Bob Chido - Mortgage Update

Estimated rates for the week of July 27th, 2009*

30 yr conforming fixed: 5.125 - 5.250
30 yr jumbo: 5.750 - to $600k
7/1 ARM 4.875 - 5.125
FHA/VA 5.250 - 5.50
OR Vet 4.75 w/1.50 - 4.875 w/1.00


As you can see rates are still very favorable. Mr. Bernanke spoke to Congress last week and his testimony assured the markets that the Fed would not let inflation get out of control. He mentioned that there are numerous ways for the Fed to tighten credit without actually having to increase interest rates. He said that he sees rates being low for a long time (at least well into next year), he said doesn't see inflation becoming an issue any time soon, and felt that the economy would start to slowly recover. With a lot of capacity still remaining in our system, any increase in consumer prices will remain subdued. It was great news for rates and we saw a nice movement downwards. Tempering that was - and will remain so - the need for the U.S. to borrow significant amounts to fund our deficit. All said, it appears that we should remain in a range for mortgage rates of 5.00 to 5.50%. When looking at rates over the last 30 years, it wasn't until April of 2002 - just a little over 7 years ago - that rates moved below 7.00 and stayed there. There is a good chance we will see those rates again - but it won't be for another year or more.

The 1st time tax credit has been motivating many buyers to get in their first home. Just heard that there is another bill up to extend and increase the credit. I wouldn't bet on it though. Granted, for our business, it would great and I hope it happens but with the deficit where it is, there won't be a lot enthusiasm to add to it. Given that and where rates sit today, I would encourage our first time homebuyers to get out there and buy.

New rules on disclosures take effect this week. With applications dated on or after July 30th, new rules promulgated with the passage of the Housing and Economic Recovery Act (HERA) require that lenders follow a number of timelines for the disclosure of loans. These disclosure rules apply to all real estate loans for primary residences and second homes. There are new time frames for when we can order an appraisal, there are re-disclosure requirements that occur if the APR changes by more than .125%, and there are new waiting requirements. Although this is a policy that is to protect consumers, I can see that there will be many unintended consequences. We will see transactions get postponed due to these new requirements. Since this policy is very new, it will take some time to get adjusted. Patience will definitely be a virtue over the next few months. It appears that a key point for all of us is that we should get the borrowers' loan terms and transaction terms set at least two weeks prior to close. That means locks should be in, any and all seller credits negotiated, the loan program, down payment, and all other terms should be finalized two weeks (or more) prior to loan documents going out. It won't be easy but, if we all work together, we'll get through this change too. I'll update you on this as time goes on.

In case you missed it, here's the petition web site again for the HVCC recall: http://www.hvccpetition.com/

Have a great week!


Bob Chiodo, CFP