Breaking News, Mortgage Markets and More

Good morning, and happy end of the first half of 2009. Tomorrow we officially begin the "second half" of 2009, which many analysts and economists have predicted will mark the beginning of the end of the worst recession to hit this country, and the world in 5 decades. Let's hope all these brilliant people are correct in their predictions.

The Case Shiller index released home valuation numbers for April (note this is 2 months behind). The news was a bit encouraging as we are seeing a decrease in the drop in home values across the country. In fact, 8 cities reported values increasing slightly. We are now well into the traditionally busiest season for home sales. While home values appear to be steadying, we do know that with the high unemployment rate, more foreclosures are upcoming. But, we also know that banks are becoming more reluctant to sell homes at below value prices, and are actually holding off on releasing their REO inventory, to help sustain home values, and of course, to save on more losses to their bottom lines.

Hang onto your pocketbooks folks. In the ongoing saga between Swiss Bank UBS and the IRS, it appears that the IRS has won the battle. If you, or anyone you know has a "hidden" bank account at UBS (for the purpose of avoiding IRS taxes), you will NOT be able to access those funds unless you close the account or move the funds to an onshore account, beginning tomorrow, July 1, 2009! In response to this announcement, many lenders have already announced this morning that prior to closing a mortgage transaction, you will be required to sign a form authorizing the lender to do an OFAC (Office of Foreign Assets Control) search prior to drawing docs or funding your loan. Some of the credit bureaus we utilize have the capacity to make this search prior to issuing the credit report. Of course, there is a nominal extra charge for this search, but the few dollars up front (my best guess is not more than $5) could save hundreds of dollars in closing delays. So, of course, we will be utilizing this service beginning immediately.

Daniel Baldwin, brother of actor Steven Baldwin, has announced that he will be moving to Portland with plans of opening a film production company here in our city. The plan is to make films in and about Oregon. His initial plans include the start of at least 3 productions within the first year. Are we ready for a Portland based reality show? Other plans include a horror flick, and a documentary on the struggling economy in Oregon. In fact, a large part of the reason for Baldwin's move to Portland is to help our economy. Did you realize that Oregon's economy is just below the poverty level? Then why are our housing prices averaging approximately $125,000 higher than the median price of homes across the nation?

The stock market is down across the board this morning, as we close out this quarter. In the meantime, the yield on the 10 year bond seems to be moving up again. It dropped slightly below 3.5% yesterday, but has reversed course today, and currently sits at 3.51%. Hang on - we're hearing the Feds are again infusing cash into the mortgage bond markets, so we just might see mortgage rates moving down again.

Best rates this morning:

30 year fixed - still above 5% - but trying to hit that mark again

5/1 ARM - this loan rate really depends on the lender. We are seeing the best rate between 4.5% - 5% for those lenders offering this product. This product is very sensitive to ALL the possible adjustments that can affect the rate you will pay.

FHA - 5.5% and up - again depending on the lender.

Speaking of lenders, please be sure to do some shopping around for rates and fees BEFORE you apply at one of the bigger banks. We are hearing that more and more big banks are requiring non-refundable application fees, and once you pay that $500-$750 fee, you will feel stuck with that bank. But, rates are so variable between lenders these days, that getting yourself stuck may not be the best option for you. There are still hundreds of lenders out there doing mortgage loans, so there is significant competition for your business.

Make it a great day everyone.

Best regards,

Shelby Bateson
Sr. Loan Officer

Town & Country Mortgage

http://www.shelbytncmortgage.com/

* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 660 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.

Mortgage Rates are Dropping AGAIN!

Happy Friday to everyone. We have some encouraging news almost all the way around.

> The stock market staged a bit of a rally yesterday, though the DOW is still down slightly for the week.

> The yield on the 10 year Treasury bond is down to 3.5% - this is a big drop from the almost 4% yield just a couple weeks ago, and mortgage rates have responded along with this yield drop. We're still off the lows of a few months ago, but this is encouraging news.

> Consumer spending increased in May, for the first time in 3 months, as average incomes also rose approximately 1.4%

> Individual savings have increased to a 15 year high, which ironically is what is holding the stock market down. Investors want and need to see us spending, in order to stimulate business. For those of you who are managing to save right now, congratulations!

> Disposable income increased an average of 1.6% due to wage increases

> The Michigan consumer sentiment index increased to 70.8% (do you remember when it was below 50% during the height of this economic downturn?)

> Some areas of the economy, including housing and manufacturing are finally seeing a slowdown in the pace of decline.

> While oil rose to above $71/barrel yesterday, based on news about the Nigerian turmoil around the oil fields and pipelines, much of that turmoil is abating through Nigerian government intervention. Oil is back under $70/barrel today.

We expect the national employment numbers next week. Most analysts expect that number to be 9.6% unemployment nationally, the highest level since the 1970s. Keep in mind that employment and unemployment are considered "lagging indicators." This means that businesses do not start hiring again until they see their numbers improving. So, we will see business improvement before we see the unemployment numbers begin to shrink. This is like a Catch 22. If all those unemployed went back to work, we would have more people spending, and businesses would be more profitable - but somehow this will work itself out; it always seems to anyway.

Enjoy your weekends. It is supposed to be warm and sunny.

This weekend, the Obama and other Healthcare reform supporters are holding limited health screenings around the state. In Oregon, almost all Farmers Markets will be hosting, at the very least, free blood pressure checks. Check out your local activity calendar to see what types of events are available in your area.

Best regards,

Shelby Bateson

503-819-6545

http://www.shelbytncmortgage.com/

Why don't I qualify for the "best" mortgage rates I see advertised?

Conforming loans (loans of $417,000 and below) are loans that very likely will ultimately be sold to Freddie Mac or Fannie Mae, so all of these loans are subject to the rate adjustments dictated by Fannie and Freddie. In addition, lenders have a lot of discretion in other adjustments to rates, based on the investor that will be buying those loans. The investor could be Bank of America, or Wells Fargo, but could also be a bank in Germany, for instance. The investors dictate rate adjustments, based on their risk tolerance. Since we've seen such a huge meltdown of lenders in the last few years, risk tolerance is very low.

Following are some of the ways that rates can be adjusted, either up or down, based on your unique financial situation:

1. Credit score - which we've already discussed many times, is huge!! Some lenders will not even look at a loan with a credit score below 680, even though Fannie and Freddie will buy loans with scores as low as 620. Other lenders will give you a better rate if your score is above 740, or 760, or 800!

2. Location, location, location - yes, this matters even in terms of rates. There are "risk" tables for different areas, and then lenders can add on to these risk tables even more. So, some lenders look at "declining value" tables, where other lenders will break this out further into categories such as "declining values, distressed values, etc." Obviously the more categories, the more the rate can move depending on where you property is located. Please be aware that these tables are not based on neighborhood demographics, but rather are based on statistical data on what has been happening to the values since the housing market went into this slump. "Redlining" of neighborhoods is still illegal and is not a part of this process.

3. Equity - Technically Fannie and Freddie will lend to you if you have at least 10% equity in your home, but the amount of equity you have is also coupled with your credit score, the location, and the type of loan transaction. So, if you have 30% equity AND a 740 credit score, AND you are buying a house, AND your home is located in a good area, you will qualify for "best rates." But, adjustments can and will be applied based on any of the above factors. If you want to refinance your house mortgage with less than 25% equity, and you want cash back, you WILL pay a higher rate.

4. Type of property - is this a Single Family home, a condo, townhouse, condhotel? Is this a property you intend to, or are currently occupying? Is this a vacation home (2nd home), an investment property? Is the condo in a high rise building (4 stories or more)? If a condo, is it a new building or one that has been deemed Fannie/Freddie "warrantable"? Is it FHA approved? Believe it or not, all these factors can and will affect, not only your rate, but if in fact this property qualifies for financing at any price.

5. Lock period - This has become huge since HVCC went into effect on May 1st. The standard used to be 30 days, which was the average time it took to go from loan application to closing that loan. With HVCC, the time is still an unknown. AND, when rates are very low, as they were just a month ago, lenders got so backed up with applications that it was not unusual for a file to sit at a lenders office for 30 days before anyone even looked at it. Most lenders are now encouraging us to lock for at least 45 days in order to ensure that the appraisal will be ordered, received, and reviewed, if necessary, and still get that loan closed in time. BUT, a 45 day lock costs more than a 30 day lock, so the rate could increase. For myself, I'm not locking any loans until an appraisal has been received and reviewed. This can save on the rate, but can also cost on the rate during these times of volatile rates. It's a juggling game, and is making lending much more difficult. (Just one more reason to repeal HVCC!!) If we are still in the iffy appraisal process and rates take a huge drop, I will notify you and allow you to make the final call on when to lock your loan. However, there are lenders out there that will not even look at your loan file until it is locked! If we can wait to lock your loan until it is completely approved, including the appraisal, and get a short term lock (7-15 days), you often will get a better rate.

6. Loan amount - A conforming loan is $417,000. This year we are seeing that ceiling raised in some areas where housing prices run higher, such as San Francisco, or New York City. However, these are called "high limit conforming loans" and are still subject to slightly higher rates. Once your loan amount exceeds the conforming, or high limit conforming amounts, you move into "jumbo loan" territory. The upward rates adjustments for jumbo loans are big. All the other potential adjustments mentioned above are added to this one.

Wow - I hope this cleared up some questions many of you have asked, and didn't confuse you more. And, I also hope that you now understand that when you call and ask "what's the rate today?" I will need to ask a lot of questions before I can answer you. Even then, until we get all the information confirmed through credit pulls, appraisals, etc, the best I can do is make a "best guess" based on what you tell me, and what rates are being quoted at that moment. Thankfully, I have a lot of experience in this industry, and know what questions to ask. But guidelines are still changing all the time.

We're all looking forward to a stabilization of the housing market, so some of these "ifs" will disappear, and lending guidelines will hopefully loosen a bit. None of us expect lending guidelines to ease to the point they were 2 years ago. If you do not have good credit, you need to fix it, or expect to pay higher rates. If you need help fixing your credit, please feel free to call or email me. But, please don't spend money at a credit repair company. They rarely do all they say they can, and your association with this company is one more factor that can cause your rate to increase. I can guide you through the process, but you will have to do most of the work on your own.

As regards credit repairs: remember that if your credit report shows you were 30 days late on a credit card payment, and you truly were 30 days late, it is very unlikely that the creditor will remove that report. Repairs apply to errors on your report. Errors can cost you hugely in terms of points lost on your score, but once removed, your score should revert to where it was prior to the error reporting.

I urge you all to sign up with some type of ID theft protection, or some credit monitoring agency. Most banks now offer this service. This service will typically report to you whenever there is any activity on your credit report, such as new debt being posted, inquiries from creditors, and late payments being reported. In addition, most of these agencies will also send you a copy of your credit report from at least one bureau either monthly or quarterly. Be sure, if you sign up with some agency that you are able to see all three bureaus AND your scores. This is important information for you to have.

As always, I am available to assist most of the time, so please feel free to call or email me, or visit my website for more information.

Best regards,

Shelby Bateson

503-819-6545

http://www.shelbytncmortgage.com/

Fed Speak today - Can we expect Mortgage rates to drop again soon?

After meeting for the last two days, Ben Bernanke spoke to the media with a summary of the key points covered. Here's a recap of today's Fed speak:

1. The Feds will leave overnight lending rates unchanged at between 0%-.25%, probably for at least the rest of 2009. For those of you with any debt tied to the prime rate (currently at 3.25%), this means no change in that rate or in those payments. NOTE: Mortgages are almost never tied to the prime rate. They are more likely to be tied to the LIBOR (London Interbank Offer Rate) index, and most specifically the 6 month LIBOR rate for most mortgages. The 6 month LIBOR is currently at 1.16%. ARM loans tied to the LIBOR will feel the effects of a rising LIBOR index only at the time of each payment adjustment.

However, if you have a variable rate HELOC (Home Equity Line of Credit), this type of loan is almost always tied to the prime rate. The good news for you is that your low monthly rate and payments will remain unchanged for now.

2. Bernanke also mentioned that the Feds are watching to see how quickly the economy will recover on its own. He said:

"The pace of the economic contraction is slowing."
"Conditions in the financial markets are improving."

Bernanke disappointed Wall Street, and all of us in the housing industry by failing to say that the Feds will resume purchases of Mortgage backed securities. This failure caused the yield on the 10 year bond to rise, and mortgage rates to rise with the yield. Currently the 30 year mortgage is averaging a rate of 5.38% nationally. That's substantially higher than just a month ago, when we saw rates below 5%, but slightly below the high we saw last week at closer to 5.6%.

A government report released today showed an unexpected increase in durable goods orders (refrigerators, televisions, computers, etc.) , but at the same time, an increase in unemployment nationally.

Ben Bernanke is walking a tightrope of a sort. Trying to move our economy into recovery mode after the worst recession in 5 decades is almost unprecedented with the powers the Feds have been assigned. And, his appointment to Chairman of the FOMC will expire shortly. There is considerable debate on whether or not he will be re-appointed. President Obama pretty much deflected the question at a recent news conference. While Bernanke was appointed by his predecessor, this is a pretty tough spot to insert a new key player.

I said my mantra last night for lower rates, but apparently the powers that be weren't listening. Can we hope for a delayed reaction? Again, I think that a key factor in whether or not the Feds will resume purchases of Mortgage backed securities will rest on the effect of the higher interest rates on the housing market recovery. Those numbers won't be released until mid-late July.

Speaking of the housing market recovery - other news released today was that sales of new homes decreased in May, but prices for those homes increased. Are we surprised then that those sales decreased?

Here's more news:
The average price of homes that are selling is at $173,000 - $200,000 nationwide.
The current inventory of homes that qualify for conforming loans (at or below $417,000) is at 9+ months nationwide.
The current inventory of homes priced at $1,000,000+ is at 8+ YEARS!!

Builders take note - the buyers out there are snapping up the lower end of the price range. If you are building, you have to keep this in mind! Home buyers are following the trends seen in the retail stores. Walmart and Kohls are thriving during this economic downturn, while Nordstom, Saks, Tiffanys, etc., are all feeling the pinch. Those who have money are holding onto it.

OK - that's it for today.
Tomorrow I will focus on what you can do to qualify for the best mortgage rates out there, and why some of you, even with good credit, are still looking at higher rates.
Enjoy the rest of your afternoons and evenings.

Best regards,
Shelby Bateson
Town & Country Mortgage
10228 SW Capitol Highway
Portland, OR 97219
503-819-6545 phone
Lic # ML-3604
http://www.shelbytncmortgage.com/

* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 660 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.

An Increased Tax credit for a Home Purchase? For Everyone?

Have you heard that the Senate is discussing increasing the tax credit for a home purchase from $8,000 to $15,000?

Did you know that this new program could be available to everyone? That is, everyone looking to purchase a home to actually live in, not an investment property, or a vacation home.

Still, for those of you waiting for more incentive to buy now!!! would an extra $7,000 make a difference?

Rates have been on roller coaster ride lately, and look to be unlikely to hit the lows in the mid 4% range. Higher rates means your dollar doesn't go as far as it would at lower rates - but $15,000 to help you out? That would cover all your closing costs and then some cash in your pocket - just for buying a house?


Stay tuned. I'll keep you posted as more news rolls out

Best regards
Shelby Bateson
503-819-6545

HVCC is raising havoc with a fragile housing industry

HVCC = The Home Valuation Code of Conduct
The focus of today's news centers around HVCC. I think it's important that you know about HVCC and how it can and WILL affect you and anyone you know buying, selling or refinancing a house. HVCC went into effect on May 1st this year, and is raising havoc with the already fragile housing industry.

HVCC has removed our ability to communicate with appraisers about your loan transaction. We are forced to use a "lender assigned" AMC (Appraisal Management Company) to order your appraisal. These management companies are located all over the country. They charge appraisers a huge percentage of the cost of the appraisal, which has driven up the cost of the appraisal to you, the consumer.

AMCs are not licensed, and are therefore not regulated, and the lenders can even own up to a 20% interest in the AMC we are required to use.

The best appraisers are often unwilling to work with AMCs, so we are often left with inexperienced appraisers doing what our local appraisers used to do best - evaluate a home's value based on their experience and knowledge of real estate in your local area. Can you believe your appraisal for a home in San Francisco, for instance, might be valued by an appraiser in Kansas? Does this make sense?

The increased cost of the appraisal is not the only way you can lose money. Since we are now relying on unknown people to do the appraisal, we have no control over the time frame to get a completed appraisal back to the lender. This can cost you in time to close the loan, which can result in either losing your rate lock, or having to pay for lock extensions. (Typical lender charges for lock extensions = 1/4% of the loan amount for a 15 day lock extension). Are we now talking potentially thousands of dollars?

And, what if the seller needs the loan to close faster? Can this result in a lost sale?

If you are unhappy with the valuation these appraisers arrive at, for your home, or the home you want to purchase, there are additional charges for an appraisal review. And, of course, you guessed it - the person doing the appraisal review is unlikely to know anything about your neighborhood or even home value trends in your state!

AND - if rates drop during your transaction, loan officers cannot transfer your appraisal to another lender to take advantage of better rates for you. You are forced to pay for another appraisal to move your loan!

If you are as outraged as those of us in the real estate, mortgage, and appraisal industries are, please write your Congressional representatives and let them know what you think. Help us kill this travesty called reform. We are doing all we can to fight this bill, but we need your help too.

Best regards,

Shelby Bateson

http://www.shelbytncmortgage.com/

USDA rural housing loans - and Market news

Are you aware of the USDA rural housing program? Perhaps you should be, because almost all of Oregon falls into the USDA rural housing boundaries. These loans are fantastic, offering 100% financing - even up to 102% financing (to help with those closing costs.) There is no Mortgage insurance requirement, even with 100% financing. Virtually all three of the tri-counties have areas that are eligible, and the further west or east you travel, the more property becomes available. For instance, did you know that if you want to move to the mountains, or the beach, almost all that property qualifies for USDA rural loans. In fact, think closer in, like Estacada, Damascus, Sandy, even parts of Oregon City - all in the USDA rural zone.

Here are some of the loan guidelines, because not everyone will qualify for this loan:

1. There are income restrictions - these loans are for low to mid-level income families
2. There are, of course location restrictions - this IS a rural housing loan program
3. There are caps on the loan amounts
4. The property being purchased must be your primary home
5. These loans are for purchase transactions, and rate and term refinances from an existing USDA rural loan only. Even if you live in a rural designated area, if your current loan is not USDA rural, you cannot refinance into this loan.
6. The minimum credit score required is 660 (no exceptions)

USDA rural loans are also available for business property purchases. Please call if you'd like more information. This is a much more difficult loan to get, but it is available.

Best regards,

Shelby Bateson

http://www.shelbytncmortgage.com/

503-819-6545