Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 18th, my take on the week’s financial news and how it affected Illinois mortgage rates.

In last weeks review I said that the calm in the mortgage backed securities market was unlikely to last, and that I

expected rates to make a move out of their range soon. On that count I was 100% correct. I did however think that the odds were that the move would be toward lower interest rates. I blew it on that call. Mortgage bonds tanked this week sending mortgage interest rates higher – though there was an impressive recovery on Friday afternoon which brought rates back from the brink. Last week the consensus was that the economy was softening and we had a ways to go before the credit crunch played out. This week traders are feeling more optimistic on the economy and think that the worst is over. The view now is that we are finished with Fed rate cuts and our biggest worry is inflation. Not a lot has changed over the week to justify such a big swing in perception. There were some better than expected earnings reports this week, and a few economic reports came in better than projections. But most of the news was in line with earlier reports of a soft economy. In fact, most of the news that came out this week showed that there may still be some bumps in the road ahead of us. Credit is still tight and consumers are feeling pressured. The slowdown appears to be spreading beyond our borders and becoming global. We may be at the tail end of the credit crunch – at least from the perspective of the big financial players – but it is going to take a while before this trickles down to the American consumer.

The most anticipated reports this week were the release of CPI and PPI, two measures of inflation. PPI, the producer price index, came in a little hotter than expected, but this was due to high fuel costs. This isn’t always the best measure of inflation because in a soft economy producers aren’t always able to push their higher costs on to consumers, and often take the hit in their profit margins. CPI, the consumer price index, came in right as expected, with a moderate increase, not in the danger zone. Unemployment claims inched higher to 322,000. The levels of unemployment claims are at the level seen in past recessions. The Philadelphia Fed index came in much worse than expected and at the lowest level since 2001, another sign of a slowdown, and the Fed Beige book showed that economic conditions have “weakened” and residential construction is “anemic”.

All this data would normally cause mortgage bonds to rally pushing mortgage rates lower. So what happened that made traders so optimistic? A couple of things. First, some big corporations – IBM, Google and Caterpillar – came in with higher than expected earnings – mostly due to a rise in sales over seas, partly helped by a weak dollar. And then some financial powerhouses – Citigroup and Merrill Lynch – came in with huge losses, but less than expected. Citigroup announced the write down of another $12 Billion from bad credit loans, a quarterly loss of $5.1 Billion, and plans to layoff 9,000 employees. I figured out a long time ago that traders (stock, bond, whatever) live in Bizarro world, so this doesn’t completely surprise me. The thinking is that these losses, while HUGE, are less than what they could have been, so this means we are now near the bottom and we are ready to get back to the way things used to be. It is true that corporations like Citi can make a ton of money quickly. Their cost of borrowing has gone down, but they haven’t lowered the rates that consumers pay for most loans. The question here is whether or not rising defaults on credit cards and car loans will cut into these profits down the road.

Though rates have risen, I still think we are going to see lower mortgage rates before this is all over. Traders are fickle creatures. They jump on a trend and ride it as far as they can, but they are quick to jump off and ride in the other direction at the slightest change in direction. Little changes make big moves, especially now in a time when volatility is so high. Friday afternoon was a good example of this. Mortgage bonds started the day off with a loss of 66 basis points (a huge loss). It looked like bonds were on track to test the worst levels we’ve seen in months, when they switched direction and rallied higher. At the end of the day mortgage bonds closed up 31 basis points, up over 100 points from their low. What news came out to justify this switch? Not a thing. After the fact commentators came up with justifications for the switch, but the truth is it is all about market sentiment and this can switch on a dime. Traders and big investors are thinking that the worst is over, and they can see a time when the housing crunch is over and the economy is back on track. They can see it clearly, but we may have some valleys we have to cross before we get there. When we hit these valleys – or if there is even a hint that these valleys are out there – stocks will tank money will rush into mortgage bonds and rates will improve.

There is still a wide spread between T-bills and mortgage bonds, the market for Jumbo loans is still broken and ARMs are still priced out of the market. Investors still lack confidence in mortgage bonds, and mortgage wholesale lenders are holding back on their pricing to make up some of their losses. All this being said, there is still mortgage money available and this is a great time to buy a home. If you are thinking about buying a home in the Chicago area, or anywhere, and are ready to pre-qualify for a mortgage, let me know what I can do to help.

So where are we with mortgage rates? Rates are sharply higher than last week, but still historically low. 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%   6.064% APR

15 year fixed rate    5.50%     5.675% APR

5-1 A.R.M.               5.50%     5.675% APR      

7-1 A.R.M.               5.75%     5.839% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.75%     6.869% 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.*             5.875%      6.142% 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%       6.047% APR

With no origination fee –        60 day lock

30 year fixed rate  6.00%       6.246%

These are just a sampling of the mortgage rates available. Which option is best for you depends on your own specific goals and needs. The big question for next week is if the rally on Friday will carry though, or if it is a temporary blip in a worsening market. Stay tuned to find out more.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 11th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Over the last few months, the mortgage backed securities market has been extremely turbulent, moving back and forth in a wide range. This week we still had our ups and downs, but the range has narrowed. There were still a few days where wholesale lenders sent out intra-day re-prices, but overall this week was the flattest week we’ve seen in ages. We are sitting up near the top of the range for mortgage bonds, which means that mortgage interest rates are near the low point of the trading range. The question is, how long are we going to stay in these calm waters? Will we stay in this range, or are we about to break out of the range, either higher or lower?

The major mover in both stocks and bonds this week was the release of quarterly corporate earnings reports. The week started out with some rumors in the financial markets that the worst of the credit crunch was over. As one example, Washington Mutual, a big mortgage lender who has been hit hard by the credit crunch, was recapitalized with a $5 billion dollar cash infusion. This was looked at as a sign that good times were ahead and optimism reigned. But optimism can be a fickle thing in a soft economy. As companies released worse than expected earnings, the view switched back to concern that we still haven’t seen the end of the problems associated with the crunch. Washington Mutual did get their money, but later in the week they announced they were closing their wholesale mortgage division and many of their retail locations will be shuttered. The earnings releases were a mixed bag. Some corporations came in with better than expected numbers, but many were worse. The biggest surprise was the release Friday of corporate giant General Electric, the world’s second largest company. Their profit dropped 6% in the first quarter and they expect the whole year to be challenging. The mood in the markets turned from optimism at the beginning of the week to pessimism at the end.

In other news, initial jobless claims came in better than expected with 357,000 new claims compared to the 383,000 projected. But the 4 week average spiked higher, which means the job market is still in the dumps. A sure sign of a recession. The Consumer confidence index came in at a 26 year low. This is a sign that consumers are worried tapped out, and unlikely to pull any cash out for big purchases. Consumer spending has been the engine driving economic growth. This reading says that they are not about to pull out their wallets in order to rescue the economy. Another sign of a recession. The state of the economy and the housing situation has now become the biggest issue in the presidential campaign and in the halls of congress. Even John McCain, a free market Republican, has now insisted that the government get involved in a solution. It’s not clear what will come out of all this, but we are sure to see more plans to stimulate the economy and get the housing market on track.

As I have written before, with all the news on the economy pointing to a slowing economy, odds favor that when we do break out, it will mean that rates will drop lower. By all economic measures mortgage interest rates should be lower now than they are. The reason they aren’t is because the mortgage bond market is still broken. Investors still lack confidence in mortgage bonds, and mortgage wholesale lenders are holding back on their pricing to make up some of their losses. At the same time, rates are excellent now, and they may drop lower. If you are thinking about illinois mortgage refinance ? or are looking at houses and are ready to pre-qualify for a mortgage, let me know what I can do to help.

So how did all this activity affect mortgage rates? Again, relatively calm waters. Rates moved around but ended up close to where they were at the end of last week. 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 illinois mortgage company and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate 5.625% 5.746% APR

15 year fixed rate 5.25% 5.324% APR

5-1 A.R.M. 5.25% 5.324% APR

7-1 A.R.M. 5.625% 5.789% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.50% 6.613% APR – Requires 20% down payment

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

7-1 A.R.M.* 5.625% 5.789% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS up to $410,000

With 1 point origination fee – 60 day lock

30 year fixed rate 5.50% 5.784% APR

With no origination fee – 60 day lock

30 year fixed rate 5.875% 6.246%

These are just a sampling of the mortgage rates available. Which option is best for you will depend on your own specific goals and needs. Next week retail sales will be released on Monday, and the expectations are for a bad number. The PPI and CPI, two big measures of inflation will also be released. This week has been calm, next week may be more choppy.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 4th, my take on the week’s financial news and how it affected Illinois mortgage rates.

This week was a good example of how bi-polar our financial markets have become. At the beginning of the week UBS, one of the biggest investment houses on Wall Street and a big player in mortgage backed securities, announced a loss of 19 billion dollars from its sub prime holdings. To me this would be looked at as bad news. This is a huge loss and a scary reminder of how Wall Street feasted on this junk, and how vulnerable these outfits are now to the risk from it. But that was just my take, and I am after all just an amateur. The professionals looked at it differently. They looked at this as great news. If the big players were writing down huge losses, this must mean the worst is over and we are about to turn the corner and happy days are ahead of us. The stock market had a huge rally (for a couple of days) and mortgage bonds tanked, sending mortgage interest rates higher. I hope they are right, but this seems like Alice through the looking glass, magical thinking. Some times bad news is just bad news.

By the end of the week we saw the other side of the coin. The monthly jobs report is usually the biggest mover in mortgage backed securities, which relate directly to interest rates. This report monitors employment, and the more people who are employed at good wages, the better the overall economy is. The opposite holds true, too. When employment is down consumers hold back spending and the economy suffers. I’ve talked before about how bad news for the economy is good news for mortgage rates, this is a prime example. The market was expecting a loss of about 50,000 jobs, and some news released earlier in the week showed a possibility that the number would come in much better than expected. The real number was a loss of 80,000 jobs, and the mortgage bond market skyrocketed, which meant that rates are again coming down. The other news in this report was a revision downward of jobs created in January and February to show another 67,000 jobs lost. So don’t be surprised if this month’s number turns out to be larger than expected when it is revised next month.

So what was the real difference between the optimism on the economy at the beginning of the week and the pessimism at the end? It was all perception and market sentiment. Mortgage bonds, and mortgage interest rates, are trading within a wide range. Volatility has been high, but there has been a ceiling and a floor, and the trading has bounced back and forth between these points. With the big run up in mortgage backed securities over the last few days, we are now starting to get close to the top of the range (which means the low end of the range for mortgage interest rates). In the past, as we hit that ceiling, mortgage bonds would bounce off of it and head back in the opposite direction, meaning mortgage interest rates would go back up. Chances are that at some point we will break through this range. With all the news on the economy pointing to a slowing economy, odds favor that when we do break out, it will mean that rates will drop lower. If you are thinking of illinois mortgage refinancing or are about to place an offer on a home, be sure and get your documentation into your mortgage lender ahead of time (or contact me, I welcome the business). You want someone who follows the market to help you time the best time to lock in your rate.

In other news, conventional ARMs are still out of the market, but some lenders are starting to test the waters again. Hopefully we will see more of a difference between fixed rates and adjustables in the coming weeks. Also, as FHA mortgages take up more and more of the slack from the tightening of conventional underwriting, we are seeing underwriting times get longer. If you are planning on buying a home or refinancing a mortgage and FHA is your best option, be sure to allow extra time for processing and closing your loan. We have some investors who are now taking up to 3 weeks for underwriting an FHA loan.

So how did all this activity affect mortgage rates? Although rates have moved a lot over the course of the week, they ended up close to where they were at the end of last week. 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 5.625% 5.746% APR

15 year fixed rate 5.125% 5.274% APR

5-1 A.R.M. 5.375% 5.587% APR

7-1 A.R.M. 5.625% 5.789% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 7.126% APR

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

7-1 A.R.M.* 5.625% 5.789% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS up to $410,000

With 1 point origination fee – 60 day lock

30 year fixed rate 5.625% 5.897% APR

With no origination fee – 60 day lock

30 year fixed rate 5.875% 6.246%

These are just a sampling of the mortgage rates available. Which option is best for you will depend on your own specific goals and circumstances. Check back regularly to keep up to date on any changes in the market.

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