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Jumbo and Conforming Loan Rate Update

Mortgage Delinquency continues to be a problem. It is our view that this could take several more years to run it's course. Average days till a home goes from first missed payment to getting listed as a foreclosure is roughly 1.5 to 2 full years in most states. The chart below is showing that over 10.18% of all mortgages are at least 60 days this is down from 10.58% at the March 2011 report. A modest improvement...

This is against the backdrop of an ultra-low purchase and refinance environment for conforming and jumbo mortgage loans.

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Global Slowdown. Ex-Asia No One Recovered. Asia Slowing Since 2010

TPL Aug 10 11

Jumbo Loan Rates Never Lower As Government Loan Limits Drop

If you have been keeping up with the real estate news, you may know that the mortgage loan limits on jumbo mortgage loans set by Congress are about to change. A jumbo mortgage is one that must be eligible to sell to Fannie Mae or Freddie Mac and it exceeds the amount of a conventional conforming limit.  Depending on where you live, the upcoming lower loan limits could impact you. Beginning on October 1, 2011 the mortgage loan limits for homes across the entire country will be $625,500.

Currently, the maximum amount for jumbo mortgage loans is anywhere between $417,000 and $729,750. The maximum limit is determined by a couple factors, including the region of the country in which you live.  Major metropolitan areas, where home prices are higher, today have limits closer to $729,750.

There are many people who will be affected by the new limits. Any homeowner who owns a home valued between $417,000 and $729,750 and wants to refinance is going to be affected by these new limits. There will be tighter credit restrictions and possibly even higher mortgage rates for homes that are valued above the new $625,000 maximum.

Any home buyer who wants to buy a home priced above the new maximum is also definitely going to be affected. Currently, jumbo mortgage loan rates are often lower than traditional mortgage rates and qualified buyers can put as little as 3.25 percent down to purchase the home. But with the new caps, mortgage rates are going to increase and home buyers will need to put down a much larger payment for the home. The down payment requirements could be as high as 20 percent.

Some of the bigger cities with higher home prices will definitely feel the punch. Places like New York City, San Francisco, Miami and Los Angeles where homes are typically priced in the jumbo mortgage loan range will see some effect from the lowered maximums. According to the National Association of Home Builders, nearly 1.4 million owner-occupied homes in more than 200 counties across the county will be valued above the $625,500 jumbo loan limit.

BestJumboRate.Com said that they are reaching out to clients who will be affected to alert them of the new guidelines. Most people simply don’t know about the new limits or the October 1 deadline for imposing the new limits.

Before criticizing the reduction, though, consider this: The Federal Housing Administration, or FHA, raised the limits for a jumbo loan in 2008. This increase in limits was only supposed to be temporary. Since 2008, the higher limit caps have been renewed each year. As of right now, those limits are set to expire on September 30, 2011. It is not like the federal government with taking action to lower the limits; rather, legislative inaction would result in the current limits expiring and reversion to the old limits.

So what does this mean for you? If you are thinking of refinancing your jumbo mortgage loan or taking out a jumbo loan to purchase an upper-end home, now may be the best time to initiate the process. The opportunity to capture a government insured rate that is often .25-.50% lower than a traditional jumbo mortgage loan won't be able if you wait until after September 30. 

Uncle Sam."Show me the Money."

Please visit Visualizing Economics for the Super Big Chart.

Housing in For Long Road to Recovery

From San Francisco Fed President John Williams: The Outlook for the Economy and Monetary Policy

Some excerpts on housing: 

One of the most important currents holding back recovery has been housing. The collapse of the housing market touched off the financial crisis and recession. In most recessions, housing construction falls sharply, but then leads the economy back when growth resumes. As you well know, that snapback hasn’t occurred this time. Before the crisis, residential investment as a share of the economy was at its highest level since the Korean War. Today, housing construction remains moribund and residential investment as a share of the economy has fallen to its lowest level since World War II.

On one level, that’s not surprising. We simply built too many—in fact, millions too many—houses during the boom and we are still feeling the effects of this overhang. Consider housing prices. From their peak in 2006 until early 2009, home prices nationwide fell by nearly a third. When you exclude distressed sales, prices appeared to bottom out in 2009 and early 2010. New housing starts also appeared to stabilize in 2009, after plummeting some 75 percent during the housing crash. ...

The $64,000 question is when will the housing market finally recover? One daunting challenge for such a recovery is the huge number of homes in foreclosure. Almost 7 million homes have entered into foreclosure since the first quarter of 2008 and some 2 million are still in the foreclosure process. In addition, there is a shadow inventory of homes currently owned by delinquent borrowers. When you add up unsold new houses left over from the boom, homes for sale by owners, foreclosed residences for sale by lenders, and the shadow inventory of houses at risk of distressed sale, you come up with a massive supply overhang.

Over time, more reasonable prices and an improving economy ought to bring buyers off the sidelines and set the stage for recovery. But high unemployment and anemic wage gains are leaving people worried about their income prospects and cautious about buying homes. Also, the dramatic plunge in home valuations since 2006 has made some first-time homebuyers wary about entering the market because of worries that prices might fall further.

These are key points: Usually housing is a key engine of recovery, but not this time because of the massive supply overhang. And looking forward: 

It’s only a matter of time before we work off the inventory overhang and construction picks up. How much time it takes will depend in part on what happens with foreclosed properties. If we begin making progress on working down the foreclosure inventory, then single-family housing starts could plausibly rise from their current level of about 400,000 per year to an average level of perhaps 1.1 million per year in three or four years, according to research at the San Francisco Fed.⁴ To put this in perspective, such an increase would boost real gross domestic product, or GDP, by at least 1 percent.

⁴ By contrast, if we can't work down the foreclosure inventory, then a return to normal construction levels could be delayed several more years. 

Jumbo Loan Rates Continue Hovering Below 5%

Mortgage Delinquency continues to be a problem. It is our view that this could take several more years to run it's course. Average days till a home goes from first missed payment to getting listed as a foreclosure is roughly 1.5 to 2 full years in most states. The chart below is showing that over 10% of all mortgages are at least 60 days.

Here is your jumbo mortgage rate chart as well:

Energy: Where the jobs of today and tomorrow are found.

Renewable energy is the fastest growing energy sector, despite the fact we still get the majority of our power from non-renewable sources. Oil, coal and fossil fuels are not only in limited supply, but are also detrimental to the health of the planet. On the other hand, renewable energy is in infinite supply and draws its power cleanly and naturally. Solar, wind, water and geothermal energy sources are the future of the industry and are expected to create 12 million new jobs through 2030. In West Virginia alone, a mere two percent of the state’s geothermal power could replace its entire electrical capacity. In just one hour, the Sun provides enough power to meet the world’s energy needs for a year.

Show Me The Money

As we have previously discussed the current unemployment rate and poor GDP figures hide the enormous gains of the high net worth and high earners. Cap Gemini has all of the details.

Most of America may be treading water, but the High Net Worth Individuals are getting their piece of the pie.

Jumbo Loan Strategic Defaults on the Rise

When Tracy Bremmer, director of decision sciences at Experian, talks about mortgage defaults, she has more than reams of data behind her. She has personal experience. She tell a story, embellished slightly but still representative, of a "neighbor" who bought their house near the height of the boom only to see it lose 40% of its value, plunging their mortgage so far underwater it would take years to surface. Then they noticed the house across the street from them for sale for roughly half of what they paid for theirs. So they bought it, and just stopped paying their original mortgage.

This family is semi-fictitious but is not alone. Ethics, morality and possible straight-up savvy aside, we started thinking about these "strategic defaulters" as a newly trending consumer segment, as they tend to become a strange new class of renters:

Data being released later today from Experian will show that in the first half of 2010, an estimated 275,000 people just walked away from mortgages they could afford to keep paying because they had become such awful investments. That adds up to roughly 17% of defaulters. While that figure is down 35% from the first half of 2009, as evidence of a double-dip housing crash mounts, "we expect the incidence of strategic defaulting to go up," said Ms. Bremmer.

Estimates of the number of mortgages under water in the U.S. hover just over 1 in 4 but that could jump to half in the coming years. Recent data from Corelogic suggests that almost 10% of mortgages originated just last year are already in the negative equity range. The Federal Reserve shows average homeowner equity at just 38% down from 61% a decade ago. We could go on, but you get the idea. A lot of home owners are hosed.

These are no deadbeats in a traditional sense. The Experian data show that they are more likely to have had a jumbo loan mortgage, have had excellent credit scores, have had more than one house or investment property, and have a higher than average household income. They also stay current on all their other bills. If you look at the incidence in these charts, the proportion of strategic defaulters keeps going up.

They should be owning and spending like home owners. But they're not, and for up to the next seven years they might have a hard time finding a mortgage while their credit recovers. "As many strategic defaulters as there are," said Ms. Bremmer, "there are many more people who are short-selling. Those people are renting, too."

For more great information and to contact the team that created the report please visit Experian Decision Analytics

Ultimate Buy American: Foreign Purchase of US Residential Real Estate

Last year, international buyers spent a whopping $41 billion to purchase US residential Real Estate. Some of this is attributable to the weak American Peso, but lower US RRE prices relative to European counterparts are also a factor.

Via Trulia, we can see the fascinating data flow of what overseas home buyers are looking at homes in which states. The global house hunters might surprise you. Click for highly interactive map courtesy of TRULIA.

Spanish Elite Say: Let Them Drink Sangria.

Looking at these pictures from Barcelona one would think this is Tunisia, Cairo, or at best, Athens. Instead, it is from the once incomparably wealthy capital of Catalunia (although they did have Olympics there: an event guaranteed to result in at least one municipal bankruptcy at some point in the future).

Why?

¿Por qué?