afternoon — after the survey had “closed”. The market deterioration ran into Thursday, too — again, unable to be captured by Freddie Mac’s PMMS.
Although the newspapers reported mortgage rates down last week, they weren’t. Conforming mortgage rates were higher by at least 1/8 percent, or roughly $11 per $100,000 borrowed per month. In some cases, rates were up by even more.
Newspapers and websites can give a lot of good information, but pricing is far too fluid to rely on a reporter. When you need to know what mortgage rates are doing in real-time, make sure you’re talking to a loan officer who’s tracking the market. Call me at 240-223-1730 or shoot me an e-mail to tim@timromp.com. Otherwise, you may just be getting yesterday’s news.
The economy’s improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.
Underwriting guidelines are tightening.
The data comes from the Federal Reserve’s quarterly survey to its member banks. The Fed asks senior bank loan officers around the country to report on “prime” residential mortgage guidelines over the most recent 3 months and whether they’ve tightened.
For the period October-December 2009:
Just 2 of 53 banks said its guidelines had loosened.
Combine the Fed’s survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it’s clear that lenders are much more cautious about their loans than they were, say, in 2007.
Today’s home buyers and would-be refinancers face a bevy of new borrowing hurdles including:
So, if you’re on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later. It doesn’t necessarily matter that mortgage rates are low, or that there’s an up-to-$8,000 home purchase tax credit for households that qualify. With each passing quarter, fewer and fewer applicants are eligible to take advantage.
A “Short Sale” is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.
By way of example, a Short Sale may be appropriate for a home seller whose mortgage balance is $250,000 but whose home wouldn’t sell for more than $220,000. Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.
Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan. Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.
For this reason, Short Sales are sometimes considered “the economical alternative” to default.
The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start. And sellers should be aware of how a Short Sale on their credit can impact future borrowing.
Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.
First Heritage Mortgage, LLC
6550 Rock Spring Drive, Suite 260, Bethesda, Maryland 20817-1131
Direct: 240.223.1730 • Toll-free: 866.833.LOAN • Fax: 240.223.1703
