Demand for home purchase loans jumps

Increase could help gauge the outlook for spring buying season

NEW YORK - U.S. mortgage applications rose last week, as demand for home purchase loans jumped even as interest rates edged up from recent record lows, data from an industry group showed on Wednesday.

Demand for home purchase loans, an indicator of home sales, far outweighed demand for refinancing. The increase may help gauge what is in store for the hard-hit U.S. housing market this spring, the peak home buying season.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended April 3 increased 4.7 percent to 1,250.6.

Cameron Findlay, chief economist at LendingTree.com based in Charlotte, North Carolina, said home loan demand at his company has remained strong and steady the last several weeks.

“In addition, the quality of the borrowers coming to us has remained high with high FICO scores and low loan-to-value ratios,” he said on Tuesday. “This is an encouraging sign as responsible borrowers looking to purchase or refinance their homes are getting the help they need with low rate, high-quality loans.”

FICO scores refer to borrowers’ credit ratings.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.73 percent, up 0.12 percentage point from the a record low the previous week but well below 5.78 percent a year ago. The survey has been conducted weekly since 1990.

“As rates remain at historic lows, we anticipate this trend will continue as more borrowers take the time to shop around for competitive rates on home loans,” he said.

The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world.

Low mortgage rates have generated demand for home refinancing loans and should continue to do so, although when it comes to demand for loans to buy homes, the low rates had only a moderate impact until last week.

The MBA’s seasonally adjusted purchase index rose 11.1 percent to 297.7. The index, however, dropped 22.6 percent from its year-ago level of 384.7.

Overall mortgage applications last week were 72.4 percent above their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 13.3 percent.

Bob Walters, chief economist at Quicken Loans, an online mortgage lender in Livonia, Michigan, said home loan activity continued to improve as consumers took advantage of attractively low interest rates.

“While credit guidelines remain stringent, there are plenty of qualified folks who are putting more money back in their pockets by locking in a low rate,” he said.

“Incentives like the first-time home buyer tax credit are helping to generate increased purchase activity,” he said.

The Mortgage Bankers Association’s seasonally adjusted index of refinancing applications increased 3.2 percent to 6,813.5. The index was up 150.1 percent from its year-ago level of 2,724.7.

The refinance share of applications decreased to 77.9 percent from 79.1 percent, while the adjustable-rate mortgage share of activity was unchanged at 1.5 percent.

Fixed 15-year mortgage rates averaged 4.49 percent, up from 4.45 percent the previous week. Rates on one-year ARMs increased to 6.23 percent from 6.20 percent.

updated 12:00 p.m. ET, Wed., April 8, 2009

http://www.msnbc.msn.com/id/30107144/

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Obama: Timing right for millions to refinance

WASHINGTON — Declaring "good news" in the midst of an economic meltdown, President Obama on Thursday urged families to take advantage of record low mortgage rates by refinancing their homes.

"We are a time where people can really take advantage of this," Obama said, seated with a handful of homeowners who have already lowered their bills.

Rates on 30-year mortgages have fallen and last week hit 4.78% on average, the lowest on record. Rates are down by more than a full percentage point from a year ago.

"The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates," Obama said in a photo opportunity in the Roosevelt Room. "That is money in their pocket."

The president encouraged people to take advantage of a government website —www.makinghomeaffordable.gov— to see how they can get help.

In just a handful of minutes of addressing reporters, Obama read the website address aloud five times.

But the top U.S. housing official said later that interest rates on typical home loans will probably continue to fall from their current, record lows..

"I think you will see them continue to come down, based on everything that we're doing, but recognize that they've already started to make a big difference," Housing and Urban Development Secretary Shawn Donovan said on CNBC.

Donovan was speaking after the White House press event where Obama touted his plans to rescue the housing market.

In late February, the White House announced a plan to help 9 million homeowners win lower mortgage rates or lower their monthly bills to a more affordable level.

"Home purchases are up about 20% since we announced the plan so we are already beginning to see a difference," Donovan said.

The president credited his own government's efforts, in part, for contributing to a recent surge in refinancing. The collapse of the inflated housing market helped contribute to a meltdown in the financial sector and the broader economy, and millions of people have lost their homes or been at risk for foreclosure.

Obama also warned people to watch out for scam artists.

"If somebody is asking you for money up front before they help you with your refinancing," Obama said, "it's probably a scam."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

New Frannie, Freddie rules on the way

Regulator will issue new rules governing the mortgage finance company's portfolio holdings. Also coming, new capital requirements for Federal Home Loan Banks.

NEW YORK (CNNMoney.com) -- The federal regulator of Fannie Mae and Freddie Mac will set new rules early next week governing the mortgage finance companies' portfolios, which play a crucial role in the nation's housing market.

The Federal Housing Finance Agency is required by Congress to issue regulations ensuring the companies' portfolios are backed by sufficient capital, while keeping in mind their ability to provide funding for the mortgage market by turning home loans into securities. Their portfolios contain mortgages and securities backed by home loans.

The agency will also establish new capital rules for the 12 regional Federal Home Loan Banks, which provide much-needed low-cost funding for more than 8,000 banks nationwide. The home-loan banks have suffered in the economic crisis and may have to reduce their lending to shore up their finances.

"The regulations will address items critical to the safety and soundness of the 14 government-sponsored enterprises, which play a vital role in the nation's mortgage market," said James Lockhart, the agency's director.

Analysts, however, say it's more important to determine the future of Fannie and Freddie, which were taken over by the federal government in September, than to issue portfolio regulations.

"What Congress decides to do with these two companies is the real question," said Jonathan Koppell, associate professor at the Yale School of Management.

Portfolio problems

Fannie and Freddie are the largest sources of funding for the U.S. housing market. They buy mortgages from lenders and either hold them on their books or bundle them into securities. The companies also buy mortgage-backed securities.

Their $1.7 trillion portfolios have long been a source of controversy. Regulators had capped the growth of the companies' portfolios after the pair emerged from accounting scandals earlier this decade in an effort to minimize their riskiness.

But as the mortgage crisis unfolded over the past two years, the federal government has leaned more heavily on Fannie and Freddie to keep the housing market afloat. With investors shying away from buying mortgage-backed securities, the two companies are essentially the only players in the arena nowadays. Regulators lifted the portfolio caps last March.

Fannie and Freddie, however, continue to suffer as delinquencies rise. On Friday, Freddie announced it would ask the U.S. Treasury for up to $35 billion more in assistance as it anticipates losses in its fourth-quarter results. The company has already drawn down $13.8 billion of the $100 billion in federal funds made available to it when it was placed into conservatorship in September.

Trouble at FHLB

Meanwhile, the agency must also set capital requirements at the Federal Home Loan Banks, which are owned by the 8,000 member banks but have an implicit government guarantee. Established during the Great Depression, the home-loan banks are the nation's largest source of residential mortgage and community development credit. They provide low-cost loans, called advances, to member institutions, taking collateral such as high-quality mortgage-backed securities in exchange. Banks nationwide have increasingly relied on the home-loan banks for crucial funding as other sources dry up.

But as the value of the mortgage-backed securities drops, the home-loan banks are facing a credit crunch of their own. Some have cut back their dividends. Others have announced they may fall below their current capital requirements.

If the Federal Housing Finance Agency ups the home-loan banks' capital rules, they may not be able to lend as much. But that may not be a bad thing, experts said.

"The problem of the last five years is that people were doing too much lending," said Thomas Stanton, a lecturer at Johns Hopkins University. "They cannot be as big as everyone would like."

By Tami Luhby, CNNMoney.com senior writer

January 23, 2009: 7:01 PM ET