Weekly Rates + Stimulus Re-Cap

Mortgage bond prices rose last week applying slight downward pressure on mortgage interest rates. Weakness in the equity markets helped bonds recover from losses seen earlier in the week. On Thursday the Dow Jones index closed at October 2002 levels. The Federal Reserve continued buying mortgage bonds with the purchase of about $20 billion from February 12 through February 18.

Fannie, Freddie to fund part of $75B foreclosure fix

Obama administration is only using $50 billion of financial bailout package to fund its loan modification program. Remaining $25 billion coming from Fannie Mae, Freddie Mac and Department of Housing and Urban Development.

Stimulus Plan and what it entails:
Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, they can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phase-out Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.

To break down what this phase-out means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.

More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.

According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future. As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.

Keep in mind that market conditions as of late have been choppy and unpredictable. Any future data releases showing a rebound in the economy as well as the Fed's promise to buy Mortgage Bonds could lead to mortgage interest rate volatility, so lower rates are not a given.

Please give me a call if you have any financial questions or if you need a second opinion on a loan scenario. If you are calling after hours or on weekends, please call my mobile at 480-225-2987 for immediate pre-qualifications.


Rates for February 20th, 2009. Rates Change Daily. Call for current pricing. #0902429
PROGRAM
30 Year Fixed Conventional 4.875%, 4.986%APR
30 Year Fixed Interest Only 6.375%, 6.488%APR
15 Year Fixed Conventional 4.375%, 4.498%APR
3/1 LIBOR ARM Conventional 4.50%, 4.613%APR
5/1 LIBOR ARM Conventional 4.25%, 4.363%APR
5/1 LIBOR ARM Interest Only 4.625%, 4.738%APR
30 Year FHA/VA 5.50%, 5.752%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 5.375%, 5.476%APR
7/1 Treasury ARM 5.625%, 5.726%APR
*30 Day Locks

ONE-TIME CONSTRUCTION
Conforming & Jumbo (to $8,000,000)
5/1 LIBOR ARM (Conforming) 6.50%, 6.882%APR
5/1 LIBOR ARM (Jumbo) 6.875%, 7.132%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.