New Disclsure rules in January

With the new rules enacted by our government - when you apply for a mortgage - there are many firm rules in place that will affect your closing date. The GFE, or Good Faith Estimate is a document that lists all your closing costs for the new mortgage. Some items are subject to change - for example, when you close a loan you do not have a mortgage payment for 1 month after the close. You will pay partial interest due on the loan at the close of the new loan - up to 15 days of interest, this will depend on the day of the month you close the loan - thus the amount may increase or decrease. If your initial Good Faith Estimate changes by more than $500.00 (in some cases) you will then be issued a new Good Faith Estimate, and your loan cannot close for 6 more days. If you are purchasing a home - this could cause some real problems. The best advice is - know when you want to close, have your Attorney or title company contact information at application, decide what program, rate and points you want to pay - this will help to make sure your charges are correct from the start.

Should I refinance

Should I refinance?
The most common reason for refinancing is to save money. Saving money through refinancing can be achieved in two ways:

By obtaining a lower interest rate that causes one's monthly mortgage payment to be reduced.
By reducing the term of the loan, thus saving money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total of the payments made during the life of the loan can be reduced significantly.
People also refinance to convert their adjustable loan to a fixed loan. The main reason behind this type of refinance is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments.

A third reason why homeowners refinance is to consolidate debts and replace high-interest loans with a low-rate mortgage. The loans being consolidated may include second mortgages, credit lines, student loans, credit cards, etc. In many cases, debt consolidation results in tax savings, since consumers loans are not tax deductible, while a mortgage loan is tax deductible.

The answer to the question "Should I refinance?" is a complex one, since every situation is different and no two homeowners are in the exact same situation. Even the conventional wisdom of refinancing only when you can save 2% on your mortgage is not really true. If you are refinancing to save money on your monthly payments, the following calculation is more appropriate than the rule of 2%:

Calculate the total cost of the refinance––example: $2,000
Calculate the monthly savings––example: $100/month
Divide the result in 1 by the result in 2––in this case 2000/100 = 20 months. This shows the break-even time. If you plan to live in the house for longer than this period of time, it makes sense to refinance.
Sometimes, you do not have a choice––you are forced to refinance. This happens when you have a loan with a balloon provision, but with no conversion option. In this case it is best to refinance a few months before the balloon comes due.

Whatever you choose to do, consulting with a seasoned mortgage professional can often save you time and money. Make a few phone calls, check out a few web sites, crunch on a few calculators and spend some time to understand the options available to you.

Foreclosure for the next years

Realty Trac is a great data base to see the current market trends in your area. Essentially, for the last 45 months foreclosure properties have increased each month.

There are 5 catagories of properties in some type of distress
1. NOD - notice of default on mortgage payments - currently about 5,000,000 are listed as late.
2. LIS - Lis Pendents - a legal term that someone has filed a legal claim on the property - this can be due to a pending divorce, pending estate settlement
3. NTS - Notice of Trust Sale
4. NFS - Foreclsure - this property will be auctioned on the court house steps.
5. REO - Foreclosure sale did not produce buyer and the bank now owns the property.

The 1st foreclosure wave was due to the market not able to sustain the high property values and the sub prime and Alt A mortgage products - in other words, very lose lending practice.

Now, it is the economy - for every 6 - 10 jobs lost, 1 home is going into foreclosure.

In 2010 - the wave will be from - Strategic Defaults - which is when the loan amount is higher than the value of the property due to the loss of property value. What will drive this is the 3,000,000,000 Option Arms and Atl A loans resetting at a rate that is higher than the home owner can afford - and they cannot refinance because the value of their property is less than 125% of the balance of their mortgage.

The treasury department is working on a couple of loan producst - as Stream Lined Short Sale Loan - and the FHA is dusting off their re hab loan ...

Stay tuned - and if you have an OPTION ARM - or Any arm that is due to reset next year - and you are concerned about the rate - now is the time to refinance!

Housing Stats report from MarketWatch

The most important message to remember - The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. Large revisions are common.

WASHINGTON (MarketWatch) -- In a blow to the optimism that had surrounded the U.S. housing sector in recent months, housing starts fell a sharp 10.6% in October, the Commerce Department reported Wednesday.
New construction on housing units dropped to a seasonally adjusted annual rate of 529,000, the lowest level since April. The 10.6% drop was the biggest percentage decline for starts since January.
Both single-family homes and multifamily units declined last month.
Prior to the October decline, housing starts have been flat for four straight months, on the heels of a big rebound earlier in the year from historic lows for the home-building industry

Housing price charts

http://mysite.verizon.net/vzeqrguz/housingbubble/

New Credit Score Rules

There's a new credit law - and a new FICO score, FICO 08. This new score promises to do a better job of predicting future credit risk. Here are what I believe to be the most important things that we consumers should be focused on in the next 24 months.
Continue to make your payments on time, regardless of what you read - Debt settlement companies would have you believe for them to serve you is to stop making payments. The theory is lenders who are not getting paid will be more flexible with customers who don't pay. The truth is, lenders want to work with their customers directly, this way they do not lose income to the debt settlement companies, thus they recover more of the debt payment and it allows you to avoid litigation if the credit card company grow tired of you avoiding them at a debt settlements company request.
Pay down your credit card debt to no more than 10% of the balance avilable - the new FICO score is more sensitive about your revolving debt utilization percentage. This means those of you who carry a high balance on your cards will suffer more as lenders continue to convert to this new scoring system. If you can not get your debt to 10%, pay it down as much as you can. Why? Lenders are being more critical about credit scores than in the last 3 years. A good score of 700 two years ago would have gotten you the best rate and terms on any loan. Today - aim for 750 - and a larger down payment.

Tax Credit Bill

Congress just expanded two key tax breaks
as part of a law extending unemployment benefits.
We will report on the changes in detail for you.
Start with the first time home buyers’ credit:
It is now extended through April 30, 2010
and won’t lapse on Nov. 30 as previously scheduled.
Binding sales contracts signed by April 30, 2010
must close by June 30, 2010 to qualify for the credit.
Congress is unlikely to OK any further extensions.
More higher-incomers can now claim it.
For homes purchased after Nov. 6, married couples
can claim the full $8,000 tax credit (assuming that the home cost $80,000 or more)
if their adjusted gross income is $225,000 or less, up from $150,000 previously.
For them the credit phases out over the next $20,000 of AGI and ends at $245,000.
The phaseout for singles starts at $125,000, up by $50,000, and ends at $145,000.
Even current homeowners can use this break. Those who’ve owned a home
for five consecutive years out of the last eight qualify for a tax credit of up to $6,500
if they go out and purchase another home after Nov. 6, 2009 and before May 1, 2010.
As with the first-timers’ credit, the house must be the buyer’s principal residence.
Buyers can claim qualifying 2009 purchases on amended 2008 returns.
Credits for 2010 purchases can go on 2009 returns. The credit remains refundable.
But there are some tightenings: Homes costing over $800,000 don’t qualify
for either the $8,000 or $6,500 tax credit if they were purchased after Nov. 6, 2009.
No credit is allowed for purchasing a home after Nov. 6 from your in-laws.
That shuts a loophole in the rules barring the credit for homes bought from relatives.
Dependents cannot claim the credit. Nor can taxpayers under age 18.
And more documentation is required to claim the credit. Filers must attach
a signed copy of the settlement statement to their tax returns or claims for refund.

unemployment numbers and mortgage rates

The latest look at Initial Jobless Claims showed that 502,000 individuals filed for unemployment for the first time last week. The number was slightly better than expectations of 510,000 and the lowest reading in 10 months – and Continuing Claims for Unemployment benefits fell by 139,000 to 5.63M. But again – we find it simply amazing that the media and others talk about the “good news” – when it is really anything but.

Let’s remember that over a HALF MILLION people every week are still losing their jobs – finding “good news” in that kind of report is like being excited that the tornado which leveled your home managed to miss the gardening shed out in the backyard. And it’s not just the media…President Obama said this morning that the Continuing Claims number moving lower is “encouraging”, but as we have explained many times, this number is likely moving lower as people are running out of Unemployment benefits before they have found a job. We expect this number to move significantly higher now that Unemployment benefits have been extended with the new legislation.

Speaking of the President, he addressed the nation this morning and said that during December, he will hold a forum of CEO’s, small business owners, Labor Union leaders and more to discuss what has to be done to create jobs. Since the recession began in December of 2007 there have been 7.3 Million jobs lost. And even in the face of all the economic stimulus, the economy has still lost nearly 3 Million jobs just this year – a far cry than what the administration had projected of a creation of 3.2 Million jobs. That’s a miss of over 6 Million jobs.

Some good news on the foreclosure front - filings slowed for a 3rd straight month, signaling that a recovery could be in the making…but a sustained recovery just won’t happen until the job market gets better.

At 1pm ET, the Treasury will auction off $16B in 30-year Bonds. And as always, the results of this auction could have an impact on the Bond market later today.

Tuesday's Alert to Lock helped avoid some re-prices for the worse or lower pricing this morning, but we will start the day by Floating. The auction at 1pm could shake things up, so stay tuned.

rates this week

Mortgage Bonds are starting the week slightly higher. Bond prices are now near a dual layer of overhead resistance, following the pricing gains seen since Friday's weak Jobs Report.

Stocks are trading sharply higher so far today after the G-20, a group of finance ministers and central bank governors from 20 world economies, pledged to keep aid flowing to global economies until a recovery was assured. We wouldn’t have expected the G-20 to say any less…of course they will want to continue to help until global economic health is restored…but the question remains of what exactly can they do, as rates are already at historic lows around the world? And what will the result of all the economic stimulus be down the road? Economic stimulus is simply injecting money into the economic system on a global level, and once the “velocity of money” increases, we could see quite a rise in inflation down the road.

Frequently asked questions about Tax Credit

Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who
meet all eligibility requirements will qualify for the $6500 credit.
Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a
new home. I have lived in my current home for more than 5 consecutive years and
am within the new income limits. I will go to settlement on November 20. If
President Obama has signed the bill by the time I go to settlement, will I qualify for
the new $6500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment
(when the bill is signed). There is no reference to the date of contract for the new credit. The
provision looks solely to the date of purchase, which is generally the date of settlement.
Question: I am a firsttime
homebuyer but was not within the prior income limits at the time I
entered into my contract to purchase on October 30, 2009. I will be covered,
however, by the new income limits. If the new rules have been signed into law by the
time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill.
The income limit and other eligibility rules will look to your status as of the date of purchase,
which is the settlement date. So if the new rules have been signed when you go to settlement,
you should be eligible for the credit (or a portion of the credit if you're within the phaseout
range).
Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I
have found a home with a nonnegotiable
price of $825,000. Will I be able to use any
of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount
above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an
absolute ceiling.
Question: I owned my home for 10 years, but sold it two years ago year and have been renting
since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the
other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you
will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000
and lived there until 2008 when he got a divorce. Whether John has been renting or bought in
the interim, he WOULD INDEED be eligible for the credit because he owned a home and
occupied it as his principal residence for 5 consecutive years out of the last 8 years. The
keyword here is "consecutive." As long as he lived in that house for 5 years straight what he
did since 3 years doesn't impact eligibility.
Question: I am an eligible firsttime
homebuyer. I entered into a contract to purchase on
November 1, 2009. Do I have to go to closing before December 1? How does the
extension date affect me?
Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as
if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30
(or July 1, worst case), the purchaser will be eligible for the credit.

How will the market react? We don't see how Stocks could improve with a 10% handle on the Unemployment Rate being announced. And should Stocks move lower, Mortgage Bonds will likely benefit - however, any pricing improvement may be modest. A look at the chart shows prices moving sideways within a range between strong overhead resistance at the 25-day Moving Average and support at the 50 and 200-day Moving Averages. We feel Floating into the report is a wise balance between the potential gains and losses at stake, but don't expect huge improvements in pricing unless the report is far, far worse than even our expectations.

Time for Fax Review

You must note the effects on two tax years as you mull over potential options...2009 and 2010. To be successful, you want to cut your total tax bill over both years, not just one. Most filers will benefit by accelerating their deductions from 2010 into 2009 and deferring income until 2010. But if you expect to be in a higher tax bracket in 2010, consider the reverse…accelerating income and delaying deductions. Income tax rates won’t change in 2010. The Bush tax cuts are set to lapse after 2010, raising the top rate back to 39.6%. Congress won’t act to accelerate that change. And any surtax on high-income folks, such as the one in the House’s health care overhaul legislation, wouldn’t be effective until after 2010.
Take a look at some strategies involving provisions set to lapse soon. First time home buyers won’t have to act by Nov. 30 to get a tax credit. Congress will extend the $8,000 credit for several months, well into 2010, so first timers will not have to hurry up and close their home purchases by Nov. 30. Prospective buyers who already own a home should wait a brief time to buy. Congress is working on a bill that expands the credit beyond first time purchasers, giving a $6,500 credit to buyers who’ve owned a home for five of the last eight years. This would apply to homes bought after enactment, which should occur by mid-Nov.

The worst U.S. housing crash since the Great Depression has led to a record number of foreclosures and shaved almost a third off property values. The S&P/Case-Shiller Index of 20 cities in August was 29 percent below its 2006 high, after rising for four consecutive months.

“We are bumping along the bottom of the housing market,” said James Lockhart, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency. “There is the potential for another swing down.”

Sales of new U.S. homes fell 3.6 percent in September to an annual pace of 402,000, the Commerce Department said yesterday. That was lower than the 440,000 median forecast of 75 economists surveyed by Bloomberg News.

The Federal Reserve will complete its $300 billion Treasury purchase program today amid signs the seven-month buying spree helped stabilize the housing market and limited increases in borrowing costs. Expect mortgage rates to start to slowly increase based on this news.

Mortgage Rate News today

New Home Sales were reported at 10am ET – and the latest trends for housing have shown encouraging signs. Back in January, the inventory levels reached a high of 12.4 month supply. And although today's number showed 7.5 month supply, which is worse than last months 7.3 reading, it is still a big improvement from where we were in January.
Senate negotiators are still working on the passage of a bill that would extend the First Time Homebuyer tax credit, but were unable to get a final vote completed yesterday.
Bill Gross said on CNBC this morning that the Fed will eventually stop purchasing Mortgage Bonds, which could lead to lower Bond prices…and higher interest rates ... now is the time to refinance!