| The mortgage industry has experienced slow | | | | fixed rate mortgages. Home loans at this price may be |
| application activity over the past several months, but | | | | a hard deal to pass up for those refinancing loans and |
| that jogging pace may turn into a sprint as mortgage | | | | purchasing homes, especially in light of the roller |
| rates fell to historical lows recently. On November 25, | | | | coaster ride that mortgage rates have taken so far |
| the government announced some major credit | | | | this year. |
| stimulation initiatives in a bold move to bolster the | | | | On the refinancing front, although interest rates are |
| depressed housing and mortgage markets. On the | | | | low, home prices continue to deteriorate across the |
| news, home loan rates tumbled by one-half percent, a | | | | country. The National Association of Realtors recently |
| move seldom encountered in the mortgage business. | | | | announced that sales of existing homes fell by 3.1 |
| Three major components came together to create | | | | percent in October, and the median home sales price |
| the sharp drop. First, the Treasury announced that | | | | plunged 11.3 percent from a year ago to $183,000. On |
| they would now guarantee Fannie Mae and Freddie | | | | this news, it's important to keep in mind that a |
| Mac debt and purchase up to $100 billion of that debt, | | | | homeowner's qualified refinance home loan interest |
| thereby bolstering investor attraction to the safety of | | | | rate may not be as low as advertised offer rates, if |
| their issued bonds. Secondly, the Treasury announced | | | | their loan-to-value (LTV) ratio exceeds 80 percent. So, |
| that it would purchase up to $500 Billion of Fannie, | | | | it's a good idea for those considering a mortgage |
| Freddie, and Ginnie securities, creating much needed | | | | refinance to get a handle on the value of their home, |
| liquidity in the mortgage markets. Finally, Treasury yields | | | | before they start shopping rates. The spread appears |
| dropped in a major one-day move, almost one-quarter | | | | to be tightening for higher LTV home loan scenarios, |
| percent on the 10-Year Treasury bond. | | | | but those refinancing over 90 percent of their home's |
| The result of this perfect storm of financial news was | | | | value will most likely get the best deal with an FHA |
| a one-half percentage point drop in mortgage rates | | | | refinance. |
| and a potential beginning for stabilization in housing. | | | | As for the rate outlook ahead, many feel that the |
| Historically low mortgage rates may be just the | | | | current low mortgage rates will continue for a while. |
| stimulus needed to drive potential homebuyers off the | | | | Whether they decline even further is anyone's guess, |
| fence to begin the offering process. After the | | | | but a leveling in home prices could be just the medicine |
| government announcement, many lenders were | | | | needed for further rate dips. |
| offering par rates in the 5.5 percent range for 30-year | | | | |