Renee Boyd\’s SoCal Real Estate Blog

Understanding What Causes Interest Rate Movement

Consumers are often misled when it comes to the subject of the Federal Reserve and how it affects mortgage interest rates. Often the media is the culprit causing the confusion. In the last few years, the Fed has taken action that caused mortgage interest rates to move in a direction other than what consumers expected, because the media provided weak reporting on the subject. The Federal Reserve affects short-term interest rate maturities, the Fed Funds rate, and the Overnight Lending rate. These factors have a direct impact on the Prime rate. If you took only this into consideration, you may mistakenly conclude that changes made by the Fed will cause a similar movement in mortgage interest rates. However, mortgage interest rates are dictated by the trading of mortgage-backed securities, which trade on a daily basis. The real dynamic at the heart of interest rate movement is the relationship between stocks and bonds.Stocks and bonds compete for the same investment dollar on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling of mortgage-backed securities.

FANNIE MAE, FREDDIE MAC, AND FHA REFORM: The new law permanently sets the conforming loan limit for FHA and government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac at 115% of an area’s median home price, not to exceed $625,500. The new loan limits take effect after the current $729,750 loan limit expires on December 31, 2008.
       The new law also authorizes the Treasury Department to bail out Fannie Mae and Freddie Mac if necessary by increasing their lines or credit or purchasing their stock. A new governmental agency, the Federal Housing Finance Agency, will be created to oversee GSE operations. Other FHA reform includes an increase in the minimum down payment requirement from 3% to 3.5%, and effective October 1, 2008, the elimination of seller-funded down payment assistance programs.

Some of the other provisions of the new Housing Act are, without limitation, $4 billion in assistance to stabilize neighborhoods hurt by the foreclosure crisis, $180 million for pre-foreclosure counseling, Home Equity Conversion Mortgage (HECM) reverse mortgage reform, assistance for veterans, and the creation of a nationwide loan originator licensing and registration system. The appropriate governmental agencies will establish new regulations as needed to carry out and enforce the new Housing Act.

$7,500 TAX CREDIT FOR FIRST-TIME HOMEBUYERS: With certain exceptions, a first-time homebuyer will receive a tax credit of 10% of the purchase price up to $7,500 maximum, for the tax year in which the buyer purchases a principal residence. The tax credit, however, must be repaid like an interest-free loan in equal installments over the next 15 years or in full if the homebuyer sells the property for a gain. A buyer qualifies as a “first-time” homebuyer as long as the buyer (and spouse if any) has not owned a principal residence in the U.S. for the last three years. The tax credit phases out for a taxpayer with a modified adjusted gross income over $75,000 (or $150,000 for joint returns). This tax credit is available for qualifying homes purchased from April 9, 2008 through June 30, 2009.

The State Legislature enacted foreclosure reform law to address the adverse effects of high foreclosure rates in California. The new law requires lenders to contact homeowners to explore options  for avoiding foreclosure at least 30 days before filing a notice of default. It also requires owners acquiring property through foreclosure to maintain the exterior of vacant residential properties. The new law also extends from 30 to 60 days the time for residential tenants to move out of properties that have been foreclosed upon, unless other laws apply. These requirements will remain in effect until January 1, 2013. The full text of Senate Bill 1137 (Perata) is available at  www.leginfo.ca.gov.

Are you a Distressed Property Owner or an Owner facing Foreclosure?
Have other Real Estate Agents told you they couldn’t help you?
Did your previous Agent allow your listing to Expire?
Did you get no offers for your property at all?…

If you answered Yes, to any of these questions then you need to call me now!

(877)551-2313 x4003

I am a licensed Realtor specializing in Distressed and Pre-Foreclosure Assistance
No upfront fees are ever charged to you. Don’t get scammed by those who have you pay them money upfront, or offer to buy your home for cash! Your lender pays my commission at closing, if you must sell!
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œWhat do you think about rates ¦ should I lock in now or wait to see if they fall further? Think I™ve been asked that a time or two over the past 18 years? You better believe it.  It™s a good question”one that goes through every single buyer™s head at some stage.  

A quoted interest rate is no good unless you™ve confirmed, in writing, that your loan is indeed œlocked, or guaranteed for a designated period of time. You need to be proactive with your locked rate as well and don™t assume that your loan officer already locked you in. In fact, your loan officer shouldn™t lock in your rate without your specific instructions. If it was locked in and rates went down you™d be pretty mad, wouldn™t you?

While neither real estate agents nor loan officers are in the business of predicting the future, it™s still possible to make a prudent choice in the face of uncertainty. Would you rather lock in your rate and watch rates fall or not lock in your rate and see rates go up?

If you decided to lock and rates go down, you™ve secured the market rate that you were happy with. But if rates went up and you didn™t lock, you™d be paying for that mistake for the rest of the loan.

There is an even worse possible scenario: After not locking in your rate, rates shoot up and you no longer qualify for the loan. So it™s important to ask yourself:   œWhich way would I rather be wrong?

If you are comfortable with the rate you™ve been quoted, talk to your real estate agent about the possible consequences of waiting to lock it in.

Yesterday we lost a great comedian.   For some he may have been a little over the top, or  crass. Others may have  thought him to be anti-establishment.    But his was a  talent that really made you think about  some of the ridiculous things that go on in our society and government.  Things that we as Americans just simply accept, and for some inane reason don’t question… most of the time! At other times he made you laugh at yourself.  His comedy knew no color lines,  nor political correctness.  Everyone was fair game. One thing for sure, he’s already causing an uproar in Heaven!

Rest in Peace George, you will truly be missed.  

A fellow Keller Williams Associate sent an email blast out to everyone the other day.   Since the Keller Williams culture operates as a family, I felt obligated to assist him in finding a home for this adorable little dog.   To see the video click the link below:

http://tinyweblink-001.com/?pid=4021136

Her name is Noodle, and she is truly adorable.   With looks like hers she™ll be gone quickly.   So don™t delay!   I™d take her myself, but we already have a Bull Mastiff/Shepard mix, and he™s so huge at 7 months he might think she™s a little chew toy.