Adjustable rate mortages frozen at their current rate

Newsflash:

December 6, 2007: In an effort to provide some stability to the mortgage market, while helping homeowner’s – as many as 2 million sub-prime ARM loans made at the start of 2005, through July 30, 2007, whose interest rates are scheduled to jump to higher rates between January 1, 2008 through July 31, 2010 will be locked in at their current rate.

Being called a ‘teaser freezer’ – the rate freeze is aimed at owner-occupied homes whose monthly mortgage payments may rise as much as 30% if adjusted to current rates. Its another effort to quash the “avalanche” of foreclosures that some in the industry are predicting. For more information visit www.federalreserve.gov or www.teamresults21.com.

Real Estate & the Economy

Business Week televised a couple of good items about the real estate industry as a whole yesterday. Their video can be seen here: http://feedroom.businessweek.com/index.jsp?fr_story=1164424c0c16afd06ab22f7edc11e1b8de2f5ab5 I've pulled information from other current videos as well.

Some of the bullet points I thought were important are:

Buyers still have an edge in real estate.
Seller's are becoming more flexible and responsive to buyers' terms. It was specifically pointed out that buyer's who low-balling the selling price won't produce the desired result and indicated that 10% below asking was a reasonable price reduction to request.

Seller's can increase their returns by upgrading with environmentally friendly improvements. Shown by the trend in eco-friendly home buyers.
Sellers were directed to post at least 6 high-quality photos (recommended by Realtor.com) because 80% of home buyer's check out listings online before touring in person.

Buyer's too have some work to do like; giving a boost to their credit score, and finding the best deal (budget friendly) on a mortgage.

Mike Mandel, Business Week Economist, talked about the economy as a whole & the real estate market's effect on it. He says there are factors other than the mortgage market that consumers should be keeping an eye on.
Mike pointed out that 30 year fixed rates are actually lower than they were a year ago and that borrower's who have an adjustable rate mortgage, and decent credit will have little trouble re-financing into a fixed rate and will be "sitting pretty".

As a whole the mortgage market is doing just fine, though the sub-prime market is in a bit of trouble. The market will no doubt affect the economy but won't cause a recession according to Mandel. One of the more important aspects to watch closely is business investment which he says have slowed and is at very low levels.

Also the increase in foreclosure activity was localized to areas that didn't have strong real estate markets in the first place.

Home Loans and Homework

When shopping for a home loan, it is important to choose reliable sources that offer reasonable rates, and that don't make claims that seem far fetched.

I like Mortgage Lenders that allow you to research your options before signing up for anything. The internet is an excellent resource for doing just that. Sites that have posted current rates and terms upfront are best. By doing a little homework ahead of time, you will be better able to make the right choices for you and your personal financial situation. In the end, it all makes for a smoother transaction.

Mortgage Lenders , is a lender site that we tried and really liked. The information is current and accurate and the website is easy to navigate. (essential because our attention span is getting shorter)

The Five Factors of Credit Scoring

There are five factors that impact consumer credit scores. They are listed here in order of importance:

• Payment History has a 35% impact. Paying debt on time and in full has a positive impact and late payments, judgements and charge-offs have a negative impact.
  
• Outstanding Credit Balances have a 30% impact. Debt ratio of outstanding balance to available credit is important. Keeping that below 50% is wise and below 30% even wiser. It is never a good idea to close an account; the debt ratio will go up and the number of seasoned lines will decrease. Pay outstanding debt down as close to zero as possible and evenly redistribute the remaining balance among the open lines. The increased interest incurred by moving a balance form a 0% card to a 23% card will be minimal relative to what the increased mortgage debt might be with a low credit score. Hitting the maximums of available credit can be very negative. It may be worth calling and asking the credit company to increase your available credit to lower the debt ratio, provided they can do that without a hard credit inquiry.
  
• Credit History has a 15% impact. The length of time a particular credit line has been opened is important. A seasoned borrower is stronger.
  
• Type of Credit has a 10% impact. A mix of auto loans, credit cards and mortgages is positive, rather than a concentration in credit cards only.
  
• Inquiries have a 10% impact. Hard inquiries for credit will negatively impact the score. Auto and mortgage inquiries receive a special treatment and 20 inquiries can be made in a 14-day period for auto or mortgage and will be treated as only 1 inquiry. The maximum number of inquiries that will reduce the score is 10. Any inquires beyond that [11+] in a six-month period will have no further impact on the borrower. Each hard inquiry can cost 2-50 points on a credit score.

You Credit Score

A good credit score can mean the difference between a low mortgage rate with conventional financing and a restrictive, higher-rate loan. There are some simple but very important steps you can take to clean up your credit.

1. Look for any past due balances on the credit report and bring them current.

2. Reduce all outstanding debt to as close to a zero balance as possible. If unable to pay all debt down, evenly distribute any remaining debt among open credit cards, or consider opening a new line and transferring some of the balances. Try to keep balances below 50% of available credit; below 30% would be even better. Do not close existing accounts.

3. If married, keep separate credit cards. This provides flexibility in transferring some or all of the balances to one spouse to increase the credit score of the other. This provides the possibility of one spouse becoming the sole borrower and it does not change the ownership of the home.

4. Request an increase in available lines on cards to reduce debt ratio, but only if your credit card company can that without a hard credit inquiry.

5. Pay off past dues and charge-offs within the last two years. Beyond two years, it will have no impact on your score if wiped out. In fact, the act of paying it off can actually take your score down temporarily.

6. Request that creditors and credit bureaus delete any outstanding debt that is incorrectly charged to you or has yet to be cleared. They have an obligation to react within 30 days. If you choose to pay off an outstanding debt (less than two years old) mark the back of the check "accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit." You may be able to use the cancelled check if the outstanding debt is not removed.



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Week in review

YOU KNOW WHO IS LOOKING FOR STOCKS? NOBODY! Last week's volatility in the stock market stabbed at the hearts of both the Stock and Bond markets, with home loan rates swinging higher and lower throughout the course of the week. Economic news releases took a backseat to the massive movements in Stocks. Amazingly, when all the smoke cleared, home loan rates were unchanged to slightly improved for the week overall.
What happened? First, remember that the Stock and Bond markets compete for the same investment dollar. This means that when Stocks are worsening and investors are selling off their holdings, some of that money gets moved over into the Bond market, which helps home loan rates improve. And vice versa, when Stocks move higher and investors are buying into the Stock market, some of that money comes back out of Bonds, which causes home loan rates to worsen.
Last week's volatility began with the Chinese Stock market plunging, setting off a string of worldwide stock selling. Our own Stock market was ripe for a reversal lower, and money flowed out of Stocks and into Bonds, helping home loan rates improve. The next day, Stocks began to rebound, moving money back out of Bonds and causing home loan rates to worsen. But the "see-saw" action continued for the balance of the week - and may not be done yet, causing high amounts of volatility in Stocks and Bonds - and therefore, home loan rates.

Compiled by TeamResults Affiliates as a service to our clients. Always seek advice from your own experts. E-mail TeamResults@Century21.com with questions, comments or concerns.