US Treasury to Sell off Mortgage Backed Securities

During the mortgage crisis, the US Department of the Treasury purchased approximately 144 billion dollars worth of mortgage backed securities to help stabalize the mortgage markets. Mortgage Backed Security prices dropped 50 basis points this morning on the news that the Treasury Department is going to systematically sell-off it’s holdings of MBS’s purchased in 2008 and 2009. It’s anticipated that the Treasury will sell approximately $10 billion per month, subject to market conditions. Stated reasons of why to sell now are due to the “stabilizing economy and market conditions”.

Traders are thinking that it could be due to US debt limit levels as well, but that has certainly not been a stated reason.
Just the anticipation of the added forthcoming supply pushed traders to a sell mode sending mortgage backed security pricing down & rates up and adds to the continued volatilty that we have seen over the past several weeks.

This will pressure mortgage rates up.  Why? because of supply and demand. Adding more securities to the market increases the supply an din order to “sell” the new mortgage backed securities they will need to offer a higher return to attract investors.

What does this mean for you? If you are considering a move, I would do it sooner than later. Rates are still below 5.0% and now is the time buy and to take advantage of these rates!

FHA increasing Mortgage Insurance Premium

FHA mortgages that are assigned FHA case numbers or after April 18, 2011 will have the Annual Mortgage Insurance Premium — often referred to as the Monthly MIP — increase by 25 basis points. Currently, the Annual MIP is .90%; this increase means that the Annual MIP will be 1.15% of the base mortgage amount.

This is important to know because it will increase the homeowner’s monthly payment.
A few conditions:
• The Upfront Mortgage Insurance Premium (UFMIP) remains 1.00%.
• The Annual MIP increase only applies to FHA loans. Fannie Mae and Freddie Mac conventional loans do not have this increase.
• This increase applies to loan terms more than 15 years in length and when the loan-to-value (LTV) ratio is greater than 95%; the Annual MIP is lower when the loan-to-value ratio is less than 95% or when clients take out a 15-year loan term (call me for details).
• HUD does not allow case numbers to be pulled prior to receipt of a fully executed purchase agreement and application.

So, what does this mean to a typical buyer. If you are buying a home with a $200,000 FHA mortgage, your montly mortgage insurance premium will go up about $42 per month. If you are buying a home with a $100,000 FHA mortgage your monthly mortgage insurance premium will go up about $21 per month. To avoid the higher MIP, you would have to have a signed purchase agreement and have your lender obtain an FHA case number prior to April 18, 2011.

If you have questions about this, or want help avoiding the increased MIP, please contact a member of the Perkins Team with RE/MAX Results at 763-591-6066 or Perkins@SuburbanHomes.com

Jobs and Homeownership ~ You can’t have one without the other

Good jobs enable people to achieve the American Dream of homeownership. Everytime a house is built, bought or sold jobs are created, lots of them…right here at home.
Home sales in the United Estates generate more than 2.5 million private sector jobs in an average year. For every two homes sold, a job is created. Every home purchased produces up to $60,000 into the economy over time for furniture, home improvements and related items. Housing accounts for more than 15% of the Gross Domestic Product, making it a key driver in our national economy. Housing has led this country out of 6 of the last eight recessions.
America needs jobs. Housing creates jobs. This is one of the many reasons home ownership matters to people, to communities and to our country. (National Association of Realtors supporting Homeownership) For more information visit HouseLogic.com

Tax Season is Here ~ Review your Homeowner Tax Advantages

One of the advantages of owning a home is that it can reduce the amount of income tax you pay every year.
With tax season here, prepare all your documentation in advance to factor in all your tax advantages.  Here is a list of benefits for homeowners:
  • Home Buyer tax credits:  You are entitled to a tax credit of up to $8,000 if you purchased your first home before April 30, 2010. Anyone  who owned and home and sold it to purchase another before April 30, 2010 is eligible for a federal tax credit of up to $6,500.
  • Loan fee deductions: Certain requirements need to be met to qualify for prepaid interest deductions when purchasing or refinancing a property. However, you may deduct points, origination fees and loan discount fees, even if the seller paid these for you.
  • Property tax deductions: In addition to deducting the property taxes you pay each year, you are entitled to deduct the taxes you paid at the closing table in the year you purchased a home.
  • Mortgage interest deduction: You may deduct the amount of interest including late charges you pay on your mortgage and home equity loans. If your down payment was less than 20% you may also deduct private mortgage insurance premiums as interest expenses.
  • Selling your home costs: You may deduct the costs related to the sale of your home (in the year you sold it), such as real estate commissions, title insurance, legal fees, advertising, administrative costs and inspection fees. This includes decorating or repair costs incurred in the 90 days before the sale of your home.
  • The gain on you home: The government allows you up to $250,000 (double for married couples) of profit on the sale of your home tax free. However, this does not apply to rental property or second homes. You are also allowed to subtract any amounts you spend on improvements, and in 2010 you can receive tax credits for making energy saving upgrades to your home. Money invested for routine maintenance doesn’t count. 
         Remember….. Consult with your tax professional about tax laws to be sure your are following the rules.

“I thought the seller paid the title fees?”

In January 2010, RESPA (Real Estate Settlement Procedures Act) mandated changes to the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement (HUD-1) so consumers could better understand and compare fees for Title Services. Title services are now placed in a “bucket” in block 4 of the GFE and quoted to the buyer early in the lending process.
The Minnesota Association of Realtor’s (MNAR) previous purchase agreement (pre-September 2010) had language which required the seller to pay some of the costs included in block 4 of the GFE (specifically, title evidence); the remainder of the title exam and title insurance fees had typically been funded by the buyer.
Since the buyer is the party who shops for title services and is able to make a value judgment as to the services being quoted by different vendors offering the services contained in block 4 of the GFE, the MNAR’s Forms Committee felt it would be easier and more market oriented if we modified the form so buyers would be responsible for paying the fees being quoted to them.
This change also corrects a market inefficiency whereby some title service providers would decrease one fee and increase another in order to secure business. The RESPA change was focused on making sure consumers understood what they were being charged in relation to the services being provided by identifying the total title service cost in one “lump sum” bucket. By making the buyer responsible for the fees they are being quoted in block 4 of the GFE, the buyer can make educated decisions as to the cost and value of the various service providers. Keeping those fees placed in the buyer’s “bucket” on the HUD-1 as charges that are ultimately paid by buyer (unless negotiated or agreed to be paid by seller) increases the transparency in the transaction and helps preserve the objective the change in the HUD-1 was designed to achieve.
In the end, a buyer can choose to have the seller contribute to their closing costs, choose to lower the property price or do any combination of things to best satisfy their needs in the real estate negotiations. The change in title language within our purchase agreement is a point from which parties can negotiate, but also provides a default position if they choose not to further negotiate. It is not a requirement, nor are our forms required to be used in residential real estate transactions. The title fees, thanks to RESPA changes, are no longer vague, misconstrued or unknown by the consuming public. Buyers will receive a firm price in their GFE that cannot vary by more than a specific amount. Armed with that knowledge, the buyer can structure the purchase agreement in a way that best satisfies their situation and open the negotiations so all parties know within a very small window what the final closing costs will be.

Mortgage Rates & Trends: Mortgage Blog

Next year is not likely to be a good one for the housing market.  The reasons for this are multifold.  In a post yesterday I discussed what I see as an inevitable decline in home values in the coming year.  In this post I want to discuss what I see as another 2011 inevitability: an increase in foreclosure activity.
According to data provider RealtyTrac, foreclosure activity was down in November.  There were 262,000 foreclosure notices issued, which is down 21 percent from the month prior and down 14 percent from the previous year.  In fact, this was the first time since February 2009 that foreclosure notices dropped below 300,000.  On the face of it, this appears to be a good thing.  In reality, the decrease can be directly attributed to foreclosure moratoriums issued by major lenders due to the incredibly sloppy paperwork that resulted in the whole robo-signing fiasco that is yet unresolved.  The decrease in foreclosure activity simply amounts to a stay of execution for many Americans who are in dire financial straights.

Reform of Fannie, Freddie unlikely

Reform of Fannie, Freddie unlikely despite House Republican push – TheHill.com.

Republicans are unlikely to fix Fannie Mae and Freddie Mac this year, despite reform’s place high on the House GOP’s agenda, mortgage industry experts say.
The effort to reform Fannie and Freddie, which back the vast majority of the nation’s mortgages, is simply too large to tackle quickly, housing experts say.
In addition, the continued fragile state of the housing market makes it difficult for lawmakers to navigate a substantial exit for Fannie and Freddie, despite tough rhetoric from Republicans for more than two years. Finally, a divided government and scars over past housing debates add doubts to whether anything will happen in 2011.
“There can’t be a magic silver-bullet solution that happens in 2011,” predicted Paul Leonard, vice president of government affairs for the Housing Policy Council, which is part of the Financial Services Roundtable. “It’ll have to be the start of the big solution.”

Down Payment Assistance for First Time Buyers

Minnesota Housing finaces and advances affordable housing opportunities for low and moderate income Minnesotans to enhance quality of life and foster strong communities.  They offer mortgage programs that provide affordable interest rate loans to eligible first-time homebuyers.
  Why Choose Minnesota Housing?                                                                                       Down Payment Assistance!
  • Below market interest rates                                                                                 
  • No extra fees or discount points                                                                               
  • Interest-free loans from $3,000 to $8,500 to help with downpayment and closing costs for eligible borrowers
  • MMP has Generous income limits in the 11 county metro area of $84,000 for a household up to 4 people and $97,500 for 6 people
  • CASA income limits in the 11 county metro area of $67,200 for a household up to 4 people and $78,000 for 6 people
  • Purchase price up to $298,125 in the 11 county metro area
  • Minnesota Housing offers below-market interest rates
To qualify, you must:
  • Be a first-time homebuyer (or have not owned a home in the past three years)
  • Meet the requirements for income and home purchase price limits
  • Have acceptable credit
Minnesota Housing First-time Homebuyer Loan Programs:
1)  Minnesota Mortgage Program (MMP)
  • Available Statewide
  • Below-market interest rate
  • Downpayment and closing cost assistance available for Targeted Borrowers up to $3,000
  • Higher income limits
2)  Community Activity Set-Aside (CASA)
  • Available in participating communities
  • Affordable interest rate
  • Downpayment and closing cost assistance available for eligible borrowers from $4,500 to $8,500
  • Purchase and repair option
Cash to Close
The Homeownership Assistance Fund (HAF) and HOME Homeowner Entry Loan Program (HOME HELP) help low to moderate income first-time homebuyers who qualify for a Minnesota Housing loan by offering interest-free, deferred loans to help with downpayment and closing costs.
Homebuyer Education
Minnesota Housing requires Qualified Homebuyer Education for some loans prior to closing.