Weekly Rates + Market Update

Mortgage Bonds are trying to stabilize after yesterday's sharp losses, which came in response to the Treasury announcing that it will be auctioning off a sizable $115 Billion in Notes next week. This in addition to $90 Billion in T-Bills that is usually auctioned off on a weekly basis. That's a lot of paper. Recent past has shown that the announcement of the Treasury auctions has weighed on the entire Bond market and yesterday was no different. Also adding pressure to Bonds was an explosive move higher in Stocks, with the Dow closing above 9,000 for the first time since Jan 6th. But Stocks failed to break resistance around 9090 on the Dow, which represents the previous intra-day high from that same day.

Consumer Sentiment was reported at 66, meeting expectations but continuing a modest trend of improvement. We feel this probably has a bit more to do with Stock prices trading higher and less to do with actual economic improvement. The Stock market often influences consumer psychology, especially when it comes to buying a home. And the nearly 50% rise since fixing mark to market in early March has helped people feel a little better about their finances.

On Wednesday, our friend and the chief economist of Freddie Mac, Frank Nothaft said that "recent housing data suggests that the positive signs indicate that the worst may be behind us". He also went on to say that "housing affordability right now is the highest it’s been in many years".

June Homes Sales Rise

SHORT SALE VS FORECLOSURE
WHAT IS IT AND HOW DOES IT AFFECT YOUR CREDIT?

What does “short sale” mean? “A short sale in real estate occurs when the outstanding obligations (loans) a property are greater than what the property can be sold for.”
In this time of depreciating markets and option-arms coming due, we will see more and more borrowers trying to negotiate short sales as opposed to going into foreclosure. In most cases the borrower will be behind on payments and about to go into foreclosure, however this will not always be the case. Some short sales are negotiated simply because a borrower knows they are upside down on their mortgage but has not reached the point where they have late payments. For example, if the borrower’s loan is an option arm and they have been making minimum payments, the balance may have increased to $263000 when the original loan amount was $250,000. At the same time, the home only appraises for the $250,000 or possibly even less. Because the option-arm period is up, the borrower’s mortgage payments will increase and they are unable to make the higher payment. There is no equity in the property and they cannot sell the home to cover the balance of the loan. At this point they can either try to negotiate a short sale with the lender or go into foreclosure.

If the lender agrees to a short sale, they are buying back the loan for less then what they are owed. This is not something a lender has to do, but it is an option for them. Why would they consider this? The real cost for the lender in a foreclosure action is that they have to carry the loan until they can resell the house. They have to pay the taxes, insurance, closing costs and marketing costs. This will take time and the cost of carrying the loan can become quite substantial. In some cases it will be more beneficial for them financially to take the short sale.

How does it affect credit?

Typically the loan will show up on a credit report as “settled for less then the full balance”. This will have a negative impact on the borrowers score however it will be less then if it shows as “foreclosure”. How much it will actually affect the score will depend on the rest of the borrowers credit history. It is always best to have an attorney negotiate a short sale with a lender and at the same time have them negotiate how it will appear on the credit report. Some lenders will agree to show the loan as “paid with no late payments” (providing the borrower hasn’t made any) or they may show it as “paid was 30” if there have been some late payments. This would be optimal.

A short sale can also have a negative affect on a borrowers credit if the lender issues a deficiency judgment. A lender may take this route even if they show the actual mortgage on the credit report as paid as agreed. When they take the short sale there is still a difference between the actual mortgage balance and the amount of the short sale. The Lender can then issue what is called a deficiency judgment against the borrower and this will show on a credit report just as any other judgment would. The attorney should attempt to get the lender to accept “payment in full without pursuit of any deficiency judgment.” Sometimes the lender will put the borrower on a payment plan for the deficiency without issuing a judgment. Again, this would be optimal. The one instance where a lender will not consider a short sale is if the borrower is in bankruptcy. Lenders consider a short sale payoff as a collection activity and collection activities are prohibited once a person has filed bankruptcy.

For any pre-qualifications or 2nd opinions on loan scenario's, please contact me at 480-626-2202.


Rates for July 24th, 2009. Rates Change Daily. Call for current pricing. #0902429
PROGRAM
30 Year Fixed Conventional 5.25%, 5.383%APR
30 Year Fixed Interest Only 6.00%, 6.113%APR
15 Year Fixed Conventional 4.625%, 4.738%APR
7/1 LIBOR ARM Conventional 4.375%, 4.476%APR
5/1 LIBOR ARM Conventional 3.875%, 3.988%APR
5/1 LIBOR ARM Interest Only 4.00%, 4.124%APR
30 Year FHA/VA 5.25%, 5.502%APR
*30 Day Locks

JUMBO $417,001+
30 Year Fixed (to $600K) 5.75%, 5.851%APR
15 Year Fixed (to $600K) 5.625%, 5.726%APR
5/1 Treasury ARM 4.875%, 4.976%APR
7/1 Treasury ARM 5.125%, 5.226%APR
*30 Day Locks

ONE-TIME CONSTRUCTION
Conforming & Jumbo (to $8,000,000)
3/1 LIBOR ARM (Conforming) 6.125%, 6.507%APR
5/1 LIBOR ARM (Jumbo) 7.25%, 7.632%APR
*60 Day Locks

6,9,12 and 24 month construction phases available. Construction phase interest only rate = PRIME (5%) + up to 1.25%. Perm. rates guaranteed through construction.Prior to modification, a free one-time float down is available. (30 Year Amortization)
For Realtor purposes only; not for distribution to potential borrowers. Rates are calculated based on no discount points and one origination fee. Conforming rates based on loan amounts greater than $200,000, minimum FICO score 720.