Welcome to Illinois Mortgage Rates and News week in review for the week ending February 20th 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

The markets closed this week with a whiff of panic in the air. Over the last several months, the financial markets have dealt with one crisis after another and gotten used to the fact that Government was now the protector of all our economic interests. In spite of the day to day and week to week chatter, as the troubles spread, affecting the entire global economy, we entered a new normal, and stock prices even rose for a while. Stocks this week fell to their lowest point since the economic crisis began, and they are likely to fall further. The trigger for this was a drop in global stock markets after the Davos Economic conference last week, as the realization took hold that this recession was likely to be longer and deeper than most had expected. Eastern Europe is a basket case and the rest of Europe is in a funk, with exports way down China and Japan are in trouble, and the question becomes who is in a position to pull us out of this?

The other big fear this week was about our banking system and what was to become of the big money center banks. Senate Banking Chairman Chris Dodd used the term nationalization in an interview, and the panic was on. The White House issued a statement on Friday emphasizing their commitment to a private banking system and this calmed the market’s fears by the closing bell. But we are sure to hear more about this in the weeks to come. Nationalization was once unthinkable, and these banks have been considered too big to fail. But over the last weeks voices across the political spectrum, including former Fed Chairmen and free market advocate Alan Greenspan, have said this may be a necessary step if we are to move forward. The Treasury plan to stress test the banks may be a first step in this direction. As their stock prices get beaten down, confidence becomes more and more of a factor. The choices will be for the government to pump more and more money into them to keep them afloat, or to do what they have done with Indy Mac and other failed banks and step in, take control, spin off the toxic assets and re-privatize as soon as possible. It won’t be called nationalization, but the result will be the same.

The other big news this week was the Obama mortgage plan. The plan is designed to help homeowners who are just slight underwater, and those who have a chance of keeping their home if they can modify the terms of their loans. Most critics said this was a good solution, as far as it goes, and it offers incentives to both banks and homeowners to make a modification work instead of pushing the loan into foreclosure where everybody loses. There is the risk of moral hazard, rewarding bad decisions on the part of the homeowner taking out loans they couldn’t afford, but this is by far the lesser evil if it manages to put a floor on foreclosures.

Mortgage rates swung up and down over the course of the week, ending about the same as last week. There was a flight to quality which benefitted both treasury notes and mortgage bonds, and sell offs as new uncertainty arose. Mortgage rates are in a channel right now. If you are planning on refinancing your mortgage and waiting for the right rate, a little patience may be the best strategy. Mortgage rates continue to be volatile and over react to news, both good and bad. A lot of clients are starting the refinance process without locking into a rate. Over the last 2 months the rates have fluctuated in a large range, but there have been several times where rates dropped, sometimes only for a short time, into the low point of the range. If your loan is in process you can lock in for the most benefit at the time. 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 $19.8 billion in mortgage backed securities this week. As of Thursday they have purchased a total of almost $135 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

30 Year Fixed Rate*       5.875%       6.098% APR

Special Pricing – Available up to $750,000 loan amount, 75% LTV Purchase/70% LTV Refinance – some restrictions apply.

(For smaller 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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