Rates on 30-year fixed mortgages remained at an all-time record low for the second week in a row.

The 30-year fixed rate held steady at an average of 3.87% for the week ending February 9, the lowest rate ever recorded in the 40-year history of the Freddie Mac Primary Mortgage Market Survey. That compares with the 5.05% rate recorded at the same time a year ago.

Meanwhile the 15-year fixed rate inched slightly higher to an average of 3.16%, up from the record 3.14% it set in the previous week. The 5-year Treasury-indexed adjustable rate mortgage and the 1-year Treasury-indexed adjustable rate mortgage also saw modest gains.

Frank Nothaft, vice president and chief economist at Freddie Mac, attributed the increases to last Friday’s much better-than-expected jobs report. The report showed that the economy gained 243,000 jobs last month and the unemployment rate eased to 8.3% — the lowest rate since February 2009.

“A strong January employment report added upward pressure to most mortgage rates this week,” said Nothaft.

Nevertheless, the historically-low rates are great news for homeowners looking to refinance their mortgages — a move many homeowners may soon be hoping to make. The same day Freddie’s mortgage rate survey was released, federal and state officials announced a $26 billion foreclosure settlement with five of the nation’s largest home lenders over charges of foreclosure made without proper paperwork and protocols, known as “robo-signing”.

Foreclosure settlement: What it means for you

At least $17 billion of the settlement will go toward reducing the principal of mortgages held by homeowners who owe more on their home than it is worth and are behind on payments.

Another $3 billion will go toward refinancing mortgages for borrowers who are current on their payments — offering them a chance to realize substantial savings on monthly payments.

Last week, the rate hit an all-time low after the fourth quarter gross domestic product report showed that the economy was growing at a rate that fell short of expectations.

By Blake Ellis@CNNMoneyFebruary 9, 2012: 12:37 PM ET

 Laurie Goodman is an apolitical number cruncher who has spent most of her 28-year career out of the public view, studying the minutiae of mortgage-backed securities (MBS) for big investment banks. She’s long been a star among Wall Street insiders, however. She holds the record for the most top rankings for fixed-in-come research from the trade bible Institutional Investor.

While Goodman concedes she underestimated the impact of the housing bubble’s bursting early on, by mid-2007 she was warning investors to prepare for a deep downturn. She prepared herself as well.

After her employer at the time, UBS, shut down its mortgage trading desk in 2008, she jumped to Amherst Securities, a small company that serves as an MBS broker-dealer for big investors. From there she’s published research that has raised her profile and made her an oft-cited source by would-be housing reformers in both the private and public sectors. If she is underestimating the problems the housing market has now, we’re all in trouble.

Goodman often pauses several seconds before speaking, choosing her words deliberately. So it is especially distressing to hear her warn of a potential housing “death spiral.”

On top of the 2.5 million homes that have already fallen to foreclosure since the bubble burst, another 4.5 million mortgage holders have given up paying and are likely to lose their homes, she calculates.

‘Shareholders of the world unite’

Millions more are underwater — owing more than their home is worth — and may give up if things don’t improve soon. All told, Goodman warns that more than 10 million of the nation’s 55 million mortgage holders could default by 2018. If home prices fall much more than the 6% or so she’s projecting over the next 12 to 18 months, the picture worsens, as more foreclosures drive prices down further, in turn causing more sheriffs’ sales.

Goodman’s research into who defaults shows that many governmental and private efforts at saving borrowers — and reducing investors’ losses — by modifying mortgages weren’t helping because they only extended payments or reduced interest rates. They didn’t fix the fundamental problem of unsupportable debt loads.

Bailout concerns mounting for federal housing agency

Goodman found that investors lose as much as 70% when the homes underlying their subprime MBS are foreclosed upon. Lenders that tried to rehabilitate delinquent borrowers by reducing the principal (or total amount owed) by an average of 26% were far less likely to have to foreclose, and they actually provided MBS investors higher returns. “If you save a borrower, you save an investor,” Goodman says.

To avoid the “moral hazard” of rewarding foolish borrowers, Goodman recommends that lenders swap immediate principal reductions for shares of any gains on the mortgaged house when it is sold.

Many mortgage holders, including giants Fannie Mae and Freddie Mac, are refusing any kind of principal-reduction deals, however. Some don’t want to have to take the immediate write-downs that would be required, preferring to delay the financial pain and hope for a rebound.

‘One bailout = endless bailouts’

Many servicers refuse to consider them because their fees are tied to the amount of principal rather than to the ultimate payback to investors. And banks often hold second mortgages for the loans that they service. Principal reductions typically require them to take total losses on those notes.

 In short, banks “are ridden with conflicts of interest” that pit them against the interests of borrowers and investors, Goodman says. “Many of the rules in place now are extremely large-bank-friendly, but borrower- and investor-unfriendly.”

Goodman’s firm, of course, is decidedly on the side of the MBS investor in this fight. Nevertheless, ideas she’s been advocating since 2008 are catching on.

The Treasury Department and several state attorneys general are encouraging lenders to offer principal-reduction options. And “shared appreciation mortgage” (SAM) modifications have won support from big thinkers such as Nouriel Roubini, the New York University economist who warned of a housing bubble in 2005. Roubini, who cites Goodman’s work in his own, recently co-wrote a report suggesting that SAMS could help “unclog the real estate and financial arteries and restore healthy circulation.”

 By Kim Clark@MoneyJanuary 17, 2012: 7:20 PM ET

The Oracle of Omaha has finally made it to the cover of Time magazine. It’s a first, which seems long overdue, considering Warren Buffett’s investment wizardry and, increasingly, his outspoken willingness to talk straight about everything, including the future of the American economy.

On that note, the profile of Buffett — an excellent read titled “Warren Buffett is on a Radical Track” — contains the octogenarian’s thoughts on the U.S. housing market. It is a succinct analysis of what Buffett believes is the intricately linked relationship between housing starts and employment.

Once we get back to a million housing starts per year”– the current tally is 685,000 — “I think pundits will be surprised just how fast unemployment will come down in this country,” he says. “There are 4 million people hitting age 22 every year in this country. Sure, you can double up on households for a while, but at some point, hormones kick in, and living with your in-laws loses its allure.” Buffett notes that nearly every one of his major non-housing businesses has had several strong quarters, and Berkshire companies are making a record number of investments, the vast majority of which are in the U.S. “I am 100% sure that people in this country will be doing more business 10 years from now than they are today.”

You heard it from the Oracle of Omaha. Anyone eager to bet against him?

The author of the article, Time assistant managing editor Rana Foroohar, lends some context to Buffett’s perspective.

It’s easier to have a bullish view on America from Omaha, where unemployment is only 4%, family-owned businesses abound, and the economy in general was never as bifurcated as in many coastal or Rust Belt areas. But Buffett insists his optimism isn’t emotional but quantitative: he focuses not on media headlines about America’s inevitable decline or cheerleading about innovation and education but on the underlying data. Basic demographics favor the U.S. over nearly every other rich country in the world. And with corporate America so lean and inventories so low, the growth engine, in his view, has to kick in soon.

Not a bad line of reasoning for eager Americans to hear as they wonder whether there’s way out of this long, hard economic slog.

Published by Zillow 1/23/12

Another update: I’ve been using inventory numbers from HousingTracker / DeptofNumbers to track changes in inventory. Tom Lawler mentioned this last year.

According to the deptofnumbers.com for monthly inventory (54 metro areas), listed inventory is probably back to early 2005 levels. Unfortunately the deptofnumbers only started tracking inventory in April 2006.

This graph shows the NAR estimate of existing home inventory through December (left axis) and the HousingTracker data for the 54 metro areas through January.

Since the NAR released their revisions for sales and inventory, the NAR and HousingTracker inventory numbers are tracking pretty well.

Seasonally, housing inventory usually bottoms in December and January and then starts to increase again in February. So inventory should increase over the next 6+ months.

HousingTracker reported that the January listings – for the 54 metro areas – declined 17% from the same month last year. The year-over-year decline will probably start to slow since listed inventory is getting close to normal levels. Also if there is an increase in foreclosures (as expected), this will give some boost to listed inventory.

This is just inventory listed for sale, sometimes referred to as “visible inventory”. There is also a large “shadow inventory” that is currently not on the market, but is expected to be listed in the next few years. Shadow inventory could include bank owned properties (REO: Real Estate Owned), properties in the foreclosure process, other properties with delinquent mortgages (both serious delinquencies of over 90+ days, and less serious), condos that were converted to apartments (and will be converted back), investor owned rental properties, and homeowners “waiting for a better market”, and a few other categories – as long as the properties are not currently listed for sale. Some of this “shadow inventory” will be forced on the market, such as completed foreclosures, but most of these sellers will probably wait for a “better market”.

However listed inventory has clearly declined in many areas. And it is the listed months-of-supply (currently 6.2 months) combined with the number of distressed sales that mostly impacts prices.

by CalculatedRisk on 1/29/2012 02:11:00 PM

The economy is improving, the Federal Reserve said Wednesday, but not enough to warrant higher interest rates for at least two-and-a-half more years.

The central bank indicated that it expects to keep the federal funds rate near historic lows until late 2014 — an extension from the Fed’s original pledge to keep rates low through mid 2013.

“[T]he economy has been expanding moderately, notwithstanding some slowing in global growth,” the Fed said in a statement Wednesday. Meanwhile, the program known as Operation Twist remains in place.

The Fed’s main tool for stimulating the economy, the federal funds rate is the interest rate banks charge one another for overnight loans. Keeping it at historic lows as the Fed has done since 2008, is meant to stimulate spending by lowering interest rates on everything from mortgages to car and student loans.

Immediately, the Fed’s announcement sent U.S. bond yields falling. The 10-year Treasury yield fell to 1.94%. That’s down from a 2.06% yield just a day earlier.

Mortgage crimes are focus of new task force

As markets reacted strongly to the news, economists cautioned that the Fed’s 2014 forecast is not a concrete promise. Should economic growth pick up more quickly, the Fed could raise interest rates sooner.

“It’s not a vow or a commitment,” said Michael Gregory, senior economist with BMO Capital Markets. “If the outlook changes on the unemployment or inflation, the Fed retains the right to change its mind.”

The statement follows a two-day policymaking meeting, at which the central bank shuffled its voting members as it does at the beginning of every year.

The rotation brings four new regional Fed presidents into voting roles: Jeffrey Lacker of Richmond, Sandra Pianalto of Cleveland, Dennis Lockhart of Atlanta and John Williams of San Francisco.

All but Lacker are considered either moderates or inflation doves, meaning they’re more likely to favor stimulative policies that promote economic growth, even at the risk of higher inflation.

Lacker was the sole Fed member to dissent against the policy decision Wednesday. He would have preferred the central bank not to release an actual timeframe for “exceptionally low” rates.

Obama created more jobs than Steve Jobs’ Apple

Besides the roster change, the Fed’s first meeting of the year is also noteworthy because it marks the first time the central bank will release forecasts, estimating where the federal funds rate will stand over the next few years.

While the Fed already alluded to those forecasts in its statement, the projections from each of its members are scheduled to be released later Wednesday, along with projections on economic growth, inflation and unemployment.

Could gloomy popular assumptions about how tough it is to get approved for a mortgage be scaring away large numbers of people who are qualified from even applying?

Could the same worries – I can’t come up with the big down payment I need, my credit scores are too low, my bank account has almost none of the “reserves” lenders want to see – put a needless damper on a housing recovery in the new year?

You bet. Lenders and economists will tell you flat out: The lack of accurate information about the availability of loan programs that are designed to address special needs is discouraging far too many consumers from even considering an application, much less shopping around.

Mortgage banker Alex Stenback of the Residential Mortgage Group in Minnetonka, Minn., says he sees it every day: “People just aren’t aware of what’s possible right now” and as a result, they are missing real estate prices and long-term interest rate opportunities they shouldn’t. Doug Lebda, founder and CEO of LendingTree, the online site that allows banks to make competing offers to applicants, believes that “the fear of being rejected” because they don’t conform to standards that may not even exist, is keeping qualified applicants on the sidelines for no reason.

For example, what’s needed for an acceptable down payment? Is it 20 percent? 10 percent? Less? Yes, it’s less – and potentially a lot less if you qualify for the right program. The widespread erroneous assumption that banks require a minimum 20 percent for conventional loans may have arisen from heavy media coverage this spring and summer of a controversial proposal by federal agencies calling for borrowers to put down that much if they want to get the best interest rates and lowest fees.

Also contributing to incorrect beliefs about down payments: The Obama administration floated the idea of a phased-in move to 10 percent upfront cash for all loans eligible for purchase by mortgage giants Fannie Mae and Freddie Mac, who together dominate the conventional home-loan sector. But neither the 20 percent nor the 10 percent plan has been adopted and the odds of either moving forward in 2012 are remote. Fannie Mae’s and Freddie Mac’s standard minimums are still 5 percent with mandatory mortgage insurance coverage.

If you have little or no cash to put down, there are multiple options for you: FHA requires just 3.5 percent down on its insured mortgages. Other programs let you go to zero – even finance more than the price on the house when fees are rolled into the mortgage – provided you fit into an eligibility niche. If you qualify as a veteran or active member of the military, you can get a zero-down VA-guaranteed mortgage. Plus the VA allows your seller to pay your loan fees and closing costs provided they don’t exceed 6 percent of the house price.

You can also buy with nothing down if you are purchasing a home in any of the many communities around the country that are eligible for rural (USDA) guaranteed mortgages. Though the property may be located on the outskirts of a large metropolitan area (some are available in the greater Tucson area) – land that might not strike you as particularly “rural” – if the local population is below roughly 20,000, there’s a decent chance you’re eligible. The little-publicized USDA guaranteed home loan program, by the way, is booming. In the last fiscal year alone, according to housing administrator Tammye Trevino, more than 130,000 borrowers received low or no down payment guaranteed mortgages – quadruple the number of loans extended as recently as 2006.

What about credit? Haven’t lenders been pushing up minimum FICO scores into the mid-700s and rejecting applications with lower scores outright? Not everywhere. Though most lenders doing FHA loans require 620 to 640 scores to get you in the door, a few of the biggest FHA originators, such as Quicken Loans, will accept scores down to 580. Bob Walters, Quicken’s chief economist, says underwriters scrutinize low FICO applications extra carefully but are seeing good to excellent performance from them: Not one has gone seriously delinquent this year.

And how about debt-to-income ratios? Aren’t they tighter than ever? Not really. Lenders say that when loan applications go through the “automated underwriting” systems used by Fannie, Freddie and FHA, borrowers with high total monthly debt levels of 45 percent to 55 percent of household income – well beyond the posted limits – frequently get approved if they have positive compensating information elsewhere in the application.

Bottom line: Don’t assume you can’t qualify for a mortgage in 2012. Talk to lenders and seek out loan products that offer flexibility where you need it. You just might be surprised.

http://azstarnet.com/search/?l=50&sd=desc&s=start_time&f=html&byline=Kenneth Harney Washington Post Writers Group

Happy holidays, homebuyers! You just got a very nice present.

Mortgage rates have hit record lows, with the interest rate on a 30-year, fixed-rate loan, the most popular choice of homebuyers, averaging 3.91% this week, according to Freddie Mac’s Primary Mortgage Market Survey.

That’s down from 3.94% last week, and is the lowest in the 40-year history of the survey.

Rates have fallen 0.9% since the beginning of the year. For a homeowner with a $200,000 mortgage, that means a savings of $1,200 a year, said Frank Nothaft, Freddie’s chief economist.

With rates at or below 4% for the last eight weeks, home sales are getting a boost, Nothaft added. Existing homes sold at their fastest pace since January last month, according to the National Association of Realtors, and new home sales edged higher in November as well.

Where homes are affordable

Meanwhile, rates for 15-year mortgages remained unchanged, matching last week’s record low of 3.21%.

“We’ve entered the holiday lull with nothing much happening to change rates one way or the other,” said Greg McBride, senior financial analyst for Bankrate.com.

Mortgages should remain affordable deep into 2012, he added. As the European debt crisis and sluggish U.S. economy keep investors focused on finding safe havens for their cash, demand for U.S. Treasury notes should remain high. That drives down their yields, which mortgage rates closely track.

“For well-qualified buyers, interest rates should be no impediment to home buying in 2012,” said McBride.

Refinancers also are pouncing on the bargain rates.

According to the Mortgage Bankers Association, about 80% of all mortgage applications last week came from existing homeowners looking to refinance their old loans into more affordable ones.

0:00 / 3:35 Zillow CEO: Why we partnered with Yahoo

McBride even expects that lenders will ease up on borrowing requirements — marginally — in 2012.

“Instead of requiring a 740 credit score for the best rates, lenders will dip their toes into 720 waters,” he said.

That is, however, just a baby step towards making mortgages much easier for borrowers with less-than-perfect credit histories to obtain.

“We’re not going back to the Wild West days of the boom,” said McBride.

By Les Christie@CNNMoney

Bank of America is trying a new approach with underwater homeowners in Florida: It is offering them money to dispose of their homes in a short sale.

It offered payments ranging from $5,000 to $20,000 to homeowners who agreed to sell, and got positive responses from about 15% of the 20,000 customers to whom it offered the deal.

The program was aimed at homeowners who cannot afford their mortgages, so not all qualified. The amount of the incentive program was based on the size of the mortgage, as well as other factors, according to an article in The Tampa (Fla.) Bay Times.

Apparently, the homeowner doesn’t find out how much the incentive payment will be until after the sale contract has been signed. The payment is made when the sale is closed.

“The bank is not putting in writing how much homeowners will get until the end,” Steve Capen, a short-sale specialist with Keller Williams Realty, told the newspaper. “By that time, homeowners have entered into a contract to sell. We’re going to have issues. Customers are going to be upset.”

About 3,000 BofA customers agreed to participate in the program before the deadline passed last month. The bank has said it would consider offering the program in other states.

Bank of America is not the only lender to offer homeowners financial incentives to sell homes the lenders think are headed for foreclosure. Florida was a logical place to launch a pilot program. Not only are a high percentage of homeowners underwater, but foreclosures take almost two years to complete.

Wells Fargo offers payments of $10,000 to $20,000 to certain homeowners who agree to a short sale or a deed in lieu of foreclosure. JPMorgan Chase also has offered some short-sale incentives of up to $20,000, and Citibank says it offers payments averaging $12,000 on mortgages it owns. (The Orlando Sentinel has more details.)

The federal government’s Home Affordable Foreclosure Alternatives program offers homeowners up to $3,000 in relocation assistance.

The lenders are calculating that the incentive payments are less than they would spend on foreclosure, especially in states such as Florida where foreclosure is a judicial process that has been slowed even more by the repercussions of the robo-signing scandal and problems with law firms hired by the lenders to bring foreclosures.

“The banks have realized, ‘We are losing more on the foreclosures than the shorts,’” Matt Augustyniak, president of Horizon Realty in Bradenton, Fla., told The Herald-Tribune of Sarasota. “And they are even willing to compensate the sellers, to give the sellers money to vacate the property.”

By Teresa at MSN Real Estate

Foreclosure filings and repossessions fell to their lowest level since 2007 last year.

Total filings, including default notices and bank repossessions were down 33% for the year to 2.7 million, according to RealtyTrac, the online marketer of foreclosed properties.

One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That’s a significant improvement from the peaks reached in 2010 — when 1.05 million homes were repossessed — and the lowest levels seen since 2007.

More than 4 million homes have been lost to foreclosure over the past five years.

While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the “robo-signing” scandal that broke in late 2010.

During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.

“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac.

However, Moore said there were “strong signs” during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011′s level but remain below the peak hit in 2010.

By Les Christie@CNNMoney

As many of you may have heard, the President signed a bill in November reinstating the higher FHA loan limits
that expired at the end of September.

 At this point we are waiting on the following:

 1. Mortgagee Letter detailing the new loan limits

2. Guidance from our Correspondent partners stating when we will be able to begin originating
    and locking loans at the higher limits.

 As soon as we have more information it will be distributed.