Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending March21st, my take on the week’s financial news and how it affected Illinois mortgage rates.

The biggest story this week was what didn’t happen. At the end of last week the Fed stepped in to engineer an emergency bailout of Wall Street giant Bear Stearns. The company was near death as a result of its cash crunch and their heavy position in Sub Prime mortgages. It turned out that the Fed bail out was just triage, a temporary solution to the problem. Over the weekend the Fed worked with JP Morgan Chase, an even bigger Wall Street giant, to put together a deal to take over Bear Stearns and keep it from bankruptcy. The deal was put together and the news released on Sunday afternoon, right before the Asian markets opened. The surprising – no, make that shocking – part of the deal was the price. $2.00 per share! Bear Stearns (BS?) was worth about $68 per share just a week before (and $160 per share last year), so the market value had free fallen from about $3.5 Billion down to $236 Million in a matter of days. Now here is the part about what didn’t happen. If Bear Stearns had been left alone, its collapse would have started a panic which would have shaken our entire financial system. The Fed has been getting a lot of heat for not stepping in soon enough (from some) and for being too aggressive and fostering inflation (from others). This time they did what they needed to keep the whole system from imploding.

Disaster was averted, but it still wasn’t pretty. If the Street had been so wrong with Bear Stearns, how many other time bombs are still out there, ticking away? As I’ve said before, everything is rooted in confidence. If you believe the system works, that you will have value in your paper, the common belief makes it so. When belief disappears, the value disappears too. My guess is that most of the toxic mortgages out there are not nearly as toxic as feared. The worst of the worst, the sub prime, no income verification loans, even these have value. Many of these loans will continue to pay off with out a problem. I am willing to bet that someone is going to make a huge fortune working out the distressed portfolios. The Fed understands how important confidence is to the markets, and in addition to their role in the Bear Stearns deal, they took several actions this week which went a long way toward restoring confidence in the financial markets:

1. They cut the discount rate on Sunday (over the weekend!) by a .25% of a point, before the scheduled Fed meeting on Tuesday.

2. They made it possible for big broker dealers (like JP Morgan Chase) to borrow directly from the Fed, a privilege only available to depositary banks before.

3. They slashed the discount and Fed funds and discount rate by .75%, a huge, but expected, amount.

4. Restrictions were lifted from Fannie Mae and Freddie Mac allowing them to buy up to $200 billion in mortgages.

All these moves (especially the last one) went a long way toward stabilizing the markets. That doesn’t mean that volatility decreased, we saw some of the biggest swings of this wild year in both the stock and mortgage backed securities markets. It also doesn’t mean that we are now back to normal, or even that the worst is over. There is still a lot of fear and the markets are truly dysfunctional. What it does mean is that the Fed, and perhaps the government as a whole, understands what would happen if our system went down, and they have signaled that they are ready to step in and do what is necessary to keep things on going. While volatility this week was out of sight, by the end of the week on Thursday (the markets were closed for Good Friday), the market ended unchanged for the day. An amazing occurrence in these wild times. Though the economic indicators took a backseat to the other news this week, there were a number of indicators released, and the consensus reading is that the economy is slowing down but inflation is still a concern.

So how did all this activity affect mortgage rates? Mortgage rates are are moving down again. There are still a lot of problems in the market. ARMs have disappeared (temporarily, I believe), Jumbos are still out of whack and the mortgage lenders continue to tighten their guidelines. But fixed rates are coming back down, and we are on the verge of another illinois mortgage refinancing boom. If you are thinking of refinancing your mortgage, be sure and get your documentation into your mortgage lender (or contact illinois mortgage company, I welcome the business). Rates have been all over the board and there is no guarantee that if they drop lower, they will stay low.

As I’ve mentioned before, one of the bright spots for buyers, especially those with low down payments, is FHA. FHA, a government insured program, recently increased their lending limits. Here in the Chicago area the new lending limit for a single family home is now $410,000. With FHA there is no hit to the pricing for credit scores and you can buy with a low or in some cases no down payment. FHA is a great alternative for home buyers here in the Chicago area, even those who could go conventional.

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% 5.749% APR

15 year fixed rate 5.00% 5.148% APR

5-1 A.R.M. 5.50% 5.659% APR

7-1 A.R.M. 5.75% 5.879% APR

For Jumbo loans over $417,000

30 year fixed rate* 7.125% 7.262% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M. 6.00% 6.174% APR

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

30 year fixed rate 5.375% 5.794% 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 which offers no down payment and below market pricing.

A lot of information is coming out next week, and there are sure to be surprises. Be sure to check back for more news and opinion. Have a great Easter.

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.

The great physicist Isaac Newton described gravity by noting, what goes up, must come down. This week gravitational forces were at play in mortgage interest rates. After moving up strongly (and strangely) most of the month, mortgage rates are now falling like the proverbial apple. Mortgage rates jumped up based

on fear of inflation. The strange part of this has been that inflation may be a problem down the road, but the credit crunch and recession are crucial problems now. As Fed Chairman Bernanke said in congressional testimony this week, “You fight the enemy in front of you, not the one over the hill.” Inflation may become a problem, and there are signs of inflation especially in fuel and food costs, but it is harder to raise prices when the economy is slowing down. At any rate, between Bernanke’s testimony (the economy is soft and it could get softer) and some pessimistic economic reports, the focus is off of inflation and this means mortgage rates are heading back down.

New claims for unemployment insurance were up to 373,000. January durable goods orders tanked by 5.3%, much more than expected. Consumer confidence dropped 12 points, coming in at the lowest level in the last 16 years. Consumer confidence is a good indicator of future spending as consumers tighten up their wallets and only spend on necessities when times are tight. The stock market got killed this week, and that meant more money coming out of stocks and into the safety of bonds, including mortgage bonds.

In other mortgage news, The Office of Federal Housing Enterprise Oversight removed limits on the amount of loans Fannie Mae and Freddie Mac can buy.  This will allow them to sell and repackage more loans which adds liquidity to the housing market. As of tomorrow the FHA lending limits are due to increase. The limit will be based on 175% of the median home price for the area. Once it is official I’ll post the details, including the cap for the Chicago area. When I first got into the mortgage business 16 years ago, FHA was one of the few options available for new buyers or those without a big down payment. Over the years they became less and less of a factor. Part of it was their old fashioned guidelines; part of it was that too may first time home buyers bought homes above the FHA lending limit. They’ve already made some moves toward modernization with more on the way. This cap increase will help a lot of people get financing they couldn’t qualify for before.

Conventional wisdom now shows a 70% chance that the Fed will slash rates by another 75 basis points on or before the March 18 FOMC meeting. What does that mean if you are looking to buy a home or refinance your mortgage here in Illinois? Well, the last time the Fed made a big cut, mortgage rates tumbled – for about a day. Then they moved higher. I think there is a good chance that rates will be moving down some more, but once the Fed does its thing again, don’t be surprised if fixed mortgage rates get worse again. If you are thinking of refinancing your current mortgage, get your papers in to your loan officer (or give me a call) and be ready to move. Same thing if you have a contract to buy and are waiting to lock in. Rates are improving now, but there were a lot of people who got left behind while they waited for lower rates the last time. Volatility is still crazy and I expect it will remain that way.

Mortgages rates are much better this week than they were last week, and the trend is going in the right direction. 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    5.75%       5.823% APR

15 year fixed rate    5.125%     5. 248% APR

5-1 A.R.M.               4.875%     5.179% APR       

7-1 A.R.M.               5.125%     5.267% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.75%       6.862% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M.              5.50%        5.639% APR

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

30 year fixed rate  5.50%        5.749% 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 are a lot of reports coming out next week, but the biggest market mover traditionally is the jobs report which will be released next Friday.

llinois Mortgage Rates and News.