Mortgage Rates Inch Higher After Existing Home Sales Data

After ending last week on a three day losing streak, loan pricing made a total turnaround in the first three days of this week, mostly thanks to the outcome of the FOMC meeting on Tuesday. This led mortgage rates almost all the way back to record lows on Wednesday morning. However, soon after, MBS prices began to tick lower (from the top of the price range) which forced a few lenders to reprice for the worse. This put pressure on mortgage rates heading into today...

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.

MORTGAGE QUESTION OF THE DAY

Q: 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

REAL ESTATE QUESTION OF THE DAY

Q: What will be my tax liability if I just return the house back to the bank?

This is something that you will need to carefully consider with your tax professional and your mortgage lender. Every circumstance is different, and it is impossible to tell you what your liability will be without knowing much more about your situation.

By involving your lender in the discussion, you are given the chance to explain why you cannont make the mortgage payments and how your local market has changed so that you cannot sell the home in order to pay back the mortgage. If your lender agrees that accepting your keys "in lieu of foreclosure", you may be in a better position financially than if you simply stop paying on the loan.

In general, if you cannot sell to pay back the loan in full, the bank does NOT want your house. When they have to take title to a home, care for it, and then resell it at a discounted, foreclosure price, they lose tens or even hundreds of thousands of dollars. If the lender feels that your default was avoidable, you can expect that they will report your derogatory credit and hold you accountable for as much as legally possible in your area. However, if it is evident that you considered all options and worked with them to find a solution, they are likely to report your status differently . . . to the credit bureaus, the IRS, etc.

Make sure you consult a tax professional, the lender, and perhaps an attorney in your area familiar with "short sales" before taking the next step.

What will be my tax liability if I just return my house back to the bank?

Mortgage Question of the Day?

• This is something that you will need to carefully consider with your tax professional and your mortgage lender. Every circumstance is different, and it is impossible to tell you what your liability will be without knowing much more about your situation.

By involving your lender in the discussion, you are given the chance to explain why you cannont make the mortgage payments and how your local market has changed so that you cannot sell the home in order to pay back the mortgage. If your lender agrees that accepting your keys "in lieu of foreclosure", you may be in a better position financially than if you simply stop paying on the loan.

In general, if you cannot sell to pay back the loan in full, the bank does NOT want your house. When they have to take title to a home, care for it, and then resell it at a discounted, foreclosure price, they lose tens or even hundreds of thousands of dollars. If the lender feels that your default was avoidable, you can expect that they will report your derogatory credit and hold you accountable for as much as legally possible in your area. However, if it is evident that you considered all options and worked with them to find a solution, they are likely to report your status differently . . . to the credit bureaus, the IRS, etc.

Make sure you consult a tax professional, the lender, and perhaps an attorney in your area familiar with "short sales" before taking the next step.

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