Freddie Mac Reports 30-Year Fixed Mortgage Rates Hold Steady At 4.51% At End Of June; Rates Likely To Move Higher Next Week As 10-Year T-Notes Move Lower On Economic News, Greek Vote

30 06 2011
  • 30-Year Fixed-Rate (FRM) averaged 4.51 percent with an average 0.7 point for the week ending June 30, 2011, up from last week when it averaged 4.50 percent. Last year at this time, the 30-year FRM averaged 4.58 percent.  
  • 15-Year FRM this week averaged 3.69 percent with an average 0.7 point, the same from last week when it averaged 3.69 percent. A year ago at this time, the 15-year FRM averaged 4.04 percent.  
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.22 percent this week, with an average 0.6 point, down from last week when it averaged 3.25 percent. A year ago, the 5-year ARM averaged 3.79 percent.
  • 1-year Treasury-indexed ARM averaged 2.97 percent this week with an average 0.6 point, down from last week when it averaged 2.99 percent. At this time last year, the 1-year ARM averaged 3.80 percent.  


  • “Interest rates on 30-year fixed mortgages hovered around 4.5 percent for the fourth consecutive week following mixed reports on the strength of the economy. First quarter economic growth was revised up in the final estimate, but growth in consumer spending stagnated in May while April’s figure was revised downward; consumer expenditures account for roughly two-thirds of the nation’s gross domestic product.
  • “Meanwhile, there were some signs of improvement in the housing market. In April, the S&P/Case-Shiller® 20-city composite home price index rose 0.7 percent, representing the first monthly increase since July 2010. However, much of the improvement reflected the seasonal increase in homebuying over the spring-summer period.  Pending existing home sales rebounded in May, exhibiting the largest monthly increase since November 2010.”
  • Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

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U.S. Housing Market: “Shadow Inventory” In April 2011 Declines To 1.7 Million Homes From Peak Of 2 Million In January 2010; Homes That Are “50% Underwater” With Negative Amortization Loans Climbs To 2 Million Representing Future Defaults

29 06 2011
  •  Shadow inventory for residential properties declined to 1.7 million units in April according to CoreLogic
  •  This five months’ worth of supply is down from 1.9 million units compared to April 2010.
  • Shadow inventory has gone down because there are fewer delinquencies and more distressed sales
  • It will probably take several years for the shadow inventory to be absorbed given the long timelines in processing and completing foreclosures
  • Out of all the shadow inventory supply, 790,000 units are seriously delinquent, 440,000 are in some stage of foreclosure and 440,000 are REO properties
  • Shadow inventory, also known as pending supply, is calculated by determining the number of distressed properties not listed on multiple listing services where the mortgage is 90 days or more late, in foreclosure already, or REO on the books of a financial institution
  • Shadow inventory peaked in January 2010 at two million units, which is eight and a half months’ supply
  • However, there are two million negative equity loans that are more than 50% or $150,000 “upside down.”
  • This would severely restrict the owners’ ability to refinace or sell the home
  • “This is another layer that is sitting behind the shadow,” said Sam Khater, senior economist at CoreLogic
  • How many of those will default is difficult to predict but negative equity of 50% or more increases the likelihood of default

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FHA Mortgage Underwriting: FHA Requires “Funds Documentation” Including Earnest Money, Large Deposits And Gift Funds

28 06 2011

FHA Mortgage Underwriting: FHA Waiver On 90-Day Anti-Flipping Rule Requires Minimum 640 FICO, Two Appraisals, Justification Of Legitimate Renovations And Purchase From “Owner Of Record”

27 06 2011

The FHA (Federal Housing Administration) has extended the temporary waiver of the less than 90-Day Anti-Flipping Rule.  The extension will permit buyers to continue to use FHA financing to purchase HUD-owned properties, bank owned properties and properties resold through private sales through 2011.

  • The minimum credit score to these transactions is 640.
  • Two (2) appraisals are required to support the property value when the increase is greater than 120% in less than 90 days.
  • Justify the increase in value by retaining in the loan file supporting documentation and a second appraisal, which verifies that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer.
  • Property was marketed open and fairly through listing service (MLS).
  • A home inspection ordered in the borrowers name is required when the property value increase is greater than 120%.
  • Multiple flips of the subject property are not permitted.
  • Properties with multiple transfers (more than one), regardless of monetary profit, in the past 12 months, are not eligible for <90 day Credit Waiver.  91-180 days from the last transaction the seller may not sell with an FHA transaction until the 181 day has elapsed.  

Example: Owner A sells to Purchaser B on 12/10.

New Seller B sells to Purchaser C 3/22/11.

Seller C now is selling to Purchaser D on 3/24/11 this would be the 3rd transfer, and the transaction is less than 90 day flip so not eligible for FHA financing. Seller C could not use FHA financing until 12/11 or after.

  •  Receipts for materials and/or contractor bids may be required to show acquisition costs.
  • Changes and overlays:
  1. The second appraisal will impact seller concessions and the second appraisal must be on the GFE at time of application.
  2. The guideline states that the second appraisal is a buyer’s cost that can be paid by a third party (lender, seller, etc.). However, the imortgage rule is that the second appraisal will not be absorbed by the branch.
  3. Property must be purchased from owner of record.
  4. Sale or assignment of sales contract not allowed.
  5. One of the four documents must be provided:
  • Property Sales history report
  • Copy of Recorded Deed from Seller
  • Copy of Property Tax Bill
  • Title commitment or binder

 Common Scenarios:

1. Realtor can sell home, as long as they only play one role in the transaction.  If they are the seller, they can’t be the agent.  Refer to Bulletin attached

2.  If the seller owner who is a Realtor wants to use another realtor in their own office to sell it, then there needs to be a commission to that agent.

3.  If a corporation goes in and acquires and fixes, and sells, that is fine.  If they sell to a realtor to sell, then we have multiple property flips and it is probably not allowed in less than 90 days.

4.  If a contractor purchases a home, and fixes it, and then sells it to a realtor, to sell it, then we have multiple property flips, and it would not be allowed in less than 90 days.

Mortgage Loan “Denial Rates” In The U.S. Increased To 26.8% Of Loans In 2010 As “Income Verification” Hampers Many Potential Homebuyers

25 06 2011


  • The percentage of mortgage applications rejected by the nation’s largest lenders increased in 2010
  • Banks’ cautious lending practices are hampering the nascent housing market recovery
  • The nation’s 10 largest mortgage lenders denied 26.8% of loan applications in 2010, an increase from 23.5% in 2009
  • With the U.S. economy still wobbly, mortgage underwriting will need to be more accomodating to obtain qualified borrowers, not harder
  • Would-be borrowers are having a harder time qualifying as their incomes have fallen or are interrupted by a period of unemployment
  • Self-employed applicants are also hitting barriers to loans—hurdles they didn’t face in the past
  • Lending standards will stay tight in part because government entities Fannie Mae, Freddie Mac, and the Federal Housing Administration, which collectively account for more than nine in 10 loans being made today, are under heavy pressure to avoid any losses

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30-Year Fixed Mortgage Rates Remain Mostly “Unchanged” At 4.50% In Most Recent Week On Reports Of Continued Weakness In Housing Markets

23 06 2011
  • 30-Year Fixed Rates (FRM) averaged 4.50 percent with an average 0.8 point for the week ending June 23, 2011, unchanged from last week when it averaged 4.50 percent. Last year at this time, the 30-year FRM averaged 4.69 percent.  
  • 15-Year Fixed Rates  this week averaged 3.69 percent with an average 0.7 point, up from last week when it averaged 3.67 percent. A year ago at this time, the 15-year FRM averaged 4.13 percent.  
  • 5-Year Treasury-Indexed Hybrid Adjustable-Rate Mortgages (ARM) averaged 3.25 percent this week, with an average 0.6 point, down from last week when it averaged 3.27 percent. A year ago, the 5-year ARM averaged 3.84 percent.
  • 1-Year Treasury-Indexed ARM averaged 2.99 percent this week with an average 0.5 point, up from last week when it averaged 2.97 percent. At this time last year, the 1-year ARM averaged 3.77 percent.  


Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

  • “Mortgage rates were virtually unchanged this week amid further indications of a soft housing market. Although new construction on single-family homes ticked up in May from April, it was still below the overall pace set in 2010. Moreover, existing home sales fell 3.8 percent in May to the fewest since November 2010.
  • The Federal Reserve also reiterated that the housing sector continues to be depressed in its June 22nd policy committee statement. The S&P/Case-Shiller® National Home Price Index fell 2.1 percent between the fourth quarter of 2010 and first quarter 2011. Based on a recent survey by MarcoMarkets  of 108 professional forecasters taken in early June, the index is predicted to decline another 1.5 percent by the fourth quarter of this year.”

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“Stabilization Of Home Prices” Will Be Dependent On The Ability Of FHA, Fannie Mae And Freddie Mac Holding Properties “Off The Market”

22 06 2011


  • The FHA, Fannie Mae and Freddie Mac will begin to take on a larger share of seriously delinquent loans and foreclosed properties
  • Policymakers will be an important factor for home prices, since these entities could in theory be used to hold supply off of the market in an effort to support prices
  • The chart below shows how distressed property sales appear to be weighing on home prices:

  • The FHA, Fannie Mae and Freddie Mac do not appear to be holding  properties back from the market
  • FHA is constrained by costs and it has been trying to raise its capital level after concerns last year that it would fall below required minimums
  • The Treasury is providing temporarily open-ended financial support to Fannie Mae and Freddie Mac
  • Despite federal support, the GSEs have not made any significant new attempts to hold supply off the market.

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