It is hard to believe that another year is just about to pass, but the end of the year holidays are already here. It has been an interesting year. We began with one of the harshest winters ever to hit the United States and it seems as if we are ending the year with the same weather pattern, as the “polar vortex” hit much of the nation in the middle of November. It is interesting that the cold weather hit the same week that there was an announcement of a climate deal between the U.S. and China. How can there be global warming when the weather is so extraordinarily cold? Well, we can’t get into the scientific arguments regarding the debate, but we will note that one of the effects of global warming is supposed to be more extreme weather, including precipitation. And these extremes did affect our economy this year.
So, we will not be thankful for the colder weather and extreme storms, but we will be thankful that the economy has moved forward in spite of these obstacles. As a matter of fact, the last employment report was the best evidence that we have had that the economy is getting better. Why do we believe that? Well, the numbers were assessed as disappointing. We think that we have come a long way in order for a month in which the unemployment rate went down and we added over 200,000 jobs to be labeled disappointing. Just five years ago the economy was losing 200,000 or more jobs per month and the economy has not averaged 200,000 jobs growth per month since before the recession.
Sure, there are disappointing statistics associated with the report. There is still a low labor force participation rate and stagnant wage growth, which means that many of the jobs being created are lower paying. However, the solution to both of these problems is the creation of more jobs. When there is a shortage of labor, then wages will increase. And if 200,000 jobs added per month is our “low-point” for the next year, there will be plenty of jobs created which will help these numbers. And continued low interest rates and falling oil prices are two additional things to be thankful for with regard to the economy. Yes, things are not perfect, but when you compare where we are today to five years ago, we are in a much better position to move forward with regard to a healthy economy. If it doesn’t snow all winter!
The Markets. Fixed rates on home loans were again stable but slightly lower in the past week. Freddie Mac announced that for the week ending November 20, 30-year fixed rates fell to 3.99% from 4.01% the week before. The average for 15-year loans decreased to 3.17%. Adjustables were mixed but also stable, with the average for one-year adjustables increasing one tick to 2.44% and five-year adjustables decreasing one tick to 3.01%. A year ago, 30-year fixed rates were at 4.22%, which continues to be higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Fixed rates on home loans were slightly down as housing starts declined 2.8 percent in October, below the upwardly revised September rate. However, building permits increased 4.8 percent in October after a 2.8 percent boost a month earlier. Lastly, industrial production slipped by 0.1 percent in October, below the market consensus forecast.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated November 21, 2014
|Daily Value||Monthly Value|
|6-month Treasury Security||0.07%||0.05%|
|1-year Treasury Security||0.14%||0.10%|
|3-year Treasury Security||0.97%||0.88%|
|5-year Treasury Security||1.64%||1.55%|
|10-year Treasury Security||2.34%||2.30%|
|12-month LIBOR||0.552% (Oct)|
|12-month MTA||0.113% (Oct)|
|11th District Cost of Funds||0.663% (Sept)|
There are more choices to finance properties today than there were just a few months ago. First, a little bit of history. During the real estate boom of ten years ago, lenders offered choices that fit just about everyone — from no-income verification loans to loans with no money down and poor credit. This was known as the “subprime boom.” In the wake of the financial crisis, these choices completely shut down and the only choices were loans for those who had money to make a larger down payment and a great credit score, especially if the loan was a large one. These are known as jumbo loans and are above the limits that the conforming agencies, Fannie Mae and Freddie Mac, are allowed to purchase. For jumbos, 20% down was the norm and larger loan amounts required even larger down payments. Today, the “non-conforming” market is coming back, though we are not expecting a return to the sub-prime days. Know as “non-qualified mortgages,” the new non-conforming alternatives are proliferating. There are now choices that allow..
- Less than 20% down for jumbos of one million dollars or more;
- Lower credit score requirements for some programs;
- Alternatives that require no mortgage insurance on jumbo loans with less than 20% down;
- Though no-income verification loans are still a rarity, there are loans that allow the use of excess assets in the income computation equation and alternatives which allow the purchaser to carry a larger debt load;
- There are loans which allow non-approved condominium projects, foreign nationals and more.
Do not get the impression that all of this easing is focused upon larger jumbo loans. Smaller loans can be non-conforming as well when dealing with issues such as foreign nationals and non-approved condominium complexes. Credits score requirements have eased for Federal Housing Administration (FHA) and Veterans Affairs (VA) loans as well. If you or your client has a unique situation, it would pay to check with a lender to see if these new home financing alternatives fit their situation. Source: The Hershman Group
A significant number of Americans are confused when it comes to what does and does not get reported to national credit bureaus. According to a new survey from TransUnion, for example, 48% of respondents assumed their rental payments are regularly reported to credit bureaus yet many landlords don’t. And this is not the only area where Americans are confused. The majority also wrongly believe that payments for cable/internet (53%), utilities (54%) and cell phone bills (52%) are regularly reported to credit bureaus when they aren’t. Only 29% correctly identified home loan payments as data that is regularly reported to credit bureaus. Credit agencies typically collect borrowers’ home loan, student loan, credit card, auto loan and payments of that nature to form a credit report for finance companies. But this could change soon. Lenders might start considering rent payment history in credit history for credit scores. “Most consumers report paying rent on-time, but many don’t realize that until now these payments are not boosting their credit histories,” said Ken Chaplin, senior vice president of TransUnion Interactive. “Renters should be aware that property managers are starting to report payments to credit bureaus and they should be consistently monitoring what is being registered on their individual report.” TransUnion and Experian have begun incorporating verified rental-payment data into credit files where it can be included in the computation of consumers’ scores when they apply for a home loan. “Expanding the share of property managers who report rental payments will produce more accurate information that truly reflects how consistently consumers meet their financial obligations,” said Kaplan “It will benefit renters who want to help their credit scores and landlords who want to attract renters who pay rent on-time.” Source: HousingWire