Welcome to Illinois Mortgage Rates and News week in review for the week ending April 3rd, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

It always amazes me how quickly we can forget what we previously believed and swing our thinking over to a completely different way of looking at the world. The same thing happens with markets. Just a few short weeks ago the consensus view was all doom and gloom on the stock market. Stocks were low and headed lower. It was almost a sense of panic. Since then the economy has still had its share of bad news, and the overall outlook is not much different now than it was then. But the attitude now has completely shifted. The stock market is roaring upwards and commentators are convinced we are at the bottom of our downswing and ready to resume our upward climb. Over the last few weeks the news has been mixed. There have been some optimistic signs, but a lot of others which weren’t. But over the last four weeks the market ignored the bad news and saw only the good. Commentators who a few weeks ago were throwing up their hands and saying the sky was falling, are now insisting that the sky is the limit. This same attitude is now spreading to views on the overall economy, too. I’m hearing more people say that the worst is over and we are now starting to recover. Maybe.

The week started out with news that the Obama administration was firing GM CEO Rick Wagoner and threatening to let the company, along with Chrysler, slide into bankruptcy if they weren’t able to get their acts together and come up with a viable plan for survival. You can question whether the government is best equipped to make decisions about what is best for a private company (or why they haven’t made these same decisions with the big banks), but when these companies are effectively wards of the state, there isn’t much real choice. The bigger question is whether this is a serious threat, or just tough talk to make the next bail out go down easier. Even an orderly bankruptcy will spike the unemployment rate higher and send out ripples that will mean more jobs lost in all the companies that support the auto industry. With unemployment as high as it is, this would be a real blow. But letting the companies flounder along would just kick the problem down the road while keeping tax payers on the hook. So there is no easy decision either way.

Speaking of unemployment, The numbers for March were released on Friday and they came in right as expected with 663,000 lost jobs and a rise in the unemployment rate to 8.5%. These numbers are real bad on their own, but if you consider those who have given up looking and those who are working part time because they can’t find full time work, the number is much higher, 15.6%. This means that about one out of every six workers in America is now either out of work or underemployed. Unemployment is a lagging indicator and the economy will be well on its way to recovery before the rate comes down. But as the unemployment rate increases this means these families have less money to spend, and many who were able to make their housing payments before, may not be able to now.

There was some good economic news this week. Factory orders rose in February for the first time in six months, consumer spending was up slightly and at the G20 meetings in London world leaders pledged not to give in to protectionist impulses, which would hurt the world economy. One of the biggest stories this week was on an accounting standard that up until recently no one but accountants knew or cared about. One of the root causes of our economic troubles is that the big banks are under capitalized and not in a position to lend because of all the bad mortgage loans they have on their books. With the accounting standards as they are, the banks have had to value these assets based on what they would sell for now, when no one wants these loans. They have pushed for a relaxation of the mark to market rules saying they should have more flexibility in how they value these securities and that if they are able to hold them until a better time, the value would be much higher. Congress was pushing for this change, and the accounting standards board came through this week. This change instantly added equity to the big banks and made it less likely that they will participate in the PIPPs (Geitner bank plan) and will hold more of their toxic loans rather than unloading them now. It is possible that some of these bad loans will be worth much more after the market recovers, but it is also possible that this will just drag out the solution much longer. It strikes me as the equivalent of wallpapering your family room after your foundation has collapsed. It makes it look prettier, but it doesn’t address the real problems.

Mortgage rates rose this week. Bad news is good news for mortgage rates, and with money flowing into the stock market, treasury bills got killed and mortgage backed securities, which often go in the same direction as treasuries, also had a bad week. Rates are closer to the top of the range they have been in over the last several months, but we are still in the range. Rates rose, but not nearly by the amount they would in a normal market. The Fed has committed to buy mortgage backed securities in an effort to keep rates low and their purchases have made the mortgage market much steadier than it would otherwise be. Their calming influence will help to insure that rates remain affordable even when market sentiment is rushing in the other direction. We are still in record low territory, and I think the odds are that we will continue to go up and down in this range. If you are planning on refinancing your mortgage, this is a great time to lower your rate and make your payment more affordable. If you have an FHA mortgage, the FHA streamlined refinance is a way to lower your payment with out qualifying and without having to get a new appraisal.

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            5.125%     5.219% APR

15 Year fixed Rate           4.625%     4.724% APR

5-1 A.R.M.                          4.75%         4.843% 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            4.875%      5.476% APR

 

With no origination fee – 45 day lock

30 year fixed rate            5.25%      5.523% 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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