The Mindset for Wealth

The last true ‘Mortgage Update' that I sent was in March, short of a few ‘rate and emergency updates'.........I thought you might appreciate an update on the last few months.

If you recall, that update was to notify you that the Fed had proactively stepped-in and rates had dropped to the 4.625%+- range.  We had a decent little stretch, where we remained between 4.625%-5%, but it would appear that we are now back in the 5.5%+ range....and will likely not see sub-5% again, anytime soon.  Last Wednesday was a big day and the rates jumped upward of ½%, in a matter of hours.  Thursday was not much better....Friday helped recover some of the losses....and, so far this week we are seeing another upward trend.  The reality is that 5.5%+- is a great rate.....no question about it...., but those of you that may have been looking for the elusive 4%, that the administration dangled, may need to re-evaluate your situation.  Now that true volatility has crept into the daily routine again, I'm skeptical on making any predictions about what the rates may do.  I think a ‘better safe, than sorry' approach is warranted.

The one thing that I am confident about is that there has NOT been sufficient time and opportunity for the housing/mortgage sector to self-correct, which is imperative to regain true economic health and momentum.  The past 3 months helped, but ‘purchase' business really just caught on in the past 6 weeks......we need more purchase business to stabilize values...which means we need to create demand....which means action will need to be taken to insure that rates remain strong and financing is easily provided. (within reason).  My prediction is that we will hover in the mid 5% for the summer and that the FED will step in and increase the standard, Conforming loan limit, so that those homes that may currently require ‘Jumbo' financing (higher rates and tougher requirements) will now fall into the ‘Fannie Mae/Freddie Mac' arena (better rates and easier approvals).   This will encourage higher-end purchase business.  I would not be surprised if a new, temporary limit in excess of $800K-$1 million is put in place, soon.  I may be wrong, but I don't see many other ways to accomplish a good push on the market.

Probably the most important change is with the ‘$8000 First-Time Homebuyer Credit"......by the way, the definition of a FTHB is anyone who hasn't had an ownership interest in a property for the past 3 years!!!  This credit is immediately available and is received by providing the IRS with a simple amended return, after closing.  I've had instances where the buyer has received the $8000 within 2 weeks of closing!...this is huge for housing and has spurred a projected 150,000 new purchase transactions, as a result.

One of the bigger changes was with the requirements and restrictions that have been placed on appraisers and appraisals.  It would be impossible to briefly convey exactly what these are and what they mean to you, but a good rule of thumb, in this current market, is that your appraised value will likely be at, or just under, your current city assessment.  If you are assessed for $300K, you may want to prepare for $285K+- as a value, for example.  As well, those few programs with FHA and VA Mortgages, that can be done without an appraisal, are slowly disappearing.......Wallstreet is growing uncomfortable with not having an appraisal and the investors are starting to require them, on all programs.  If you currently have an FHA or VA loan with a higher rate, you may not want to wait much longer.

All-in-all, I'm very pleased with how the past few months have played out.  I would prefer to see the sub-5% rate for a bit longer, but remain excited about a 5.5% rate.  I think this market is offering one of the greatest opportunities in history to secure good real estate at a great price......especially for the FTHB.  I think those that have an interest in stepping-up into the higher end will have a great opportunity in the near future, as well.  I think the changes with Wallstreet and how loans are evaluated have proven to be good for the Mortgage Backed Securities market and have created a more consistent product.  I'm not overly excited about the appraisal changes, but something did need to be changed with the system, so we're better off than the alternative.

Bill Lane

Monarch Mortgage

Sr. Mortgage Loan Officer

#757-390-2213 (office-direct)

#757-651-7474 (cell-direct)

#757-390-2313 (fax--personal line)

billlane@monarchmtg.com