Welcome to Illinois Mortgage Rates and News week in review for the week ending February 13th 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

There are 3 main players whose actions move the economy, consumers, business and government. Consumers and business are mostly sitting on the sidelines, so it is up to the government to pull the heavy weight of getting the economy moving again. The biggest news this week was all centered on government action, the passage of a huge stimulus bill, and the unveiling of the outline of a new plan to fix the banking system. The stimulus plan which passed both houses and is expected to be signed into law on Monday, was a good news – bad news situation. Most economists agree that we need something big and we need it quickly. The good news is that this plan is big, $787 Billion in the final draft. The bad news is we will have to pay for it, and this is a whole lot of money. Even if this does everything it is supposed to, the economy is not going to rebound over night. The best case scenario calls for an improvement in the economy by sometime next year. Others say we will be in this down draft for years.

The plan for the banks was a much anticipated event, and the expectation was that Treasury Secretary Tim Geitner would lay out a full and detailed plan for what the Obama administration would do to take care of the toxic assets that are the root of the problem. Instead, Geitner gave an outline of a plan without a lot of details. It may make sense to not get too specific when it is not clear what the final solution will be, but the stock market took this as a punt, and all the major indexes dropped (but the bond market soared, bringing mortgage rates). The plan wasn’t detailed, but it did lay out the strategy going forward. The first step will be a stress test on the major banks. So far the government has been approaching the problem with a one size fits all solution. The stress test is a way to determine which banks are sound (or sound enough) and could be saved with an infusion of more cash, and which banks are so far gone they will need to be reorganized. You don’t know how to fix something until you do a full examination and see what exactly is wrong. Part of the problem in our banking system is that there are so many toxic mortgage backed securities in the system, but no one knows exactly the extent of the problem, who owns what. This stress test will find out, but the big question is what happens next? If one of the big banks is insolvent, will the government really close it down and reorganize it? We will find out more soon enough. Other parts of the plan include bringing in private investors to buy the toxic assets and using the Fed to pump more money into the system.

In other economic news consumer sentiment moved lower than expected, again, dropping to 56.2 from last months 61.2. This is looked at as a gauge of how willing consumers are to spend money. On the other hand, retail spending came in higher than expected. So are consumers continuing to buy even as they feel more nervous about their own economic prospects? It appears that way, unless this is all revised lower next month when the full figures come in. Some of the mayor loan servicers including Chase, Wells Fargo and Bank of America have announced a foreclosure moratorium for the next several weeks anticipating the Obama plan.

One part of the stimulus bill altered the First Time Home Buyer Credit and raised the level from $7,500 to $8,000 (This is 10% of the purchase price up to a maximum of $8,000). As originally written, this credit would be taken in the first year but have to be paid back over the next 15 years, so it was more of a no interest loan than a true credit. That has been changed and it is now a full credit as long as you stay in the home for at least 3 years. The credit is good for any first time buyer who buys between January 1^st and December 1^st of this year and is available for singles with income up to $75,000 per year, and married couples with income up to $150,000.

Mortgage rates were EXTRA VOLATILE this week. The week started off with rates heading back up, switched around and headed down to the best rates we have seen in weeks, and then ticked up again on Friday. What this means is that a rate quoted in the morning won’t be the same as what you may get in the afternoon. Also, for those who missed the low rates before, we may be getting another chance, but don’t count on the rates staying down. Mortgage rates are based on activity in the mortgage backed securities markets, and rates can change more than once a day. The best rates may be available for only a matter of hours. The Fed continues to buy mortgage backed securities in order to try and lower mortgage rates and stabilize the real estate market. The Fed bought about another $23 billion in mortgage backed securities this week. As of Thursday they have purchased a total of almost $115 billion in mortgage backed securities out of a goal of $500 billion by the beginning of July. Here is a link to the New York Fed which tracks the Fed’s mortgage bond purchases. This number is updated every Thursday.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 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      5.125%    5.276% APR

15 Year fixed Rate     4.75%   4.823% APR

5-1 A.R.M.                   5.125%   5.263% APR

For Jumbo loans over $417,000

7-1 A.R.M.                   5.375%       5.598% APR

(For Jumbo loans consider breaking your loan into 2 parts – conventional to the limit and a HELOC for the rest.)

FHA LOANS – 3.5% down payment

With 1 point origination fee – 45 day lock

30 year fixed rate       5.25%      6.023% APR

With no origination fee – 45 day lock

30 year fixed rate       5.625%     6.245% APR

FHA APR reflects 3.5% 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.

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