FHA has made recent changes to the credit qualifying guidelines for FHA mortgages. While this may sound like a confusing and terrible thing, it is not really as awful as it appears. Under some conditions, FHA mortgages allow certain credit issues to remain on a credit report without payoff.

Under the past FHA guidelines, if the credit report showed that a borrower was disputing any credit accounts or collections, the mortgage application had to be referred to a DE underwriter for further review. Under the new guidelines, if the FHA mortgage receives an Accept/Approve findings through the AUS system, and if the total single or cumulative balances of the disputed and/or collection accounts total less than $1,000 and finally, if these accounts are two years old from the last date of activity shown on the most recent credit report, then no further action is necessary. In other words, old collections totaling under $1,000 that are accepted through automated underwriting do not have to be paid or submitted for further review. When the amount totals $1,000 or more, borrowers must pay in full, make payment arrangements and show three months of payments or show proof of theft or fraud even if they are old collections.

Most borrowers who have been planning on purchasing a home, have also been working to clean up their credit in recent years. For these borrowers, the latest FHA changes will probably have no affect. Even in the past, lenders have always had their own guidelines in place in addition to FHA guidelines with respect to credit issues and credit scores. When credit underwriting a loan file, FHA DE underwriters have always taken into consideration any credit issues and the amount of collections when making their decision for an approval. Often, borrowers were requested to pay off credit accounts or collections at closing if, upon inspection of the loan file, the underwriter made their determination for approval based on these stipulations.

By updating their credit qualifying guidelines, FHA is just putting into writing what may already be the rule by some individual lenders. The changes are there to protect borrowers from taking on more debt than they can handle. Although FHA mortgages will allow certain credit issues, lenders will still be looking closely to make sure that FHA agrees with their decision to give a borrower an FHA loan approval.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.

Low mortgages rates may drop further after todays poor jobs report disappointed investors and sent MBS prices higher. The US Labor Department reported that the economy added only 120,000 jobs in March which was way below the expectations of 200,000. Even though, the unemployment rate dropped to 8.2% due to people leaving the labor force.

Current 30 year fixed mortgage rates are at 3.750% and 15 year fixed mortgage interest rates are at 3.000%. 5/1 ARM loan rates are at 2.375%. It is a necessity that borrowers have good credit in order to obtain these low mortgage rates with 0.7 to 1% origination fee. Having steady employment and income is also required, as well as, enough assets for the down payment and reserves as per the lenders guidelines. These will need to be documented in order for the lender to perform verifications and to support the integrity of the loan file. Borrowers who are underwater with conforming mortgages that are held by Fannie Mae and Freddie Mac should inquire about the latest Harp 2.0 program which, in most cases, will not need an appraisal. Since Harp 2.0 is available through many participating lenders, borrowers should receive several quotes in order to get the lowest mortgage rate.

Todays FHA 30 year fixed mortgage interest rates are at 3.375%, FHA 15 year fixed mortgage rates are at 2.875% and FHA 5/1 ARM loan rates are at 2.875%. On April 9th, higher FHA upfront and annual mortgage insurance premium fees will go into effect. Generally, FHA closing costs (APR) have always been higher because of the upfront mortgage insurance premium and other FHA fees, but as always, FHA will continue to allow these costs to be added to the mortgage provided that the loan to value remains the same. FHA mortgages still give borrowers the opportunity to purchase a home with low down payments that can come from gifts or housing grants, low FHA mortgage rates for financing and flexible credit terms. Other FHA benefits include permitting the use of co-borrowers and having an assumable mortgage to offer when selling the home.

Jumbo 30 year fixed mortgage rates are at 4.500%, jumbo 15 year fixed mortgage interest rates are at 3.375% and jumbo 5/1 ARM loan rates are at 2.500%. Lenders require that borrowers have excellent credit in order to receive these low jumbo mortgage rates with 0.7 to 1% origination point. Full documentation for employment, income and assets are also necessary. Borrowers must have enough funds to cover the larger down payments and additional reserves that are often a lender stipulation for approval. Jumbo mortgages are private loans which are usually held by the lender in their portfolio.

Todays Wells Fargo California 30 year fixed mortgage interest rates are at 4.000% (4.180% APR).

MBS prices (mortgage backed securities) are up +24/32 (FNMA 30 yr 3.5 at 103.16) which is higher than earlier levels. MBS prices affect mortgage rates which move in the opposite direction. The stock market is closed today. There is the possibility of favorable repricing for mortgage rates today after the weak employment data created a rally for MBS. Other data showed that the Average Hourly Earnings increased at a 2.1% annual rate. Several key reports will be released next week including the Consumer Price Index.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.

April 5 (Bloomberg) — Ben S. Bernankes Federal Reserve signaled this week it isnt ready to buy more bonds to stimulate the economy. Mortgage investors arent convinced.

Trading in the market for government-backed mortgage bonds is showing a 37 percent chance of a third round of so-called quantitative easing, or QE3, according to Credit Suisse Group AG calculations. While thats declined from 40 percent last week, its up from 25 percent after the April 3 release of the minutes of the Feds monetary-policy panel meeting last month.

Stocks, commodities and bonds declined after the statement, which showed certain members support easing only if the economy lost momentum. Treasuries and mortgage securities pared losses yesterday with some investors speculating the Fed will eventually acquire more home-loan debt to bolster consumer spending and support a housing market the minutes described as depressed.

Mortgages didnt underperform in a truly meaningful fashion, said Jason Callan, head of structured products at Columbia Management Investment Advisers LLC in Minneapolis, which oversees about $180 billion in fixed income. The likelihood of QE was modestly diminished, particularly in terms of the April meeting, but that doesnt take it off the table for later.

After Fannie Maes 3.5 percent, 30-year mortgage securities underperformed similar-duration interest-rate swaps by 0.34 cent on the dollar on April 3, the most since October, the home-loan notes outperformed by 0.25 cent yesterday, according to data compiled by Bloomberg.

Bellwether to Buying

Trading in the $5.4 trillion market for so-called agency mortgage securities relative to fixed-income benchmarks such as Treasuries and interest-rate swaps is serving as a QE3 bellwether because any program may focus on home-loan bonds after Fed Chairman Bernanke sent a study to Congress in January that highlighted how housing is restraining the economic recovery.

The central bank acquired $2.3 trillion of bonds in two rounds of quantitative easing from December 2008 until June 2011, including $1.25 trillion of agency mortgage securities. In September it announced it would buy $400 billion of longer-term US securities through June while selling an equal amount of shorter-term debt in its holdings, and start reinvesting proceeds from its housing debt back into the mortgage market.

The probability being assigned to QE3 is now too high, Credit Suisse analyst Mahesh Swaminathan in New York, said in an e-mail. After the Feds statement, his team recommended bets that mortgage bonds will underperform, based on the central banks incrementally hawkish sentiment.

Further Easing

Four Federal Reserve regional bank presidents who vote on monetary policy this year said this week they see less of a need for the Fed to spur the economy with new accommodation.

Richmonds Jeffrey Lacker said yesterday he was surprised a couple months ago at the probability market participants seemed to ascribe to further easing.

Jobless claims fell 6,000 to 357,000 in the week ended March 31, the fewest since April 2008, the Labor Department reported today in Washington.

A report on the state of the US job market tomorrow also may show the unemployment rate held at 8.3 percent, according to estimates compiled by Bloomberg. While that would match the rate in January and February, the lowest in three years, it may provide the Fed with evidence that consumers and housing need additional help.

Housing Recovery

Home-loan securities guaranteed by government-supported Fannie Mae and Freddie Mac and US-owned Ginnie Mae have returned 0.99 percentage point more than Treasuries this year through April 4, according to Barclays Plc index data. The rally was partly driven by investors who anticipate QE3, such as Pacific Investment Management Co.s Bill Gross.

Based on Freddie Macs latest Primary Mortgage Market Survey (PMMS), US mortgage rates changing little from the previous week with the average 30-year fixed-rate mortgage remaining just below 4.00 percent for the second consecutive week.

Freddie Mac chief economist Frank Nothaft said, Average weekly mortgage rates were little changed this week amid mixed signals on the health of the economy. The final estimate of 2011 fourth quarter growth remained unchanged at 3 percent, representing the strongest pace since the second quarter of 2010. The March 13th policy committee minutes from the Federal Reserve noted that the housing market remained depressed and supported the continuation of the maturity extension program through June 2012, but did not announce any new stimulus action beyond that date.

The 30-year fixed-rate mortgage (FRM) averaged 3.98 percent with an average 0.7 point for the week ending April 5, 2012, down from last week when it averaged 3.99 percent. Last year at this time, the 30-year FRM averaged 4.87 percent.

15-year FRM this week averaged 3.21 percent with an average 0.7 point, down from last week when it averaged 3.23 percent. A year ago at this time, the 15-year FRM averaged 4.10 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.86 percent this week, with an average 0.8 point, down from last week when it averaged 2.90 percent. A year ago, the 5-year ARM averaged 3.72 percent.

1-year Treasury-indexed ARM averaged 2.78 percent this week with an average 0.6 point, unchanged from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 3.22 percent.

April 5 (Bloomberg) — Ben S. Bernankes Federal Reserve signaled this week it isnt ready to buy more bonds to stimulate the economy. Mortgage investors arent convinced.

Trading in the market for government-backed mortgage bonds is showing a 37 percent chance of a third round of so-called quantitative easing, or QE3, according to Credit Suisse Group AG calculations. While thats declined from 40 percent last week, its up from 25 percent after the April 3 release of the minutes of the Feds monetary-policy panel meeting last month.

Stocks, commodities and bonds declined after the statement, which showed certain members support easing only if the economy lost momentum. Treasuries and mortgage securities pared losses yesterday with some investors speculating the Fed will eventually acquire more home-loan debt to bolster consumer spending and support a housing market the minutes described as depressed.

Mortgages didnt underperform in a truly meaningful fashion, said Jason Callan, head of structured products at Columbia Management Investment Advisers LLC in Minneapolis, which oversees about $180 billion in fixed income. The likelihood of QE was modestly diminished, particularly in terms of the April meeting, but that doesnt take it off the table for later.

After Fannie Maes 3.5 percent, 30-year mortgage securities underperformed similar-duration interest-rate swaps by 0.34 cent on the dollar on April 3, the most since October, the home-loan notes outperformed by 0.25 cent yesterday, according to data compiled by Bloomberg.

Bellwether to Buying

Trading in the $5.4 trillion market for so-called agency mortgage securities relative to fixed-income benchmarks such as Treasuries and interest-rate swaps is serving as a QE3 bellwether because any program may focus on home-loan bonds after Fed Chairman Bernanke sent a study to Congress in January that highlighted how housing is restraining the economic recovery.

The central bank acquired $2.3 trillion of bonds in two rounds of quantitative easing from December 2008 until June 2011, including $1.25 trillion of agency mortgage securities. In September it announced it would buy $400 billion of longer-term US securities through June while selling an equal amount of shorter-term debt in its holdings, and start reinvesting proceeds from its housing debt back into the mortgage market.

The probability being assigned to QE3 is now too high, Credit Suisse analyst Mahesh Swaminathan in New York, said in an e-mail. After the Feds statement, his team recommended bets that mortgage bonds will underperform, based on the central banks incrementally hawkish sentiment.

Further Easing

Four Federal Reserve regional bank presidents who vote on monetary policy this year said this week they see less of a need for the Fed to spur the economy with new accommodation.

Richmonds Jeffrey Lacker said yesterday he was surprised a couple months ago at the probability market participants seemed to ascribe to further easing.

A report on the state of the US job market tomorrow may show the unemployment rate held at 8.3 percent, according to estimates compiled by Bloomberg. While that would match the rate in January and February, the lowest in three years, it may provide the Fed with evidence that consumers and housing need additional help.

Home-loan securities guaranteed by government-supported Fannie Mae and Freddie Mac and US-owned Ginnie Mae have returned 0.99 percentage point more than Treasuries this year through April 4, according to Barclays Plc index data. The rally was partly driven by investors who anticipate QE3, such as Pacific Investment Management Co.s Bill Gross.

Housing Recovery

The Fed has already helped push borrowing costs on new mortgages to record lows. Almost 90 percent of new home lending goes through government-supported programs fueled by the agency mortgage-bond market, making the debt key to the level of loan rates, according to newsletter Inside Mortgage Finance.

Abu Dhabi The UAE needs to develop rules and institutions allowing banks to control and oversee mortgages effectively, which would help manage risks and encourage property lending, the governor of the central bank said.

The bank asset quality in the UAE has deteriorated in the short term due to oversupply as number of completed projects entered the market and the country faces several challenges to reduce the risk, Sultan Bin Nasser Al Suwaidi said.

The UAE has several challenges. Among them is the need for banks and other financial institutions to establish policies regarding real estate financing risk and oversight, Al Suwaidi told a conference on developing housing finance in the region. The next one is developing a legislative system to allow lenders to have effective control over mortgages and speeding up the process of possessing the mortgage property as a guarantee in the event of defaulting on the payment.

There is an immense need to have an active legislative framework, including the real estate registrar and also dispute settlement bodies and this would encourage banks to accept houses as collaterals for financing, Al Suwaidi said.

(CBS News)

If lawmakers could design a housing policy from scratch what might it look like?

Today Fannie Mae and Freddie Mac–two government-sponsored enterprises originally designed to increase the availability of loans and thereby raise levels of home ownership–dominate the US mortgage lending market. Fannie Mae, which was established in 1938 as part of Franklin Delano Roosevelts New Deal, provides local banks with federal money to finance home mortgages. Freddie Mac, created in 1970, underwrites mortgages that fall below a certain size threshold with the intention of helping homeowners get access the housing market. These mortgages are cheaper since they implicitly–and after 2008 explicitly–benefited from a government guarantee.

In 2008, after incurring significant losses on their portfolios, Fannie and Freddie were taken over by the government; still, they finance the majority of mortgages in the US.

According to my latest research,* this arrangement is problematic. My research shows that houses financed with loans through Fannie and Freddie have higher prices than comparable homes bought with unsubsidized (jumbo) mortgages. In other words: the credit that Fannie and Freddie provide ostensibly to help homebuyers get a foot on the property ladder, has the unintended consequence of increasing house prices. That means a fraction of the lower cost of credit is passed on to the sellers of homes.

My colleagues, Manuel Adelino at Dartmouth College and Felipe Severino a PhD candidate at Sloan, and I looked at deed records from ten big US cities, including New York and Boston, for the ten-year span of 1995-2005. We compared the sale prices of houses that were eligible for financing through Fannie and Freddie with houses that were sold for prices just above the conforming loan limit (CLL). Fannie and Freddie underwrite home loans that fall beneath the CLL, an amount set by Congress each year. Mortgages for amounts greater than the CLL are considered non-conforming loans or jumbo loans.

We find that houses that were eligible for Fannie and Freddie loans cost $1.10 more per square foot than houses eligible for jumbo loans. Considering that the average home size is 1,800 sf, this represents a disparity of $1,980 or a .5% difference in price per square foot from year to year. This credit helps buyers afford a home, to be sure, but a big fraction of that subsidy goes to home sellers in the form of higher prices.

My concern is that the costs of Fannie and Freddie might vastly outweigh their benefits. On one hand, Fannie and Freddie provide a slight reduction in borrowing costs to homebuyers. On the other hand, the cost imposed on taxpayers through the bailout of Fannie and Freddie, and the lobbying efforts of these entities in the period leading up to the crisis, have proven to be humongous.

In February, the White House announced plans to reduce the governments outsized role in mortgage funding and wind-down Fannie and Freddie. This is a very welcome goal. But the findings from our study also caution that the winding down of government support for the mortgage market has to be gradual, since we would surely see a reduction in the average price of houses. In the short run a drop in asset prices could have negative multiplier effects, which is certainly not what we want in the current economic environment.

Unwinding Fannie and Freddie over a period of time seems the best way to go. This could happen through restructuring the overall loan support that is provided or by lowering the CLL every year by a preset amount. The influence on house prices would be smoother, and more incremental, as opposed to a big shock that might take place if the government were to, say, close down Fannie and Freddie tomorrow. Of course, the big question is whether the political process allows for such a smooth transition or if these efforts would be diverted over time by opposing political interests.

Bio: Antoinette Schoar is the Michael Koerner 49 Professor of Entrepreneurial Finance at MIT Sloan School of Management. The opinions expressed in this commentary are solely those of the author.

PRAGUE Jan 25 (Reuters) – The number of mortgages
provided by Czech banks rose by 40 percent last year from 2010,
data showed on Wednesday, confounding fears that credit in
emerging Europe would dry up due to the crisis in the
neighbouring euro zone.

Banks lent more than 119 million crowns($6.09 million) in
71,088 individual loans, the data from the Regional Development
Ministry showed, as interest rates charged on mortgages
gradually declined through the year.

Low official interest rates in the central European country,
coupled with strong competition in the sector dominated by
well-capitalised banks, has kept borrowing relatively cheap.

The average mortgage rate was 3.65 percent in November last
year and the rate has been gradually declining from 4.28 percent
seen in April, a consultancy Hypoindex data showed.

The Czech banking association said last week lending to
households would continue to lead lending growth this year.

Main Czech lenders are units of euro zone banks including
Belgiums KBC, Austrias Erste Bank and Frances
Societe Generale.

There have been fears that credit would dry up in emerging
Europe as west European parent banks withdrew liquidity from
local banks to improve their own capital buffers.
($1 = 19.5243 Czech crowns)

(Reporting by Jana Mlcochova; editing by Anna Willard)

According to the Mortgage Bankers Associations Weekly Mortgage Applications Survey for the week ending January 20, mortgage applications decreased 5.0 percent from one week earlier. The results include an adjustment to account for the Martin Luther King holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 13.8 percent compared with the previous week. The Refinance Index decreased 5.2 percent from the previous week. The seasonally adjusted Purchase Index decreased 5.4 percent from one week earlier. The unadjusted Purchase Index decreased 9.7 percent compared with the previous week and was 6.5 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 4.12 percent. The four week moving average is up 0.47 percent for the seasonally adjusted Purchase Index, while this average is up 4.85 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 81.3 percent of total applications from 82.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.6 percent of total applications from the previous week.

In December 2011, among refinance borrowers, 56.6 percent of applications were for fixed-rate 30-year loans, 24.3 percent for 15-year fixed loans, and 5.3 percent for ARMs. The share of refinance applications for other fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 13.8 percent of all refinance applications. The share for 30-year fixed increased from the previous month while the 15-year fixed, ARM and the other fixed category shares decreased from last month.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.11 percent from 4.06 percent, with points decreasing to 0.47 from 0.48 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.39 percent from 4.40 percent, with points increasing to 0.40 from 0.37 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.97 percent from 3.91 percent, with points decreasing to 0.57 from 0.59 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.40 percent from 3.33 percent, with points increasing to 0.40 from 0.39 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.91 percent from 2.90 percent, with points decreasing to 0.41 from 0.45 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also increased from last week.

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