The Phoenix Real Estate Advisor

What another great week for Mortgage Rates!  It was not without the wild ride we have all become accustomed to.  There were multiple days this week where the mortgage market was knee deep in a puddle of red only to end up well into the black!  Since the day before Halloween (this quarters low point for mortgage bond prices and this quarters high point for mortgage interest rates), Mortgage Backed Securities have rallied 503 basis points!  That is HUGE and is exactly why interest rates have plummeted to the 5 to 5.5% range!

Taking an educated guess I expect that Mortgage rates will remain in the current range at least into early 2009.  As we have all learned in this market, things can change quickly, so please stay tuned!

Please let me know if you need any help over the weekend, our team is available.

Thank you!

Your Trusted Advisor,

Jeremy House, C.M.P.S.

JHouse@PrimeLending.com

I wanted to pass along a “short-cut” that may help to avoid having to utilize an FHA 203k.

If your buyer has a contract on a home that requires some minor repair, there is a way to finance the cost of the repair through an old fashioned escrow holdback.  FHA will allow a buyer to finance in the cost of a repair (so long as it is related to Minimum Property Standards – MPS) up to the amount of $5,000.  In order to do this, the appraiser must note that the requested or desired repair is related to and a functional part of one of the homes “systems.”  The cost of the repair is then added to the buyers final loan amount and the amount for the repair is held back at Escrow.  The allowance is not for upgrades.  The allowance is permitted when dealing with a repair related to the following examples to name a few:
 
1. Cooling system
2. Heating system
3. Electric system
4. Plumbing system

Utilizing this program when possible will allow clients to avoid the higher interest rates and the extra work that comes with the 203K program.  Using this program does not involve any renegotiations with the seller.  We simply submit the contract between the buyer and the contractor (who will be doing the repair) to our underwriting department.  All repairs are subject to approval by our secondary market.  In general this is not a difficult process and most repairs are approved without any extra contingency funds such as 150% of the cost of the repair you may have seen in the past with holdbacks.

When using this program, minimum down payment requirements do NOT change (3% now and 3.5% on January 1, 2009).

Please let me know if you have any questions or if anyone you know now could benefit from this program.
Your Trusted Advisor,

Jeremy House, C.M.P.S. 

Contact - JHouse@PrimeLending.com

Good morning,

On the news that Fannie and Freddie will be purchasing mortgage backed securities  - mortgage rates fell over .5% this morning putting us 5.5% range on 30 year fixed loans.  Traders now have a bit more confidence in the mortgage bond market and as mortgage bonds demand and price go up mortgage rates go down.  This is the breakaway that I have been talking about in the past weeks emails.

If you  or any of your clients are in a position to refinance please email or call me as soon as possible.  Last time we saw this range it was gone in a day so let’s be prepared to lock!

Also, this would be a valuable piece of info to pass on to your clients.  We would be honored to assist any clients, family, friends or co-workers that could benefit from these lower interest rates.

Jeremy A. House - Certified Mortgage Planner

480-755-1404 office - 602-435-2149 mobile/direct - JHouse@PrimeLending.com – Email

Prime Lending, A Plains Capital Company

Election day is turning out to be a great day for both bonds (MBS up 90 bps currently) and stocks (DIJA up 202 currently).  Mortgage rates are possibly at the beginning of the rally we talked about last week.  So far rates have improved by .25% today on 30 yr fixed with no stopping in sight.  I will be sure to keep you posted as the higher rates may have been keeping the “on the fencers” on the wrong side of the fence. 

I would invite you to also listen to my recent audio podcast about the market conditions in the Phoenix, Arizona area. It also digs into the northwest valley market conditions.

Click here to listen to the podcast!

The roller coaster ride continued with the Dow Jones Industrial Average exploding up 889.35 points or 10.88% in trading today.  Much of this was due to stocks being on clearance and in anticipation of a possible .75% rate cut by the Fed tomorrow.  A .5% cut is virtually guaranteed and some expect a larger cut that would take the target rate under 1% for the first time. 

As we have talked about in the past, often times money will flow into stocks and out of bonds and vice versa.  The price and demand of mortgage backed bonds on Wall Street is the ONLY thing that moves long term mortgage rates.  So right now, mortgage rates are being pounded a bit.  However, if we see a dramatic cut in the Fed Funds Rate tomorrow you can bet  at some point we will see investors begin to move back into mortgage back securities (MBS’s).  The result for MBS’s could very well be a nice rally, higher yields and most importantly lower 30 year fixed mortgage rates.   Stay tuned!

Take a peek at the chart below showing daily activity over a the past 3 months for Mortgage Backed Securities.  Up equals lower mortgage rates and down means….well we don’t like down J  As you can see there has been a TON of volatility as this market starts to heal.