Welcome to Illinois Mortgage Rates and News week in review for the week ending March 27^th, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

One of the major factors in getting the economy back on track will be getting the banking system re-capitalized and lending again. The biggest obstacle to that goal is what to do with all the toxic assets, mostly bad pools of mortgages, that are corroding the balance sheets of the big banks. Treasury Secretary Geitner took a first stab at a plan nearly two months back, but that attempt was a bust, no specifics and no real plan. He tried again this week, announcing the Public-Private Investment Program (PIPP) which will use some public funds along with big government guarantees  to encourage private investment in these bad assets and actually make a market for what has up to now been unsalable junk.

The idea behind this plan is that our main problem in the banking system is one of confidence, and with the right incentives, investors will come out and pay higher prices for these assets than what they are now valued at. If this happens as intended, it will allow the banks to get rid of the bad debts which are keeping them from lending now, allow the new buyers of the now toxic debt to come in and do workouts and hold the loans long enough for the market to recover, assuring them a hefty profit for their risk. If this works, the government guarantees won’t kick in and this will be a relatively inexpensive way for the government to fix the problem. The first review of the new plan came from the stock market, and this was a rave review. The stock market, and especially financial stocks, surged on the news. The hope is that this will provide the missing piece of the puzzle and get us moving back in the right direction. It will take a month or two to see how this all works out, and whether the big banks will be willing to put their assets up for auction, and whether the Federal guarantees are enough to bring in the higher bids that will make the program work. Many economists think that this program will help, but it that some of the mega banks are so far gone that the only real solution is some form of nationalization. We’ll know more as this goes along.

There were a few bright spots in economic reports this week. Home sales came in higher than expected causing some to say we are approaching the bottom of the housing slump, durable goods orders came in much higher than expected and inflation data was tame. One month doesn’t indicate a trend, and all of these reports will be subject to revision later. But this week there was more optimistic news on the economy than at any time in the recent months. The stock market has also roared back this month, making this one of the best months on record. I am a true optimist and it is great to see this good news, but next week might not be so sunny. The jobs report comes out next Friday, and that is sure to be awful. Unemployment is still growing and this ripples out with more pain to every other part of the economy. GM and Chrysler are still on the ropes and another bailout is expected next week. The stock market has had a big upswing, but markets are fickle and this rally might be running out of steam.

Mortgage rates are about the same as they were last week, and near their low point. Mortgage rates ticked up a little in the first part of the week but came down after a rally in the mortgage backed securities market on Thursday. This week there were several auctions of new government debt, which usually puts pressure on mortgage rates. New debt supply means more competition for mortgage bonds and usually drives rates higher. Rates moved up a little early in the week, but not much. Fed buying is still keeping rates low, and their commitment to continue buying as long as is necessary will continue to be the biggest factor in mortgage rates over the coming months. One thing I am seeing now is mortgage lenders coming in or out of the market based on their own individual needs. One of our largest wholesale lenders who has been mostly on the sidelines over the last weeks is now pricing much more aggressively than any one else in the market. This means they need more inventory and are lowering their rates in order to get it. This is a good sign moving forward. It means that the big lenders are ramping up and ready for an increased volume of refinances. It also means that if your loan is in and moving forward, you are in a position to take advantage of the low rates as they come.

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 and FHA rates 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            4.875%     5.039% APR

15 Year fixed Rate           4.625%     4.724% 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

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

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

With 1 point origination fee – 45 day lock

30 year fixed rate            4.75%      5.576% APR

With no origination fee – 45 day lock

30 year fixed rate            5.00%      5.494% 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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