Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 22nd, my take on the week’s financial news and how it affected Illinois mortgage rates.

This was another week in the mortgage bond market with huge volatility on a day to day basis, but an amazingly stable market when you squint your eyes and look just at the week end results. In other words, mortgage bonds went up and down like crazy , but mortgage interest rates ended the week just about where they started. This is the end of August doldrums, and there wasn’t a lot of market changing news released this week. Still, there were a couple of events that make me think that the market focus is starting to change.

The PPI (Producer Price Index) a measure of inflation, jumped 1.2% in July, the largest increase in 27 years.

Inflation hawk and Dallas Fed Chairman Richard Fisher warned in a speech that though the economy was slowing, the up-tick in inflation could lead to a “lingering inflationary fever”.

Over the last couple of months either of those items would have been enough to spark a huge sell-off in mortgage bonds. That didn’t happen this time. There was plenty of news showing the economy is still slowing, but the inflation fear would have trumped the other news. Mortgage bonds actually broke through and ended the week above a stubborn level of resistance. Some of the inflation is obviously seen through the rear view mirror, but in the past it hasn’t mattered. Bond traders have been wearing their inflation blinders and they would take any excuse to sell. The fact that the market took this news in without flinching makes me think we are likely to see better rates in the near future.

The big news this week (or really lack of news, but focus of rumors) was the condition of the big dogs in the mortgage arena, Fannie Mae and Freddie Mac. Their stocks sold off again this week as rumors of their impending demise continued. The Treasury has already announced that they will stand behind Fannie and Freddie, and a bail out has been worked into all the market equations. But knowing it is coming while not knowing when or how (or who wins and who loses) has kept the organizations in limbo. Fannie and Freddie are the biggest buyers of mortgage loans, so getting them out of limbo and in a position to buy will help stabilize the housing market. Letting it go on as it is now, with everyone knowing something is coming but waiting to see how it all pans out, makes for more fear and insecurity, which puts more pressure on Fannie and Freddie, keeping a negative loop going. I’m guessing that this will all come to a head soon, and the bailout will become official.

Here is what Illinois Home 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 6.50% 6.852% 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.

Illinois Home Mortgage Rates and News

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

The Fed took the spotlight this week, and as anticipated, they left interest rates the same but talked tough about the threat of inflation. Wall Street wasn’t happy with the decision. The Dow hit a low just ticks away from a 20% overall decline, the official mark of a Bear market. Not only did the Fed not raise rates, but their announcement balanced the threat of inflation with the threat of further slow downs in the general economy. This signaled that the Fed plans to stand pat, keeping rates the same until something forces their hand. The stock market dived and mortgage bonds benefited. Mortgage backed securities moved through an area of strong resistance Friday afternoon, ending the week at their best level in the last 3 weeks.

The question this week, as it has been over the last few months is which is worse, inflation or recession? This is much like saying which way would you rather be tortured? Water boarding? Or bamboo shoots under your fingernails? If it’s all the same to you, I’d rather do without either. But the Fed doesn’t have that choice. The case for raising rates is that the low Fed funds rate has killed the value of the dollar, and oil is denominated in dollars so its rise is a direct result of the weak dollar. The argument here is that raising the rates will add value to the dollar and oil will fall once the Fed acts. This may be true, but the global economy is much more complex than this, and a raise in rates might do more harm than good. The credit crunch is still in force, and hiking rates would mean that credit goes from tight to a stranglehold, smacking the real estate market and the business climate down further. This would surely lower gas prices; with lower demand prices would have to fall. But if the economy falls into a deep recession, it could make matters much worse and killing the patient doesn’t make for a successful operation.

The other school of thought is that inflation is a problem, but the oil shock we are experiencing isn’t the same as inflationary spirals we’ve seen in the past. For one thing, there is no wage inflation. Inflation can destroy an economy if everyone thinks that prices on everything are moving higher. But wages are stagnant and with global competition no one expects wages to move up much any time soon. Prices are moving up on food, fuel and anything that uses petroleum, but if you look at the value of your home or the balance on your 401K the values are down. The other thing is that the Fed might not be able to do anything to control the inflation, even if they raised rates sharply. In a global economy there are more moving parts than in a Rube Goldberg machine, and the United States doesn’t have the economic power it once did. The cost of oil has been moving up steadily for years now. China, India and much of the developing world have been booming, and their demand for oil has pushed the cost higher. We also aren’t finding new oil supplies fast enough to replace the wells that run out. Add in a good dose of fear and speculation and it’s no wonder the price runs up higher. As the global economy slows down, speculation should ease and oil prices may come down as a result. At least a little. But the world has changed and most experts don’t think we will ever see cheap oil again. So the real question is the run up in oil inflation, or the new fact of life?

In other economic news, consumer confidence this week came in at the third lowest reading ever, and the lowest since 1980. Oil prices surged again, now up to $142 per barrel. Personal spending for last month was the best reading in the last 5 months, but if the stimulus checks are gone this is probably not a trend. New and existing homes both came in a touch better than expected, but still at low levels. Sales of homes in the Chicago area were down 29% from last year, but up from the previous month. Prices here seem to be stabilizing. The core inflation rate showed we are just over the target zone, giving the Fed some cover for their decision not to raise rates. Here in Illinois, Attorney General Lisa Madigan sued Countrywide Mortgage for abusive loan practices. I have mixed feelings on this one. I’m not a fan of Countrywide. As a company they have been arrogant and they were the leaders in some of the bad practices that got us into this whole mortgage mess. I also like Lisa Madigan. She’s done a good job as Attorney General, and I expect that she will be our next Governor. But that’s the point of this, it’s all political. Countrywide is a big target and an easy way to score political points, but unless they can show it was a corporate decision to defraud customers, I don’t see this going anywhere.

Mortgage rates are moving in the right direction, but the real improvement in mortgage bonds came at the end of the session on Friday afternoon, and most of the lenders didn’t re-price to show the improvement (it’s funny how quickly they re-price when rates are heading up, but are slower on the trigger when mortgage rates are moving down). The area of resistance that was keeping rates from improving may now act as resistance and a stopping point when rates are getting worse. It’s amazing how often points on a graph that acted as a ceiling become a floor when the market breaks through.

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    5.875%   6.124% 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    6.125%     7.048% APR

With no origination fee –        60 day lock

30 year fixed rate    6.375%     7.056%

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.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending May 16th, my take on the week’s financial news and how it affected Illinois mortgage rates.

If you follow the news, it was a grim week with talk of natural disasters in Asia, an earthquake in China and a cyclone in Myanmar. With true disasters like this the mess in the real estate and mortgage markets doesn’t look nearly so bad. In fact, there were a few signs this week that we are starting to come out of the worst of the mess. While it is too soon to say that we have reached a bottom, there are signs that point to how we can navigate through this. We are still a long ways from where we were, but in a way we are coming to a new normal, and I see signs of the financial markets stabilizing and the mortgage industry gaining confidence. Two things happened this week that point to this conclusion. One, foreign investors started to show interest in buying mortgage bonds again, and two, Fannie Mae is getting rid of their disastrous declining market policy.

Let’s start out with number two, Fannie Mae’s scrapping their declining market policy. Last December, in a reaction to the down turn in the housing market, Fannie Mae, the biggest purchaser of mortgages, came up with a plan that they thought would shield them from the risk of falling home prices. The idea was to identify markets where the prices were falling, and require a higher down payment in those areas. So if someone was going to buy with what would normally be a 95% loan to value (5% down), in a declining market they would need to put down 10%. The idea was for Fannie Mae to cut their exposure in the worst markets. In a way this was a form of Redlining, a discriminatory lending practice and because of this they became a target for consumer groups. The bigger problem was that it made things worse. By making financing more difficult it took more buyers out of the system, guaranteeing that home prices would continue to spiral down. And while the original idea was to cap off the worst areas, the declining markets started to creep into areas that were looked at as more stable, including portions of the Chicago area, again making sure that prices would continue to fall. The new plan is to go back to the old plan. Financing rules will be the same for all parts of the country, with no hits based on the market condition of the area. This change will be part of the release of the new DU version 7, which is going to be tightening qualifying overall, so it’s not all good news. The changes go into affect staring June first.

The other encouraging sign was a return of foreign investors to the mortgage bond markets this week. The lack of foreign buyers in the mortgage backed securities market has been one factor in keeping mortgage rates higher than they would be otherwise. There is now evidence that the foreign investors are starting to buy again. This means they have confidence that the worst is over, and are willing to vote with their cash. We are also starting to see some movement on some programs that have been given up for dead, like adjustable rate mortgages and Jumbo loans. We’ll see how this develops as time goes on, but it is another encouraging sign.

A lot of economic reports were released this week, and as has been usual in this market, they were a mixed bag. Retail sales numbers dropped, but when low auto sales were factored out they increased by a higher than expected .5%. This could be looked at as proof that consumers are still spending, which means that the economy still has some strength. It could also be looked at as a reflection of higher prices, and the increase is due to inflation. Housing starts unexpectedly moved higher, but again this was a mixed result because the increase was due to a surge in multi unit apartment buildings. Single family home starts dropped for the 12^th straight month. Consumer price index came in lower than expected, which means inflation is still manageable. Good news for mortgage rates. There were some other reports which showed that the economy is continuing to loose steam, and consumer confidence fell again to its lowest reading since 1980.

All this activity meant another see-saw market where volatility was amazingly high. Mortgage bonds tried to break through a layer of resistance, and finally did on Friday afternoon, before giving back their gains and ending down for the session. Still, mortgage rates are about the same as they were last week, and poised at level of support. Over the last few weeks rates have dropped each time they got to this level, but at some point I think we are going to break through and rates will drop down again. If you are in the market to refinance your mortgage, get your papers ready. We’ve had a couple of opportunities where the rates dropped to the lowest points, but the windows were only open for a short time. If it happens again you should be ready to jump on it.

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    5.875%   5.942% APR

15 year fixed rate    5.50%   5.657% APR

5-1 A.R.M.               5.25%     5.398% APR      

7-1 A.R.M.               5.50%     5.659% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.50%     6.674% APR – Requires 20% down payment

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines – 75% loan to value, tighter ratios.)

7-1 A.R.M.*             5.75%     6.014% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS

With 1 point origination fee – 60 day lock

30 year fixed rate   5.75%     6.159% APR

With no origination fee –        60 day lock

30 year fixed rate   6.00%     6.274%

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 a situation, let me know how I can help.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending March14th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Do you remember the scene in It’s a Wonderful Life where they had the run on the bank? In the movie Jimmy Stewart was on his way out of town, just about to go on his honeymoon, when he noticed the crowd of people swarming around the Building and Loan. The rumor was that the bank was out of funds, so the town’s people were in a panic as they tried to get out with whatever they could before they lost everything. Jimmy stepped in and calmed the people by doling out his honeymoon savings and assuring them that they were all in this together. We had a similar situation in the mortgage backed securities market this week with Fed Chairman Bernanke playing the Jimmy Stewart role, but to much less success.

The run on the bank started last week when Thornburg Mortgage and the Carlyle Group, a heavily leveraged hedge fund, were unable to meet margin calls from their lenders. Panic set in as mortgage bond investors wondered if there was any value in mortgages at all. Like any panic, this was all about confidence. As the big banks sit on their portfolios of mortgages, investors wonder how much of their holdings are junk, and with buyers in short supply the value of the mortgage portfolios deteriorate. The banks are forced to sell their good loans at fire sale prices in order to raise funds to keep their financial numbers up, but this only makes matters worse.

On Tuesday the Fed came in with a plan for a $200 billion dollar fund which banks could borrow against, using their mortgage portfolios as security. This was just what the markets needed. After the news was announced, the stock market had its best day in ages, and the mortgage bond market started to improve, too. Unfortunately, it was too little too late. The Carlyle Group was too far under (they were leveraged to the hilt with $97 borrowed against every $3 of equity) and they missed their margin call on Thursday. But that was just a hint of trouble to come. Friday morning Bear Stearns, one of the biggest players on Wall Street, got caught in the liquidity crunch and had to be bailed out by the Fed and fellow giant JP Morgan. This was truly scary news. If the big boys can be in such bad shape, who is going to be the next to crack?

The reports coming out this week confirmed that the economy is in a recession. The one good piece of news was the release of the Consumer Price Index this morning showing no increase in inflation. The CPI is a measure of inflation in the economy, and inflation has been the fear over the horizon. The low reading means the Fed is now nearly certain to cut rates again next week, a .75% cut is expected. The thing that I wonder is, what comes next? The Fed has already cut short term rates by 2 points in the last 6 months and credit still continues to tighten. Money is much cheaper but the credit market is frozen. What happens when the Fed lowers rates down to the bottom, what can it do next? The major problem in the market now isn’t that short term rates aren’t low enough; the problem is that no one wants to lend money if they think that things are going to get worse later. We are back to confidence and the Fed’s tinkering at the edges isn’t enough to do the job. I expect we will have a bailout of some sort. This is going to be a bitter pill for many, but I expect that the only way out of this mess will be through some form of political solution – probably a free pass for the big banks, a plan where the Fed buys up their troubled mortgages. What ever the solution, it won’t be fair and it won’t be pretty, but we are up the proverbial creek if we don’t get the credit machine moving again.

So how did all this mess affect mortgage rates? Volatility was again off the charts. Mortgage rates lately have been like weather in Chicago, constantly changing. The swings have been outrageously wide and it is now normal to have intra-day re-prices from our wholesale lenders. Fixed rate mortgages moved down over the week, but not nearly as much as you would expect given the state of the economy. Even as fixed rate mortgages improved, there were signs that the credit crunch was worsening. Last week adjustable rate mortgages went up sharply. This week they virtually disappeared. The rates on most ARMs is now higher than on fixed rate mortgages, even though short term interest rates are very low. (There are still a few private investors with good pricing – check out their rates below). Again this comes down to confidence. The other big move was that Fannie Mae and Freddie Mac, the 2 big buyers of mortgages in the mortgage aftermarket, came out with their second round of risk based pricing, the idea that those with the best credit scores will get the best interest rate. The idea makes sense, but they have increased the pricing on those with excellent credit and good down payments. This looks more like a way to get themselves out of the hole they dug, then a plan to price according to the risk.

With all the changes in the conventional market, one of the best deals out there is buying with an FHA mortgage. 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 used to be thought of as a loan for those who had few other options, now it is a good alternative for home buyers here in the Chicago area 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    5.875%    6.147% APR

15 year fixed rate    5.25%      5.377% 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  5.50%        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.

The big news next week will be the Fed meeting on Tuesday. I expect it to be another crazy week.

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 think it is safe to say that the mortgage system is officially broken. Mortgage rates are determined by the buying and selling of mortgage backed securities (MBSs), a type of bond backed by home mortgages. They trade on an open market and, like stock prices, go up and down by supply and demand. Mortgage bonds have always been looked at as one of the safest investments around. They paid slightly higher yields than Treasury notes, which are backed by the Federal Government, but the biggest risk with mortgage bonds was that interest rates would go down and the loans would pay off early, lowering the over all yield. Over the last year, ever since the sub prime mess hit the fan, there have been signs that the mortgage system was out of whack. Whole classes of mortgages (sub prime and Alt A) have disappeared and the Jumbo mortgage market still hasn’t recovered. But conventional loans, those loans bought up by Fannie Mae and Freddie Mac, were considered as safe as safe can be. Now it seems that investors are getting scared off even from these loans, and this could be a big problem going forward.

The volatility in this market is absolutely crazy. There is a real disconnect between the economic fundamentals and mortgage interest rates. This week was one of the worst weeks I’ve seen in the mortgage backed securities market, and the effect on mortgage rates. Mortgage bonds plunged and rates moved up sharply over the course of the week. Part of this was due to financial problems with 2 lenders, Carlyle Capital and Thornburg Mortgage. They were forced to liquidate mortgages to raise funds, and buyers were scarce. On Thursday, when we saw the worst of it, we had 3 re-prices, all for the worse, over the course of the day.

One of the more puzzling things going on now is the widening spread between mortgage bonds and Treasury bonds, which are issued by the US government and considered nearly risk free. Over the course of the week Treasury rates barely changed, but mortgage rates jumped by about half a point. The spread between Treasuries and mortgages is well over 2 points now, much higher than normal. Investors are demanding a higher return from mortgage bonds, and this means higher mortgage rates.

Though mortgage rates did take a hit this week, fixed rates were looking much better by the end of Friday when the markets closed. But some programs this week got hit harder. Over the last several months I’ve encouraged borrowers to look at adjustable rate mortgages. That meant a borrower would save a tremendous amount on their payments while still having the security of knowing that their payment was fixed for the first 5 years. Last week the spread between a 30 year fixed and a 5 year Arm was almost a full point. This week the spread has nearly disappeared. Jumbo mortgages got hit hard this week, too. The big question is whether this is the new reality in mortgage pricing, or if this was just an uncommonly bad week and we will start to return to normal in the coming weeks.

The week was a disaster for mortgage rates, but they did improve some on Friday. The widely watched employment numbers came in much lower than expected. The expectation was that the economy would create 25,000 new jobs, instead it lost 63,000 jobs. The numbers for January and February were revised downward too, so the overall job picture is bleak. As I’ve said before, bad news for the economy is good news for mortgage rates, and the mortgage rates had a great day today, erasing much of the loss from yesterday, though they are still much higher for the week.

The other big news for the week was the release of the new FHA lending limits. Here in the Chicago area, the new lending limit for a single family home is now $410,000. This is great news for home buyers here in the Chicago area. The increase in loan limits will mean that many people who couldn’t buy a house before, will now be able to through the common sense underwriting of FHA.

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    6.25%       6.478% APR

15 year fixed rate    5.625%     5. 778% APR

5-1 A.R.M.               6.00%       6.239% APR       

7-1 A.R.M.               6.125%     6.287% 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.              6.125%        6.275% APR

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

30 year fixed rate  6.00%        6.249% 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.

Next week the Consumer Price Index will be released, and the focus will be on inflation again. There are a number of other reports scheduled for release, but the bigger issue may be about investor confidence, and whether they are willing to come back into the market. I expect the week will be volatile again. As usual.

Illinois Mortgage Rates and News.