What The Homeowner Affordability and Stability Plan Doesn’t Mean For Homeowners

Posted on February 22, 2009 by MortgageNews

Underwater homeowners may be able to refinance under the housing stimulus plan On Wednesday, the President presented the Homeowner Affordability and Stability plan, a multi-pronged effort to support the housing market.

The story made the front page of nearly every newspaper in the country.

The president’s plan is sweeping:

  • Incent mortgage servicers to work with at-risk homeowners before delinquency starts
  • Let homeowners with good credit but little equity refinance to today’s low rates
  • Fund Fannie Mae and Freddie Mac to support mortgage markets

It is a broad plan with many positive angles, but for now, we can’t forget that it’s just a plan.  Although the White House shapes and influences housing policy, Congress, Loan Servicers, and the Federal Agencies must still implement and execute it.  Until that implementation occurs, these reforms exist only on paper.

It is a key aspect of the speech that’s not getting coverage. 

One thing we learned during the stimulus package debate was that just because the President wants something to happen doesn’t mean that it will.  There are always details to be worked out and that’s one reason why the Homeowner Affordability and Stability Plan couldn’t go into effect immediately.  There are still loose ends to tie and details to define.

According to its website, the White House lists March 4, 2009 as the plan’s effective date.  Until March 4, nothing in Wednesday’s speech is guaranteed.

(Image courtesy: Birmingham News)

Trying to Time Market CAN hurt!

Posted on January 24, 2009 by StaceyFleece

Unless you’ve been living in a cave as of late, you are probably well aware that the financial and lending climate has changed dramatically…and it continues to be very dynamic. Every week, we have lender changes, investor changes, market changes, etc. that can affect how borrowers can structure both purchase and refinance loans. Rates have been and continue to be extremely attractive…are they the absolutely lowest we’ve seen in the past month? No, not today. But sometimes waiting for that lowest point can hurt your ability to get your financing completed. Here’s a real life example…

I have a client who wants to refinance her condominium. She currently has a 30-year fixed loan at 6.625%…way above the market. A few weeks ago, I quoted her a new 30-year fixed at 5.25% with no points which would save her $520 per month! The client, in listening to the misguided media and well-meaning but misinformed parents, decided to wait until rates dropped to 5.125% as she did not feel they were “low enough”. I counseled her about the possibility that rates could worsen while she waited for that 0.125% and that the current option would save her over $6,200 per year but agreed to monitor the market for her.

While she was waiting to pick the bottom, rates moved up as we saw selling in the mortgage-backed securities market. Then, to add insult to injury, Fannie Mae and Freddie Mac rolled out a new set of risk-based pricing “add-ons” that are MANDATED by Fannie and Freddie for all lenders. Factor in these “add-ons” to her refinancing pricing and now she’s even FURTHER away from that 5.125% she wanted…and not even in the 5.25% mix right now, either.

Moral of the story…a bird in the hand CAN be worth two in the bush. While waiting to save another $46 per month, she missed the opportunity to capture an additional $520 in her pocket! Will rates come back down to where she can even get the 5.25% again? No one knows for certain…but it will definitely be harder to get there for her particular file given the changes.

If you have a loan opportunity in front of you at a competitive rate which saves you money and/or satisfies what you’re looking to accomplish, jump on it while you can! You don’t know what changes lie in wait from the lenders in terms of structure and pricing or, even worse, if your company is about to go through layoffs, paycuts, etc. where your personal finances may no longer qualify you for a loan. Don’t miss the boat as opportunities may be fleeting.

Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley in Marin County, California.

A 4.5% conforming fixed rate? Don’t count your chickens…

Posted on December 5, 2008 by StaceyFleece

These are certainly very dynamic and fast moving times in the mortgage market these days!  Just when you think things are settling down a bit, another curve ball comes our way.  The most recent one came to us courtesy of Secretary Treasurer Hank Paulson yet again.

As you know, the Treasury has already announced a plan to buy mortgage backed securities (MBS) issued by Fannie Mae and Freddie Mac.  Yesterday, they came out and said that they would ideally like to step up those purchases in order to drive mortgage rates down to 4.5% for conforming loans.  I would love to see that happen as much as the next person…but there is NO guarantee that rates will actually get there.  A couple of points to consider:

  • The Treasury DOES NOT set home mortgage rates…period!  Mortgage rates are based on where mortgage bonds trade in the open market.  There are many economic and other external factors that contribute to the trading of these bonds.  While their aggressive purchase of the securities could help drive rates down, it is not the only factor.
  • It is very difficult, if not nearly impossible, for any one entity to set a target interest rate on home mortgages because of the reasons stated above.
  • The MBS market is obviously skeptical of the ability for the Treasury to impact rates down to 4.5% as the market reaction to the announcement was quite muted…and, in fact, rates have ticked UP slightly today.

We certainly are not in a typical trading environment for mortgage backed securities as we are still experiencing significant volatility which is causing rates to move rapidly.  If you are buying a home or refinancing and have locked in a rate that you are happy with now, you should grab it while you can.  There is no guarantee that rates will go lower and in waiting for an incremental drop that may never come, rates could move up fast and furiously in this environment as well.

Most mortgages now come with no prepayment penalty so if down the road rates do come down further, you can always refinance again and can even do it with no closing costs…just ask your mortgage professional about that option.

Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley in Marin County, California.

Fed Boosts Mortgage Industry,Hands Consumers Lower Rates

Posted on November 25, 2008 by StaceyFleece

The Federal Reserve just announced this morning that it would purchase $600 Billion of Mortgage-Backed Securities (often referred to as MBS) backed by Fannie Mae, Freddie Mac and Ginnie Mae. This action is “being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” said the statement from the Fed.

In plain English, the Fed is doing this to help increase availability of credit while lowering fixed mortgage rates. Secretary Paulson noted in his press conference this morning (which is still ongoing as I write this) that increased liquidity and lower rates in the housing market would go a long way toward stabilizing the economy. I couldn’t agree more!

In addition to purchasing the MBS debt, the Fed will set up a $200 Billion program to support consumer and small-business loans. This is specifically designed to create liquidity in the auto, small business and student loan markets.

This means consumers BIG opportunity to grab a lower rate RIGHT NOW…

The Fed’s move is already lowering mortgage rates this morning as the mortgage bonds are trading up over 100 basis points (note that prices and rates move in opposite directions…so a move UP in prices means a move DOWN in rates) which is significant. This is a GREAT opportunity for home buyers to take advantage of lower rates that we will see because of this historic move!

Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley.

$729,750 Conforming Loans: Going, Going…Soon to be Gone!

Posted on October 22, 2008 by StaceyFleece

Back in February of this year (wow…doesn’t that seem SO long ago), the Economic Stimulus Act of 2008 was enacted and part of that Act was to temporarily increase the loan limit on mortgages backed by Fannie Mae and Freddie Mac to 125% of the average cost of a home, county-by-county, to a maximum of $729,750. Of course, because of our higher housing costs, most of the Bay Area counties qualified for that maximum. However, the Economic Stimulus Act only put that that increase into play temporarily…until December 31, 2008.

We are rapidly approaching that deadline and lenders are going to shut that pipeline down in late November/early December in order to give them time to package the loans and deliver them to Fannie/Freddie before the end of the year. In other words, we probably only have about 6-7 weeks left to offer these higher conforming loan limits to borrowers!!

If you have any real estate financing to complete that would involve a loan for $729,750 or less, it is imperative that you start your process as soon as possible in order to take advantage of this program as time is running short!

We are hearing that there will still be some sort of high limit conforming loan amount in 2009 but it will probably drop to something closer to $625,000. Stay tuned…

Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley.

Fed cuts rate by 0.5%…why didn’t mortgage rates go down, too?

Posted on October 14, 2008 by StaceyFleece

In response to the slowing pace of economic activity and intensified turmoil in financial markets, the Federal Reserve cut the its key rate by 50 basis points, or 0.5%, last week ahead of its regularly scheduled meeting at the end of October. The action was globally orchestrated with banks around the world, including the Bank of England, the European Central Bank and others in Canada, China, Switzerland and Sweden, who also cut rates on the same day. There are multiple ways this cut will have a direct effect on consumers:

  • The Prime Rate will follow the Fed Fund rate cut and also drop by 0.5% – currently standing at 4.5%
  • Auto loans, equity lines and credit cards with rates tied to prime will now be cheaper

So why didn’t mortgage rates go down? Two main reasons…

  • Mortgage rates are set based on where mortgage bonds trade in the open market. They are not directly tied to the Fed Fund Rate although monetary policy does play a big part in mortgage rates. However, the bond market tends to anticipate any monetary policy action the Fed takes so usually by the time the Fed acts, the rate cut has already been fully priced into the bond market.
  • Also, amid the current financial chaos, investors are selling assets across the board – equities and bonds included. This sell-off, combined with record volatility in the market, is causing a short-term increase in rates. Don’t get me wrong…rates are still quite good…just a bit higher than we saw the past week.

Along those lines, I keep hearing in the media (as I’m sure you do!) that banks aren’t lending to each other or to consumers and that borrowers are unable to get mortgages, car loans or equity lines due to the credit freeze. This is absolutely not the case so let me once again be clear on this…WE ARE CLOSING MORTGAGE LOANS!! We are processing, underwriting, and closing loans daily and have money to lend!

So…as usual…don’t believe all you hear from the supposed experts on TV!

Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley.

Yes…we ARE still closing home loans in Marin!

Posted on September 30, 2008 by StaceyFleece

We’re entering yet another week of turmoil in the financial markets and we’re still trying to work our way out of this mess. In the recent days, we continue to see challenges for financial companies and our economy as a whole including:

  • The failure of Washington Mutual (the largest bank failure in our nation’s history) and the subsequent buyout by JP Morgan Chase.
  • The buyout of Wachovia by Citibank…note that Wachovia did not fail but rather took the opportunity to sell itself before it came to that.
  • The $700 billion bailout package made it out of committee on Sunday and headed to the floor for a vote – only to miss approval by The House of Representatives falling 13 votes shy.

So now what? Well, I don’t know where Washington goes on the financial bailout in their effort to “get battered US credit markets working normally again”. We continue to hear that without this bailout, the credit markets are coming to a grinding halt – with banks unwilling to lend to businesses, individuals and even to each other. I don’t want to comment on the credit crisis from a Wall Street perspective but I do think it is important today for us as consumers to understand what is happening from a Main Street perspective. So here it is…and let me make this very clear…

Here in Marin, we are still lending on real estate and closing on mortgage loans daily! The media would have you believe otherwise and I can certainly only speak from the perspective of Countrywide/Bank of America (where I work) but it is pretty much business as usual…only with AMAZING rates due to the chaos that continues to swirl around the equity markets.

Last week, Countrywide got very aggressive on jumbo 30-year fixed (yes…jumbo….like loans more than $729,750) as we are pricing below all major competitors right now. We have not seen rates on jumbo 30-year fixed loans this low since before the credit crisis began back in August 2007. Now is the time to grab these – for a purchase or a refinance – as you can borrow up to $3mm with rates around 6.375% with no points!

How long will these rates last? No one knows…but I do know that when Congress gets the bailout figured out (and I suppose eventually they will), that should provide a level of comfort to the equity markets. The potential fallout from that is a shift of funds in the market from mortgage bonds to stocks which would cause mortgage rates to rise. The advantageous low rates are available to consumers now…get ‘em while they are HOT!

Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley.

Marin Real Estate Market- Is it all just a mess?

Posted on September 28, 2008 by Ginger Wilcox

timeWhat a mess.  In a two week period the government nationalized Fannie, Freddie and AIG and let Lehman take a tumble.  The government proposed the largest bailout in 80 years, and taxpayers are concerned about fronting the bill.  The election campaign is in high gear, debates are happening, and the political landscape also looks scary to a lot of people.

I loved the Time magazine cover this week  “Who can rescue the economy?” 

  • a) John McCain
  • b) Barack Obama
  • c) None of the above

Everyone is concerned about politics and the economy.  At every dinner, BBQ, play date, or even a casual run in at the grocery store, I find people want to know “What is all of this mess doing to the housing market?”

It is hard to tell.  The government bailout may slow the decline of housing prices.  Presumably, jumbo loan rates will stabilize and be more affordable, which will definitely help the Marin real estate market.  Buyers may start to feel like the bottom is near and get off the fence.  I do think people are having a hard time focusing on buying real estate with the impending election, so this October could be a tough one in Marin.

Buyers with cash or who can qualify for a good loan program are sitting pretty- this is definitely a great opportunity to find good bargains in Marin County.  Yes- I said bargains and I can’t believe it.  There are good homes for sale in Marin just waiting for a buyer to make an offer.

If you want real time Marin real estate market reports to see exactly how the turmoil is impacting Marin real estate, you can always see them live here on my site.

Continued Chaos Created Opportunity!

Posted on September 15, 2008 by StaceyFleece

First of all, I want to say how excited I am to be part of Blog By The Bay! This is a great opportunity for me to get current and accurate information out about what is happening in the world of real estate finance. The opportunity is especially critical given all the misinformation I hear and read constantly in the media. With all that has been happening in the mortgage industry, it is vital that we keep you informed!

But let’s talk about what has been going on over the past two weeks and what it means to you as a consumer…

On Sunday, September 7th, it was announced that the government will take operational control over Fannie Mae and Freddie Mac. The Federal Housing Finance Agency (FHFA) will be taking over the board of directors and management of the two mortgage giants while the U.S. Treasury is providing up to $100 billion in capital for each company to ensure they will be able to meet their debt obligations. 30-year conventional mortgage rates fell by as much as half a point on this news presenting borrowers a great opportunity to refinance loans at lower rates or, for those with excellent timing, buy at a much lower rate than expected.

Why is this having such an effect on rates? In order to continue to buy and securitize mortgages, Fannie and Freddie sell bonds (or “paper” as it is referred to on Wall Street) to replenish their capital. As the mortgage crisis continued to unfold and investors remained concerned about mortgage bonds, Fannie and Freddie had to offer this paper at higher and higher rates to attract buyers. Investors became concerned that Fannie and Freddie would not be able to continue to meet the debt obligations of this paper. With the conservatorship, the government is essentially backing the paper and guaranteeing the obligation will be met. Therefore, the risk profile of this paper is similar now to a government treasury bond but with a much higher rate of return. The investment becomes much more attractive on a rate vs. return basis. Buyers scooped up this paper and took prices up significantly – since bonds prices and rates move on an inverted basis, rates dropped accordingly.

We are seeing a similar move in rates this week – but for very different reasons. As of this morning, Lehman Brothers declared bankruptcy after 158 years in business and Merrill Lynch, which was also teetering on the edge of financial collapse, was purchased by Bank of America. These announcements have put more fear and concern around the stability of our financial markets and caused a “flight to quality” on Wall Street. Investors are selling equities (stocks) and buying bonds today. Again, this creates a great opportunity for consumers with mortgages because as the prices of bonds are going up, rates are coming down! So while there is undoubtedly concern about the short-term effects on our economy, the windfall for us as consumers is cheaper money for homes.

We continue to see significant improvement in the 30-year fixed rates and some improvement in ARMs, too. Currently, a zero point conforming 30-year fixed loan ($417,000 or less) will run you as low as 5.75% and an agency jumbo 30-year fixed loan ($417,001-$729,750) with zero points is near 6.0%. These are some of the best rates we have seen for all of 2008! If you are currently in an ARM and want to grab a longer-term loan, there has not been a better time to jump on a 30-year fixed. The chaos in the financial market has provided an amazing opportunity for buyers and those interested in refinancing.

I look forward to many more postings on the Blog By The Bay and keeping you up-to-date on happenings around the financial world!

-Stacey Fleece is a Marin County Loan Consultant.

Welcome to a new Blog by the Bay Contributor!

Posted on by Ginger Wilcox

Fleece headshot color-1 I am very excited to announce that Blog by the Bay has a new contributor.  Stacey Fleece will be writing about the mortgage industry, the good, the bad and the ugly!  Stacey is a Senior Loan Consultant with Countrywide Home Loans.  This is her first blogging experience and I am thrilled that she is joining me here at Blog by the Bay.  I met Stacey through volunteering with the Junior League of San Francisco where she is Immediate Past President.  Stacey has 20+ years in the finance industry and is a CFA- Charted Financial Analyst.

Stacey, her husband and two children live in Mill Valley.  Stacey is also a member of the Financial Women’s Association of San Francisco and the Security Analysts of San Francisco. She is a Director of the San Francisco Opera Guild and is co-chair for the International Museum of Women’s Spring Gala (scheduled for March 2009).

While this is her first blogging venture, Stacey is no stranger to writing- she is also the co-author of SKIRTWorking, How to Network Using SKIRT which was released in September 2008.

Stacey has always impressed me with her commitment to helping others in the community and she does the same with her clients.  She is extremely knowledgeable about the mortgage industry and I am THRILLED that she will be contributing at BlogbytheBay.com.

Welcome Stacey!