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Mortgage Rate Swings May Mean “Bumpy” 2014 Housing Market        

12/30/2013

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Climbing mortgage rates in 2013 corresponded with declines in home buying, a trend that could to some extent continue in coming months as interest rates adjust to shifts in the Federal Reserve’s monetary stimulus effort.

The average of 30-year fixed-rate mortgage interest rates so far this year compared against new-home sales illustrates that inversely proportional relationship: When interest rates go up, demand from would-be homeowners drops. 

When rates as measured by Freddie Mac started rising in May and averaged 3.54% for the month, the seasonally adjusted annual rate of new home sales dropped by 4% from the prior month, according to the most recent housing data from the Commerce Department. Meanwhile, in October, mortgage rates dropped by three-tenths of a percentage point just as new home sales surged 18%.

The trend could continue in 2014, experts said, especially if rates change significantly.

“Particularly if we see a pretty quick rise – maybe a half a percentage point to percentage point rise — it’ll make for some bumpy demand in 2014,” said Ellen Haberle, an economist at Redfin, an online real-estate firm.

 Mortgage rates first spiked in May after the Fed signaled it was considering pulling back its bond-buying program meant to keep a lid on long-term interest rates. The housing market initially stumbled, but started to recover once the central bank decided against any changes to the stimulus effort throughout the summer and into the fall.

 Mortgage rates are still at historical lows, but they are already starting to creep upward once again. Freddie Mac said Thursday the average 30-year fixed rate mortgage was at 4.48%, its highest level since mid-September.

 The interest rate on U.S. Treasurys is also going up. On Thursday, the yield on 10-year notes hit 3%, its highest level since September and the second time this year it has reached that mark. That threshold could signal higher interest rates ahead because it is used as a reference point for the cost of borrowed money for U.S. consumers and businesses. A higher yield can push up mortgage rates.

 While rising interest rates could continue to drag on the housing market, it could also encourage those people waiting on the fence to make a decision to buy.

 Even with rising rates, homes data is starting to show underlying strength in the market. The Commerce Department’s new-home sales reports for October and November marked the two strongest months of new-home sales since mid-2008, and sales in November alone were up nearly 17% from a year earlier, the report said.

 New home sales data are a leading indicator in housing trends because  sales are tallied at the signing of a contract rather than the closing. But they are an imperfect gauge because homebuilders are sometimes willing to buy down interest rate for buyers.

 Data for pending-home sales in November, which is a similar measure for previously owned homes, will be released on Monday by the National Association of Realtors

source: http://blogs.wsj.com/economics/2013/12/27/mortgage-rate-swings-may-mean-bumpy-2014-housing-market/
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U.S. mortgage applications fall as refinance hits five-year low: MBA

12/27/2013

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(Reuters) - Applications for U.S. home mortgages fell for a second week and hit a 13-year low as mortgage rates rose due to a bond market sell-off following the Federal Reserve's decision to pare its bond purchase stimulus in January, an industry group said on Tuesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 6.3 percent to the lowest level since December 2000.

Mortgage applications have fallen sharply since this summer on a jump in home finance costs as benchmark Treasuries yields eventually rose to a two-year high.

Last Wednesday, Fed policy-makers opted to make their tapering move, which will begin in January with a $10 billion monthly reduction evenly split between Treasuries and mortgage-backed securities to $75 billion.

"Following the Federal Reserve's taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008," Mike Fratantoni, MBA's vice president of research and economics, said in a statement.

The rate on fixed 30-year mortgages averaged 4.64 percent last week, up 2 basis points from the prior week. It fell short of the two-plus year high of 4.80 percent set in September.

The MBA's seasonally adjusted index of refinancing applications fell 7.7 percent.

The gauge of loan requests for home purchases, a leading indicator of home sales, fell 3.5 percent to its lowest level since February 2012.

The refinance share of total mortgage activity slipped to 65 percent from 66 percent the previous week, while adjustable-rate mortgages rose 8.3 percent last week to the biggest share since July 2008.

The MBA typically reports its weekly application data on Wednesday, but released the data a day early due to the Christmas holiday. It said it will suspend release of the data next week. It will resume the release of the data on January 8 with results of the two prior weeks.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

Source: http://www.reuters.com/article/2013/12/24/us-usa-economy-mortgages-idUSBRE9BH0IK20131224

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Money Minute: Waiting for the Fed's Decision; Mortgages to Get Pricier

12/18/2013

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It's all about the Fed.

You may have heard this song before, but after months of speculation, we could find out Wednesday afternoon when the Federal Reserve will begin to cut back on its massive bond-buying program.

Now it's important to understand that even if the Fed does begin the long-awaited taper, it won't end the stimulus program. It has been pumping 85 billion dollars a month into the economy. When the taper does begin, it will "only" buy $70 billion or $75 billion a month.

Despite the Fed's pledge to keep interest rates low, mortgage rates are likely to rise. Fannie Mae and Freddie Mac will soon begin to charge more to borrowers who don't make a large down payment and have a high credit score. The effective mortgage rate on new loans could increase by as much as half a point.

An important court win for Philip Morris. The New York Court of Appeals said long-term smokers who don't show signs of disease can't sue the Altria (MO) unit to set up a program to monitor their health. The court upheld an earlier decision that there was no legal basis for such a claim.

On Wall Street, the Dow Jones industrial average (^DJI), edged 9 points lower Tuesday, the Nasdaq composite (^IXIC) fell 6 and the Standard & Poor's 500 index (^GPSC) lost 5 points.

Another well-known company makes its Wall Street debut today. Movie theater owner AMC Entertainment priced its stock at $18 a share, which is at the low end of expectations. And there's an interesting twist to this initial public offering. The company offered shares at the IPO price to its most loyal movie customers. AMC is owned by a Chinese conglomerate.

Finally, the number of students enrolling in law school continues to decline. The American Bar Association says there were 11 percent fewer first year students this year, and the total number is the lowest it's been since 1977. One reason: the high level of student debt for many recent college grads.

Source: http://www.dailyfinance.com/on/federal-reserve-decision-stimulus-mortgages-get-pricier/


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CoreLogic Reports 791,000 More Residential Properties Return To Positive Equity In Third Quarter Of 2013 

12/17/2013

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IRVINE, Calif., Dec. 17, 2013 /PRNewswire/ -- CoreLogic(R) (NYSE: CLGX), a leading residential property information, analytics and services provider, today released new analysis showing approximately 791,000 more residential properties returned to a state of positive equity during the third quarter of 2013, and the total number of mortgaged residential properties with equity currently stands at 42.6 million. The analysis indicates that nearly 6.4 million homes, or 13 percent of all residential properties with a mortgage, were still in negative equity at the end of the third quarter of 2013. This figure is down from 7.2 million homes, or 14.7 percent of all residential properties with a mortgage, at the end of the second quarter of 2013*. 

 Negative equity, often referred to as "underwater" or "upside down," means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

The national aggregate value of negative equity was $397 billion at the end of the third quarter compared to $430 billion at the end of the second quarter of 2013, a decrease of $33.7 billion. This decrease was driven in large part by an improvement in home prices.

Of the 42.6 million residential properties with positive equity, 10 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as "under-equitied," may have a more difficult time obtaining new financing for their homes due to underwriting constraints. Under-equitied mortgages accounted for 20.4 percent of all residential properties with a mortgage nationwide in the third quarter of 2013, with more than 1.5 million residential properties at less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are considered at risk should home prices fall.

"Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013," said Mark Fleming, chief economist for CoreLogic. "Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve."

"We should see a further rebound in consumer confidence and economic growth in 2014 as more homeowners escape the negative equity trap," said Anand Nallathambi, president and CEO of CoreLogic. "Home price appreciation has helped more than 3 million property owners regain equity since the first quarter of 2013." 

read more: http://online.wsj.com/article/PR-CO-20131217-904750.html?dsk=y
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How the Tax Rules Work When You Refinance Your Home Mortgage      

12/16/2013

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Recent drops in interest rates have prompted millions of households to refinance their mortgages. Borrowers who refinance need to familiarize themselves with tricky tax rules on what is or isn't deductible for interest payments. Here are some reminders on how the rules work.

Question: I own a personal residence. It's worth more than the remaining principal balance on the mortgage. My lender is willing to allow me to refinance for more than the balance of the existing mortgage. I know that the tax rules allow me to deduct interest payments on a refinancing loan as long as it's for the same amount as the existing balance. But am I also entitled to deduct interest payments for the part of the refinancing that exceeds the existing balance? And does it matter that I plan to use most of the excess refinancing proceeds to pay off credit card debts?

Answer: Whether borrowers are entitled to deduct interest on the excess amount depends upon how they use the proceeds from the refinancing and the amount of the proceeds. When borrowers use the amount in excess of the existing mortgage to buy, build or substantially improve principal residences, meaning year-round dwellings, or second homes such as vacation retreats, their interest payments come under the rules for home acquisition loans. Those rules allow them to deduct the entire interest as long as the excess plus all other home acquisition loans don't exceed $1,000,000, dropping to $500,000 for married couples filing separate returns.

When borrowers use the excess for any other purposes, another set of rules prohibits deductions for payments of interest on "consumer loans." This wide-ranging category includes credit card bills, auto loans, medical expenses and other personal debts such as overdue federal and state income taxes. There is, though, a limited exception for interest on student loans, one of those "above-the-line" subtractions to arrive at adjusted gross income, the amount on the last line of the first page of the 1040 form.

But most borrowers are able to sidestep these restrictions on deductions for consumer interest, thanks to the rules for home equity loans. Those rules allow them to deduct the entire interest as long as the amount in excess of the existing mortgage plus all other home equity loans don't exceed $100,000, dropping to $50,000 for married couples filing separate returns. It makes no difference how borrowers use the proceeds.

When their refinanced loans are partly home acquisition loans and partly home equity loans, there's an overall limit of $1,100,000, which is a combination of $1,000,000 from the home acquisition debt and $100,000 home equity debt. That number drops to $550,000 for married couples filing separately. When the loans exceed the ceiling of $1,000,000 for home acquisition loans and $100,000 for home equity loans, the excess generally is categorized as nondeductible personal interest. The general disallowance is subject to exceptions for loan proceeds used for business or investment purposes.

Yet another restriction applies to the steadily growing number of borrowers burdened by the AMT, the alternative minimum tax. The AMT allows deductions for interest payments on home acquisition loans of up to $1,000,000 ($500,000 for married couples filing separately). But AMT rules deny any deductions for interest on home equity loans for first or second homes, unless the loan proceeds are used to buy, build, or substantially improve the dwellings. 

Source: http://www.huffingtonpost.com/julian-block/how-the-tax-rules-work-when-you-refinance-your-home-mortgage_b_4415838.html
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Fannie Mae Mortgage-Guarantee Fees Increased by U.S. Overseer 

12/11/2013

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Job growth drives mortgage rate jump

12/9/2013

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Mortgage rates jumped this week on stronger-than-expected economic reports, according to Freddie Mac's weekly survey.

The 30-year, fixed-rate loan, the most popular product for homebuyers, rose to 4.46% from 4.29% last week. The average rate on a 15-year, fixed-rate mortgage, typically used for refinancing higher interest mortgages, also jumped 0.17 percentage point to 3.47%. 

 This week's rate approached a high for the year. Rates on the 30-year have ranged from a low of 3.34% in the first week of January to a high of 4.58% in August.

Frank Nothaft, Freddie's chief economist, cited job creation as a prime reason for the rate spike.

"Private companies added 215,000 new jobs in November according to the ADP employment report, well above the consensus," he said. "In addition, revisions added 54,000 jobs in the prior month." 

Read more: http://money.cnn.com/2013/12/05/real_estate/mortgage-rate-rise/
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Fixed Mortgage Rates Move Higher

12/6/2013

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Average interest rates on fixed-rate mortgages jumped higher this week according to Freddie Mac’s Primary Mortgage Market Survey® (PMMS) for the week ending December 5th, 2013.

Fixed Rate Mortgages:

Interest rates on fixed rate mortgages pushed higher this week with the 30-year fixed rate mortgage increasing by seventeen basis points to an average of 4.46 percent with an average of 0.5 points. Last week the average rate increased by seven basis points. A year ago, the 30-year fixed rate mortgage averaged 3.34 percent.

Average 30-year fixed rates were generally the lowest in the Southeastern portion of the United States where mortgage rates averaged 4.43 percent while the highest rates were reported in the North Central area of the country where interest rates averaged 4.50 percent.

The average rate for a 15-year fixed mortgage was 3.47 percent this week with an average of 0.4 points, up from an average of 3.30 percent last week. At this time last year, the 15-year fixed rate mortgage averaged 2.67 percent.

Adjustable Rate Mortgages:

Interest rates for adjustable-rate mortgages were mixed this week with the 5-year Treasury-indexed hybrid ARM averaging 2.99 percent, with an average of 0.4 points, up from an average of 2.94 percent last week. The 5-year adjustable rate mortgage averaged 2.69 percent a year earlier.

The 1-year Treasury-indexed adjustable rate mortgage averaged 2.59 percent with an average of 0.4 points, down slightly from an average of 2.60 percent last week. A year ago, the 1-year adjustable rate mortgage averaged 2.55 percent.

Source: http://loanrateupdate.com/mortgages/fixed-mortgage-rates-move-higher

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5 Great Reasons Why You Should Think About Refinancing Your Mortgage

12/5/2013

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The option of refinancing your mortgage offers advantages.

Once you have a mortgage you’re not locked into it until your home is completely paid off. You always have the option of refinancing the loan and in some cases it might be in your best interests because of the perks involved. It’s definitely something to keep in mind and if you’ve not even thought about it yet we can look at some of the reasons why you should. If you think your life will improve for the better you should go and speak to someone about it after reading this.

Shorten the term of your loan

When most people take out a mortgage they are young and they aren’t making a lot of money. Fast forward a few years and they’re making a little more plus the interest rates could have dropped a considerable amount. If you enter your details into a mortgage calculator you might find because of the lower interest rates you could easily reduce the term of your mortgage and it wouldn’t cost you much more per month. It’s definitely worth considering if you can afford it because life is better when your mortgage has been paid off.

Lower your interest rate

Sometimes it’s not nice looking at the money coming out of your bank account every month because you know deep down you should be paying a lot less. Always be open to the possibility of refinancing your mortgage if you can get a lower interest rate because over the life of your mortgage it could save you tens of thousands of dollars. It’s better in your pocket than the bank’s especially when you realize you can save all that money by simply filling out a few forms.

Reduce your monthly payment

You know you’re in trouble when the ground opens up and starts swallowing you. That is how some people feel when they can’t afford their mortgage payments no matter what they do. Maybe your interest rate shot up or you had your hours cut back at work, but no matter the reason it might be a good idea to refinance your mortgage in order to reduce your monthly repayments. When less money is coming out of your account each month it means you have more of a safety net.

Switch to a different loan

If you signed up to the wrong type mortgage in the first place it might be a good idea to find out how to claw yourself out of the hole you find yourself in. Some people decide to take out an adjustable-rate mortgage because fixed-rate ones didn’t look so good at the time, but as soon as things change for the worst it might be time to refinance your mortgage to jump onto something else. Fixed-rate mortgages are a lot better when the interest rate is low because you’ll find it much easier to juggle your finances.

In order to treat yourself

The last reason you might want to refinance your mortgage is because you want to treat yourself to an expensive gift. If your home is getting old it might need major renovations carried out and refinancing could be the only way you can get that sort of money together. You could take some money to start your own business or you could put a deposit down on a rental home. If you decide to take any money out of your home it must be for a good reason or it’s not worth it.What are you thinking?

Do you think now is a good time to look more deeply at your refinancing options? If you don’t do something about it now you could be losing money each and every month. It’s not actually too hard to sort out and you’ll not lose your hair because of the stress involved, so just do something before you forget.

Source: http://wallstreetsectorselector.com/2013/12/5-great-reasons-think-refinancing-mortgage/
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30-year mortgage rate rises again: Zillow

12/4/2013

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