Stigma Surrounds Home Ownership. Emotional Currency Undervalue

The Obama administration has tried gallantly to combat the financial crisis. Using virtually every conceivable tool at its disposal to keep people in their homes and prevent an outright collapse in home values.

The data calendar picked up today with several economic releases, starting with weekly Jobless Claims. Released by the Department of Labor, this report provides three timely metrics on the health of the labor market:

Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits in the previous week

Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job

Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits

Since our economy is driven by consumer spending, market participants track employment data to get a gauge on economic momentum. Higher jobless claims imply less consumers have jobs and therefore less money to spend. This is a negative for the overall economy but generally helpful in keeping consumer borrowing costs from rising. Since peaking in mid-August at 504,000 claims, initial claims for unemployment benefits have either held steady or improved in the past 5 weeks.

Here are the results:

Initial Jobless Claims: +12,000 to 465,000 vs. estimates for a read of 450,000. WORSE THAN EXPECTED. Prior week’s data was revised worse to show 3,000 more claims.

Continued Claims: -48,000 to 4.489 million vs. estimates of 4.460million.

Extended and Emergency Benefits: +208,000 to 5.17million.

This worse than forecast data was a positive for mortgage rates. Bonds rallied on the news and mortgage rates looked like they were set to correct today.

Next on the docket was Existing Home Sales for August. Released by the National Association of Realtors (NAR), this data totals the number of previously owned homes in which a sale closed in the previous month. Last month’s report was downright horrible, EHS plunged 27.2% to record low annualized pace of 3.83 million existing home sales. Right after this report was released last month, mortgage rates set new record lows.

Today’s release indicated Existing Home Sales in August improved 7.6%, which was slightly better than expectations. That equates to an annualized pace of 4.13 million homes sold. The increased number of sales helped reduce the number of homes on the market to 11.6 months worth. The median home price fell 1.9% from last month to $178,600. NAR states that supply would need to fall to 8 or 9 months in order to stabilize home prices. Despite the positive news on existing home sales, this was still the second lowest amount of sales on record, with last month being the lowest. HERE are charts and more commentary.

Bonds sold off after this data and mortgage rates moved higher as lenders who published rate sheets earlier in the day (after jobless claims) ended up repricing for the worse. Overall, loan pricing was weaker today than it was yesterday, but consumer borrowing costs didn't get beat up too badly. Mortgage rates remain close to record lows.

The best par 30 year fixed mortgage rates remain in a range between 4.25% to 4.50%, with several lenders still offering 4.125%. The par 15 year conventional rate mortgage continues to hold in the 3.75% to 4.00% range, which several lenders offering 3.625%. To secure a par interest rate you will be required to pay all the closing costs associated with your loan which includes lender fees, title fees, government recording fees and taxes including one point loan origination/discount/broker fee. You may elect to pay less in costs but you will have to accept a higher interest rate.

Same lock advice as yesterday. Short term closings should lock while those with time are probably safe to float but you should consider locking as lender pricing is very close to the best we have ever seen.

How does one person get from under a mortgage with some one whom is not their spouse, but is on the mortgage with them?

Mortgage Question of the Day?

How does one person get from under a mortgage with some one whom is not their spouse, but is on the mortgage with them.

• I think you are asking how to "get out from under" a mortgage. (There appear to be words missing in your question.) Once you have signed the mortgage, it does not matter whether the co-mortgagor is your spouse, a friend or a stranger. Both people who sign the mortgage are fully responsible for repayment of the debt.

If one mortgagor does not pay, the other one is fully liable for the entire amount of the mortgage. Even though co-borrowers may have personally agreed that each one owes 50% of the payments, that agreement is immaterial to the mortgage lender. If, for example, the two of you have a mortgage for $400,000 and one of you loses his job or moves away, the OTHER one is responsible for the full $400,000. Simply put - every person who signs a mortgage is responsible for 100% of the mortgage amount. The bank is not required to divide up the loan and decide "who pays what."

The only way to "get out" from a mortgage is to pay it off, or to have the lender release you from the mortgage. The lender is unlikely to release you from a mortgage, because that means there is one less person responsible for the repayment of the loan. You could sell your interest in the house to your co-borrower, but even then, the mortgage company would continue to hold you (as original signer of the mortgage) responsible for repayment of the loan.

-written by: Tim Rood

mortgage question of the day?????

Today's Mortgage Question Of The Day:
Q: Can gifted money be used towards a downpayment? If so, does that money have to be reported to the IRS as gifted money?

A: You are basically asking two different questions. Let's separate the two. Yes, gift money can be used towards a downpayment. FHA loans for example allow 100% of the downpayment to be gift funds. Most FannieMae lenders allow 100% of the downpayment to be gift funds as long as it is a 20% downpayment.

Some lender/investors do have restrictions on this so it's best to talk with your lender before making an assumption. If they don't like your solution then shop around.With less than 20% downpayment using conventional loans typically the Mortgage Insurance providers are going to require some percentage of the funds to come from your own account, typically that is 5%, but you should check with your lender to verify.

The final thing on gift funds is that typically they need to be from a "relative", Parents, siblings, cousins, etc. With regards to the IRS that's really a tax question for a tax advisor to answer. In my experience there is no reporting between the gift letter/funds that are provided to the lender and the IRS.

Market Snapshot

The Obama Administration appears to be tossing in the towel on consumers in this recovery. I missed it yesterday but one of our subscribers brought it to my attention; in the WSJ yesterday Sec of Treasury Geithner made this comment; "He said the U.S. can no longer rely on consumer spending, which has long powered the economy, to be the growth engine that leads the recovery this time around and said Washington needed to plant the seeds for business investment and exports." Well, in a perverse sense he has a point, the admission that consumers in the US are not going to bring the economy out of its slump and exports have to drive it forward indicates this administration has tossed in the towel. Exports, what exports? The US gave up its export base 20 years ago, we cannot compete in the export markets to the levels that will change how the US economy will grow itself out of this slump. Consumers in the US have accounted for 65% to 70% of GDP growth, although consumer spending will likely increase from what we have now, to think that we can rely on exports is wishful thinking in the short and intermediate term. To focus on exports is long overdue, however to be competitive US wages will have to decline in order to compete with low wage major countries like China, Japan, Indonesia, India and others; that won't happen anytime soon. This economic recovery cannot be speeded up, that is a hard pill to swallow but we all better get used to it. Planting the seeds is the first step, but it takes years for a seed to grow into a tree.

The interest rate markets rebounded the past two days to technical levels of resistance. This morning so far markets are testing resistance levels in mortgages and treasuries. If the 10 yr note can push below 2.65% (now 2.69%) rates will likely continue to slip lower; however the near term is still slightly negative; 4.00% for the 10 yr note is what many are thinking. If the 10 yr were to climb to 4.00% mortgage rates on 30s will increase 10 basis points in rate from current rates.

Current Mortgage Rates

Best Rates Yesterday Today 30 Yr FRM 4.37% 4.39% 15 Yr FRM 3.78% 3.80% FHA 30 Year Fixed 4.39% 4.42% Jumbo 30 Year Fixed 5.55% 5.58% 5/1 Yr ARM 3.53% 3.55% Rate Disclaimer Updated: 9/15/10 5:14 PM

National Average Mortgage Rates Rate Points Change 30 Yr FRM 4.35% 0.7 0.03% 15 Yr FRM 3.83% 0.6 0% 1 Yr ARM 3.46% 0.7 -0.04% 5/1 Yr ARM 3.56% 0.6 0.02% Source: Freddie Mac Updated: 9/9/10 2:00 PM

Credit Tips

"Over 70% of consumers identify errors on their credit report. 25% of those are serious enough to deny consumers...acess to credit, preferred interest rates, or even a job." ("Real Estate" magazine, 03/09).
It is important to make sure your report is up to date and accurate.
Obtain a copy of your credit report and review the accuracy of the information. Under federal law, you are allowed 1 per year from each of the three major reporting bureaus. Log onto www.annualcreditreport.com for more info.
Be careful of making large purchases right before applying for a home loan. This may affect your qualifications.
If you cannot make a payment on time, contact the lender to make other arrangements BEFORE it's too late.
Do not fall victim to scams that claim they can remedy your credit score. Only time and consistent, timely payments can improve your credit report.

For more information contact "Florida's Mortgage Expert," at 561-654-1886 or www.floridasmortgageexpert.com

US Foreclosures Fell in April, Signaling Improvement

Foreclosures in the US fell by more than 2 percent in April from a year earlier, the first year-over-year decline in the five years RealtyTrac has been reporting the data.
The number of Americans receiving foreclosure notices was down 2.4 percent in April from a year before and 9 percent lower than March 2010.
Experts say the foreclosure situation is slowing, and may have hit a plateau.
“I think you shouldn’t read too much into a one month dip, even if it is the first time,” said Rick Sharga, senior vice president of RealtyTrac. "It really isn’t that we’re out of the woods. It’s more of a process issue," he said, explaining that lenders are working through a backlog of troubled properties.
In all, one in every 387 homes in America received a foreclosure notice, which is defined as a notice of default, auction sale or bank repossession.
“The data is starting to indicate that it is stabilizing,” said housing analyst Patrick Newport of IHS Global Insight. He cited Fannie Mae’s [FNM 1.06 0.03 (+2.91%) ] first-quarter results released Monday, which indicated that single-family mortgage delinquencies were starting to slow down.
“Although our single-family serious delinquency rate increased during the first quarter of 2010 and remains high, our single-family serious delinquency rate grew at a much slower rate during the first quarter of 2010 than during each quarter of 2009,” Fannie Mae said in its filing.
While the foreclosure rate dropped, the RealtyTrac data shows that bank repossessions—also known as real estate owned, or REO—hit a record high in April; a total of 92,432 homes that were taken back by the lender. That’s a 1-percent increase from the previous month and a 45- percent increase from April 2009.
“If we start creating jobs, I think the situation will start getting better,” said Newport.
The ten states with the highest foreclosure rates were little changed from the previous month. According to the RealtyTrac report, Nevada remains No. 1 for the 40th straight month, with one in every 69 properties in the state getting a foreclosure notice.
Arizona ranked second with one in every 169 households receiving a notice, followed by Florida (one in 182 households), California (one in 192 households) and Utah (one in every 221 households.)
Vermont had the lowest rate, with one in every 26,051 properties receiving a foreclosure notice.

-Florida's Mortgage Expert
05/13/10

High Credit Scores are possible...

Learn from some credit scoring superstars.
While most Americans strive for good credit scores, others take special care to achieve great ones. Meet some credit score superstars -- and learn why and how they keep those precious three digits so high.

Good Scores Key to Financial Health
Credit scores were developed as tools to help banks and businesses make objective decisions. To generate them, a mathematical formula pulls credit report data and transforms it into a numerical rating. FICO (FICO) scores range from a low of 300 to a high of 850, and according to MyFico.com, mortgage lenders consider anything above 760 as ideal. While it is the dominant score, FICO isn't the sole scoring model. For example, the three major credit reporting bureaus -- TransUnion, Experian and Equifax (EFX)-- produce the VantageScore, with a scale ranging from 501 to 990.
Despite ranking system differences, a higher score always indicate less risk, and having them makes you more appealing to lenders, employers and landlords.
Consequently, focusing on scores is only natural. "People are drawn to this subject because it allows them to measure something that they equate to financial health," says Jose Rivas, national education manager for Consumer Credit Counseling Service of San Francisco.
That focus, however, can turn into anxiety, with conflicting information often to blame. "One article states that consumers should close their unused accounts," says Rivas, "another states that consumers should never close their accounts." For this reason, getting the facts from reliable sources is essential. Like the following high achievers, you can create a terrific credit score with real knowledge and a specific sense of purpose.
Credit Score Vigilante
Dan N, a professional comedian who constantly travels between New York and Los Angeles, has carefully built an 830 FICO score. Doing so enabled him to negotiate preferential terms with his premium reward card. "I was able to drop the annual fee for my $450 per year American Express card to $150!" Dan also cites the "feel-good" factor: "It's a comfort to know that wherever I go and whatever I apply for, I can get it."
Vigilance is Dan’s strategy. "If there's anything at all that might affect my score, I ask a ton of questions and go to the Internet and do as much research as possible. If I test drive a car, or sign up for a health club, I look at the fine print very carefully to see if they have a right to hit my credit file with an inquiry." He's also programmed everything online "so that all of the bills pay themselves, and any and all credit card balances are paid off immediately."
Protecting a Long History of Timely Payments
Want the very best vehicle loan available? Let your numbers do the talking. When Brenda A, founder of TheCaregiversVoice.com, out of Pearblossom, Calif., was applying for a car loan, her 849 score helped her secure top financing. "Saving thousands on interest charges is a tremendous motivator," says Brenda, who locked in 0 percent interest for five years. A loan with a 4 percent rate would have cost her an extra $3,200 on the same vehicle.

Brenda attributes her impressive score to a long history of timely payments. "And on those rare moments when a bill sneaks under some paperwork and it's either late or due that day," says Brenda, "I call and take care of it." She believes her loyalty to the same banks (three credit accounts -- not too many, not too few) also helps. "Instead of constantly shifting to capture the best deal, discount rate, rebate points, etc., I've stuck with the same folks for years."
Regular Charging, Zero Balances
At last check, marketing company president Paul E, from Bloomsbury N.J., holds a 990 VantageScore. For him, it's a matter of honor and integrity. "A high credit score indicates your name and your signature on a contract have meaning. It's an indicator of certainty ... of character. It would be difficult to trust someone with a poor credit rating to the same extent you can trust someone with a higher credit rating."
Paul maintains his high score by using his business and personal credit cards regularly and paying them off every month. "It's not magic -- pay your bills on time and pay the debt. Make it a priority. Pay attention to spending."
Keeping the Right Mix of Credit
"Every time someone runs my credit they say, 'Wow, I almost never see someone with credit that high,'" says Carrie R, founder of pocketyourdollars.com in Minneapolis. She keeps it first-rate to preserve her autonomy. "As someone who got out of $50,000 in debt in less than three years, I take a lot of personal pride in my financial freedom." Though Carrie has no plans to borrow money again, "I have no barriers when it comes to employment, insurance or other areas of life where my credit score is used to assess the kind of risk I am."

Besides "the obvious things like pay my bills," Carrie says she increased her score by talking to her credit union loan officer, who said an overabundance of idle retail accounts was driving it down. She had opened the cards randomly during in-store promotions, but never really charged on them, so there was no history to protect. After formally closing the accounts, her scores that were previously in the 720 to 740 mark rose to the 800s.
Does the Perfect Credit Score Exist?
Pursuit of excellence is often wise, but does 'perfect' exist? Yes, says Craig W, public affairs director for FICO. "Several thousand consumers do in fact have the highest possible FICO score."
While not everyone will reach the credit score apex, you can get close by consistently following three simple guidelines:
1. Pay all bills on time.
2. Keep credit card balances low.
3. Take on new credit only when you really need it.

-Florida's Mortgage Expert