This is good news!

MARKET UPDATE

Two great pieces of news came out this week.
1) Conforming Jumbo loans are now available on 2 unit properties. Depending on the median home prices in your local market, a buyer could be eligible for up to $934,200 at a great rate (this is up from the $533,850 for conventional conforming 2 unit loans). Awesome!
2) Owning and renting have now become comparable in cost in many hard hit areas of California like Vallejo, Fairfield, and Sacramento. This has brought out lots of first time home buyers and investors who can do the math and see what deals are available when this phenomenon occurs in California. This is further indication that we may be at or near the bottom of the current downturn in some markets. (Even some newspapers are starting to get this.)

Interest Rates on the Rise!

What a week in the mortgage market! Fears of inflation hammered long term rates. Fed board members are out fanning the fears of inflation. Oil and gas prices are at record highs.

So naturally, rates on 15 and 30 year fixed rate mortgages have started to rise. In fact, they jumped ½% or more this week alone. It was one of the worst weeks for mortgage rates in the past 20 years. Ouch!

But don't despair. There are options. Some have moved to 5 year ARMs in order to hold the line on rates. Others are considering Temporary Buydowns. And you know what? 30 year fixed rates on conforming and conforming jumbo loans are still in the mid sixes. Not bad from a historical perspective.

JUMBO RATES FALLING- GREAT NEWS!

JUMBO RATES FALLING- GREAT NEWS!
Just a quick bulletin to inform you of some fabulous news.
The interest rates on the newly coined "Conforming Jumbo Loans" (from $417,001 to as high as $729,750) have plummeted, and are now a mere ¼ % higher than standard conforming loan rates. (By contrast last week they were nearly a full percentage point higher.) This adds great buying power for your clients in this price range!
Moreover, Freddie Mac has announced that they will be buying more Conforming Jumbo Loans, adding further liquidity to this market.
And in further good news, rates for standard jumbo loans (those above $729,750 in San Francisco- lower in lower median home price areas) have dropped also.
At the risk of being overly optimistic, it appears that the tide is beginning to shift. We're starting to see buyers come out and buy in the hardest hit areas. This is causing lenders to believe that we may finally be at or near the bottom of the pricing cycle. Keep your fingers crossed! Next thing you know, they might even start easing up a bit on underwriting!

News & Notes on the Notoriously Unpredictable Market

Signs of possible stability coming back into the financial and mortgage markets have appeared once again this week. To what do we owe the positive news? Frankly, your guess is as good as mine, as trying to predict what will happen from day to day has become an exercise in futility!.
However, I do try to seek out the variables which seem to have the most impact on our rates, our housing markets and our economy. Here are a few items that seem to indicate that things are looking a bit better this week.

· The aftermath of the FED bailing out Bear Stearns via lending Chase Morgan nearly $30 billion to buy the troubled investment house led to panic. Then, just as we were all getting comfortable with the panic and the seemingly second coming of the Great Depression; news arrives that Lehman Brothers Holdings actually raised $1 Billion more in liquidity than predicted-in one night! What does this mean? It means that investors are still investing in financial institutions- good news!

· Over the course of the last few days, mortgage rates have stabilized as well. The gap in interest rates between the new conforming jumbo loans, and conventional loans is narrowing. Better pricing is a great indication of stabilization.

· The talk of overhauling our financial regulations hit a peak in the media yesterday, insinuating that this reform was imminent. Good news prevails though, as this reform will not take place immediately, so the chances of an over correction are reduced.

· Finally, stocks have rallied a bit of late. This is leading many to think that we may have seen the worst of the credit crunch. Now if the economy will just cooperate!

While none of these items alone are enough to say (with any degree of certainty) that the real estate and mortgage markets will improve soon, together they paint a slightly sunnier outlook than we've been seeing of late.

Stay tuned!

Fannie Mae and Freddie Mac Announce Requirements for Jumbo Conforming Mortgages

Fannie Mae and Freddie Mac (the government sponsored enterprises or GSEs) have each announced special requirements for the origination, underwriting, delivery, and servicing of jumbo conforming mortgages loans (loans above $417,000 up to $729,750). Both Fannie and Freddie are taking a conservative underwriting approach to the new jumbo conforming mortgages. It was announced earlier this month that the conforming loan limit for San Mateo and Santa Clara Counties will be the new maximum of $729,750.

Under Fannie's requirements, the maximum loan-to-value ratio (LTV) is 90 percent for fixed rate mortgages (FRMs) and 80 percent for adjustable rate mortgages (ARMs). The minimum FICO score for a primary residence purchase loan is 700 for loans with LTVs of more than 80 percent and 660 for LTVs of 80 percent or less.

Under Freddie's requirements, the maximum LTV is 90 percent for both FRMs and ARMs. The minimum FICO score for a primary residence purchase loan is 700 for LTVs of more than 75 percent and 660 for LTVs of 75 percent or less.

Both GSEs limit jumbo conforming mortgages to one-unit attached or detached dwellings (including condos but excluding manufactured homes). There are many other requirements that apply to these newly eligible jumbo conforming mortgages. Contact your favorite lender for more details.

Just how bad is it?

With the many headlines and stories about rising interest rates, falling home values and rising foreclosures, you would think the sky is falling. But just how bad is it?

Turns out, not all that bad for most of us. For starters, long-term fixed rates are only about .5% higher than 6 months ago and no higher than they were a year ago at this time. BUT underwriting guidelines have tightened considerably and will get stricter before they get easier.

Housing prices nationally are off about 1% from a year ago. In the Bay Area, median prices are flat to slightly higher than a year ago. The real problem for home owneres is when they have to sell quickly and/or are in less desirable locations. Then prices take a hit. Sometimes a big hit!

It has always been important to maintain liquidity when you own real estate so that you can survive personal setbacks and market challenges. this is especially true now.

With Thanksgiving just around the corner, this year I think Chicken Little would look great on a platter stuffed with all the fixin's at dinner time.

Feds Lowered Rates to 4.75%

Lower Fed Rate Means Opportunities on the Rise

For the first time in more than four years, the Federal Reserve cut its Fed Funds Rate, which directly impacts millions of American borrowers. And while this important decision has many implications, there’s still some debate among experts about what this means to the economy as a whole.

The Federal Reserve meets again in six weeks, and no one is certain how market volatility and inflation concerns will affect their future policy and decision-making.

Bottom line: Take advantage of this opportunity while you still can. Call me right away.

* If you’re looking to capture a lower interest rate for refinancing or buying a home, this could be your best opportunity to do so.
* If you have an Adjustable Rate Mortgage, while this rate cut might help to improve your situation, now is the time to refinance into a fixed-rate loan.
* If you have a Home Equity Line of Credit (HELOC) or credit cards tied to the Prime Rate, the Fed’s cut in the Fed Funds Rate just put a little money in your pocket.

Borrowers waiting for a lower fixed-rate mortgage may be waiting for a long time. The chart above clearly shows how Fed Funds Rate cuts do not translate into cuts in fixed-rate mortgages. In January 2001, the Fed Funds Rate was at 6% and 30-year fixed rates averaged 7.03%. By December 2001, following 4.25% in cuts throughout the year, home loan rates were actually up to 7.07%.

Yes, we may experience some temporary improvements in rates in the coming weeks, but the markets will remain volatile as long as inflation and recession are a possible threat to the Federal Reserve's long-term economic policies.

10 Do's and Don't of Credit

Follow these Top Ten Do’s and Don’ts of credit if you are planning to enter into a loan transaction in the next 6 months:
o DON’T APPLY FOR NEW CREDIT OF ANY KIND. This includes those “You have been pre-approved” credit card invitations that you receive in the mail. Every time you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.
o DON’T PAY OFF COLLECTIONS OR CHARGE OFFS DURING THE LOAN PROCESS. Paying collections will decrease your credit score immediately due to the “date of last activity” becoming recent. If you want to pay off old accounts, do it through escrow, and make sure that 1) you validate that the debt is yours, and 2) the creditor agrees to give you a letter of deletion.
o DON’T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account, it will appear to FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure that it is a more recent account.
o DON’T MAX OUT OR OVER-CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring about an immediate drop of 50-100 points in your credit score. Try to keep your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all of your cards at the same time.
o DON’T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do; however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above. If you want to save money on credit card interest rates, wait until after closing.
o DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, or changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.
o DO JOIN A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports weekly, or even daily depending upon the program you select. (When you pull your own reports, you don’t get dinged for a hard inquiry.) This way, if something does show up on your reports that caused your score to go down, you’ll know it immediately, and you may be able to take care of the problem before closing.
o DO STAY CURRENT ON EXISTINGING ACCOUNTS. This includes your mortgage and car payments. One 30-day late can cost you anywhere from 30-75 points.
o DO CONTINUE TO USE YOUR CREDIT AS NORMAL. Red Flags are easily raised within the scoring system. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.
o DO CALL YOUR MORTGAGE PROFESSIONAL if you receive something in the mail from a creditor or collection agency that you believe may affect your score during the loan process. Your mortgage professional may be able to supply you with the resources you need to stop any derogatory reporting to the bureaus.
By Linda Ferrari, President, Credit Resource Corp.