Welcome to Illinois Mortgage Rates and News week in review for the week ending August 1st, my take on the week’s financial news and how it affected Illinois mortgage rates.

Allow me to take a moment away from the weekly mortgage rate update to mark an anniversary, of sorts. No, there are no holidays, no president’s or celebrity birthdays that I know of, and if it is your wedding anniversary, congratulations, but that’s not what I’m talking about either. Give up? This week marks the 1^st anniversary of the mortgage crisis and the resulting credit crunch. Celebrating probably isn’t on the agenda, but it is worth a look back to see what happened and how much has changed over the last year.

I mark this as the anniversary of the start of the mortgage mess because it was just a year ago that American Home Mortgage (AHM), the 10^th largest mortgage lender in the country at the time announced they were shutting down operations and going bankrupt. There were a few small sub-prime outfits that had gone bust before this, but American Home’s demise was so sudden and so unexpected it caused an earthquake in the mortgage industry and set off a chain reaction which sped through the mortgage industry, Wall Street and our whole economy.

AHM wasn’t involved in sup-prime mortgages, but they did do a lot of stated income and no verification loans for borrowers with good credit. These loans had been one the hottest products in the mortgage market and because the interest rates were higher than the normal conventional loans, Wall Street couldn’t get enough of these loans to fill up its pipeline. But house prices had started to slide and loan default rates were edging higher. Suddenly their appetite for these riskier mortgages dried up and they stopped buying the loans from wholesalers like AHM entirely. Like a game of hot potato, you don’t want to be the one holding the spud when the music stops. AHM had a whole portfolio of unsalable loans which they had leveraged to the hilt. On Friday it was business as usual, on Monday they were effectively out of business.

After that it seemed like a new lender bit the dust nearly every week. Wall Street had their casualties, too and soon it wasn’t just sub-prime mortgages that were toxic, but all mortgages. Now a year later, mortgage underwriting is much tighter, home prices are much lower, and the mortgage crisis is still a fixture on the front page news. A year ago I don’t think anyone would have predicted that the sub-prime mess would lead to a bailout/rescue of Fannie Mae and Freddie Mac. But now, a year into it, how far are we from the end? I think we are through the worst of it, but we will be dealing with the repercussions for a quite a while. Mortgage guidelines were too loose for a while and now they are tighter than they should be. But if you are looking to buy a new home you can buy it a lot cheaper than you could just a year ago. With home prices coming down more buyers will come into the market and eventually lenders will start looking at the opportunities not just the risks.

The biggest mover of mortgage rates each month is the jobs report. The unemployment rate released today rose to the highest level in more than four years. Payrolls fell by 51,000, less than the 65,000 forecast, but enough to drive the unemployment rate up to 5.7%. Earlier in the week consumer sentiment came in at a low51.9 reading, but that was better than what was expected. The Institute for Supply Management’s factory index fell to 50, again, slightly higher than projected and right at the dividing line between expansion and contraction. The upshot is that the economy is struggling and will probably get worse, but it isn’t plunging lower. This also means the Fed is unlikely to raise short term rates any time soon.

Mortgage rates improved most of the week and we are now at the best rate in the last month. 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 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% APR

5-1 A.R.M. 5.75% 5.867% APR

7-1 A.R.M. 5.875% 5.989% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.50% 6.634% APR – SPECIAL PRICING –

Requires 25% down payment

7-1 A.R.M.* 6.00% 6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate 6.375% 7.169% APR

With no origination fee – 60 day lock

30 year fixed rate 6.625% 7.135%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

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 your situation in depth, let me know how I can help You, Contact your illinois Mortgage Company Today !

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