Archive for November, 2009

Mortgage Lenders Bailed Out By the U.S. Government

Beginning October 2008 through October 2009, the U.S. Treasury Department has been bailing out U.S. banks. In efforts to undergird the economy, and stabilize the struggling institutions, over $200 billion has been paid out to over 600 mortgage lenders through the Treasury’s Capital Purchase Program.

Surprisingly, almost $71 billion has been paid back to the U.S. Treasury so far. That’s almost 36 percent of $200 billion being paid back by 41 different banks. Interestingly to note, almost 7 percent of the banks who borrowed federal money owed 36 percent of the government’s capital purchase.

Looking at the extensive list of all lenders included can make your head spin. Names like 1st Enterprise Bank, 1st FS Corp. and 1st Source Corporation start off the registry that progresses to a multitude of variations of Bancorp names, ending on Yadkin Valley Financial Corporation, York Traditions Bank and Zion Bancorporation.

The Freeport State Bank of Harper, Kansas received the lowest bailout in the amount of $301,000. It looks like CitiGroup Inc. and JP Morgan Chase & Co. of New York, along with Wells Fargo & Co. based in California, received the largest bailouts in the amount of $25 billion each. Out of the three lenders receiving the biggest bailouts, only JP Morgan Chase & Co. is noted as having paid anything back to the government. To the credit of JP Morgan Chase & Co., the group has repaid the entirety of the $25 billion borrowed.

Not surprisingly, lenders in New York State lead U.S. territory and states in the Union with $79.5 billion in bailout bucks. The ten states that top the list are:

1. New York State – $79.5 billion
2. North Carolina – $28.6
3. California – $27.6 billion
4. Pennsylvania – $9.4 billion
5. Ohio – $7.65 billion
6. Minnesota – $7 billion
7. Georgia – $6.2 billion
8. Illinois – $4.5 billion
9. Virginia – $4.2 billion
10. Connecticut – $3.8 billion

States in which lenders borrowed the least include the following bottom ten:

1. Washington, D.C. – $6 million
2. Wyoming (all in Buffalo) – $8.1 million
3. Rhode Island – $31 million
4. New Hampshire – $40.8 million
5. New Mexico – $45.5 million
6. Nebraska – $51.6 million
7. Maine – $58.4 million
8. Idaho – $81.7 million
9. Arizona – $83 million
10. North Dakota – $85.8 million

The following states and companies are in the top ten to have paid back bailout money in the amounts indicated:
1. New York State — $51.7 billion
— JP Morgan Chase & Co. – $25 billion
— Goldman Sachs Group Inc. – $10 billion
— Morgan Stanley – $10 billion
— American Express Company – $3.4 billion
— First Niagara Financial Group – $184 million
— Signature Bank – $120 million
— Alliance Financial Corporation – $27 million
— Bank of New York Melon Corp. – $3 billion
2. Minnesota – $7 billion
— U.S. Bancorp – $6.6 billion
— TCF Financial Corp. – $361 million
3. Virginia – $3.7 billion
— Capital One Financial Corp. – $3.55 billion
— First Community Bank Shares – $41.5 million
4. North Carolina – $3.15 billion
— BB&T Corp. – $3.13 billion
— Crescent Financial Corporation – $24.9 million
5. Massachusetts – $2.1 billion
— State Street Corp. – $2 billion
— Independent Bank Corp. – $78 million
— Berkshire Hills Bancorp Inc. – $40 million
6. Illinois – $1.6 billion
— Northern Trust Corp. – $1.6 billion
7. New Jersey – $397 million
— Valley National Bancorp – $300 million
— Sun Bancorp, Inc. – $89.3 million
— Somerset Hills Bancorp – $7.4 million
8. California – $248 million
v CVB Financial Corp. – $130 million
— Westamerica Bancorporation – $83.7 million
— Bank of Marin Bancorp – $28 million
— First ULB Corp. – $4.9 million
— Manhattan Bancorp – $1.7 million
9. Washington – $200 million
— Washington Federal Inc. – $200 million
10. Texas – $200 million
— Sterling Bancshares, Inc. – $125 million
— Texas Capital Banchshares, Inc. – $75 million

Don’t let the numbers fool you. Just because a bank borrowed little doesn’t necessarily mean that it is a strong institution. On the contrary, it could be a smaller bank with shallower pockets. That should be even more cause for concern if the bank has not yet repaid borrowed bailout money to the government.

On the other hand, it should be encouraging if your bank is one of the lenders who landed in the top ten list of those who repaid their debt to the government. Also encouraging is that the $150 billion government bailout of the 1980s for the savings and loan debacle served the U.S. economy well. If history repeats itself, this will set the banks on track to overcome the current U.S. economic challenges.

Ki graduated from UT, and stayed in Austin to live and work. He authored a website, which serves Austin real estate buyers. It has a feature, which includes free searches of properties in the Austin MLS. His site also has statistical information on Austin real estate and a graph which shows mortgage rate history.

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Mortgage Rates Hit Historic Low

Mortgage rates fell this week with three of the 4 major mortgage products hitting all time lows. The most important of the four mortgage products the 30 year rate fell to 4.78 from 4.83 equaling the previous low. The 15 year mortgage product hit 4.29 beating the previous low of 4.32 reached last week. The 5 year arm came in at 4.18 breaking the previous low of 4.25 also reached last week. The 1 year arm stayed at 4.35. Below are rates from the weeks from Oct 29, 2009 to Nov 26, 2009

Nov 26, 2009
30-yr 4.78 15-yr 4.29 5-yr ARM 4.18 1-yr ARM 4.35

Nov 19, 2009
30-yr 4.83 15-yr 4.32 5-yr ARM 4.25 1-yr ARM 4.35

Nov 12, 2009
30-yr 4.91 15-yr 4.36 5-yr ARM 4.29 1-yr ARM 4.46

Nov 05, 2009
30-yr 4.98 15-yr 4.40 5-yr ARM 4.35 1-yr ARM 4.47

Oct 29, 2009
30-yr 5.03 15-yr 4.46 5-yr ARM 4.42 1-yr ARM 4.57

Jul 30, 2009
30-yr 5.25 15-yr 4.69 5-yr ARM 4.75 1-yr ARM 4.80

What’s interesting is that we keep waiting for mortgage rates to increase. Some have any speculated that rates could move into double digits in the next two years. But while this discussion has been occurring mortgage rates have continued to drop and reach historical lows. In addition to rates it’s interesting to look at actual mortgage payments. We took today’s rates and translated them into a payment on a 200k. We also did the same thing with rates from November 12th (2 weeks ago) and July 30th, 2009 (4 months ago).

Nov 26
30-yr $1046.91
15-yr $1508.6
5-yr ARM $975.7
1-yr ARM $995.62

Nov 12
30-yr $1062.66
15-yr $1515.71
5-yr ARM $988.56
1-yr ARM $1008.62

Jul 30
30-yr $1104.4
15-yr $1549.47
5-yr ARM $1043.29
1-yr ARM $1049.33

The payment is 5.5 percent less than what it was 6 months ago or 57.49 less a month for a 200k loan.

So what is going to happen moving forward? I have been predicting for the last several weeks that mortgage rates were going to eventually move up and they have continued to move down. But I am going to continue with the same prediction. In the short term rates might move down slightly. But in the long term there is more of a risk of mortgage rates moving up drastically. With mortgage rates sitting at historical lows there is more of a chance of rates moving up a point or two than moving down a point or two.

Although 5 year arms are at historical lows it makes more sense to look at the 30 year rate. Locking in at all time lows is simply too appealing to pass up.

In Austin, Ki organizes information on Austin Texas real estate. He writes frequently about mortgage rates. His site has multiple mortgage widgets and a mortgage calculator widget.

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Mortgage Lenders under Government Scrutiny

Topping the list of institutions under fire are the familiar faces of Fannie Mae and Freddie Mac, the poster children for good intentions gone bad. The government entities faced renewed federal scrutiny earlier this year. What to do with the troubled HUD groups, however, is still up in the air. The issue is delayed until after the current federal bank restructuring effort is completed, which is anticipated by year-end.

Reformation is definitely on the horizon for these two lenders. The Treasury Department is considering an expansion of options on guidelines officials released in June regarding both lenders. Privatization, nationalism, hybrid strategies are all being measured for reform.

Fannie and Freddie were taken into conservatorship by the federal government last year as the financial crisis spread. Governmental control seemed inevitable. If the two were to collapse, it was thought that the damage would be irreparable and more widespread and devastating than even the Lehman Brothers’ failure.

Reform is critical, since these entities provide the majority of home loans in the U.S. The U.S. Treasury Department was authorized to purchase Fannie and Freddie mortgage securities through the end of this year. Legislation is anticipated to extend the Treasury’s conservatorship through the end of 2010.

Wells Fargo, the receiver of $25 billion in bank bailout money, was the primary lender on two recently shuttered businesses in Alabama. Wadley company Plantation Patterns and Anniston corporation Anniston Sportswear both filed for bankruptcy, and Wells Fargo was the primary lender for both companies. According to federal statistics and a local mayor’s report, a total of more than 660 jobs were lost in both closings. Birmingham-based Meadowcraft is the parent company of Plantation Patterns. Chicago-based Hartmax Corporation is the parent company of Anniston Sportswear.
Wells Fargo’s apparent refusal to work with either business brought federal scrutiny. In two separate incidents, the lender was named by over 40 members of Congress in complaints written to Treasury Secretary Timothy Geithner.

Not unfamiliar to federal scrutiny, Countrywide came under the federal microscope again last year, this time by a federal bankruptcy court official. Accused of destroying, losing or misplacing $515,000 in checks issued by homeowners, the home lender was further accused of adding inappropriate charges to the bankruptcy debt of homeowners.

Countrywide eventually worked out a deal with the court; however, the Justice Department challenged the settlement due to some unsavory terms presented by the mortgage lender. A non-disparaging clause was included, which caused the judge in the case to approve a probe of Countrywide’s entire systems by the U.S. trustee.

Many mortgage lenders letting loans for reverse mortgages are now being examined under federal scrutiny. Some lenders responsible for predatory lending have now turned to high-pressure tactics and broad-yield premiums intended to rip off elderly homeowners. Michael S. Blume, U.S. Attorney, noted a dramatic increase in reverse mortgage loan numbers.

Bank of America and Wells Fargo, along with insurers like MetLife and Genworth, heavily invest in reverse mortgages worth about $17 billion annually. The FHA insures most reverse mortgages. Lenders are approved by HUD. Borrowers are required to meet with HUD-approved counselors prior to being approved for the reverse mortgage loan. New certification requirements have resulted in a reduction of counselors available nationwide, alongside an increase in the number of reverse mortgage loans.

The similarities of subprime loans to reverse mortgages are eerily similar in their predatory lending practices. Senior homeowners are strongly encouraged to avoid high-pressure sales that involve add-on products and services for reverse mortgages.

For more mortgage lenders under federal scrutiny, check out the Federal Trade Commission website at FTC.gov. You’ll find formal complaints and current cases being prosecuted by the federal government.

Ki developed a website to serve Austin real estate investors. The site lets people search for homes and condos in the Austin MLS. His site has information on historical mortgage rates along with general information on Austin real estate.

Mortgage Rates Plummet: 6th Lowest of All Time

Rates fell for the third straight week. They hit the lowest point since May 21st and they reached the 6th lowest point in history. It will come as no shock to those that have been following rates that the 5 lower rates all occurred this year. Below are the 6 lowest rates of all time.

April 30th – 4.78
April 2nd – 4.78
April 23rd – 4.80
April 16th – 4.82
May 21st – 4.82
Nov 19th – 4.83

As we can see although it’s the 6th lowest it’s extremely close to the all time low of 4.78 reached in April. Falling below 4.78 at this point would be significant though. While it would not make a big difference in actual mortgage payments it would create headlines. And having a bunch of stories about historically low mortgage rates could push some buyers off the fence and help increase sales.

In addition to the 30 year rate falling the other major mortgage products fell as well this week. In fact the 15 year mortgage and the 5 year arm both hit all time lows this week. Below are rates from the weeks from Oct 22, 2009 to Nov 19, 2009. We also showed rates from April 30th, 2009 which was the all time low for the 30 year mortgage.

Nov 19, 2009
30-yr 4.83 15-yr 4.32 5-yr ARM 4.25 1-yr ARM 4.35

Nov 12, 2009
30-yr 4.91 15-yr 4.36 5-yr ARM 4.29 1-yr ARM 4.46

Nov 05, 2009
30-yr 4.98 15-yr 4.40 5-yr ARM 4.35 1-yr ARM 4.47

Oct 29, 2009
30-yr 5.03 15-yr 4.46 5-yr ARM 4.42 1-yr ARM 4.57

Oct 22, 2009
30-yr 5.00 15-yr 4.43 5-yr ARM 4.40 1-yr ARM 4.54

Apr 30, 2009
30-yr 4.78 15-yr 4.48 5-yr ARM 4.80 1-yr ARM 4.77

So now that we have locked at rates lets look at actual mortgage payments. We took current rates and translated them into a mortgage payment for a 200k mortgage. We also did the same thing with rates from November 19th (2 weeks ago) and from April 30, 2009 (the all time low for the 30 year rate.

Nov 19
30-yr $1052.96
15-yr $1511.65
5-yr ARM $983.87
1-yr ARM $995.62

Nov 05
30-yr $1071.19
15-yr $1519.78
5-yr ARM $995.62
1-yr ARM $1009.8

Apr 30
30-yr $1046.91
15-yr $1527.94
5-yr ARM $1049.33
1-yr ARM $1045.7

So based on current mortgage rates the payment on a 200k loan would be $1052.96. What’s interesting is that the payment is 1.7% less than what it was two weeks ago. On the other hand the payment based on today’s rates is only 0.5% higher than what it was on April 30th when the 30 year rate hit its all time low.

So what is advice to people looking for mortgage? Although the 5 year arm is at an all time low I would avoid ARM’s at this point. Looking at historical mortgage rates it would seem that most likely rates will be significantly higher in 5 years than what we are seeing currently.

Now is probably a going time to lock in a mortgage rate. With rates just barely above all time lows the chances of rates falling drastically is pretty low. On the other hand rates have a lot more room to move up.

Ki works in Central Austin. His website distributes free information on Austin Tx real estate to potential buyers. His site also has a free mortgage calculator and a interest rate widget.

The Ripple Effect of Foreclosure

Having the bank seize your home is nobody’s idea of a good time. A word that was hardly part of the American vernacular two years ago, foreclosure is all too common these days. While the number of homes in some state of foreclosure is decreasing each month, the fact is that foreclosures across the country are up 19 percent from a year ago (RealtyTrac).

According to the Associated Press, one in every 385 homes received some sort of foreclosure-related notice in October. Foreclosure is a multi-step process that often begins with the loss of a job, includes several stages and can end with ruined credit. Banks repossessed over 77,000 homes last month, dramatically changing the lives of hundreds of thousands of people. What is harder to quantify is the ripple effect foreclosures have in not only devastating a single family, but also affecting an entire community.

A homeowner not only loses the house, but also all the money put into the house. The homeowner walks away from all the equity and any money spent on improvements. The tax liability and bad credit can linger for years after a foreclosure. Families can be uprooted and long-standing social ties can be broken. Emotions can run high and a person’s self-esteem and sense of well being can be battered.

Then there is what can be called the “spillover effects” of foreclosure. Beyond the homeowner who lost a home, the property values of surrounding homes can be negatively affected. In the broader view, this can affect the local property tax base, which has far reaching implications for an entire city. Because the foreclosure can be drawn out, homes often remain empty for months. Empty or abandoned homes can fall into disrepair and even invite crime.

These are unusual times with the country still reeling from the Great Recession and perhaps unusual steps are needed to keep more struggling homeowners out of foreclosure. Both the Federal Reserve and the Treasury Department have enacted programs to get lenders to work with homeowners. Programs offering mediation before a bank can seize a property have helped in states like Nevada, where the foreclosure rate is the highest in the nation. (AP)

The recent decline in foreclosures is largely attributed to these measures by the government to encourage banks to work with homeowners before foreclosing. However, those efforts are only a drop in the bucket. The AP reported that about 650,000 borrowers, or 20 percent of those eligible, were taking part in temporary trial plans. The reality is that since the beginning of September, only about 1,700 loan modifications had been made permanent.

It’s been reported that lenders are making efforts to delay foreclosure as they evaluate which borrowers might qualify for the government’s loan modification program. Also, housing prices have started to climb again after three years of startling declines. This helps reduce the number of homeowners who owe more than their home is worth. As foreclosures remain at a crisis level, affecting a wide range of people, the Obama administration may need to push more lenders to take part in loan modification plans–for all our sakes.

Ki enjoys sharing his passion for Austin Texas real estate with future homebuyers. One way he distributes information in through his website, which offers a free search Austin MLS search. He lives and works in Austin, Texas. And writes on his blog about Austin real estate.

Mortgage Rates Fall Back Below 5.00

After rising steadily for the last 3 weeks mortgage rates fell back down this week. The 30 year rate fell from 5.03 to 4.98. The 15 year rate fell from 4.46 to 4.40. The 5 and 1 year arm fell from 4.42 to 4.35 and 4.57 to 4.47 respectively. This looks like more of a hiccup as mortgage rates steadily start there rise. At this point the overwhelming consensus is that mortgage rates are going to rise in the next six months. But the lowered rates do provide an opportunity for potential homeowners to lock in rates at sub 5.00 rates. Below are rates from the weeks from October 8, 2009 to November 5, 2009.

Nov 05, 2009
30-yr 4.98 15-yr 4.40 5-yr ARM 4.35 1-yr ARM 4.47

Oct 29, 2009
30-yr 5.03 15-yr 4.46 5-yr ARM 4.42 1-yr ARM 4.57

Oct 22, 2009
30-yr 5.00 15-yr 4.43 5-yr ARM 4.40 1-yr ARM 4.54

Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60

Oct 08, 2009
30-yr 4.87 15-yr 4.33 5-yr ARM 4.35 1-yr ARM 4.53

Apr 16, 2009
30-yr 4.54 15-yr 4.93 5-yr ARM 4.83 1-yr ARM 4.82

As has been the case for several months the interest rate to watch is the 30 year rate. When rates are low (and the expectation is that they are going to rise) there is no real reason to look at short term ARMS.

In addition to looking at rates we also calculated the mortgage payments for a 200k loan based on today’s rates.

Nov 05
30-yr $1071.19
15-yr $1519.78
5-yr ARM $995.62
1-yr ARM $1009.8

Oct 22
30-yr $1073.64
15-yr $1522.84
5-yr ARM $1001.52
1-yr ARM $1018.12

Apr 09
30-yr $1015.74
15-yr $1573.26
5-yr ARM $1043.29
1-yr ARM $1057.8

This show how little rates have moved in the last two weeks. For a 30 year loan on a 200k mortgage the payment is $2.45 less a month for a decrease of about 1/5 of 1 percent

So what is our advice? First I would avoid anything but a 30 year mortgage. Their is simply too much of a chance of higher rates. Second I would start looking for a mortgage earlier in the process instead of later. Basically their are too many issues with lending right now and it’s a good idea to find out any issues to get a loan earlier in the process. Second it’s a good to check into the 7,500 tax credit. The new program has expanded the eligibility so if you didn’t qualify for the 8,000 tax credit you might qualify for the new one.

Ki works, and lives, in Austin, Texas. His website arranges details on the Austin Tx real estate market. It also has graphs of mortgage rate trends and a few free mortgage widgets.

Famous Historic American Homes

There are a plethora of historic homes existing in the U.S. today. Some are noted for their connection to our heritage as a nation. Others are famous for their association to crime, criminals and movie stars. And, of course, you’ve got literary greats, real estate tycoons, media moguls, publish giants and all the rest. Here, you’ll find just a few with details that might surprise you.

Robert E. Lee’s old home, AKA Custis-Lee Mansion, became home of the honorable Arlington National Cemetery. Overlooking the Potomac River, the Greek revival style manor was selected by the government as the site for the cemetery to ensure that Lee never again returned to his home after the Civil War. Sitting on 1,100 acres, the mansion hosts two kitchens for the summer and winter. The most prominent features of the estate are the eight massive, 5-feet-in-diameter columns supporting the portico. The mansion is managed by the National Park Service, while the surrounding grounds, known as Arlington National Cemetery, are managed by the U.S. Department of the Army.

William Randolph Hearst, newspaper magnate and grandfather to the infamous Patti Hearst, once owned a mansion at 1101 N. Beverly Dr. in Beverly Hills, California with his actress girlfriend Marion Davies. Built in 1926, it’s estimated worth is $165 million with 9 bedrooms, 15 bathrooms, 20,570 square feet of living and sits on a 153,766 square foot lot. Just a small slice of heaven right there outside of Hollywood. If you were in the market to buy the property with a 30-year, fixed-rate loan at, let’s say, 4.91 percent with 20 percent down, you’d have estimated monthly payments of just $31,645. Can you say cha-ching?!

George Washington Vanderbilt II completed the construction of the Biltmore Estate in 1895, which is located in Asheville, North Carolina. With 250 rooms in 175,000 square feet of living space, the home is the largest privately owned estate in the U.S., and is still owned by Vanderbilt’s grandson, William A. V. Cecil II. The French Broad River divides the estate in half. Resting magnificently on 8,000 acres, the mansion echoes the sentiment of an elaborate French chateau and the excesses of the America’s Gilded Age. It was inducted in the National Historical Society and designated a National Historic Landmark in 1964. Tourists worldwide visit the palatial estate throughout the year. Featured are a 70,000 gallon indoor swimming pool, a bowling alley, a two-story library, dated antiquities throughout and 75 acres of formal gardens with a winery and triple A, 4-diamond, 213-room hotel called the Inn on Biltmore Estate. Tickets to tour the estate may be purchased in advance on the Biltmore website.

David Gamble of Proctor & Gamble fame hired architectural firm Greene & Greene (G&G) to design the Gamble House (AKA David B. Gamble House), which was completed by 1909. Located in Pasadena, California, the estate was declared a National Historic Landmark in 1977. Matching inlay was designed by G&G for the custom-made furniture and tile mantle surrounds, which were built by contractors Peter and John Hall. A secret door that leads to the kitchen is hidden in one of the wooden panels of the entry hall. Another panel leads to a clothes closet. The three-story, Arts and Crafts masterpiece, influenced by Japanese aesthetics, sits on an expansive acreage decorated generously with Arroyo stone paths that give the effect of running brooks. Realizing the artistic significance of the estate, the Gamble family deeded Gamble House in joint ownership to the City of Pasadena and the University of Southern California School of Architecture in 1966.

Al Capone stunned law enforcement with his ability to divert indictments and skirt the law. Infamous for his crime syndicate leadership during the Prohibition Era, Capone lived much more modestly in private in contrast to his flamboyant public persona. Located at 7244 S. Prairie Avenue in Chicago, Capone’s 4-bedroom, 2-bath, modest unit in the multi-family home was built in 1908. Last heard, the home was for sale for a mere $450,000. If you wanted to buy it at a 30-year, fixed-rate loan at 4.92 percent with 20 percent down, you’d pay an estimated $1,915 per month.

Nathaniel Hawthorne immortalized the House of the Seven Gables in his literary fictional novel with the same name. Located in Salem, Massachusetts, the home is currently a non-profit museum and still functions as an active settlement house hosting programs for children. Although Hawthorne never lived in the home, he visited his cousin Susannah Ingersoll who lived in the home when he was growing up. One quite clever creation found in the home is what looks like a wooden closet. The false back, however, opens to a hidden staircase leading up to the attic.

Erotica king Hugh Hefner lives in his current Playboy Mansion (AKA Playboy Mansion West) in Los Angeles, California. Located at 10236 Charing Cross Road in Holmby Hills, the manor is famous for its lavish parties and rumored orgies. Built in 1927, the 14,217 square foot home sits on a 219,107 square foot lot and was acquired by Hefner in 1971 for $1.1 million. With 29 rooms, the estate hosts a game room, wine cellar, an aviary, a zoo, tennis courts, waterfall and a swimming pool, along with a sauna and bathhouse. One room in the palatial home known as the “Elvis Suite” has been kept off limits to public viewing. Hefner said the room holds sentiment due to the one night that Elvis Presley stayed in it in the early seventies. He was accompanied by no less than eight girls. Although, sports stars, movies stars and rappers request the suite when they come there, Hefner says he’s kept it off limits.

Ki caters to future buyers of Austin real estate. He has a searchable website of Austin homes for sale. He site has statistics and info on Cedar Park and Austin real estate

Mortgage Rates Continue To Rise: Are Sub 5 Rates Gone Forever?

So are sub 5.0 rates gone forever? The short answer is probably yes. While rates might briefly fall below 5 in the next month for the most part the era of sub 5.0 rates is over. Mortgage rates rose for the third straight week. The thirty year rate rose from 5.00 to 5.03. The 15 year rate rose from 4.43 to 4.46. The 5 and 1 year rates rose from 4.40 to 4.42 and 4.54 to 4.57. Its interesting to note that the 1 year arm has had a higher rate than the 5 year arm for the last few weeks. Below are rates for the last few weeks.

Oct 29, 2009
30-yr 5.03 15-yr 4.46 5-yr ARM 4.42 1-yr ARM 4.57

Oct 22, 2009
30-yr 5.00 15-yr 4.43 5-yr ARM 4.40 1-yr ARM 4.54

Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60

Oct 08, 2009
30-yr 4.87 15-yr 4.33 5-yr ARM 4.35 1-yr ARM 4.53

Oct 01, 2009
30-yr 4.94 15-yr 4.36 5-yr ARM 4.42 1-yr ARM 4.49

Apr 02, 2009
30-yr 5.05 15-yr 5.13 5-yr ARM 5.00 1-yr ARM 4.78

The only two mortgage products that are interesting is the 30 year and the 15 year fixed rates. With 1 year rates higher than the 5 year arm they are obviously pointless. And with current rates low compared to historical mortgage rates the lower rates of the 5 year arm (compared to the 30 year rate) don’t seem worth the risk. In addition to mortgage rates lets look at mortgage payments. Taking today’s rates we can translate them into a payment for a 200k mortgage. We did the same thing with rates from October 15th (2 weeks ago) and April 2 (6 months ago).

Oct 29
30-yr $1077.31
15-yr $1525.9
5-yr ARM $1003.88
1-yr ARM $1021.7

Oct 15
30-yr $1063.88
15-yr $1516.73
5-yr ARM $999.16
1-yr ARM $1025.28

Apr 02
30-yr $1079.76
15-yr $1595.16
5-yr ARM $1073.64
1-yr ARM $1046.91

A mortgage payment is about $13 more than 2 weeks ago and about $2 less than it was six months ago.

So why are rates rising? Although its a weak recovery, the economy by most accounts is experiencing a recovery. In addition, the government has lowered the amount of mortgage backed securities it was buying which was keeping rates artifically low.

So what is our advice to people interested in buying a house? It might seem obvious but I would lock in now instead of waiting. Almost all signs point to mortgage rates rising over the next few months. The real question is will the strengthing real estate market be able to withstand higher rates? We will have to wait to find out.

Ki writes frequently about the mortgage industry and mortgage rates. He caters to the real estate market in Austin. His site www.escapesomewhere.com www.escapesomewhere.com has information on historical mortgage rates along with a free mortgage widget.

The Income Gap Widens

The Great Recession is not the great American equalizer after all. It’s been widely reported recently that this recession hit middle and low income families the hardest, while the wealthy have continued to prosper. It may be chic to save and everyone brags about coupon clipping, but the idea that “we are all in this together” may not actually be the case.

According to the Associated Press, incomes have declined across all demographics, but at a greater percentage for middle and lower income groups. “Median income fell last year from $52,163 to $50,303, wiping out a decade’s worth of gains to hit the lowest level since 1997.” In fact, the gap between the rich and the poor has widened to the point that the wealthiest ten percent of Americans earned 11.4 times those below the poverty line earning $12,000 a year. Previously, the highest earning difference was 11.22 times higher in 2003.

The unemployment rate stands at a thirty year high of 9.7 and a great majority of those job losses have been lower income ones, particularly in construction and manufacturing. While wealthier Americans have had reductions in executive pay, far more of the middle and lower income earners have lost their jobs. This disparity between the rich and the poor is more pronounced in larger cities, like Atlanta, New York and Chicago.

The recession seems to be coming to a close with signs that the economy is finally growing. The Commerce Department reported that the economy shrank less than expected, with gross domestic product dipping just 0.7 percent from April to June, after dropping 6.4 percent in the first quarter of the year (AP). Measuring the value of all goods and services, the GPD is a good barometer of the health of the economy.

The better than anticipated numbers are attributed to businesses and consumers spending more than expected. The better news is largely credited to the government’s $787 billion stimulus package and programs like Cash for Clunkers. What is not expected to improve anytime soon is the unemployment rate, which analysts believe will reach 10 percent by the end of the year.

As hiring in most sectors remains stagnate and layoffs continue, the gap between the haves and have-nots is likely to widen. Congress is considering ways to regulate executive pay and this along with The Great Recession is not the great American equalizer after all. It’s been widely reported recently that this recession hit middle and low income families the hardest, while the wealthy have continued to prosper. It may be chic to save and everyone brags about coupon clipping, but the idea that “we are all in this together” may not actually be the case.

According to the Associated Press, incomes have declined across all demographics, but at a greater percentage for middle and lower income groups. “Median income fell last year from $52,163 to $50,303, wiping out a decade’s worth of gains to hit the lowest level since 1997.” In fact, the gap between the rich and the poor has widened to the point that the wealthiest ten percent of Americans earned 11.4 times those below the poverty line earning $12,000 a year.

The unemployment rate stands at a thirty year high of 9.7 and a great majority of those job losses have been lower income ones, particularly in construction and manufacturing. While wealthier Americans have had reductions in executive pay, far more of the middle and lower income earners have lost their jobs. This disparity between the rich and the poor is more pronounced in larger cities, like Atlanta, New York and Chicago.

The recession seems to be coming to a close with signs that the economy is finally growing. The Commerce Department reported that the economy shrank less than expected, with gross domestic product dipping just 0.7 percent from April to June, after dropping 6.4 percent in the first quarter of the year (AP). Measuring the value of all goods and services, the GPD is a good barometer of the health of the economy.

The better than anticipated numbers are attributed to businesses and consumers spending more than expected. The better news is largely credited to the government’s $787 billion stimulus package and programs like Cash for Clunkers. What is not expected to improve anytime soon is the unemployment rate, which analysts believe will reach 10 percent by the end of the year.

As hiring in most sectors remains stagnate and layoffs continue, the gap between the haves and have-nots is likely to widen. Congress considering ways to regulate executive pay along with President Obama suggesting higher taxes on the wealthy as one the ways to pay for health care reform, the resentment between the two ends of the income spectrum may also increase. While the Great Recession is the worst state the economy has been in since the Great Depression, some Americans are faring better than others.

Ki’s real estate business is based in Austin, Texas. His website gives comprehensive information on Austin real estate. His website provides future home buyers with a free search of homes in the Austin MLS along with a blog with statistics and commentary on Austin Texas real estate.

Traditional Home Loan or ARM?

If you’re obtaining a mortgage and contemplating whether to get a traditional home loan or adjustable rate mortgage (ARM), there are definitely some things you’ll want to consider.

Before deciding on either, you’ll want to understand the dynamics and look into the advantages and disadvantages of each. Some considerations to keep in mind are how long you intend on keeping the home; whether one of your intentions in buying a home is to build credit and what will give you the best annual percentage rate (APR) in the beginning and throughout the lifetime of the loan.

Traditional home loans are typically known as fixed rate mortgages (FRMs). The most popular FRM, a longer term mortgage, has the following characteristics:

* Payments are fixed throughout the term of the loan
* Are available from 15 to 40 years, in 5 year increments
* The shorter the loan term, the lower the interest rate
* The shorter the loan term, the less interest you will pay over the life of the loan
* The bulk of loan payments go to interest in the beginning of the loan
* There are penalties for early payoff on some FRMs – ask your lender

Included in FRMs is the balloon loan, a short-term, fixed-rate mortgage. The balloon loan has some advantages in that the interest is typically much lower and you have lower monthly payments than on a 15- to 40-year term loan. The terms are usually from 3 to 7 years, but you are required to pay the remaining balance in full at the end of the term.

If you are considering a balloon loan and think you will be keeping the home for a long period of time, obtain one with a refinancing option. Certain conditions will have to be met, but it allows you to convert the remaining balance of the loan into a longer fixed-rate mortgage at the end of the term without going through the buying process again.

With the caveat of the refinancing option, you don’t have to go through another credit check or reapproval of the property. The interest assigned to the new loan will be at the current market rate at the time it is converted. A processing fee may be required when obtaining the new loan. You’ll want to ask about this long before you agree to the balloon loan.

ARMs, on the other hand, provide you with a broad array of options, advantages and disadvantages. Similar to a balloon loan, the payments and interest rate are typically lower in the beginning of the ARM term. Periodic assessments are made throughout the lifetime of the loan, which can lower or raise your interest rate and monthly payment.

Keep in mind, interest rates typically are higher at the first assessment of the loan and often continue to rise. These kinds of loans, however, commonly have caps that put a ceiling on your maximum monthly payment that can be required of you throughout the lifetime of the loan. The excess will simply be added to the principal of your loan, which could extend the lifetime of your loan.

ARMs option ARMs are also available, can be very complex loans, so you’ll want to understand the conditions of the loan, along with terminology applicable to the loan. Ask your lender prior to committing to an ARM about the advantages and disadvantages.

Generally, ARMS are best suited for those who are making an investment where rents are low and property values are high. This option allows you more cash flow. They also often benefit seasonal workers and those who own businesses where the revenues fluctuate.

Keep in mind, the interest rate on an ARM can adjust as soon as one month from the loan’s inception, depending on the conditions of the loan. Some terminology to ask about and pay close attention to is:

* Lifetime cap limit
* Index
* Margin
* Periodic or adjustment cap limit
* Interest rate cap
* Loan recast
* Minimum payment factor

General advantages from a traditional mortgage are that you have significantly more flexible payment options and your monthly payments at the onset of your loan are much lower. One disadvantage is that if you only pay the minimum payment due monthly, your loan will recast at some point and your lender will recalculate your loan payments over the next 30 years based on your remaining balance. This could drastically raise your monthly loan payment.

Again, ask your lender as many questions as you can think of. Compare terms, advantages and disadvantages of each. Make sure you understand the terminology used and conditions prior to agreeing and signing to any loan.

Ki lives and works as a realtor in the Austin real estate market. There is comprehensive Austin home search on his website. His website also has detailed information on Austin real estate and a mortgage calculator widget.