Welcome to Illinois Mortgage Rates and News week in review for the week ending March 6^th, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

The question of the week is, where is the bottom? This question could apply to a number of things, the stock market, unemployment, the housing crisis and our over all economy. These are all interrelated, of course, and bad news in one area means more pressure on the other areas. For now we are trapped in a cycle and the negative feedback loop has us in free fall, wondering if there even is a bottom. Markets run on a battle between fear and greed and right now fear is winning, hands down.

We’ve gotten used to bad news, and as a rule, much of the bad news is already baked into the market prices of both stocks and bonds. But this was a particularly ugly week for news. GM is on the ropes again and the odds of bankruptcy are higher than ever. The biggest banks continue on life support. A record number of home owners are in default of their mortgage or underwater with home values less than the amount they owe. And then the kicker, the unemployment rate this week came in right as expected with a loss of 651,000 jobs last month (horrendous), but the 2 previous months were adjusted downward and the unemployment rate hit 8.1%. The numbers themselves are frightening, but the velocity of the change is an even bigger concern. The economy has shed nearly two million jobs over the last 3 months and more pain is expected.

Consumer spending has been the biggest engine for our growth, but as the unemployment rate rises, fear takes over and even those who have safe jobs are pulling back and feeling nervous. This mans less business, which impacts corporate profits, which mean stocks slide further, hitting 401k values, meaning consumers pull back further, and the cycle keeps itself going. The Government is frantically trying to spend us out of this cycle with the just passed stimulus plan, the hefty new budget and the Fed TALF program which will try and get lending back on track with $1 trillion of loans to consumers and businesses. But so far, government spending is like trying to fill up a bathtub when the drain has been pulled. It’s not going to work if more is flowing out than is coming in.

The conventional wisdom among economists is that we can’t turn the economy around until the banking problems are fixed. The Fed is now administering stress tests to the nation’s 19 biggest banks, but even before the results come back, the consensus is that some of these banks are insolvent now. Up until now the plan was to keep sending them money as they ran low, but this money was used to keep them solvent and not for additional lending. That may be about to change. The FDIC (Federal Deposit Insurance Corporation) is borrowing $500 billion from Treasury, in anticipation for future problems.

There was some good news released this week. Details of the Obama mortgage plan, Home Affordable, were released this week. There are two parts of the plan. One is geared toward those home owners who are behind on their mortgages and at risk of foreclosure. This plan gives incentives for both the home owner and the loan servicer to modify the terms of the loan and to help keep more homes out of foreclosure. This is done directly through the loan servicer. This program has some great features and it will help more than previous plans to stem the tide of home foreclosures. But the other part of the program may have a wider impact. It has been frustrating over the last months as mortgage rates have dropped and refinancing has become a great way for many home owners to lower their rates and payment, but many borrowers couldn’t take advantage of this because their homes had lost value. The Home Affordable DU Refi Plus program allows home owners who have been paying on time to refinance at favorable terms, even if their first loan is up to 105% of their home’s value. Loans have to be held by either Fannie Mae or Freddie Mac, and the specifics of how this will all work are still being worked out. This looks like it could be a big winner for a lot of home owners and it will be available from affiliated mortgage brokers or mortgage bankers. I will have more details as they come available.

Mortgage rates improved this week and are close to their lows again. We have been going back and forth in a range. If you are looking to refinance your mortgage or buy a new home, this may be an opportunity to lock in for a low rate. But it pays to be nimble. Rates have dropped down in this range or slightly below a few times in the last month, but the low rates haven’t lasted long. The Fed bought just over $30 billion in mortgage backed securities this week for a total of almost $190 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          5.00%     5.169% APR

15 Year fixed Rate         4.75%    4.843% APR

5-1 A.R.M.                       4.50%     4.652% APR

For Jumbo loans over $417,000

7-1 A.R.M.                     5.125%       5.279% 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.

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

With 1 point origination fee – 45 day lock

30 year fixed rate         5.00%      6.026% APR

With no origination fee – 45 day lock

30 year fixed rate         5.50%     6.135% 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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