Mortgage Update

Mortgage Update Through the First Half of 2010
By Adam Black of Coast Village Lending, a Division of Prospect Mortgage

While we are still as an industry working our way through the challenges of the “Credit Crunch”, so far 2010 has brought many of positives. First, rates have been at historic lows at a point when most industry analysts were expecting them to go higher. As part of the 2008 Stimulus Act, the Fed was buying mortgage backed securities from Fannie Mae and Freddie Mac to the tune of $1.25 trillion.

At the start of 2010 the Fed started to slowdown and ultimately stopped their mortgage backed security purchase program by the end of the 1st Quarter of 2010. Without the Fed buying mortgages from Fannie Mae and Freddie Mac, the unanimous expectation was that their rates at would start to inch up. In fact, the opposite happened and we are now seeing conforming rates at all time lows.

Second, FHA financing continues to provide opportunity for more buyers to get into the market with little money down with loan amounts up to $729,750. Although the upfront mortgage insurance premium (the charge FHA adds to their loans as an insurance against default) increased from 1.75% to 2.25% FHA it is still a great financing option for buyers that otherwise may not have one.

Also, we have seen more use of the FHA 203k renovation loans. These loans allow buyers to finance home improvements into the purchase loan. Now, fixer properties become more of an option to first time buyers as they can use the renovation loan for anything from a new roof to new appliances, kitchen or bath. This loan can also be used by existing homeowners that do not have much equity, but would like get additional funds to improve their home.

Last, Jumbo and Super Jumbo financing is really starting to open up. Over the last few years Jumbo financing has been very difficult to find, and when we did find it, it was very restrictive. In the last six months we have seen the Jumbo loan market start to heat up. There are new products available, more investors offering Jumbo programs and extremely low rates. We now have a broad offering of well priced 5, 7 and 10 year ARM’s as well as competitively priced 30 year fixed loan options.

Written by Adam Black, Senior Loan Officer
Coast Village Lending, a Division of Prospect Mortgage
Adam can be reached at: 805-452-8393