Tag Archives: Interest rate

Date Set For Elimination OF HECM Fixed Standard

5 Feb

The FHA has finally set the date for the discontinuation of the Fixed Standard HECM (Home Equity Conversion Mortgage) reverse mortgage.

Per MORTGAGEE LETTER 2013-1 from HUD, all fixed interest rate case numbers assigned on or after April 1, 2013 can be SAVER products but no longer Standard HECMs.

Read the Mortgagee letter here:

http://portal.hud.gov/hudportal/documents/huddoc?id=13-01ml.pdf

All fixed interest rate mortgages that were assigned a FHA case number on or before March 31, 2013, may be processed as either a HECM Standard or HECM Saver as the initial MIP; but any fixed interest rate HECM Standard mortgage must close on or before July 1, 2013.

There has been much discussion in online reverse mortgage forums as to the value of this change.  Some applaud the move, while others question whether it will make a difference.  One motivation for the change was the depleted state of the FHA insurance reserves in a declining housing market.  But will depriving senior borrowers of one avenue for reverse mortgage financing hurt them?

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Some Promising Numbers

23 Mar

Mortgage rates dropped slightly this week after an uptick of just under ½% in the last two weeks. The recent rate increase, however, immediately impacted activity in the housing market. The Mortgage Bankers Association reported that for the prior week, applications for home purchases declined by 1.0%. The big impact of the rate increase was felt in the refinance index which dropped 9.3%.

The Housing Market Index, which measures the confidence reported by the National Association of Home Builders, is at the highest level since the start of the recession. Home builders are indicating that they are expecting significant growth in new construction in the coming months. Although housing starts dropped slightly after January’s very strong report, the good news is that permits for new construction are continuing to increase which is evidence of the builder’s sentiment on an improving real estate picture.

Existing Home Sales dropped just under 1.0%, however this report comes after January’s upwardly revised jump of 5.7%. Compared to last year, existing home sales are up 8.8%, making us optimistic that housing is on the mend.

Inflation and Its Impact on Home Loan Rates – Simplified!

4 Nov

The Consumer Price Index, or the amount of  you pay for goods and services day in and day out, plays an enormous role in consumer loan rates as well – here’s how:

Imagine for a moment that you are going to lend someone your own money to buy a house. So you determine that this person is a good credit risk, you do the loan, and you start receiving $1,500 per month as your regular payment. You then of course take that $1,500 and start loading up your shopping cart with the goods and services you need on a monthly basis…food, clothing, medicine, gas, etc.

But over time, you notice something happening. Every month, you are getting slightly less in your cart than you did the month before, for that same $1,500 you are spending. Why? Because costs are on the rise–that’s inflation.

Now imagine that you are once again going to lend your very own money to another person to buy a house. You go through all the paces once again, and determine that the person is a good credit risk. You want the same shopping cart full of “stuff” that you got last time in return for doing the loan, but this time you realize that you can no longer get that same cart full with $1,500. Due to inflation, you now need $1,700 to buy those same goods and services.

So what does this mean for the interest rate you will charge this second person? It means you will need to charge a higher interest rate to compensate you for the ongoing impact of inflation. And that is why home loan rates change when there is a fear of inflation in the air, as lenders need to offset the impact of inflation over the years, which will erode the value of the dollars they are receiving over time. And that’s also why it makes sense to work with a smart home loan professional who can be watching these types of indicators and keeping you informed and advised.

 

INCREASE IN MORTGAGE APPLICATIONS NOTED

31 Oct

lAST WEEK, the Mortgage Bankers Association said the refinance index climbed 4.4% from the previous week, while the seasonally adjusted purchase index jumped 6.4%.

Mortgage applications rose 4.9%.  Refinancing applications accounted for 77.3% of this activity.

The average interest rate on a 30-year, FRM backed by the FHA fell to 4.11% from 4.12%, while the 15-year, FRM increased to 3.62% from 3.61%.

In addition, the average contract interest rate for 5/1 ARMs increased to 3.11% from 3.08%.