Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending May 16th, my take on the week’s financial news and how it affected Illinois mortgage rates.

If you follow the news, it was a grim week with talk of natural disasters in Asia, an earthquake in China and a cyclone in Myanmar. With true disasters like this the mess in the real estate and mortgage markets doesn’t look nearly so bad. In fact, there were a few signs this week that we are starting to come out of the worst of the mess. While it is too soon to say that we have reached a bottom, there are signs that point to how we can navigate through this. We are still a long ways from where we were, but in a way we are coming to a new normal, and I see signs of the financial markets stabilizing and the mortgage industry gaining confidence. Two things happened this week that point to this conclusion. One, foreign investors started to show interest in buying mortgage bonds again, and two, Fannie Mae is getting rid of their disastrous declining market policy.

Let’s start out with number two, Fannie Mae’s scrapping their declining market policy. Last December, in a reaction to the down turn in the housing market, Fannie Mae, the biggest purchaser of mortgages, came up with a plan that they thought would shield them from the risk of falling home prices. The idea was to identify markets where the prices were falling, and require a higher down payment in those areas. So if someone was going to buy with what would normally be a 95% loan to value (5% down), in a declining market they would need to put down 10%. The idea was for Fannie Mae to cut their exposure in the worst markets. In a way this was a form of Redlining, a discriminatory lending practice and because of this they became a target for consumer groups. The bigger problem was that it made things worse. By making financing more difficult it took more buyers out of the system, guaranteeing that home prices would continue to spiral down. And while the original idea was to cap off the worst areas, the declining markets started to creep into areas that were looked at as more stable, including portions of the Chicago area, again making sure that prices would continue to fall. The new plan is to go back to the old plan. Financing rules will be the same for all parts of the country, with no hits based on the market condition of the area. This change will be part of the release of the new DU version 7, which is going to be tightening qualifying overall, so it’s not all good news. The changes go into affect staring June first.

The other encouraging sign was a return of foreign investors to the mortgage bond markets this week. The lack of foreign buyers in the mortgage backed securities market has been one factor in keeping mortgage rates higher than they would be otherwise. There is now evidence that the foreign investors are starting to buy again. This means they have confidence that the worst is over, and are willing to vote with their cash. We are also starting to see some movement on some programs that have been given up for dead, like adjustable rate mortgages and Jumbo loans. We’ll see how this develops as time goes on, but it is another encouraging sign.

A lot of economic reports were released this week, and as has been usual in this market, they were a mixed bag. Retail sales numbers dropped, but when low auto sales were factored out they increased by a higher than expected .5%. This could be looked at as proof that consumers are still spending, which means that the economy still has some strength. It could also be looked at as a reflection of higher prices, and the increase is due to inflation. Housing starts unexpectedly moved higher, but again this was a mixed result because the increase was due to a surge in multi unit apartment buildings. Single family home starts dropped for the 12^th straight month. Consumer price index came in lower than expected, which means inflation is still manageable. Good news for mortgage rates. There were some other reports which showed that the economy is continuing to loose steam, and consumer confidence fell again to its lowest reading since 1980.

All this activity meant another see-saw market where volatility was amazingly high. Mortgage bonds tried to break through a layer of resistance, and finally did on Friday afternoon, before giving back their gains and ending down for the session. Still, mortgage rates are about the same as they were last week, and poised at level of support. Over the last few weeks rates have dropped each time they got to this level, but at some point I think we are going to break through and rates will drop down again. If you are in the market to refinance your mortgage, get your papers ready. We’ve had a couple of opportunities where the rates dropped to the lowest points, but the windows were only open for a short time. If it happens again you should be ready to jump on it.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate    5.875%   5.942% APR

15 year fixed rate    5.50%   5.657% APR

5-1 A.R.M.               5.25%     5.398% APR      

7-1 A.R.M.               5.50%     5.659% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.50%     6.674% APR – Requires 20% down payment

(*We have one lender at 6.125% for a Jumbo fixed rate - if you meet their guidelines – 75% loan to value, tighter ratios.)

7-1 A.R.M.*             5.75%     6.014% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS

With 1 point origination fee – 60 day lock

30 year fixed rate   5.75%     6.159% APR

With no origination fee –        60 day lock

30 year fixed rate   6.00%     6.274%

These are just a few of the programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over a situation, let me know how I can help.

Illinois Mortgage Rates and News

Peter Thompson is illinois Mortgage Broker



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