UPDATE 1-US 30-yr mortgage rate drops to new record low
(Adds quotes, background, details from survey)
By Julie Haviv
NEW YORK, July 8 (Reuters) - U.S. 30-year mortgage rates dropped to a new record low in the past week, according to a survey released on Thursday by Freddie Mac (FMCC.OB), as concerns mounted about the economic recovery.
Attractive mortgage rates have raised demand for home refinancing loans in recent weeks. They have failed to increase appetite for mortgages to purchase a home, a trend that does not bode well for a housing market that still faces a huge imbalance between supply and demand.
Rates on 30-year fixed-rate mortgages, the most widely used loan, averaged 4.57 percent for the week ended July 8, down from the previous week's 4.58 percent and 5.20 percent a year earlier, according to the survey, which started in April 1971.
"With mortgage rates falling to historic lows, refinance activity has been strong over the past three months," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.
While low rates and high affordability have helped the housing market gain ground, it has struggled in recent months given stubbornly high unemployment and mounting foreclosures.
Home loan refinancing, however, puts more cash into consumers' hands to funnel into the U.S. economy and could help many homeowners avoid foreclosure.
Freddie Mac is the second-largest U.S. mortgage finance company.
Freddie Mac said the 15-year fixed-rate mortgage averaged 4.07 percent, up from 4.04 percent last week.
Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.
David Adamo, CEO of Luxury Mortgage in Stamford, Connecticut, said consumers are wary about making a home purchase despite low mortgage rates,
"Even with historically low interest rates and the affordability factor for housing at all time highs there seems to still be an air of caution for many would be buyers," he said.
"In addition, many homeowners have been discouraged from refinancing, particularly for jumbo loans," he said.
LOW RATES, MIXED DEMAND
The rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 3.75 percent, down from 3.79 percent last week, and the lowest since Freddie Mac started tracking the mortgage type in 2005. For details double-click on [ID:nWAL8IE6C2].
One-year adjustable-rate mortgages (ARMs) were 3.75 percent, down from 3.80 percent last week.
The Mortgage Bankers Association said on Wednesday that applications for home refinancing loans surged last week. For details double-click on [ID:nNLL6IE68D].
A year ago, 15-year mortgages averaged 4.69 percent, the one-year ARM was 4.82 percent and the 5/1 ARM was 4.82 percent.
(Editing by Andrew Hay)
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In addition, if the appraisal comes in low, an applicant might face having to pay mortgage insurance and from a credit qualifying standpoint – be further evaluated by the stricter MI underwriting guidelines. In essence even though we bailed out AIG they have minimum FICO’s about 60 points higher than Fannie or Freddie, meaning a person with a 620 FICO can only qualify for a mortgage if he has 20% equity and a debt to income ratio lower than 45%. The rates are great if they help the economy but when H.A.R.P. programs have minimum FICO’s and Servicers are not Mandated to reissue MI for refinances options are limited.
Housing has made the world go round and to think that it can not turn the wheels again is short sighted. If we are going to have the great rates lets have the ability to research property values in advance to save applicants their $450 if they do not qualify so we can reduce the bottlenecks in underwriting and processing by only proceeding with applicants that qualify.
Also lets come up with one set of guidelines for everyone all GSE’s Mortgage Banks, MI providers and Brokers. Supposedly FHA minimum FICO is 580 but no-one funds those loans most servicers require 640 FICO plus you have to get an appraisal on what is called a streamline. H.A.R.P. lets you refinance if you are upside down but your current servicer is not required to reissue your MI and lenders can impose a minimum FICO. Fannie Mae and Freddie Mac guidelines are further constricted by Mortgage insurance companies guidelines. Firms like AIG, Radian, RMIC and GE say you have to have a higher score sometimes as much as 100 points higher to qualify for MI.
All I seem to hear is that we are regulating subprime when subprime died 3 years ago. Remember the high yielding interest rates of subprime borrowers was what Wall St wanted. Subprime Mortgage was not a dirty word until the highly leveraged pump and dump energy speculating strategies of Hedge Funds and non-energy producing Banks drove energy prices to $5 a gallon gas and $3K electric bills causing the defaults in fixed income inner cities and outer-lying commuter suburbs. It was the exposing of AAA Rated SubPrime Bonds and the Credit Default Swaps that made SubPrime a dirty word.
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