Earlier this week, President Obama announced a new plan to rework the HARP program designed to help more homeowners take advantage of low mortgage rates. The HARP program covers loans that were taken over by Fannie Mae (DU Refi Plus) and Freddie Mac (open Access). When the program was first rolled out, the idea was to allow homebuyers to refinance even if their homes had lost considerable value. The program was originally set to allow home owners to refinance based on their original mortgage terms, so if you had put 20% down when you first bought the home, the new loan would be treated as the same and you wouldn’t need to buy mortgage insurance, even if the value was much less now. Originally the program was set to that help even borrowers who were underwater, that is they owed more on their home than the property was worth, and the guidelines allowed up to 125% loan to value (negative equity of 25%). Unfortunately, this program worked better on paper than in real life. It worked great for the best borrowers, those who had lost value but still had some equity and had put down larger down payments originally. But it didn’t work as well for those who had second mortgages attached (many second mortgage lenders wouldn’t subordinate their loans, a necessity to refinance), and though the program went up to 125%, all the lenders put in their own overlays making it impossible for most borrowers to refinance if they didn’t have some equity in the home. As a result, the original program didn’t work any where near as well as intended, and many other wise well qualified home owners were left out in the cold.

This new version is designed to fix these problems and to help all the home owners who continue to make their mortgage payments even though their value has gone south. One of the main problems with the original plan was that Fannie and Freddie passed much of the risk on to the lenders through the representations and warranties written into their purchase agreements (most of the conventional loans are bought by Fannie or Freddie even if another lender handles the servicing or collecting the payments). The issue here is that if a loan went into default or some problem was discovered in the loan package, Fannie and Freddie could force the lender to “buy back” the loan. If a lender is forced to buy back a loan, this is an immediate loss. The fear of buy backs has been a big part of the tightening of approval guidelines over the last few years. This new version of HARP takes this off the table, and allows refinancing even if their value has declined beyond the 125% set in the first go around. So far we have the broad strokes of the program, but the details won’t be released until November 15th 2011. The first applications can be taken after December 1st. There are sure to be issues that have to be worked out, but this looks like it will help a lot of responsible home owners who owe more than their homes are worth take advantage of today’s record low interest rates.

Here are some of the changes with the new version of HARP:

1. Eliminating certain risk-based fees (price hits or loan level price adjustments) for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers.
2. Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac.
3. Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac.
4. Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises.
5. Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

To Qualify, Borrowers must meet the following:

1. The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
3. The mortgage cannot have been refinanced under HARP previously.
4. The current loan-to-value (LTV) ratio must be greater than 80%.
5. The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

To see if your loan is held by Fannie Mae or Freddie Mac, here are the links to the look up tools:

FANNIE MAE LOOKUP

FREDDIE MAC LOOKUP

I will post more information on this program as it comes available.

Free Home Buyers Guide

You can trust in us to get the job done right.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

Do you have listings that will not sell?

Are your borrowers looking at an older home that need work?

Do you have listings that need updating or repairs?

Renovation Loans can help you sell more homes and increase your commission! Attend this exclusive event on how to sell more homes using Renovation Loans offered by Prospect Mortgage, the nation’s No. 3 lender in 203K Renovation Loan origination. Renovation Loans are ideal for buyers who want to remodel an older home or buy a fixer-upper, and YOU can benefit from this growing market!

This seminar includes:

• Everything you need to know about selling more homes with Renovation Loans.
• Why Renovation Loans are EASY for Agents and buyers.
• Why more buyers are choosing renovation loans and need Agents who can help.
• How to grow your business with Renovation Loans.
• How to market “fixer-uppers” using attractive Renovation Loan options.

Join New York Times best-selling author Todd Duncan, who will talk about ways to build your business in today’s market, Prospect Mortgage’s National Renovation Manager John Adams and Former Cook County Assessor James Houlihan for an information-packed event sponsored by Prospect Mortgage, the experts in renovation lending!

Date & Time

Thursday, August 11 from 1:00pm – 4:00pm (CDT)

Location

Philip H. Corboy Law Center – Loyola University Chicago School of Law
Kasbeer Hall
25 East Pearson Street
Chicago Illinois

Show MapGet Directions

Call me if you would like to attend or if you have any questions -

Peter Thompson 630-479-6424

What Realtors need to know when working with an FHA 203k Rehab loan

Free Home Buyers Guide

You can trust in us to get the job done.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

One of the best kept secrets for many real estate agents, home buyers and investors, is the Homepath loan. This is a type of mortgage specifically for purchasing Fannie Mae foreclosed homes, and there are  some great advantages to buying with this program. These foreclosures are priced right from the start, you can buy with a low down payment (3% down for owner occupants and 15% down for investors) and there is no mortgage insurance. Now we have a new type of Homepath loan, the Homepath Renovation loan. This mortgage allows buyers to purchase a Fannie Mae foreclosure and add the cost of repairs and improvements into one loan, with one closing. The biggest problem when buying a foreclosure is often that the home needs work, either repairs immediately, or deferred maintenance. This mortgage is modeled after the Streamlined FHA 203k, and the Homepath Renovation loan allows you to add these repairs into your mortgage, and you can also include other improvements to make the home the way you want it to be.

Some of the features for this loan include:

• Available for eligible Fannie Mae foreclosures as listed on Homepath.com.
• 3% down payment available for owner occupied buyers.
• 15% down payment for investors (2 –4 units require a higher down payment).
• Available for 1-4 units, condos and townhomes.
• The mortgage is available as 30 year fixed, 15 year fixed and 5 year adjustable mortgages, so there is flexibility in how you can structure your financing.
• There is no mortgage insurance on these loans (There are however pricing adjustments for this. You can either build this into the rate or pay to buy for it at closing – you can use seller credits to pay for this.)
• You can ask for up to 6% of the sale price as a seller credit for owner occupants, and 2% is allowed for investors.
• Unlike the regular Homepath mortgage, a full “as-completed” appraisal is required.

Here are the steps of a Homepath renovation Mortgage from start through the completion of the work:

1. Find the property and choose your lender.
2. Decide exactly what work needs to be done, and work with your lender to come up with an estimate of how much it will cost.
3. Apply for the mortgage so we can get the credit approval as quickly as possible.
4. Get bids for the work that needs to be done, and pick the contractor you want to work with.
5. Have your contractor work with your lender to submit the contractor approval package and make sure the bids are put together correctly.
6. Once we have the credit approval and the contractors bid and package, we will order the appraisal (showing value after all the work is completed).
7. Once the appraisal is in, this, along with any other needed documentation, is submitted for the full loan approval.
8. You close on the loan and now own the home.
9. At Prospect, 5-7 business days after closing you will receive 50% of the funds so you can start the work (this comes in a check made out to you and the contractor).
10. The contractor must start the project within 30 days and must complete it within 6 months. 
11. When the work is completed the contractor signs a lien release, the borrower signs a statement showing the work has been completed and a final inspection and title update are done.
12. The balance of the funds are released in a two party check to the contractor and the borrower.
13. If there is any money left over after all the work is done it will be applied to the principal balance of the mortgage.

Homepath Renovation loans are a great way to buy a home and fix it up at the same time, but it is a very specialized loan. There are only a few lenders able to do them here in Illinois, my company, Prospect Mortgage is one of them. Make sure you work with a loan officer who is certified to work with renovation financing as there are a lot more moving parts and you want someone who can help you navigate through the approval process. Let me know what I can do to help you.

Free Home Buyers Guide

You can trust in us to get the job done.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

If you are planning on buying your first home in Naperville, Oak Park, Elgin or South Holland, you may be able to save some extra money. In fact, you could save a lot of extra money if you fit the guidelines for the MCC (Mortgage credit certificate) program. MCCs are issued as part of a state bond program to make housing more affordable. Most communities turn their funds over to the stat and have IHDA (the Illinois Housing Development Agency) use the funds for their low down payment grant programs ( I will have more on that later). These communities keep the funds themselves so that eligible home buyers can take the MCCs which effectively lower the payment for their mortgage by $2,000 per year for every year they stay in the home and the mortgage.

The Mortgage Credit Certificate allows up to 20 percent of the mortgage interest (for a maximum of $2,000 each year) to be claimed as a credit against your federal taxes. You can change your withholding amount at work and get the benefit immediately by paying less tax each pay period, or you can get this as a tax refund at the end of the year. You have to apply for this mortgage when you apply for the loan to buy your home. This isn’t available for refinances. But it can be used with any type of mortgage including FHA, which only requires a 3.5% down Payment.

In order to qualify for this program you need to be a first time home buyer (or haven’t owned a home for at least 3 years). Because this program is designed to help low and moderate income earners afford to buy a home, there are income restrictions and a cap on the maximum price of the home. But the caps are high enough that many home buyers will qualify. In these areas the MCC is available as long as you don’t make more than $75,100 per year for a single or a family of 2, and if their are 3 or more you can earn up to $86,365 and still be able to qualify. The maximum size of a home is $349,020, which covers a lot of ground in this market.

So, for first time home buyers in Naperville,Oak Park, Elgin and South Holland, give me a call and I can give you more details and see if this would be a benefit for you, and a way to save money over the years you are in the loan.

Free Home Buyers Guide

You can trust in us to get the job done.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

The good news is that there are real signs that the economy is getting better. The Philadelphia and New York Fed reports showed strength in manufacturing. Retail sales were up .1% for the month. Initial unemployment claims fell by 16,000 to 385,000 for the week, a sign that companies really are starting to hire new workers. Unemployment is still way too high, but this shows we are headed in the right direction. After finishing their meeting, the Fed also changed the wording on their report to show more optimism about the economy. Though they hedged their optimism somewhat, the statement said that the economic recovery appears to be on firmer footing and their are genuine improvements in the labor market. The Fed did bring up the concern about increasing oil and commodity prices, but their view is that long term inflation is not a threat (unless wages move higher, the higher prices will just slow down economic activity). So domestically the news is improving.

The bad news is that there is so much happening internationally and that has been the focus of the markets. The effects of the earthquake and tsunami in Japan, and the state of their nuclear power plants was the biggest story. The Japanese nuclear industry has been considered the model for safety, so the threat of a meltdown calls into question the safety of the entire industry. At any rate, the level of destruction is immense. I’ve heard some commentators talk about how this will be a boost to the global economy as Japan rebuilds, but Japan had the highest debt of the highest debt of the industrial countries before, so this means piling more debt on an already high level. This won’t be a simple solution. The other big news was in Libya. What looked like a quick win for the opposition, changed as Gadafhi took control with bombings and air power. With the UN resolution, a US and international No-Fly zone will be an equalizer, but it may be too late to turn the tide for a quick victory. The question now is if this morphs into another long term commitment. 

Mortgage rates improved at the beginning of the week, but got a little worse by the end of the week as optimism spread that the crisis’s were under control. Expect the front page to set the tone for mortgage rates this week, too.

Here are the current Chicago Illinois Home mortgage rates 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, best FHA rates assume a 660 Fico score, but loans are available with credit scores as low as 580. Mortgage rates in other states may be slightly different, give me a call and I will give you an accurate quote for your particular situation. 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 will take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

FHA 203K Rehab Loans – Call for Current Quote – FHA 203k Rehab and Renovation loans are now available as 30 year fixed or 5-1 ARMs.

VA Veterans Administration 0 Down Loans

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.

Free Home Buyers Guide

You can trust in us to get the job done.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

The Federal Open Market Committee (FOMC) finished their 2 day meeting and issued their report yesterday afternoon. As expected, the message was very similar to what it has been over the last year, and as expected the Fed Funds Rate (the rate they charge their best customers, the big banks) will continue at 0-.25%. The biggest change was an acknowledgement that commodity prices have run up, fueling inflation concerns. Despite this, the Fed maintains that inflation is still “trending downward” and is expected to remain low, and their primary concern continues to be the high unemployment rate. Although there are signs that the economy is picking up, it isn’t improving enough to add any meaningful job creation. So the Fed will continue with their $600 billion quantitative easing program as planned, which will continue through June of this year. Mortgage bonds (which go opposite direction to mortgage rates) fell after the release, as bond hawks major worry is an increase of inflation.

The most interesting part of the release to me though, was that all the Fed members voted to accept this policy, the first time this has happened since December 2009. Dallas Fed President Richard Fischer voted for the policy, a change from previous months, and though several new supposedly hawkish members rotated in as voting members for this meeting, the consensus to continue the policy was unanimous. The goal of QE2 has been to keep mortgage rates low to help stimulate business growth and a stronger housing market. This hasn’t worked out as planned. At least not yet.

Here is the full text of the Fed release:

Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

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Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

Two weeks into the new year, the consensus is that the Fed quantitative easing program has been a dud. The intention of the program was too pump new money into the economy by buying treasuries and other bonds, as a way to drive interest rates lower and slowly re-inflate asset prices. The Fed’s big worry has been the risk of deflation. The concept here was to battle deflation by adding a little positive inflation into the mix. This concept has worked before when the Fed ran a similar program last year, but this time as the Fed rose up for what they considered a slam dunk, the markets slapped the ball back in their face. Over the last few months there have been signs that the economy is improving. It is still not clear that this is sustainable, but it is enough to refocus thinking from the fear of falling to the fear of over-heating and running up our debt and bankrupting the country. Instead of achieving their stated goal, the main effect of QE2 so far has been to run interest rates up, prop up the stock market and pressure the dollar which means oil prices have spiked higher. We still have some major problems associated with deflation, the housing market is still a mess and unemployment is high and not likely to get better for years. The Fed still may be proved right about deflation in the long run, but the money machine they control is more complex and the law of unintended consequences is now in play. From street level this looks a lot like stagflation, where the economy is soft but prices for gas and groceries are going up. This round of QE2 will run its course, but the Fed will need to go back to the drawing board to come up with a new way to achieve its goals. Barring a sudden down draft, there will not be a third round.

Reports released last week showed some doubt about the strength of the new recovery. Retail sales in December came in much better than the last two years, but a lot lower than what was expected, an increase  of .4%. The expectations were that consumers were ready to get back to old habits and spend big on Christmas, but instead, much of the spending was again focused on big bargains and discount shopping, which does not look good for retailers bottom lines. The CPI (consumer Price Index), the biggest measure of consumer inflation, came in with an increase of ,5% for the month, a hot reading. But when oil (mostly) and food costs which tend to be more volatile, were backed out, the core reading was at plus .1%, showing overall inflation is under control. The University of Michigan consumer confidence index slipped lower, showing that people are still worried.

The reaction in the interest rate markets to all this news has been one of consolidation. Rates have improved some, but the question now is whether this is a pause before heading higher again, or are we about to drop back closer to the levels rates were at before the Fed announced their plans for easing. At this point there is a lot of uncertainty in the market and rates could still go in either direction. Reports released this week will focus on the strength of the housing market, and the markets are still watching the situation in Europe where the strongest economies are holding up the weaker ones so the Euro won’t crack. Even with the run up in rates over the last few months, mortgage rates are still near historic lows. If you are thinking about buying a home this year, especially if you plan to be ready for the Spring market, this is the time to be pre-approved for a mortgage. If there is anyway I can help, give me a call.

Here are the current Chicago Illinois Home mortgage rates 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, best FHA rates assume a 660 Fico score, but loans are available with credit scores as low as 620. Mortgage rates in other states may be slightly different, give me a call and I will give you an accurate quote for your particular situation. 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 will take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

FHA 203K Rehab Loans – Call for CurrentQuote

VA Veterans Administration 0 Down Loans

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.

Free Home Buyers Guide

You can trust in us to get the job done.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

If you are looking to buy and rehab a home, or if you have a home that needs some work and you think the Chicago FHA 203k renovation loan is the answer, the first step is to make sure you qualify and that this is the right solution for your situation. Getting pre-approved for an FHA 203k loan involves two parts. First making sure that the property improvements you are planning on willl work with the program, and second, making sure that you will qualify for the Chicago are FHA 203k rehab mortgage. The qualification for an FHA 203k is the same as qualifying for a regular FHA loan. Some of the advantages include:

• The down payment is as little as 3.5%.
• Credit standards are much more common sense than with conventional.
• 640 minimum credit scores.
• All the down payment can be a gift.
• Co-signors are allowed.

There are a lot of true advantages to buying with an FHA mortgage, and the additional advantage with the Chicago area FHA 203k loan is that you can add all the costs of repairs into the loan and buy and rehab your home with a minimum down payment and an affordable interest rate.

If you think the FHA 203k renovation loan might be the solution for your situation, give me a call and I will go over your situation and the details of what you are planning on doing, and help you get started. All it takes is a phone call to see if this is the right thing for you.

You can trust in us to get the job done right.

Peter Thompson 630-479-6424

Chicago FHA 203k Mortgage                   FHA 203k rehab loans in Chicago

Happy New Year. Looking back on all that has happened over the past year in the real estate and mortgage markets and the economy in general, the good news is that it could have been much worse. The economy is still soft but is now showing signs of growth. The fears of a double dip recession have faded and the business analysts are now talking about how the deficit and inflation are our biggest long term risks. That may or may not be the case, but it always fascinates me how quickly conventional wisdom can change. There are some good signs, especially if you grade on a curve, but there are still some big concerns. Unemployment is still high, even after several months of good gains in the market the unemployment rate is still just under 10%, almost the same as it was last year at this time. The housing market is still in the dumps. In a lot of ways, we end this year very close to where we were last year at this time. Going forward, I expect that we will see the same things played out over the coming year.

Here are some of the major trends from 2010 and what the impact is likely to be for 2011:

The housing market is still a mess – Home sales strengthened in the beginning of the year aided by a home buyers credit for both first time home buyers and move up home buyers. But once the credit ended, home buyers for the most part retreated back to the sidelines. The tax credit prompted a lot of buyers who would have bought later to move up their time table and buy earlier. Home prices seemed to stabilize in the beginning of the year, but by the end home prices were dipping down again, though at a much lower pace than last year. The good news is that there are a lot of people who want to buy a home now and homes are the most affordable than they have been in years. The last few years the market has been almost entirely fueled by first time home buyers, but there is a huge base of people who own a home now but need more space and want to move up, if they can. This may be the year that a substantial number of those who have the ability to do so, will bite the bullet and make the move now. The problem here is that most homeowners don’t have the ability to take a loss on their home or are able to carry two mortgages at the same time. New home construction has almost stopped, which will help keep the supply of homes down. On the other side, the number of homes behind on their mortgage payments is at a record high, and the banks are still sitting on a huge shadow inventory of foreclosed homes. If they bring these homes on to the market in mass, prices are likely to drop again. I think home prices are close to the bottom, but we will be bouncing around at a low level for a while yet. And housing won’t improve a lot until the employment situation improves, and as a good portion of employment is based on housing, this is somewhat of a chicken and egg dilemma.

Mortgage rates stayed low all year, and are likely to stay low for the coming year – Mortgage rates ended 2009 just under 5%, and rates are almost exactly the same as we start 2011. In between this time rates dipped down to historic lows, before surging higher at the end of the year. The real question now is if the lowest interest rates are gone for good. Some commentators are forecasting that mortgage rates will fluctuate from the high 4s up to the mid 5% range, possibly higher. Most of these same commentators were predicting higher rates at this time last year, too. If the economy continues picking up steam there is no doubt that mortgage rates will rise. But that isn’t by any means a certainty. We are in a catch 22 situation where even if the economy improves, high unemployment and a tough housing market are likely to remain problems. Low mortgage rates are necessary for any kind of recovery and the Fed is doing everything they can to keep rates low. Right now bond investors are more worried about the risk of inflation down the road and the insupportable increase in debt as the Fed continues to spend money to drive rates lower. But so far inflation (outside of some commodity prices) has been non existent. As to the debt, there will be an accounting at some time and as a country we will need to reduce spending in a way that may not be politically feasible, but timing is everything. Our economy was on life support and government spending was what got us to this point. The whole basis of Keynesian economics is that as the economy recovers new growth will bring in higher tax revenues, so you spend more when the economy is down and save when it is riding high. We didn’t do so well on the saving part, but austerity now is likely to cut off the growth we are seeing. All this means that there will be a push-pull with interest rates throughout the year, but even the high range means rates will continue to be affordable.

Regulations and underwriting changes will continue to make it challenging to get a mortgage – Before the bubble popped, the mortgage industry was nearly unregulated. Most states had no licensing requirements and anyone could become a mortgage originator, no matter what their skills or background. At the height of the bubble it was just as easy for buyers to get a mortgage. If you could fog a mirror, there was a mortgage available for you. Since then tightening has been the trend, as it needed to be, but when the pendulum swings it often swings farther than it should. This has been happening on both the regulation and underwriting side. Over the last two years, the mortgage industry has been regulated with a vengeance. Some of these were needed changes like a National licensing requirement which means all mortgage loan officers have to pass a test and a background check so they meet at least a minimal standard. Other changes were well meaning, but ended up missing their objectives. The change in the appraisal guidelines was intended to make the appraisal independent of influence from the mortgage company. The unintended consequence was that it brought in a whole new entity, the appraisal management company, squeezed appraisers income, encouraged out of area appraisers to take assignments in areas they didn’t have expertise in, and made it more difficult and more expensive to get an appraisal. The new Good Faith Estimate released at the beginning of last year, was meant to make comparing loan options more transparent, but the result was the opposite. There are several new regulations on the industry due to take effect this year, and my guess is that these too will make it more expensive and more cumbersome to get a mortgage. The trend in underwriting is the same, more tightening. The changes over the past few years have largely a return to rational ways to access risk. All the loan programs that helped inflate the bubble have disappeared. Here too the pendulum is swinging far. Credit criteria is still tightening, and it is likely to stay this way until the housing market shows real signs of improvement.

I expect this year will in many ways be similar to last year. We are still in a difficult economy and we are more likely to muddle through than surge back to what we used to consider normal. But the troubled economy also means opportunities abound. With home prices down and mortgage rates low, i have worked with a lot of home buyers over the last year who couldn’t have dreamed of buying a home before but are now celebrating their first year in a new home of their own. The economy won’t recover over night, but it will recover. At some point supply and demand will balance out and home prices will rise. For now, homes and mortgages are more affordable than they have been in years.

You can trust in us to get the job done right.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

(Sorry this is out late – had internet issues.) William Goldman, the screenwriter of such hits as Marathon Man and Butch Cassidy and the Sundance Kid, made a famous comment about Hollywood and the folly of predicting which movies would hit it big – “Nobody knows nothing.” The same sentiment could be applied to what happens in the markets and the economy in general. A great example of this happened Friday after the release of the monthly employment report. Over the last few weeks, the stock market has climbed and bonds have been punished with the belief that the economy had turned the corner, and was on the brink of a rebound. The conventional wisdom now, was that inflation was the major risk now, not a slowing economy. But on Friday morning the employment report came out and it was absolutely miserable. The economy produced 39,000 new jobs and the unemployment rate increased to 9.8%. To add context, the experts were expecting at least 140,000 new jobs, and many were expecting a surprise on the upside with many predicting over 200,000 new jobs created. It takes about 150,000 new jobs each month just to keep up with new people entering the job market, and it will take consistently big numbers over a long period of time in order to bring the unemployment rate down, so the 39,000 jobs created is a step back and a very disappointing number. This is usually the economic indicator that is most important to the markets, and a number like this would be expected to send money rushing out of the stock market and into the safety of bonds. It didn’t. Stocks have been on a run because the new QE2 policy was was supposed to be good for stocks because the new money in the economy would pump up the economy, raise profits and add value to asset prices. The downside of this was the worry about inflation. After the employment numbers were released, the stock market surged again and bonds took more punishment (which means mortgage rates went up again). The rationality of this changed to the idea that with the number so bad, the Fed would need to pump even more money into the economy, allowing more room for stocks to grow. This fluid thinking allows traders to have their cake and eat it too.

Fed Chairman Ben Bernanke gave an extended interview to 60 Minutes Sunday night, defending the QE2 policy and the actions the Fed has taken since the credit bubble burst (the interview video is at the top of the page). Bernanke gave a very public defense of the Fed which has been under attack since the new program started. Some highlights – In the interview he stated that without the massive stimulus at the beginning of the financial crisis, the unemployment rate would be much higher, possibly in the 25% range. The economy is still fragile and we are not at the point where we can self sustain growth. High unemployment is likely to continue for the next 4 to 5 years. He also said that the critics don’t understand how the program works and that no new money is being created, this is a way to lower the effective interest rate. The risk of inflation is way overstated. The Fed is committed to the QE2 program, and if conditions warrant, it’s possible they could extend or expand it. The whole point of the interview was that we need to have low rates for an extended period of time in order to get out of this mess. The Fed is sticking to its guns. The question now is if, or when, the markets will fall in line.

Here are the current Chicago Illinois Home mortgage rates 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, best FHA rates assume a 660 Fico score, but loans are available with credit scores as low as 620. Mortgage rates in other states may be slightly different, give me a call and I will give you an accurate quote for your particular situation. 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 will take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

FHA 203K Rehab Loans – Call for Quote

VA Veterans Administration 0 Down Loans

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.

You can trust in us to get the job done.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages