Your Certified Mortgage Planner — Michael Eiden, Mortgage Blogger

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 26, 2010, increased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.5 percent compared with the previous week. “Purchase applications have increased over the past month, and are now at their highest level since last October when many home buyers were rushing to get loans closed before the expected expiration of the home buyer tax credit,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “We may be seeing a similar pattern now, as the extended version of the tax credit ends next month.”

The Refinance Index decreased 1.3 percent from the previous week and the seasonally adjusted Purchase Index increased 6.8 percent from one week earlier. This is the highest Purchase Index since the week ending October 30, 2009. The unadjusted Purchase Index also increased 6.8 percent compared with the previous week and was 9.3 percent lower than the same week one year ago. While both conventional and government purchase indexes saw increases this week, the government purchase index and the government share of purchase applications are at their highest levels since October 2009. The government share of purchase applications is currently 47.2 percent. The four week moving average for the seasonally adjusted Market Index is up 2.2 percent.

The four week moving average is up 5.4 percent for the seasonally adjusted Purchase Index, while this average is up 0.9 percent for the Refinance Index. The refinance share of mortgage activity decreased to 63.2 percent of total applications from 65.0 percent the previous week. This is the lowest refinance share recorded in the survey since the week ending October 23, 2009. The adjustable-rate mortgage (ARM) share of activity increased to 5.2 percent from 4.8 percent of total applications from the previous week.

The plain and simple? Looks like the market is turning to being driven by purchases. We know this because the refinance index failed to make much progress in the first quarter 2010, even as mortgage rates held below 5.00%.  It’s also entirely likely that the ‘fence sitters’ are getting nervous about rates rising coupled with the expiring home buyer tax credit are giving them the proverbial ‘kick-in-the-butt’ they so desperately need.

The listing presentation of one of the top producers in the country will be exposed on an on-line workshop on Thursday.

Put your credit cards away, there will be nothing for you to buy at this On-Line Workshop for Real Estate Agents.

Go Here Now to see it:
http://bit.ly/Unfairadvantage

This class will show you no less than 7 specific strategies that top producers are using to get virtually 100% success rate with their listing presentations.

You will see at least 3 that I bet you have never seen, didn’t even know existed…….

http://bit.ly/Unfairadvantage

These are the undercover strategies that the top producers have been secretly using to have their best 12 months ever!!!!

We will also be answer the questions that you posted on our InterNet TV Show.

But I warn you, this will not be a warm and fuzzy love fest. If the phrase Tough Love makes you uncomfortable, you may want to pass on this.

Be one of the 200 to see this (if there are any spots left)

Join Us Thursday, April 1st at:

2 p.m. EST
1 p.m. CST
12 p.m. MST
11 a.m. PST

Some of the things that will be covered will be

1. How to get more buyers than you could ever follow up on

2. How to get Virtual Tours done without paying $300 each

3. How to turn Craigslist into a printing press for money

Join Us Thursday, April 1st at:

2 p.m. EST
1 p.m. CST
12 p.m. MST
11 a.m. PST

If you just emerged from your cave, you may not know the home buyer tax credit is set to expire on April 30th. In order to take advantage of the $8,000 First Time Buyer credit or the $6,500 credit, you must have an accepted offer by that date and the transaction must close on or before June 30th. You can find out how to qualify at the IRS website: IRS Home Buyer Tax Credit The only exception is for those who are currently serving in the military.

Kipplinger article about the tax credit:

Homeowner breaks. And now service members serving outside the U.S. for at least 90 days between December 31, 2008, and May 1, 2010, have an extra year to qualify for the $8,000 first-time home-buyer credit or the $6,500 credit for current homeowners. They have until April 30, 2011, to sign a contract and until June 30, 2011, to close on the new house. Normally, if homeowners don’t live in the new house for at least three years, they have to repay the tax credit. But there’s an exception for members of the military who have to relocate because of government orders.

Military families also get a special break when they sell their homes. Most homeowners need to live in a house for at least two of the five years leading up to the sale in order to claim tax-free profits of up to $250,000 ($500,000 if married filing jointly). But because they move frequently, military families need to live in the house for only two of the preceding ten years in order to qualify if they are on qualified official extended duty, which means living at least 50 miles from home or in government quarters.

Having been a Marine myself, I am very pleased this was written into the legislation. Many thanks to you that have served our country and those that continue to serve.

If you haven’t heard… FHA borrowing costs are going up! (per Mortgage Letter 10-02)

Effective for FHA loans for which the case number is assigned on or after April 5, 2010 (here’s a hint, try and beat the deadline!), FHA will collect an upfront mortgage insurance premium of 2.25 percent. This policy change will increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit qualifying and non-credit qualifying streamlined refinance transactions.

Here’s what it means in real dollars and sense. Let’s say you get a loan for $175,000. As of right now, the upfront mortgage insurance would be $3062.50. After the deadline of April, 5th 2010 that will increase to $3,937.50. You will save yourself $875 by getting off the fence and getting your application in. You need to have your loan officer submit your case number to FHA BEFORE April, 5th 2010. After that… it’s too late.

If you are looking to get an FHA loan, call or email me to get pre-approved BEFORE the deadline. Not looking to get a loan? Do your friends a favor and pass this post on to those that are. Thanks!

Jump to Summary

Last Week; by the end of the week mortgage rates were unchanged from the previous Friday. The bellwether 10 yr note also essentially unchanged at 3.69% -1 BP. Short term rates however increased last week, somewhat preparing for the Fed withdrawing from the quantative easing programs initiated when the economic recession began; the only program still alive by the end of this month will be the TALF (treasury auction lending facility) to purchase commercial real-estate loans. At the end of March the Fed will have completed purchasing $1.25T of MBSs over the past year. Questions abound as to the potential impact on mortgage rates as a result of the Fed’s exit. So far mortgage interest rates haven’t experienced any unusual activity, holding a tight spread between the 10 yr note rate and 30 yr fixed mortgages.

The FOMC meeting last week; in the post-meeting stated that “Economic activity continued to strengthen…” would get a poor reception in your average Main Street saloon. Improve, yeah, in places; but, “strengthen”?… nah. If it were truly strengthening, how come exceptionally-low-rate-for-extended-period? The Fed also hit the end game of its housing-forecast. In November, “Activity in the housing sector has increased”; December, “Some signs of improvement”; January, no comment; this week, “Housing starts have been flat at a depressed level.” The equity markets continue to improve, betting heavily there will be no double dip; the DJIA index jumped 117 points but the broader averages were only fractionally better. Skeptics point to the very low volume in the stock market as evidence the market is softening, so far though no retreat.

This Week; starts with nothing in the way of economic data on Monday; the day will likely be dominated with the health care reform package that is expected to have passed on Sunday. If Democrats fail to get the votes (not likely) it will spell the end of this plan and Congress will have to start again. The week has Feb home sales reports on both existing and new homes; estimates are for a decline of 1.0% on existing sales and +1.9% for new home sales. The home buyers tax credit is about all that is driving sales recently. Treasury will have more borrowing with $44B of 2 yr notes on Tuesday, $42B of 5 yr notes on Wednesday, and $32B of 7 yr notes on Thursday.

So far, and for the past year, the demand for funding US budget deficits has been very strong and we expect that will continue this week. There are two interesting Fed officials speaking this week; SF Fed Pres Janet Yellen, likely the next vice chair of the Fed, and KC Pres Hoenig. Hoenig has been THE hawk at the Fed, pushing for the FOMC to point the markets to rate increases possibly sooner than that “extended period” for low rates to continue. The rate markets last week were soft at the lower end of the curve with longer term rates flat. Technically the long end including mortgages is sending bearish indicators on the key moving averages and momentum oscillators.

In Summary:

• The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
• The New Home Sales data for February is released Wednesday
• Consumer Confidence data hits Friday

Don’t forget, we are now in the week after the FED confirmed that they are in fact ending their Mortgage buyback program March 31st, 2010. We also have to be on the lookout for Kansas Fed President Thomas Hoenig. He will be out speaking why rates should be higher and what the are doing to prepare for the rest of this year and beyond.

As always, I welcome your comments! Email me if need help putting a mortgage together for a home purchase or refinance.

Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent. In its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”. Fed Chairman Ben S. Bernanke is trying to determine how long to hold down borrowing costs to strengthen the recovery from the worst slump since the 1930s and to reduce joblessness persisting near a 26-year high. At the same time, policy makers are developing tools to tighten credit and ensure $1.2 trillion in excess bank reserves doesn’t stoke inflation.

In its press release, the FOMC also noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”. It also said that business spending has “has risen significantly”.

This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.

It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism. This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.

The economy is not without threats, however, and the Fed identified several:

1. High unemployment threatens consumer spending
2. Housing starts are at a “depressed level”
3. Consumer credit remains tight

The message’s overall tone, however, remained positive and inflation is within tolerance limits

Even bigger new for you and I in the mortgage world, Bernake also confirmed the end of its $1.25 trillion commitment to the mortgage market by March 31, 2010.  This is huge for the Real Estate Mortgage Markets. See my earlier post FED Pulls Out in 37 Days: You Need to get Your Butt in Gear! from February 2010 for my thoughts. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.

Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates are unchanged this afternoon.

The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.

Last Week; after all the chopping around the longer end of the yield curve ended generally unchanged, mortgage rates and prices were unchanged. At the middle and short end of the yield curve rates increased, the 5 yr treasury increased to 2.41% up 7 basis points, the 2 yr note jumped 6 basis points to 0.96%. The short end saw position covering from the relaxing of the Greek deficit problems as European countries vowed to keep Greece from defaulting on its sovereign debt.

Not a lot of economic measurements to work on, but what there was added to the conviction that the economy is continuing to improve. Feb retail sales increased 0.3%, slightly more than expectations; when we strip away auto and gasoline retail sales were up 0.8%. Weekly unemployment claims continued to decline, down 6K for the previous week. Treasury once again found strong demand for its debt, selling $74B in 3 yr, 10 yr and 30 yr instruments. Equity markets moved up a little, but volume through the week was thin.

This Week; no Treasury borrowing, it is an every other week event. The key this week is the FOMC meeting on Tuesday with the Fed’s policy statement at its conclusion. Look for the statement to be re-worded on the issue as to when the Fed will begin to increase short term interest rates. For the last three meetings the phrase “for an extended period of time” was how the Fed answered how long it would leave interest rates low. An increasing number of FOMC members and Fed Presidents are pushing for a statement that has has less certainty, and want the extended period changed to allow more wiggle room for the Fed. This week the economic calendar has housing starts and permits for Feb, both expected to have declined from Jan; two measurements on inflation with Feb PPI and CPI, and the Philadelphia Fed business index.

Interest rate markets continue to have a slight bearish technical pattern but are completely fixated on how stock investors act; any decline in rates will be keyed on stock market declines as the ebb and flow on the future of the economy continue to dominate all thinking. Also on tap this week; it looks like Congress is going to ram through the health care reform. A plan that few understand, and a plan that in six years will blow another hole in the federal budget deficit. Look for the interest rate markets to be choppy again with not much change this week.

In Summary:

• Monday : Industrial Production and Home Builder Index
• Tuesday : Housing Starts and Building Permits
• Wednesday: Consumer Confidence
• Thursday : Producer Price Index and Initial Jobless Claims
• Friday : Consumer Price Index and Continuing Jobless Claims

If all that weren’t enough to digest, the Federal Open Market Committee meets for a scheduled, 1-day event Tuesday. They are expected to vote and hold the Federal Funds Rate a it’s Target of 0%. However, that doesn’t mean mortgage rates won’t change. Remember, it’s not so much what the do, it ‘what’ and ‘how’ they say it. I’ll and the markets will be paying close attention to their language.

If you are floating a mortgage rate right now… strap in! It’s gonna be a bumpy ride!

USDA Section 502 loans are primarily used to help low-income individuals (here in Oregon that starts at $80,500 gross income for a family of 1-4) or households purchase homes in rural areas.  You can view the eligible areas via their website.  Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities. There is no required down payment. The lender must determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.

USDA official release can be found below:

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.”  This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita.  Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

We apologize for any inconvenience this may cause you.  Should you have any questions, you may contact the Single Family Housing Guaranteed Loan Division at (202)720-1452.

—– End Release

Technically speaking USDA runs out of money every year and this usually doesn’t affect anything. They just source the fund somewhere else in government. Last year USDA ran out of money too but the stimulus plan buffered that shortfall. Things are different this year because of the huge demand placed on the program.  It looks like the 502 guaranteed Rural Housing program will have exhausted their funds by April 2010!!! For this to not happen, the USDA would need to receive about 150 million in funds to be able to continue the rest of the fiscal year which runs September 2010.

We are just now finding out about this so what is a consumer to do? Or for that matter, my industry peers; Realtor, Loan Officer etc..? We need to contact our local government representation and get them working on a solution. If they don’t, I’m afraid many folks are going to be left up that certain creek without a paddle. You can look up your local representation here. Once at the site, just click your state.

Some lenders have already stopped taking USDA loan applications. If you are in the middle of a transaction, contact your Loan Professional or Realtor immediately and find out your status.

Take advantage of improved tax credits available for many energy-efficient home improvements. Find a professional remodeler at www.nahb.org/remodel for assurance of a project well done.

The Existing Home Retrofit Tax Credit (Tax Code Section 25C): Tax credits are available at 30% of the cost, up to a $1,500 lifetime limit, for installation in 2009 & 2010 (for existing homes only) of these products:

Building envelope components: (Installation costs not included)

• Insulation material or system
• Exterior window, skylight, door, storm window or storm door
• Metal or asphalt roofs

Qualified energy products: (Installation costs may be included)

• Electric heat pump water heaters
• Electric heat pumps and central air conditioners
• Natural gas, propane or oil water heaters
• Biomass burning stoves
• Natural gas and propane furnaces
• Natural gas, propane, or oil water boilers and oil furnaces
• Advanced main air conditioning fans

The Wind, Solar, Geothermal and Fuel Cell Tax Credit (Tax Code Section 25D): Tax credits are available at 30% of the cost, with no cap through 2016 (for existing homes and new construction) for:

• Geothermal Heat Pumps
• Solar Panels
• Solar Water Heaters
• Small Wind Energy Systems
• Fuel Cells

The energy-efficiency home products must be “placed in service” between Jan. 1, 2009 and Dec. 31, 2010. The credits are only valid for improvements made to the taxpayer’s principal residence, except for qualified geothermal, solar, wind property, which can be installed on any home used as a residence by the taxpayer.

Home owners can claim the 25C and 25D credits on Form 5695 when they file their income tax returns. Check with your tax professional to ensure correct application of the energy-efficiency tax credit. Retain all receipts as well as records that include:

• Name and address of manufacturer
• Identification of the class of eligible building envelope component
• Make, model number and any other property identifiers
• A statement that the component is eligible for the credit

For more information, visit www.nahb.org/efficiencytaxcredit.

Only 7 weeks left folks to grab up to $8000 in tax credits from good ole Uncle Sam. In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:

• You can’t purchase the home from a parent, spouse, or child
• You can’t purchase the home from an entity in which the seller is a majority owner
• You can’t acquire the home by gift or inheritance
• Each buyer in the purchase must meet eligibility requirements

There’s other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.

And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction. This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase. You may find sellers more willing to negotiate today than several weeks from now.