Effective April 1st, 2012, Fannie and Freddie will be increasing their Guarantee Fee by 10bps.
This is just the first increase. Fannie and Freddie will continue to increase the Guarantee Fee over the next 24 months. Experts estimate an additional 15 to 35 bps increase over this time period.
WHAT DOES THIS MEAN TO CONSUMERS LOOKING TO REFINANCE OR PURCHASE?
On a $200,000, to save .125% in rate will cost $800 (40bps). Looking long term, an additional 30 bps Guarantee Fee increase by Fannie and Freddie will equal and additional .375% or $2400 cost to consumers on a $200,000 mortgage. Total expected increase would then be .500% to rate or $3,200 on a $200,000 over the next 24 months.
Keep in mind, interest rates at sitting at all-time lows right now. If the economy improves (unemployment went down to 8.5% today) rates will rise. Rising rates, combined with the Guarantee Fee increase, will have a pretty substantial impact on the amount of money a consumer can spend on a home.
The majority if not all banks will have this first adjustment in place by February 1, and some have already put this in place.
WHAT TO DO?
If you are a consumer and you have been waiting for lower rates; rates are increasing regardless of market conditions. If you are a consumer who is waiting for the bottom of the housing market; it has come and gone in Denver and most surrounding areas. (home inventory is at $12,000, where as we typically have as many as $30,000 active homes on the market. Supply and demand states prices will increase and they have).
If you want to know if it makes sense to refinance or what you can qualify for to purchase a home, you can apply at SECURE ONLINE LOAN APPLICATION
To search homes for sale, as well as homes in foreclosure -FREE HOME SEARCH
WHY DID THIS OCCUR?
As part of the Temporary Tax Cut Extension that was passed on December 23, 2011, Congress decided that mortgage borrowers should foot some of the bill for this extension.
Call or email anytime with any quesitons.
UPDATED INFORMATION 1/10/2011 In doing price comparisons over a 7 day look back as well as through conversations with our capital markets group, it is safe to say that most if not all lenders have increased their pricing. This is done to make certain that lenders have enough margin to cover the guarantee fee on loans delivered to Fannie Mae and Freddie Mac after April 1.�
In addition, it appears that the effect on interest rates is actually .25% to .375% as opposed to .125% that I had originally estimated.
It has been a good time to buy for the past 18 months. So the bigger question is, why have you not yet bought a home?
ANSWERS TO WHY PEOPLE HAVE NOT YET PURCHASED:
1) I AM WAITING FOR BOTTOM –
That ship has sailed. Bottom has come and gone.
Looking at Denver Housing Data after Q3, 2011;
-The inventory of homes for sale has decreased by 27.3%in the past 12 months.
-Home for sale in Denver are at an 11 year low! Currently there are 16,858 homes for sale
-The median price has increased by 8.1% in the past 12 months.
Less inventory, equals higher demand, equals higher prices.
2) OWING A HOME IS POOR INVESTMENT-
3) RENTING IS CHEAPER THAN BUYING-
Again the data tells a different story,
-The rental vacancy rate for Denver-area rental houses and condominiums hit its lowest level in the first quarter since Colorado officials have tracked the market.
-Only 2.6 percent of single-family homes and condos were available for rent
-The average rent in Denver is $1050 per month
The fewer homes there are for rent, the higher the cost of renting:
Here are 356 homes that you can buy with $1,000 and pay less than $1150 per month. LOOK AT HOMES
Do you see something you like? I guess it is the time to buy
Do you qualify for a mortgage with down payment assistance? Apply here
Is it a good time to sell?
Yes, the answer is yes, why? There are 3 simple reasons
1) Supply and Demand
-housing inventory is at an 11 year low = little supply
-rent is at an all-time home = high demand
2) Is it easier to sell your home when there are hundreds of similar homes or just a handful, such as right now?
3) You may not get what you want for your home, however, you are buying near the bottom so you are more than likely to make up for you loses
Here is an interesting quote from Forbes: “Trying to time the housing bottom is as much folly as trying to time stocks or any other investment vehicle. In fact, it’s greater folly because if housing prices do fall further, it’s likely to be because mortgage rates are rising, which would mean that over the long term that slightly lower price you may have paid could end up costing more in carrying costs than you saved.”
The bottom line is this: The American Dream is and always WAS alive and well. It has nothing to do with the direction of housing prices but everything to do with your financial situation, income stability, ability to shoulder the costs, and if the home you have your eye on is your version of the American Dream – a home you love that you hope to live in for an extended period of time
The Perfect Storm For Interest Rate Series (Part 2 of 5)
Does it make sense to refinance?
One can never know for certain until they have applied for a mortgage. A good way to know if it is worth the time to fill out an application is if you fall into any of the categories below.
-Do Your Currently Pay Mortgage Insurance? you may be able to elimate or reduce your MI; convential MI factors have seen significant declines since the middle of 2011
-Do You Have An Adjustable Rate Mortgage? often times in our current interest rate market, consumers are able to get a fixed rate mortgage equal to or less than their current adjustable rate mortgage.
-Is Your Loan Serviced By Fannie Mae and Has Lost Equity? a loan serviced by Fannie Mae can be sold back to Fannie regardless of appraised value at our current markets interest rate…with out paying mortgage insurance
-A General Chart
Loan Amounts $200,000 or less. Saving 1% in rate will save more than $125 per month on average.
Loan Amounts $201,000 to $300,000. Saving .75% in rate will save more than $125 per month on average.
Loan Amounts $301,00 to $417,000. Saving .50% in rate will save more than $125 per month on average.
The Perfect Storm For Interest Rate Series (Part 1 of 5)
The 3 Major Factors That Have Driven Rates To Historic Lows:
FACTOR #1: S&P Downgrade of The United States of America
Just last month, on August 5th, Standard and Poor (S&P) downgraded America’s long term outlook from AAA to AA+. The experts in teh news stated that this would have a dramatic effect on interest rates, however it had the reverse effect. Why? If people started questioning the American economy and what America could do, they were going to question the whole world and that’s exactly what took place. And that drove people to the most secure of all investments, the Treasury bond for this country, and that lowered interest rates. Probably what we’re going to see is it level out a little bit and maybe even tick up as we move forward. But that big spike up that everyone predicted didn’t take place.
Factor #2: European Debt Crisis The European and the American economies are deeply intertwined. Trade is the major channel through which ongoing stress in the European Union will affect the United States. A sharp economic downturn in Europe means demand for U.S. products and services is likely to decline significantly. Falling U.S. exports will be an additional drag on the economy and on jobs at a time when America can least afford it. This fear creates a flight towards saftey in the purchase or treasuries, thus dropping interest rates.
Factor #3: Fed Buying $400 billion In Treasuries One of the Feds primary goals to help economic growth is to keep long term interest rates low…this is how they can do it…
WHERE ARE WE TODAY:
The chart below shows the Fannie Mae 4.0 Mortgage Backed Sucurity (MBS). The buying and selling of this coupon is the determining factor in interest rates.
Today 9.27.2011 the FNMA 4.0 coupon is trading at 102.31, down from the record high of 105.75 three days ago, but still trading at historic highs.
Original article written by The KCM Crew on August 29, 2011 www.kcmblog.com
Last week, RealtyTrac released its Q2 2011 U.S. Foreclosure Sales Report. The report confirmed what we are hearing in the marketplace – banks are beginning to look more favorably on short sales as option to foreclosure.
The report dissected the sales of distressed properties in the second quarter of 2011. Here are several of their findings:
■Sales of homes that were in some stage of foreclosure or bank owned accounted for 31 percent of all U.S. residential sales in the second quarter of 2011, down from nearly 36 percent of all sales in the first quarter.
■A total of 102,407 pre-foreclosure homes (short sales) sold in the second quarter, an increase of 19 percent from the previous quarter.
■A total of 162,680 REO homes (foreclosures) sold in the second quarter, virtually unchanged from the first quarter.
■Short sales on average sold for a discount of 21 percent below the average sales price of non-foreclosure homes.
■REOs on average sold at a discount of nearly 40 percent below the average sales price of non-foreclosure homes.
This could be a great sign that banks are finally realizing the advantages of short sales over foreclosures.
Bloomberg.com quoted Rick Sharga, senior vice president of RealtyTrac, in an article covering the report:
“This is a glimmer of hope that lenders are getting more realistic. It’s a win for borrowers who avoid foreclosure, buyers who get a house in better condition and banks that lose less money, which is also a win for taxpayers.”
Bottom Line:
Banks are beginning to do more short sales. It is time for everyone involved to help in this endeavor.
NOTE: if are considering a short sale, please contact Brian Pintar 303-478-1425 and he will refer a great short sale real estate expert in your area.
Christopher Reale, Director of Short Sale Operations at Lepizzera and Laprocina Title and Escrow Services. He is an expert on the short sale process.
In any business discipline, having the proper mindset is the key to a successful business venture. This holds true in the Real Estate industry. Now more than ever, having the proper “Short Sale Mindset” is a key ingredient to a successful short sale transaction. In order to have the proper” Short Sale Mindset” we need to ask ourselves:
What are the parties involved thinking?
During our nationwide educational seminars regarding the short sale process, we have found the following mindsets to permeate the industry:
■Listing Agents – The short sale process is too lengthy. It is impossible to deal with the short selling banks.
■Buyers – The short sale process takes too long. We want an answer from the short selling bank ASAP. Why should I wait to purchase a short sale when I can purchase a non- distressed asset?
■Sellers - What is the point? I am just going to let the bank foreclose.
■Banks – Their mindset changes all the time!
The Key to Success
1.) Listing Agents – Though the short sale process does take longer than the traditional non distressed property sale, the short sale process on average is taking 72 days from start to finish. If the agents are properly positioned to negotiate with the bank, preferably through a law firm who has experience in the short sale process, their mindset will change. Taking the negotiation burden off the agent will allow them to properly market the property and help the distressed seller.
2.) Buyers – Understandably the short sale process is lengthy and not every buyer is a “short sale buyer” depending on their individual circumstances. However, according to the Realty Trac Foreclosure Report dated 8/23/2011, a buyer who engages in the purchase of a short sale will typically purchase the property at a 21% reduction to the current market value. That means INSTANT EQUITY for the potential buyer. In most cases this will change the mindset of the buyer.
3.) Sellers – In nearly every instance, a short sale is more advantageous to the seller than a foreclosure. We will cover this in detail in a later post.
4.) Banks – It is apparent the bank’s mindset changes on a day to day basis. However, through successfully negotiating over 1000 short sale transactions, we have found one common thread to be true. Banks are becoming more and more open to a discussion regarding short selling a property. We will again reference the RealtyTrac Foreclosure Report to explain our point. If a bank approves a short sale, on average, they will be approving a sales price that is at 79% of current market value. The other most common loss mitigation option is for the bank to foreclose on the property. When sold, the bank will sell the REO asset for 60% of current market value. Their mindsets are changing!
We certainly understand that a short sale transaction is not one without its complexities. That being said, if we change our mindset when dealing with them, we will be truly doing a service to our communities and the entire Real Estate market.
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