The average rate for 30-year-fixed-rate mortgages fell to 3.94% for the week
ended Oct. 6, according to mortgage-finance giant Freddie Mac—the lowest on
record. Rates on 15-year loans, meanwhile, have fallen to a record low of 3.28%.

While mortgage rates vary by region even among the nation’s biggest lenders,
they are down throughout the country for borrowers with excellent credit.
Citigroup, the third-largest U.S. bank by assets, is pitching a 4.193% rate on
30-year-fixed loans and a 3.806% rate for 15-year-fixed mortgages. EverBank
Financial of Jacksonville, Fla., is offering Cincinnati-area residents a 3.89%
rate on 30-year fixed-rate loans.

Steve Walsh, who heads mortgage lender Scout Mortgage in Scottsdale, Ariz.,
says he has seen a surge in interest among borrowers looking to take advantage
of low rates. “There’s a feeling that rates are basically at the lowest they can
get,” he says. But are they?

No one can predict the future, of course, but policy makers seem intent on
pushing rates down even further.

The Federal Reserve, for example, is trying to move rates lower by buying
more mortgage-backed securities. And Obama administration officials are talking
to lenders about ways to reinvigorate the Home Affordable Refinance Program, a
government initiative to help borrowers refinance even if they have little or no
equity left in their homes.

The goal for both: to get rates low enough so that more people will find it
beneficial to refinance. If people start doing it en masse, it could help the
economy.

“In the short term, rates could fall,” says Brad Hunter, chief economist for
Houston-based Metrostudy, a housing-market research firm. “In the longer term,
rates will rise as the economy starts to strengthen.”

If that were to play out, then refinancing now, with rates still around 4%,
could be a mistake. That’s because the chances are good that if you own a home,
and have significant equity in that home and good credit, you already have
refinanced in the past few years. Because refinancing involves costs—typically
2% of the mortgage value—it often doesn’t pay to refinance every time rates tick
down, tempting though it is.

“Don’t become a refinance junkie,” says Greg McBride, a senior financial
analyst at Bankrate.com, a consumer-information site. “You pay for it later in
the form of closing costs.”

So how far do rates need to fall before it makes sense for you to refinance?
Economists at the University of Chicago have tried to answer the question.

The ideal refinance rate must factor in closing costs, marginal tax rates,
the number of years left on the mortgage and other factors, the economists say.
Homeowners often make decisions based on faulty assumptions about rates, says
David Laibson, an economics professor at Harvard University and one of the
Chicago study’s authors. “Mortgage rates follow what we call a random walk, and don’t bounce back from
lows like most people assume,” he says.

In other words, what goes down could keep going down—even if it goes up for a
little while first. If you catch the first big dip, you can miss later ones that
offer even better opportunities.

The economists produced an online calculator, at zwicke.nber.org/refinance/, that distills their theory into a
tool that calculates how far interest rates need to fall for homeowners to
derive value from refinancing—the “optimal” refinance rate.

For example, their formula suggests that a homeowner with a $400,000 mortgage
with 25 years left on a 30-year-fixed rate mortgage at 4.75% shouldn’t refinance
until rates fall to below 3.51%, assuming 2% closing costs.

The risk of waiting for a lower rate, of course, is that it will never come.
If you are unwilling to take the gamble, your best bet is to negotiate hard on
fees.

The conventional wisdom is that it doesn’t make sense to refinance unless you
can shave at least a point off your interest rate. That’s because you don’t want
your “break-even” point—when your savings exceed your refinancing costs—to be
longer than two years or so.

But if you can persuade your lender to waive the fees, or most of them, you
might need only a half-point of savings to make a deal worthwhile, says
Bankrate.com’s Mr. McBride.

Last week, Michael Allison refinanced his $417,000 mortgage on a
three-bedroom California Ranch-style house in Santa Barbara, Calif. The
41-year-old fitness-center owner says he will save $200 a month by switching
from a 30-year fixed-rate mortgage at 4.87% to one at 4.25%.

“It’s an absolutely great deal and didn’t cost me anything,” Mr. Allison
says. His lender, Provident Savings Bank in Pleasanton, Calif., covered the
closing costs after his real-estate agent made some calls to the firm.

With a little negotiation, homeowners can persuade lenders to cover their
fees. “It’s not a free lunch,” Mr. McBride says, because borrowers get slightly
higher rates in exchange—but it is a good way to minimize your upfront
costs.

Another option that’s growing in popularity: refinancing a home at a shorter
term—say, 20 or 15 years. If you can find a rate that keeps your monthly payment
about the same as you were paying on your old 30-year loan, the decision is a
no-brainer, says Mr. Walsh of Scout Mortgage.

Lloyd Qualls, a 57-year-old accountant in Mesa, Ariz., decided to do just
that. Last month he ditched his 30-year fixed-rate loan at 4.875% for a 15-year
fixed-rate loan at 3.375%. While that boosted his payments by $89 a month, it
will shorten his payment period by 13 years and save him $104,233 on interest
over the life of the loan.

The number of borrowers who are underwater on their mortgages has declined by more than 500,000 to date in 2010, but an additional 2.4 million borrowers were near negative equity (within 5 percent) in the third quarter. Negative equity and near-negative equity mortgages accounted for 27.5 percent of all mortgaged residential properties at the end of the third quarter.

Negative equity was most prevalent in five states: Nevada, Arizona, Florida, Michigan and California.

2. GET RID OF THE LEAD FOOT.  According to the U.S. Department of Energy (DOE), quick acceleration and heavy braking reduce fuel economy by as much as 33% on the highway and 5%around town.  Give the lead foot a rest to improve your fuel efficiency and your passengers ride.  Difficulty: l

3. STOP IDLING.  Although most of us grew up needing to let the car “warm up” any car built after 1990 doesn’t need the warm-up, so go ahead and get a move on.   Difficulty: l

4.GIVE YOUR CAR A BREAK.   You may n0t be able to retire your car completely, but try to opt for public transportation, carpooling, walking or biking when you can, and you’ll save both money and carbon emissions.  For each gallon of gas you save, you keep 20 pounds of carbon dioxide out of the environment and nearly $5.00 in your wallet!  Difficulty: l

5. BE REASONABLE WITH THE THERMOSTAT.  You don’t have to be uncomfortable in your home to save energy or reduce emissions, but try to keep it as warm as you can stand it in the summer, and turn it down to 68 or below in the winter.  Difficulty: l

6, CAULKING AND STORM PANELS.  Double-paned wondows are are good fix but, a least expensive way to improve insulation, is to seal and leaks or gaps around doors and windows with caulking and weather stripping.  You can then add a storm panel to your single-pane window to increase energy efficiency for less money than double paned windows.  Difficulty: ll

7.SWAP YOUR A/C FOR A CEILING FAN.  Ceiling fans are remarkably effective in cooling and use far less energy (or chemicals!) than air conditioning.  If you still need a A/C, consider running it on low and using ceiling fans to circulate the cool air.   Difficulty ll

8. PLANT TREES.  On top of soaking up carbon dioxide, trees that surround your home can provide shading in the summertime, keeping your house cool and requiring less energy-intensive air conditioning.  Difficulty: ll

9.  GET YOUR DUCTS IN A ROW.  In addition to increasing your electricity bills and and your carbon foot print, faulty duct work can cause serious, life-threatening carbon monoxide problems in the home.  Check your ducts for air leaks.  First, look for sections that should be joined but have separated, and then look for obvious holes.  If you use tape,  to seal your ducts, use mastic, butyl tape, foil tape,or other heat-approved tapes (look for tape with the Underwriters Laboratories logo.)  Be sure a well-sealed vapor barrier exists on the outside of the insulation on cooling ducts to prevent moisture buildup.  Difficulty: lll

10. GO FOR DOUBLE-PANED WINDOWS.  According to the DOE, the typical family spends $1,300 a year on home energy bills.  If your windows are letting air in or out, some of that money is being wasted, as is the energy its paying for.  Double-paned windows are up to 40% more energy-efficient than standard windows, and could shave 10% to 25% off youe heating or cooling bill, on top of saving five tons of carbon dioxide emissions per household per year.  Difficulty: lll

DIFFICULTY SCALE:                                                  

l= No Pain, but Lots of Gain.

ll= Commitment and Consciousness Required Daily.

lll= You Will Soon Reap the Financial Rewards of your Herculean Efforts.

TO BE CONTINUED NEXT WEEK!

With all the foreclosures and short sales going on, and all us Realtors trying so hard to help our clients, it amazes me how the banks try so hard to be as uncooperative as possible.  My latest experience in this involved a listing that I had been trying to sell for so long it turned out to be a record in our office!  My client had just lost her job and could no longer pay the mortgage payments.  I rushed to get a buyer so she would not foreclose.  We get into escrow all the inspections and FHA requirements have been passed, the buyers has signed the loan docs.   The seller has signed off the house……..We cannot get chase to send the payoff demand to escrow so we can close.   I requested the demand again and again by phone after the title and escrow company had sent in a written demand and got no response.  Every time I called I was on the phone with them for at least 40 mins. and 30 of those mins. I was on hold!  I asked to speak to a supervisor and was told there were none I could talk to.  Over and over I got various customer service reps. who told me they were very sorry it has taken so long and they would fax it to escrow in 24 to 48 hours…to no avail.  Mean while they were calling my client three times a day demanding to be paid, while the whole time I was calling three times a day trying to pay them.    I finally had to find the main number for chase in New York by looking online.   I called and was told by the executive resolution dept. that I would need to talk to the attorney that was assigned to the loan. ( you would think that after I had called 15 to 20 times that someone would have told me I needed to talk to the attorney????? )  Well, I called “customer service” back up asked to be given the name and number of the attorney assigned to the loan and low and behold I was given a name and number.  I called said name and number and was e-mailed the payoff  demand right then.   I don’t know, but I would think the banks would be more cooperative when someone is trying to pay them???

Among those who see improvement in the 2010 market is Lawrence Yun, chief economist for the NATIONAL ASSOCIATION OF REALTORS® (NAR). Yun hopes that the extension of the first-time home-buyer tax credit will provide a new pool of buyers to absorb the additional foreclosures that will hit the market this year.

He expects existing-home sales to rise 13.6 percent in 2010; home prices should go up 3 to 5 percent, with wide geographic differences. The average rate on 30-year fixed mortgages will range from 5.3 percent in the first quarter to 5.8 percent by year end. This forecast assumes there will be no major economic surprises. The weak job market remains a concern.

The Mortgage Bankers Association (MBA) has a slightly different take on the 2010 housing market. MBA predicts existing-home sales will increase approximately 11.2 percent. Interest rates should be about 5.6 percent by the end of 2010. The unemployment rate is expected to peak at 10.2 percent and gradually decline in 2011. National average home prices should stop sliding during the first part of the year and stabilize, depending on area and price range. 

In my office we have seen a marked improvement in the number of first time buyers calling for help buying a home.  I have been doing floor time (answering calls) and in the last five days I have acquired 5 new clients, one a day.

The FHA has come up with some new rules when it comes to their loans. 

Beginning April 2010, the up front mortgage insurance will increase from 1.75% to 2.25%

There will be no more spot appraisals.  So it will be harder to get an approval on a condo. 

This is a big one.  Effective for all case numbers issued on or after February 1 of this year, all previous FHA condo approvals will be eliminated and condominium projects must be recertified by HUD.

You can pretty much forget about buying a condo until the project has been blessed by HUD or one of HUD’s approved lenders.

Going forward there will be two approval methods for FHA Case numbers ordered after February 1, 2010; 

Hud Review and Approval Process (H-RAP)

DE Lender-Approval and Review Process (DEL-RAP)

On another note>>> 
For all purchase contracts dated after February 1st, 2010, FHA has waived the flipping rule.
Private Sellers & Investors can now sell their properties to FHA buyers without having to wait 90 days.

Then I viewed my Active Rain site and read a blog by JP Lowry of Preferred Financial Funding, titled What are We Doing America? in which he VERY ADAMANTLY stated why the bill was Disgusting, Ridiculous & Entitled. I have to say after reading it there were some very good points. Now I am not sure where I stand and was wondering what other opinions were.

I am very happy for the families that will be able to keep their homes, but at what cost? I agree that some people bought homes that they knew they could not afford, but… the lenders let them. Also as tax payers have already bailed out the banks shouldn’t the money be used for what it was intended?