Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 19th, my take on the week’s financial news and how it affected Illinois mortgage rates.

I expected this to be a wild and volatile week. I never expected it to be this wild. There was a near melt down in the financial markets and at the end of the week in an unprecedented move, the government was putting together a bailout of the entire banking system. Ever since the credit crunch kicked in over a year ago, the economy has been crippled by a lack of credit. All this goes back to the banks and brokerage company’s exposure to bad mortgage loans. While the real estate market was hot, they loaded up on loans that seemed risky at the time, and down right stupid in hindsight. It was a herd mentality that said risk didn’t matter as long as home prices continued to rise. When the bubble popped, the market for these securities disappeared overnight. Pools of theses riskier mortgages (Sub prime and Alt A loans) which used to sell for a premium, were suddenly so toxic that investors wouldn’t touch them at any price. The economy runs by money constantly changing hands. All these loans were like a game of hot potato or musical chairs. You were safe as long as the music was playing and the money and loans were being passed along to the next in line. But when the music stopped, these financial companies were stuck with billions of dollars of loans that they couldn’t sell. Their balance sheets overloaded with debt, they had trouble borrowing and cut back on who they would lend to. With less credit available, the economy has contracted and the real estate market has continued to fall, cutting the value on their collateral causing the entire market to cycle lower to the point this week where the system almost collapsed. Now the government is stepping in with a plan to buy out all the non-performing loans at a deep discount, as a way to bring liquidity back and get the banks to start lending again.

This week started out with Lehman Brothers forced into bankruptcy and insurance giant AIG being virtually nationalized by the government to keep it from failing. The Fed along with a consortium of other national banks extended another $250 billion dollars of credit into the financial system. These were the latest in a long line of falling dominoes. Over the course of this year the Fed and Treasury have stepped in to bail out Bear Stearns, sent out billions of dollars of stimulus checks, opened the discount window several times making credit easier for the big banks and brokerages, rescued Fannie Mae and Freddie Mac, and took over AIG. Each move was supposed to be the one that made the difference. This time they have abandoned the piecemeal approach and decided to take on the whole enchilada. The plan will allow these companies to sell off their toxic loans to the government at a deep discount, getting the junk off their balance sheets and putting them into a position where they can lend and money can flow again. The cost of this plan will be as much as 1 trillion dollars – about the cost of the Iraq war.

How this all turns out depends on the details of the plan. The Fed and Treasury are working through the weekend to get something to send to congress. The balancing act will be who they will allow into the program and how they will buy out the toxic loans. The truth is that as toxic as these loans are, there is some value there. Many of the loans in these pools are non-performing, that is in default or in foreclosure, but many are also paying as agreed. If the government takes on these loans, provides workouts to the ones that are in trouble and sells off as the market improves, it is even possible that they will end up making a profit on the deal. On the other hand, the last time they tried this, after the savings and loan crisis in the 80s, much of the best assets were sold to politically connected companies who then made the profits. However it happens, in the short term the treasury will be printing more money to fund this plan.

So here are my questions:

Is this enough to restore confidence and get the markets moving again?

How will this plan affect mortgage interest rates?

Will this be enough to kick start the real estate market?

At this point we don’t know any of the answers. A big part of this crisis is due to a lack of confidence. The economy was surging forward on a wave of greed, but now fear has gripped the markets. The stock market has signaled that it likes the plan so far, but who knows whether this is a long term positive or if fear will win out again, and more will be required.

I’ve been pondering how this will affect mortgage rates and so far I don’t have a clue. On the one hand, this buyout is inflationary, the government will print more money to make it happen, and mortgage bonds hate inflation. This points toward higher rates on mortgages. On the other hand the credit crunch has taken money out of the system and the bad loans being marked to market mean we have lost a ton of global value. The economy is still slowing and this plan won’t turn that around any time soon. The whole point of this emergency plan is to stabilize the real estate market and the way to do that is to get mortgage rates down. If confidence is restored, the spread between treasury bills and mortgages would narrow and mortgage rates will come down. Will see how this plays out over the next weeks.

As to the real estate market, there are a lot of prospective home buyers sitting on the side lines waiting for the right time to jump in. If this is the event that signals that it is okay for them to make the move, we could see the market come to life. There is still a lot of inventory to work through, and with the foreclosures on the market there are still more sellers than buyers available. So I don’t see home values rising quickly, but my guess is that we may be closer to the bottom than people think and this will start to turn things around. It won’t be a quick process, but there will be opportunities, and if you are prepared, it could be a great time to buy.

Mortgage rates this week were all over the board. The week started with a flight to quality into mortgage bonds and rates dropping near their lows for the years. Then as panic set in, we had a roller coaster market where each day the swing between the high and the low was nausea inducing. On Friday mortgage bonds bounced around in a range of over 100 basis points, ending up down for the day but better than their low point leaving rates up for the week.

Because of all the confusion in the market this week, I’m going to hold off on posting the current rates. If you want to know what Illinois Home mortgage rates look like today, give me a call or contact me and my illinois mortgage company and I’ll take the time to find the rate and program that is best for you.

Next week promises to be just as wild. Stay tuned and buckle your seat belts.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 15th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Over the last several weeks, mortgage rates have been going in a pattern, two steps forward – two steps back. Some weeks it is three steps forward and two steps back and other weeks it is exactly the reverse. In other words mortgage rates have been volatile with big daily moves either up or down, but over all they are in a tight pattern with mortgage rates hardly changing at all from week to week. We may be about to see a change as mortgage rates improve and break out of this dance. Then again, this could be a head fake to the outside before we return back to the range.

As has been the case over the last several months, there was a lot of contradictory information released this week. Early in the week the CPI (Consumer Price Index) came in with a red hot reading showing inflation at a 17 year high. The number was higher than expected, but it was expected to be high as a result of the high oil and commodity prices we’ve seen over the last months. This reading would have normally killed the mortgage bond market, but with oil prices coming down this was seen as a look in the rear view mirror and largely discounted. A couple of regional manufacturing indexes also came in with better than expected results. On the other side, the retail sales report looked weak, and even weaker when you factor inflation into that number. Unemployment numbers jumped to near 450,000, much worse than the 375,000 average we’ve seen over the first half of the year. The Michigan Consumer Confidence index also came in shaky at 61.7% just below the anticipated 62%, but the bigger news was that consumers are not as pessimistic about inflation in the future as they have been. Economists and market prognosticators are starting to think the same thing. Gary Stern, the Fed President of the Minneapolis region, announced in a speech that he expects higher unemployment and lower inflation as we go forward, another Fed member had the same sentiments earlier this week – a sharp change from what we’ve been hearing from other Fed governors recently, and another suggestion that the Fed won’t be raising rates any time soon.

The market is now starting to think that inflation may not be the biggest problem our economy faces after all. Why the switch? A couple of reasons. First, oil prices are coming down steadily. The price of a barrel of oil was as low as $111 on Friday and closed at $113. This is a big drop from the high of $147 a few weeks back, and even more amazing that it happened at the same time as an invasion by Russia into Georgia, an oil producing nation. The dollar is also strengthening steadily. As the dollar increases compared to other currencies, this should mean higher exports and lower mortgage rates. Maybe a bigger factor is that the rest of the world is starting to slow down along with the US. It used to be that the United States led the way economically for the rest of the world. Many economists recently have signed on to the theory that this is no longer the case, that with the rise of China and the European Union as economic powerhouses the rest of the world has decoupled from the U.S. and will continue to grow as we dip. It turns out that that is not the case. The economic downturn we have been seeing is now spreading world wide. Another suggestion that rates should be going down.

Then again, even as the macro outlook points to lower mortgage rates, consumers aren’t going to get the full benefit. Last week both Fannie Mae and Freddie Mac announced another round of extra fees and increased risk based pricing.

Mortgage rates improved this week and mortgage bonds moved above a level of technical resistance. There is another resistance level just above where mortgage bonds are now, but if bonds can move past that there is a lot of room for mortgage rates to drop. Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 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 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% APR

5-1 A.R.M. 5.75% 5.867% APR

7-1 A.R.M. 5.875% 5.989% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 6.634% APR

7-1 A.R.M.* 6.00% 6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate 6.25% 6.713% APR

With no origination fee – 60 day lock

30 year fixed rate 6.625% 6.962% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the 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.

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

Is it over yet? Not so long ago the big worry was that our economy was on the brink. Bad mortgages and the lack of credit were choking the system. Big banks and financial powerhouses were on the edge of failure and our whole economy was in the danger zone. The Fed moved decisively to inject credit into the financial markets and stem the panic. Wall Street breathed a sigh of relief, but the easier credit didn’t trickle down to the small business or home mortgage markets. On Main Street the stranglehold still seems pretty tight. The economy hasn’t been growing, but with the rate cuts and stimulus checks there have been some signs of activity. And now with gas and food prices spiking up, the worry has turned from the softness in the economy to the threat of inflation. Over the last few weeks mortgage rates headed higher as the financial community, in mass, called for higher rates to stop the inflationary spiral that was about to hit us. Last week it became official that the economy was on the road to recovery when former Fed Chairman Alan Greenspan announced that the credit crunch was over, or would be soon. This week a new message is coming through – not so fast, we might not be out of the woods yet.

The news and reports released this week were once again mixed. Oil prices headed higher again, but the producer price index showed that inflation, outside of the fuel and food costs, was within the expected range. New housing starts are at their lowest pace since 1991, confirming the softness in the housing market. The Empire State and Philly Fed indexes came in lower than expected, again showing softness, but new job claims came in slightly better than expected. The biggest market movers this week came from the stock market. Earlier in the week Fed Ex announced that their business is under pressure. This is partly because with a slowing economy fewer packages are being shipped, and with high gas prices their cost of doing business is much higher. On Thursday Citigroup announced that they would be writing off more substantial losses due to their mortgage portfolio. Merrill Lynch is rumored to be in the same boat. This throws water at all the pronouncements that the worst of the credit situation is over. Food and fuel prices are rising way too fast (speculation?) but the higher prices aren’t translated into higher wages and most companies are being forced to absorb the extra costs rather than pass them along to the consumer. If inflation is a major problem, the only way to get rid of it is an economic slowdown. This is why so many have called for the Fed to raise rates again. But if a new round of write offs are in the works from the major financial companies, this means we still don’t know how bad the situation is and how much more bad debt is still out there. It’s hard to see the Fed raising rates any time soon if the economy is still contracting.

Mortgage bonds improved some this week, bouncing off of their worst showing in 6 months. Mortgage rates are better this week, but still facing resistance. We will see if they are able to break through this resistance over the next few weeks, in the mean time any news of higher inflation could send rates higher. If you are applying for a mortgage don’t roll the dice, lock in your rate at application.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 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 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    6.375%   6.589% APR

15 year fixed rate    6.00%     6.175% APR

5-1 A.R.M.               5.625%   5.788% APR      

7-1 A.R.M.               5.875%   5.989% APR

For Jumbo loans over $417,000

30 year fixed rate*   6.875%    6.997% APR – Requires 20% down payment

7-1 A.R.M.*              6.125%    6.327% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS – 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate   6.25%     7.190% APR

With no origination fee –        60 day lock

30 year fixed rate   6.50%     7.238%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the 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. A lot of information will hit the mortgage markets next week, not the least of which is the Fed meeting on Wednesday. Expect another volatile week for mortgage rates.

Illinois Mortgage Rates and News

Welcome to this week’s Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates.

I’ve used the analogy of the mortgage bond market being like a roller coaster. Still fits. Or maybe it’s like an out of control elevator, rising upward, then without warning, plunging down in a free fall. Then when you are sure it is going to hit bottom, it shifts direction and heads back up again. Yes, it’s been another exciting week in the mortgage market.

This was another week without a clear direction. Markets, whether the stock market, mortgage rates or the market in pork bellies, typically trend in one direction, up, down or sideways. There will be day to day movement within the trend, so you can have down days in an upward trending market, but the trends usually hold until something happens which kicks them out in another direction. Mortgage interest rates have moved down a fair amount since the beginning of the year, but it’s still hard to see this as a decided downward trend. Mortgage bond traders are still bi-polar, and the swings between the highs and lows are enough to induce motion sickness. In this market volatility is King.

A lot of information came out this week. The Gross Domestic Product for the fourth quarter, a measure of strength in the economy, came in at 0.6% growth, a big drop from the 4.9% seen in the previous quarter. New home sales were anemic, consumer confidence was low, but slightly better than expected, and inflation was relatively tame. The two biggest events this week were the Fed meeting on Wednesday, and the Employment Report released this morning.

The Fed, as expected, cut the discount rate another half a point, making it a drop of 1.25% in just over a week – a jaw dropping cut. The economic data coming out is soft, but it is still mixed. Some commentators are speculating that the Fed knows more than it is letting on about the economy, and the reason for the dramatic rate cuts is the fear that something, maybe one of the big banks or the monoline bond insurers, is on the edge, and if it fell, the default would set off a domino effect of losses which would send us into a deep recession. Others think it’s just a matter of Fed Chairman Bernanke’s inexperience.

The jobs report this morning was the other big mover. The expectation was for 75,000 jobs being created last month. Instead we saw a loss of 17,000. It takes 150,000 new jobs each month just to keep even with the new people coming into the job market, so this was one weak report. It was moderated a little by upward revisions in the previous months reports, but the net difference still left a whole lot of people in the unemployment line. Mortgage bonds moved up and mortgage rates improved after the announcement, but, once again, sold off before the end of the day. It’s been that kind of week, and so far, that kind of year.

So how did all this news affect the markets? Once again we are pretty close to back where we started at the begining of the week. Still, if you are thinking of refinancing your mortgage, this is a great time to get started. I’ve been on the phone with my clients telling them to get their paperwork in so we are ready to go. With all the volatility, it pays to pick the right time to lock your rate in. You can do this easier if your paperwork is ready to go. If you don’t have a loan officer you work with, give me a call.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 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, give me a call or contact me 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    5.625%    5.734% APR

15 year fixed rate    5.125%    5.237% APR

5-1 A.R.M.               5.00%      5.187% APR       

7-1 A.R.M.               5.125%     5.263% APR

For Jumbo loans over $417,000

30 year fixed rate    6.00%       6.179% APR

7-1 A.R.M.               5.75%       5.893% APR

FHA LOANS up to $270,200 with 1 point origination fee

30 year fixed rate    5.375%       5.623% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program and the State of Illinois Bond program which offer no down payment and below market pricing.

There aren’t a lot of reports scheduled for release next week, but my guess is that we will still see some wild swings in pricing. Stay tuned and I’ll fill you in on the details as they come available.

Illinois Mortgage Rates and News.