Welcome to Illinois Mortgage Rates and News week in review for the week ending September 26th, my take on the week’s financial news and how it affected Illinois mortgage rates.

This week the markets were in limbo as everyone waited for congress to approve some version of the financial bailout bill. The original Paulson proposal has been changed around so there is now more transparency and accountability. At several times over the week it looked like an agreement was about to come together, but politics came in the way as neither party wanted to take the blame for what is sure to be an unpopular program. Even as groups of economists said that this isn’t the right way to handle the crisis, the risk of not doing something quickly was judged as a bigger risk. The markets were fairly calm, but the expectation is that an agreement will be in place over the weekend, before the Asian financial markets open Sunday night.

Some sort of bill is likely to be passed, but the question is, will it be enough? Our entire financial system has been on life support for most of the past year. Ever since the bubble popped in the mortgage backed securities market, the financial markets has been close to frozen. When the system is working, banks lend money to each other and money flows smoothly. This is all based on confidence that whatever money is lent out will be repaid as agreed. Now, with so much toxic debt in the system, the banks are afraid to lend to each other. This is a crisis of confidence that has worked its way from Wall Street down to Main Street, and the fear is that if this isn’t resolved soon, it will cut off credit to businesses of all sizes forcing us into a recession. The idea behind the bailout bill is that using up to $700 billion of tax payer money to buy up the bad debt, it will recapitalize the banks and the banks will then start to lend freely again.

But we could be in a recession already, or at best, the economy is slowing down sharply. Washington Mutual, one of the biggest banks in the country went belly up this week, the GDP for last quarter was down graded sharply. Jobless claims were up and home sales and durable goods orders were down. All of these things would have been huge news in a normal week, but were just side notes this week. With the economy slowing, will this bailout be enough to get the economy back on track? If the banks and investors are still nervous, what is to stop them from holding on to the money they get instead of lending it out freely? Odds are that we are still in for some economic contraction. What does the government have left to offer if this doesn’t work?

I’m not sure where we go from here, but I do see some trends which will have a big impact on mortgages, mortgage rates and the national real estate market as time goes on.

More regulation – Deregulation has been the trend for the most of the last 25 years, not just in the financial markets but in most industries. We are about to see a return to more regulation and government monitoring of any financial transaction.

The big will get bigger – We’ve been seeing consolidation in the financial industry for quite some time. Now the strong institutions, with government backing, are using the distress in the markets to buy up competitors on the cheap. Bank of America and Morgan Stanley Chase have been big beneficiaries of this trend, and it looks like Citi Group is going to buy Wachovia, another lender on the ropes. With less players, will this reduce competition and increase costs for consumers? Probably.

More direct Government control – Through FHA and the takeover of Fannie Mae and Freddie Mac, the government is now the 32,000 pound gorilla in the mortgage market. Over the last year as the market for conventional loans got squeezed with tougher and tougher guidelines for who could qualify for a mortgage, FHA took up a big part of the slack. Now that Fannie and Freddie are direct government charges, their mission will change from making a profit, to making more loans and helping to get the real estate market moving again.

Mortgage rates this week traded in a very narrow range all week as traders sat on the sidelines waiting for a deal to get done.

Here is what Illinois Home 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 illinois mortgage company 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 6.00%      6.136% APR

15 year fixed rate 5.75%      5.819% APR

5-1 A.R.M.            5.875%     6.176% APR

For Jumbo loans over $417,000

30 year fixed rate *6.50%     6.615% APR Special pricing requires 25% down payment or equity

7-1 A.R.M.             6.125%    6.344% APR

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate 5.875%    6.524% APR

With no origination fee – 60 day lock

30 year fixed rate 6.00%    6.486% APR

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

These are just a few of the mortgage 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.

With the fate of the bailout and the reaction of the markets, this should be another eventful week.

Illinois Home Mortgage Rates and News

Have you ever watched the TV game show The Price is Right? The most compelling part of that show is when the contestant has already won something, but they are now faced with a decision. Do they want to keep what they have, or trade it in for the unknown? What lies behind door number two? Is it a fabulous prize like a new car or a trip around the world? Or is it a goat and a wheel barrow? I think it is human nature to always want more, and when I watch the show I find myself rooting for the contestant to take the chance and go for the glory. But if they get the boobie prize, it is easy to feel kind of smug. They should have been happy with what they already had. When you buy a home or decide to refinance your mortgage, you are faced with the same kind of decision. Are you happy with the rates you are offered? Or do you risk it all by going for the unknown and taking your chance on what lies behind door number two?

Once you have decided on a mortgage company and started the mortgage process, one of the first decisions you make is whether or not to lock in your interest rate. This means you have a choice, locking in your interest rate guarantees that this is the rate you will have at the closing, no matter how high mortgage interest rates may rise. On the other hand, you can float the rate, which means you are taking a risk, but you have a chance to get a better rate if mortgage rates improve. One of the services I offer my clients is to keep them informed of what is happening in the mortgage backed securities markets, and let them know about any news that could affect mortgage rates. There are times when the mortgage market is improving and the odds strongly favor rates coming down. At times like this it may make sense to float for a bit and take advantage of the trend. There are other times when the odds say that rates will move higher. At these times the best thing you can do is lock in your rate and be able to relax and sleep at night. Then there are times like now when the market volatility is on steroids and the rate swings are hair raising, but you don’t know if rates are trending up or falling down.

Mortgage backed securities (which mortgage rates are based on) have been volatile all year. Intra day price changes (where lenders change there prices during the day) used to be a rare occurrence. Now it’s normal to have prices change at least once during the day, several times a week. This whole past year has been volatile, but in the past couple of weeks we have really kicked it up a notch. When the government stepped in to take over Fannie Mae and Freddie Mac I called this as a positive for the housing market and that mortgage rates were about to get better. I nailed the call and mortgage rates dropped the next day to their lowest point since last Spring. But since then we have gone from one crisis to the next, and mortgage bonds have swung wildly with almost a half point difference in rate between the high and the low.

So what should you do if you are about to get financing and the markets are in turmoil? In times like this the fear of loss is stronger than the hope of getting a slightly better rate. The safest thing to do is to lock in at the current rates. If you lock in your rate you know what your payment will be, which will save you a lot of anxiety. If interest rates do come down you still have options.

If you have already locked your rate in and the rates tick down  just a little, there’s not a lot you can do. That’s the cost of peace of mind and the security of locking in. But in a market like this it is possible that mortgage rates could improve by a lot.mortgage rates improve by a lot. And if rates do fall by a lot, you want to be able to take advantage of the better rate. You have a few of options:

Renegotiate the interest rate -Lenders are trying to deal with this volatility just like borrowers are. They know that if mortgage rates go down by a lot, their pipelines of loans will quickly empty if they aren’t willing to work with the borrowers. This means that they may be willing to come down close to where the market is when you ask for the better rate.

Flip the loan – This means we would take your loan file from one lender and relock it with a new lender. This is something that we can do, but it’s usually not the best option. Let me explain. When I (or any mortgage broker or mortgage banker) lock in a loan I lock the rate in with a wholesale lender. The lender hedges the loan by buying an option on the mortgage backed securities market, guarantying that they will be able to take on the new mortgage at locked interest rate no matter what happens to rates between then and the closing. It cost the wholesale lender money to do this, so they expect and demand that the banker or broker close a high percentage of the loans they lock with the wholesale lenders. There are penalties if that doesn’t happen, and if it happens too much, the broker can be dropped from the  lender’s list. If this happens too often you run out of places to work with or your cost to make a loan gets too expensive. So it is better to renegotiate if possible, but if that isn’t possible and there is enough time, I will flip the loan to get the client the best rate.

No Cost refinance – Sometimes the rate doesn’t drop until after you’ve already closed. If that is the case, we can usually offer a no-cost refinance so you don’t have to stay at the higher rate any longer than you need to.

The financial markets have been nervous lately, but you can keep calm and safe by making the right moves.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 19th, my take on the week’s financial news and how it affected Illinois mortgage rates.

I expected this to be a wild and volatile week. I never expected it to be this wild. There was a near melt down in the financial markets and at the end of the week in an unprecedented move, the government was putting together a bailout of the entire banking system. Ever since the credit crunch kicked in over a year ago, the economy has been crippled by a lack of credit. All this goes back to the banks and brokerage company’s exposure to bad mortgage loans. While the real estate market was hot, they loaded up on loans that seemed risky at the time, and down right stupid in hindsight. It was a herd mentality that said risk didn’t matter as long as home prices continued to rise. When the bubble popped, the market for these securities disappeared overnight. Pools of theses riskier mortgages (Sub prime and Alt A loans) which used to sell for a premium, were suddenly so toxic that investors wouldn’t touch them at any price. The economy runs by money constantly changing hands. All these loans were like a game of hot potato or musical chairs. You were safe as long as the music was playing and the money and loans were being passed along to the next in line. But when the music stopped, these financial companies were stuck with billions of dollars of loans that they couldn’t sell. Their balance sheets overloaded with debt, they had trouble borrowing and cut back on who they would lend to. With less credit available, the economy has contracted and the real estate market has continued to fall, cutting the value on their collateral causing the entire market to cycle lower to the point this week where the system almost collapsed. Now the government is stepping in with a plan to buy out all the non-performing loans at a deep discount, as a way to bring liquidity back and get the banks to start lending again.

This week started out with Lehman Brothers forced into bankruptcy and insurance giant AIG being virtually nationalized by the government to keep it from failing. The Fed along with a consortium of other national banks extended another $250 billion dollars of credit into the financial system. These were the latest in a long line of falling dominoes. Over the course of this year the Fed and Treasury have stepped in to bail out Bear Stearns, sent out billions of dollars of stimulus checks, opened the discount window several times making credit easier for the big banks and brokerages, rescued Fannie Mae and Freddie Mac, and took over AIG. Each move was supposed to be the one that made the difference. This time they have abandoned the piecemeal approach and decided to take on the whole enchilada. The plan will allow these companies to sell off their toxic loans to the government at a deep discount, getting the junk off their balance sheets and putting them into a position where they can lend and money can flow again. The cost of this plan will be as much as 1 trillion dollars – about the cost of the Iraq war.

How this all turns out depends on the details of the plan. The Fed and Treasury are working through the weekend to get something to send to congress. The balancing act will be who they will allow into the program and how they will buy out the toxic loans. The truth is that as toxic as these loans are, there is some value there. Many of the loans in these pools are non-performing, that is in default or in foreclosure, but many are also paying as agreed. If the government takes on these loans, provides workouts to the ones that are in trouble and sells off as the market improves, it is even possible that they will end up making a profit on the deal. On the other hand, the last time they tried this, after the savings and loan crisis in the 80s, much of the best assets were sold to politically connected companies who then made the profits. However it happens, in the short term the treasury will be printing more money to fund this plan.

So here are my questions:

Is this enough to restore confidence and get the markets moving again?

How will this plan affect mortgage interest rates?

Will this be enough to kick start the real estate market?

At this point we don’t know any of the answers. A big part of this crisis is due to a lack of confidence. The economy was surging forward on a wave of greed, but now fear has gripped the markets. The stock market has signaled that it likes the plan so far, but who knows whether this is a long term positive or if fear will win out again, and more will be required.

I’ve been pondering how this will affect mortgage rates and so far I don’t have a clue. On the one hand, this buyout is inflationary, the government will print more money to make it happen, and mortgage bonds hate inflation. This points toward higher rates on mortgages. On the other hand the credit crunch has taken money out of the system and the bad loans being marked to market mean we have lost a ton of global value. The economy is still slowing and this plan won’t turn that around any time soon. The whole point of this emergency plan is to stabilize the real estate market and the way to do that is to get mortgage rates down. If confidence is restored, the spread between treasury bills and mortgages would narrow and mortgage rates will come down. Will see how this plays out over the next weeks.

As to the real estate market, there are a lot of prospective home buyers sitting on the side lines waiting for the right time to jump in. If this is the event that signals that it is okay for them to make the move, we could see the market come to life. There is still a lot of inventory to work through, and with the foreclosures on the market there are still more sellers than buyers available. So I don’t see home values rising quickly, but my guess is that we may be closer to the bottom than people think and this will start to turn things around. It won’t be a quick process, but there will be opportunities, and if you are prepared, it could be a great time to buy.

Mortgage rates this week were all over the board. The week started with a flight to quality into mortgage bonds and rates dropping near their lows for the years. Then as panic set in, we had a roller coaster market where each day the swing between the high and the low was nausea inducing. On Friday mortgage bonds bounced around in a range of over 100 basis points, ending up down for the day but better than their low point leaving rates up for the week.

Because of all the confusion in the market this week, I’m going to hold off on posting the current rates. If you want to know what Illinois Home mortgage rates look like today, give me a call or contact me and my illinois mortgage company and I’ll take the time to find the rate and program that is best for you.

Next week promises to be just as wild. Stay tuned and buckle your seat belts.

Illinois Mortgage Rates and News

These last few weeks have been scary times in the financial markets. It felt like an earthquake a little over a week ago when the government stepped in and took over mortgage giants Fannie Mae and Freddie Mac. The ground shifted on Wall Street again this weekend as the feds declined to save Lehman Brothers, letting one of the biggest players on Wall Street go bankrupt as a result of its exposure to bad mortgage loans. Bank of America also bought out Merrill Lynch this weekend for pennies on the dollar, avoiding another big name bankruptcy. The earth moved again Tuesday night when the US government stepped in to save AIG, a huge international insurance company that was overloaded with credit swaps linked to mortgage debt. The AIG deal is structured as a 2 year loan of 85 billion dollars in exchange for 80% of the company’s equity. AIG has a tremendous amount of assets, but if it was forced to liquidate quickly at fire sale prices, it would wreak havoc on the financial markets. So unlike Lehman Brothers it was considered too big too fail, and chances are good that the Fed will get our money back. The earth is still shaking, and with companies like Washington Mutual and Morgan Stanley still on the brink, we know there are still many aftershocks to come. Is it time to panic yet?

This mortgage crisis is showing how interlinked our financial system is. This isn’t just happening here, repercussions are being felt across the globe. The stock market has had an awful week, and even the safest investments like money market funds are affected. This is a crisis of confidence in our entire financial system. The use of derivatives, complicated financial instruments like collateralized debt obligations and credit default swaps which slice and dice a pool of mortgages or other financial assets into a variety of new investments, is at the heart of this crisis. The goal of these products was to increase return and cut the risk for the investor. But the truth was that the derivatives were so complicated that most investors had no idea what they were really buying, and what the true risk of the underlying assets were. These derivatives were sold based on the confidence that someone knew what they were doing, and that the risk and returns were as advertised. That has turned out not to be the case, and investor confidence is shaken. There is no doubt that these are scary times.

But this isn’t the end of the world if you are able to look at this with a long range perspective. The government was late figuring out that this was a problem, but they are now very actively managing the crisis. This morning the Fed stepped in with a consortium of foreign central banks and pumped another 247 billion into the financial system in an effort to increase liquidity and boost confidence. The impression is that what ever needs to be done will be done.

So the question is, how does this affect you as a home buyer or home owner, and what can you do now?

Don’t panic – If I could go back in time, I’m sure I would have done some things differently. But what is done is already done and it is too late to change. There will be more bankruptcies and more shocks to the system in the weeks and months to come. But I’m guessing that we are a lot closer to the bottom now than we were before.

Focus on the long term — I try not to look at my stock accounts or 401k balance too often, especially lately, because I know I’m not going to like what I see. At the same time I’m not planning on spending the money anytime soon, so the loss now is just on paper. It is the same with my house. I know it was worth a lot more a few years ago than it is now, but I don’t plan on moving any time soon, so the paper loss I have now is no more important than the paper gain I could have sold it for a few years back.

Take advantage of opportunities – In every crisis there is an opportunity. The old saying is that the time to buy is when there is blood in the streets. The housing market has seen its share of blood lately, and if you are willing to go against the crowd, this is a time where you can find some real bargains. House prices are much lower than they were over the last several years, and sellers are starting to accept the reality of the market. Interest rates are also near their low for the year, so you can buy more of a house at a lower interest rate than you could before.

The same thinking applies if you already own your home and have no intention of moving. The bad news in the economy could be an opportunity for you to improve your own financial position. The low interest rates we are seeing could allow you to refinance your higher rate mortgage for a lower interest rate mortgage. Or get out of your adjustable rate loan and into a more stable fixed rate. You should also look at your over all debt structure. If you have a lot of credit cards and consumer debt, the equity in your home could be restructured to pay off your debts and roll it into your mortgage, which could save you hundreds of dollars per month, giving you some extra breathing room. Rates are low now, take advantage of the low rates while you can.

Put yourself in the best situation for later – With the problems in the financial industry, it is harder to qualify for a mortgage than it used to be. Maybe you aren’t able to take advantage of the opportunities now, but you can work on improving your position so you can be in a better position soon. That could mean fixing some problems with your credit, or saving for a down payment. Working on your problems now will help you get where you want to go later.

There is no question that these are scary times, but my guess is that we will get through this and our financial system will be stronger in the end. If you take advantage of the opportunities as they present themselves, you could be in a stronger position, too.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 12th, my take on the week’s financial news and how it affected Illinois mortgage rates.

It’s beginning to seem like all the most important news happens on the weekends. At least that’s the case in the financial markets lately. Last week the big bombshell was the government takeover of mortgage giants Fannie Mae and Freddie Mac. This takeover was something that had long been expected, but it wasn’t looked at as an imminent event. After all, just a month before, the Fed and the Treasury made a joint statement that they were fully prepared to stand behind Fannie and Freddie. There has always been an implicit guarantee that the government would step in if necessary to keep the mortgage market functioning, but the guarantee made it official. Only this wasn’t enough to restore confidence to the markets. Fannie and Freddie’s stocks remained on death watch, and the markets remained in turmoil. So last Sunday morning the Treasury pulled the trigger and the entire mortgage landscape has now changed.

The immediate impact of the bailout was that mortgage bonds soared on Monday and mortgage rates dropped down to the levels they were at last Spring. But so far this has been a one day rally. Mortgage rates are dramatically better, but are now going back and forth in a tight pattern. The big improvement in rates was a result of mortgage bonds now being seen as much lower in risk than they were before the government stepped in. As part of the rescue agreement, the Treasury also indicated that it would be buying up mortgage backed securities. This should mean that rate will drop lower, but in order for that to happen, bond market investors will need to come into the market stronger than they have up to now. So the question is, what are they waiting for?

One thing could be is that it’s a weekend again. Several big companies are in trouble. California banking giant Washington Mutual is near the end of the road and said to be in buy out talks with JP Morgan Chase. And investment house Lehman Brothers, another big player in the mortgage security market, is also on the verge of breakup. The question here is if the Treasury is going to step in and fund these transactions, too. Fannie and Freddie were too big to fail, but if the government continues to fund these buyouts, it dilutes the value of government debt and erodes the value of the dollar. Corporate welfare is a growth industry now, and it’s not just the financials. GM and Ford are hoping for handouts, too. Being that most of the buyers of our bonds, both mortgage and T-bills, are foreign governments, this is a huge concern.

Most of the reports issued this week showed more proof of a slowing economy. Retail sales were much worse than expected (the stimulus checks have now all been spent) for the second month in a row. Jobless claims again came in high, again. And producer prices were down, a signal that inflation is coming under control. This is a function of oil prices, which are now just over $100 per barrel, their lowest price in months. All that news is bond friendly (bad news is good news for mortgage rates) and reason to expect that rates will dip lower. On the other side, the consumer sentiment index came in 10 points higher than expected, a sign that consumers, at least this month, are feeling a little more optimistic about the economy.

Mortgage rates dropped about 3/8s of a point this week and are now at the lowest point in months. Fixed rates have come down a lot. Adjustable rate mortgages and Jumbo loans haven’t had the same move, yet. The mortgage bond market finished the week on a down note, with mortgage rates rising for the day, but still strongly down for the week. What this all means is that if you are in the market to buy a new home, or if you’ve been thinking about refinancing your mortgage, this is a great time to get a mortgage. If you need help, give me a call.

Here is what Illinois Home 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 illinois mortgage company 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 5.75% 5.849% APR

15 year fixed rate 5.50% 5.629% APR

5-1 A.R.M. 5.375% 5.476% APR

For Jumbo loans over $417,000

30 year fixed rate 6.50% 6.615% APR

7-1 A.R.M. 5.875% 6.042% APR

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate 5.50% 6.124% APR

With no origination fee – 60 day lock

30 year fixed rate 5.875% 6.316% APR

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

These are just a few of the mortgage 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.

Next week along with several important economic reports being released, there is also a Fed Open Markets Committee meeting (no one expects them to raise rates) and the continued fall out from the Fannie and Freddie bailout. I expect another volatile week.

Illinois Home Mortgage Rates and News

Not so long ago it looked like the FHA Down Payment Assistance programs (DPAs) were gone for good. The DPAs were one of the last ways available for first time home buyers Loan and others who were short a down payment but otherwise qualified, to buy a home with no money out of their own pocket. This program was a way to launder a seller’s equity and use it as the basis of a grant from a charitable group like Ameridream or Nehemiah (here is a detailed look at how FHA DPAs work). But the DPAs were cut as one of the provisions of the new housing bill due to go into affect October 1^st. It now seems that rumors of their death may be greatly exaggerated. A compromise deal to save the DPAs appears to be about to be accepted, and the FHA Down Payment Assistance programs could be back in business before the end of this month. (here is a detailed look at Chicago mortgage refinance ).

The DPAs have long been controversial. FHA has linked the DPAs to a higher default rate, and they’ve been trying to shut them down for years. Ameridream and Nehemiah, the two biggest DPA Charitable organizations, contest the default figures, and claim that the defaults are more a function of fraudulent loans than problems with the down payment programs. It’s been estimated that 30% of FHA loans have been combined with a DPA, so this has been a big factor in the market. After the housing bill was released, a group of Realtors, lenders, builders and community organizations led the fight to get the DPA reinstated. But it looked like this was a done deal. FHA claimed that the problems with the DPAs were severe enough that it could bankrupt the entire FHA system.

My experience has been different. FHA loans aren’t and never have been Sub Prime loans. These loans are fully underwritten and the borrowers need to show that they have the income, job stability and credit responsibility necessary to handle their mortgage obligations. The down payment is one piece of the puzzle, but not the whole picture. I’ve worked with many borrowers who were otherwise great prospects to buy a home, but had not been able to save enough for the down payment and closing costs. FHA with a grant from Ameridream or Nehemiah was a way to get them into their first home. The problem as I see it wasn’t the lack of a down payment on its own, but the layering of risk. In other words, a first time home buyer with a good credit history, a good income and some money in the bank was likely to make their mortgage payments on time, whether they contributed a down payment or not. On the other hand, a borrower with a low credit score, an inconsistent job history and high debt ratios was already on shaky ground, and the lack of a down payment just increased the risk of default.

With the new compromise it looks like FHA is coming around to this way of thinking. According to details released by House Financial Services Committee Chairman Barney Frank, a new bill will allow the DPAs to remain, but with limits and risk based pricing. Those home buyers with credit scores of 680 or above would be automatically eligible for the program, those with credit scores between 620 and 680 would be able to take advantage of the DPAs, but their mortgage insurance premium would be higher. This compromise makes a lot of sense to me. When the real estate market is soft, taking away one of the best programs available for first time home buyers didn’t make much sense. This will take the riskiest loans off the table while still offering the program to more credit worthy borrowers. The new bill appears to have enough support to get through and is expected to be in place by the end of the month. I’ll have more details as they come available.

Illinois Mortgage Rates and News

When mortgage chicago il rates started moving up at the beginning of this summer, many people thought they missed the boat on any chances of refinancing their mortgage and getting a better interest rate and payment. Well, the boat is on the way back to port and it looks like you are about to get another chance. With the weekend takeover of Fannie Mae and Freddie Mac, the government is now standing fully behind these mortgage giants. This move was a green light for investors to buy more mortgage bonds, as the risk on mortgage bonds is now roughly the equivalent of buying Treasury securities. The mortgage bond market had a huge day yesterday, and mortgage interest rates have dropped.

Why would you consider refinancing ?

• You can lower your interest rate and payments.
• You can shorten your loan term and pay your mortgage off early.
• You can take cash out for home improvements, college expenses, investments, or whatever your needs may be.
• You can restructure your debts with a refinance to get rid of your high interest credit card balances and save hundreds of dollars per month.
• If you bought with a low down payment, you can often refinance to get rid of mortgage insurance or your higher rate second mortgage.

· You can get rid of an adjustable mortgage and lock in to a fixed rate.

No one knows if this is a one time improvement for mortgage rates, or if the rally will continue and rates will keep on dropping. But we do know that mortgage rates are back in the 5s, and refinancing makes sense again. Contact me for a personal quote on an Chicago mortgage refinance.

Illinois Mortgage Rates and News

As expected, the US government stepped in today and placed Fannie Mae and Freddie Mac into a conservatorship under federal control. This is the long talked about bailout of the two mortgage giants. This action has been anticipated for a while as both the Fed and Treasury Secretary Paulson announced a month ago that they were ready to stand behind and guarantee any losses. Announcing the guarantees calmed the markets at first, but further losses have now forced the Government’s hand. The new plan means that the Federal Government is not just standing behind Fannie and Freddie, but propping them up completely. They now have virtually unlimited access to capital. This plan will dilute common shares of stock in the companies to the point they are near worthless. Preferred shares (owned mostly by big banks) will still be viable, but a new treasury class of preferred stock (owned by the Treasury) will be issued. This new stock will have first dibs on any profits the company makes, and the stock holders won’t see any dividends until all the money lent from the treasury has been paid back.

By doing this over the weekend (as they did with Bear Stearns several months ago) the intent is to avoid a panic in the markets. The initial response is positive. The Asian markets are rallying on the news as I write this. But the initial reaction is not always the lasting response. It is hard to know how this will play out in the short term, but in the long run this should bring mortgage rates down and be a boost for the real estate markets.

Over the last year the mortgage chicago il market has been nearly frozen. Investors in mortgage backed securities, lacking confidence in Fannie and Freddie being able to stand behind their losses, have avoided mortgage bonds and demanded a much higher premium for those they bought. The spread of mortgages over Treasury bills used to be about a 1% premium, over the last year it has grown to about 3%. All the big banks have huge portfolios of mortgages they haven’t been able to sell. Fannie and Freddie have pulled back and are only taking on the most risk free loans. With the US Government behind it, this will give investors the confidence that if they buy a mortgage bond, they won’t be left holding the bag if Fannie and Freddie go down.

The markets will be volatile this week, but when this all shakes out I expect that it will lead to a more normalized exchange and that the risk premium (the spread between mortgage bonds and treasury bonds) will begin to narrow. That means rates will come down.

This is an unprecedented move, and it puts all the risk of losses on the tax payer’s shoulders. With a combined portfolio of about $5 trillion this is a huge risk, but the risk of doing nothing would be worse. The hope is that over the next 5 years as the real estate market improves, this could actually pay for itself. We will see how it all shakes out, but I think this is a good sign for the real estate market.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 5th, my take on the week’s financial news and how it affected Illinois mortgage rates.

It’s official. The biggest threat of inflation has passed and the weakening economy is our worst fear going forward (for this week anyways). Mortgage bonds are in full rally mode now, which means Chicago mortgage rates are moving down. Rates are at the best level in months, and this rally may have some more room to go. Over the last 3 months all the talk from the financial pundits (and many Fed Chairmen) has been about how inflation is set to ravage our economy. But now oil prices are down to $105 per barrel (from a high of $147 in July), and the economies in Europe and Asia are skidding to a halt. The dollar is showing signs of life and this all leads to money flowing out of stocks and into Treasury Bonds as a flight to quality, with mortgage backed securities going along for the ride.

The economic news this week showed more signs that the Fed won’t be raising rates any time soon. The ISM index, a survey of national purchasing managers, came in at 49. Anything below 50 is a sign that the economy is down. The Fed Beige Book showed that most areas of the country are showing signs of economic weakness. Productivity was up slightly, but that just shows that producers are able to get more out put with less labor. The biggest report of the week was the unemployment report released this morning showing an increase in the unemployment rate from 5.7% to 6.1%, the highest it has been in the last five years. The report showed a loss of 84,000 jobs for the month (worse than the 70,000 loss that was expected) and the previous 2 months were also revised lower. Remember, with new population growth, it takes an increase of about 150,000 new jobs per month just to stay even. We now have less people employed than were at this time last year. Several Fed members also gave speeches, and the consensus was that we are going to be muddling through for a while, and inflation is, or will be under control.

A bigger story may be brewing this weekend. According to articles in the Wall Street Journal, Washington Post and New York Times (Hat trip to Calculated Risk), Fannie Mae and Freddie Mac are about to be put into a conservatorship under government control. This is the long talked about bailout of the two mortgage giants, and it would likely wipe out any equity stock investors still hold. It’s not that this action is unexpected, both the Fed and the Treasury Secretary announced a month ago that they were ready to stand behind and guarantee any losses. But knowing a bomb is out there and hearing the explosion are different. If this takeover happens as they expect, it will be another interesting weekend, and it will have a big impact on the markets on Monday. (here is a detailed look at Chicago mortgage refinance ).

Mortgage bonds improved most of this week, but after the worse than expected employment numbers bonds actually ended the day worse than where they started. Still, it was a major rally for the week, and some profit taking by traders is expected. Technical indicators show that we may have some more room to run. One unknown is how low oil prices will go. Some analysts doubt that they will go below $100 per gallon. If they do OPEC could shut off the spigot and reduce supply to keep prices high. That may be harder to enforce than it has in the past, and with the economy slowing they may need to cut back a lot to keep the price propped up. What this all means is that if you are in the market to buy a new home, you may have better rates in your future, and if you’ve been thinking about refinancing but weren’t able to get it done when the rates were lower, you may be about to get a second chance. Either way, if you need help, give me a call.

Here is what Illinois Home 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 illinois mortgage company 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 6.125% 6.254% APR

15 year fixed rate 5.625% 5.789% APR

5-1 A.R.M. 5.46% 5.576% APR

7-1 A.R.M. 5.69% 5.735% APR

For Jumbo loans over $417,000

30 year fixed rate 6.75% 6.834% APR

7-1 A.R.M. 5.99% 6.103% APR

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate 5.875% 6.463% APR

With no origination fee – 60 day lock

30 year fixed rate 6.00% 6.472% APR

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

These are just a few of the mortgage 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.

Illinois Home Mortgage Rates and News

Chicago, Illinois – One of the major differences between FHA loans and conventional loans is how the loans are approved. Conventional loans are almost entirely dependent on the automated approval, that is as long as you put the right information into the computer (Getting the information right is one of the jobs of a good mortgage broker or mortgage banker) and provide the matching documentation, the automated decision will stand. FHA is different. With FHA there are two ways to get your loan approved, through the automated decision, or with an FHA manual underwrite. FHA is also different in that any credit issues that show on your credit report (especially over the last 2 years) will need to be explained. If you already have an automated approval, this is more of a matter of dotting the I’s and crossing the T’s. If you can’t get your FHA loan approved automatically, your credit letter may make the difference in whether or not your loan is approved.

First of all, if you’ve had serious credit problems you need to ask yourself if you really are ready to buy a home. This can be a hard question to answer, but if you have been struggling to pay your bills on time, buying a house is probably not the right decision for you. At the same time, I’ve seen many cases where the borrowers were good credit risks who for one reason or another had a situation that made it hard to pay their bills on time. This is especially true when the problems were caused by circumstances beyond their control, like a job loss or medical emergency. If you are looking to buy make sure you are back on your feet and your finances are under control. Another thing to look for is to see if the problems on your credit report are correct. If there are mistakes on your report and you can show that they are mistakes, you can get the report cleaned up before it is submitted to underwriting.

An FHA letter of explanation is used to explain exactly what happened and to give the underwriter a reason why she (or he) should approve the loan in spite of all the reasons she has to deny it. In other words, this is your opportunity to make your own case for why you are a good credit risk even though you show some credit problems and your scores may be low. Bad things happen to good people. There is a big difference between someone who runs into tough circumstances and has a hard time taking care of their obligations for a while, and someone who just doesn’t bother to pay their bills or who takes on credit without figuring out how they will make the payments. The credit letter of explanation allows you to say in your own words why this was a temporary blip and that you are now ready to take on more credit.

So what are underwriters looking for in your FHA credit letter? In a nutshell, they are looking for 3 things.

1. The problems were a one time event, not a regular pattern. This is especially true if you can show that this happened due to circumstances beyond your control.
2. What did you do when faced with this difficulty? The key here is to explain what you did to get yourself back on track. Have you paid off the debts? Are you on a payment plan? You need to show that the credit problems have now been dealt with and are not a current concern.
3. Why won’t this be a problem in the future? The underwriter is putting her credibility on the line when she approves a loan manually. You need to be able to show what has changed so the problems won’t happen again. Has your income increased? Are your expenses lower now? What in your life has changed for the better that will give the underwriter confidence that she is not making a mistake in approving your loan?

There are a few things to keep in mind when writing your letter:

Authenticity, be yourself. This isn’t an English paper and won’t be graded on spelling or punctuation. Explain what happened just as if you were talking with the underwriter face to face. Don’t try and shorten the explanation. Take as much time as you need to get the story right.

Document everything. If you have a good story to tell, you will also need to show proof to make your case.

So what happens if you don’t fit these guidelines? Most situations fit under the automated approval, even situations which show some rough credit. So if you have some good compensating factors you may be in a better position than you think. But in many cases the best thing you can do is use this as motivation to get your credit back in order and be ready to buy a home down the road.

Here is a series of posts I wrote on how to clean up your credit and increase your credit scores:

How to understand and make the most of your credit score part 1

How to understand and make the most of your credit score – part2

How to understand and make the most of your credit scores -part 3

How to understand and make the most of your credit scores – part 4

Illinois Mortgage Rates and News