The Chicago 77
Comprehensive Chicago Real Estate Information

Daily Mortgage Update from A&N; Mortgage

• 14 April 2009 – Have we seen the bottom in the housing market? Well, according to current trends in the mortgage industry, it would be nearly impossible to tell. While we have seen a rise in purchase activity recently, mortgage interest rates are still very sensitive to the uncertainty of the financial markets. Today, mortgage rates are nearly unchanged from recent levels, which leads us to a cautiously floating mindset. Recent concerns over inflation coupled with comments this morning by Fed Chairman, Ben Bernanke, stating that there are definite signs that the sharp decline in the economy is slowing, can be interpreted as a possible “first step” towards a recovery. However, aside from the Fed Chairman’s comments and lack of financial news today we see no clear direction that the recession is over.

  President Obama’s Home Affordable Stimulus package was more clearly defined late last week. The guidelines are still vague and not being applied consistently by the mortgage lending industry. Who qualifies? That’s simple to determine:

  • owner occupied homeowner’s of one to four unit properties.
  • a loan owned or guaranteed by Fannie Mae or Freddie Mac.
  • 12 months worth of current mortgage payments (i.e. no late payments during the past 12 months).
  • and a mortgage balance not more than 105% of the current value of the home.

  Sounds simple, right? However, the difficulty lies in whether or not your mortgage is a Fannie Mae or Freddie Mac loan with private mortgage insurance (PMI). If the loan carries PMI, lenders may not accept those applications for the rate/payment reduction program, since those loans carry further issues. The lenders must negotiate with the private mortgage insurance providers in order for the PMI companies to agree to insure a primary mortgage that now exceeds pre-established limits set by PMI companies. These limits are directly related to the amount of insurance needed to protect the banking industry from defaults and those coverage’s are directly linked to loans reaching a loan to value percentage of 78%, which now comes into jeopardy when banks are refinancing 1st mortgages to 105% of a property’s current market value. Good grief; we answer one problem and create another; par for the mortgage industry these days.

  
  Alicia Hyland