A few of the larger lenders in the mortgage industry are putting a stop to home foreclosures while the Obama Administration develops a plan to help the struggling homeowners.
President Barack Obama outlined in his speech in Arizona on Wednesday his much-anticipated plan to spend at least $50 billion to prevent foreclosures.
Arizona is one of the states hardest hit by the crisis.
It contained outlines of a foreclosure-relief effort but few details.
Though lenders have beefed up their efforts to aid borrowers over the past year, their action hasn't kept up with the worst housing recession in decades.
More than 2.3 million homeowners faced foreclosure proceedings last year.
Government-controlled mortgage finance companies Fannie Mae and Freddie Mac, and major banks JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. said Friday they are halting foreclosures through March 6.
New York-based Citigroup Inc. said it will extend until the administration has completed the details of the loan modification program or March 12, whichever is earlier. Citi's action expands on a similar effort it started in November.
The banks' pledges apply to owner-occupied homes, not those owned by investors.
Fannie Mae said it was suspending all foreclosure sales and evictions for occupied properties, while Freddie Mac said its suspension would apply to properties with up to four units and noted that the ban would not apply to vacant properties. Both Fannie and Freddie had suspended foreclosure sales during the winter holidays and halted evictions from foreclosed properties through the end of this month. Together, they own or guarantee around half of U.S. home loans.
Fannie and Freddie have developed systems to determine which loans need to be modified.
To qualify for those programs, borrowers have to be at least three months behind on their home loans.
The top executives of Bank of America, and Citi announced their intention to halt foreclosures under questioning Wednesday by House lawmakers.
Jamie Dimon, JPMorgan's chief executive, detailed his plans in a letter to Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, who released it Friday.
"We stand ready to work with you to put the appropriate processes in place, including a national modification standard, to reduce the incidence of foreclosure and to encourage long-term, sustainable home mortgages," Dimon wrote.
Information from CAR
Friday, February 20, 2009
Friday, January 30, 2009
Market expected to be flooded with REOs
It is very likely that mortgage lenders will be putting their increasing supply of repossessed homes up for sale in the next few months.
According to the Mortgage Bankers Association, 10 percent of home loans was either delinquent or in the foreclosure process at the end of September. Plus, Fannie Mae and Freddie Mac saw repossessions grow nearly 25 percent to 15,196 homes from the second quarter to the third quarter of 2008.
Lenders may have to reduce the principal balance on loans to do more than slow down the foreclosure process for many borrowers.
Source: Inman News, Matt Carter (01/26/09)
According to the Mortgage Bankers Association, 10 percent of home loans was either delinquent or in the foreclosure process at the end of September. Plus, Fannie Mae and Freddie Mac saw repossessions grow nearly 25 percent to 15,196 homes from the second quarter to the third quarter of 2008.
Lenders may have to reduce the principal balance on loans to do more than slow down the foreclosure process for many borrowers.
Source: Inman News, Matt Carter (01/26/09)
Saturday, January 24, 2009
Daring Design - The Elrod House
The Elrod House epitomizes John Lautner’s go-for-broke philosophy
By Allison Engel
An apprentice to Frank Lloyd Wright early in his career, John Lautner eschewed the cool, severe geometry of his midcentury minimalist peers. Instead, he spent a lifetime as an iconoclast, alternately overlooked or miscast by critics. Several of his best-known projects — including the iconic Googie coffee shop on Sunset Boulevard — have been wrongly celebrated as Atomic Age or Hollywood kitsch.
"Lautner’s fascination with new shapes and structures had nothing to do with Space Age futurism, or movieland glamour, or virtuoso engineering, but came from his determination to humanize the spaces of the built world and create an endlessly varied organic poetry. This was a profoundly serious agenda," wrote Ann Philbin, director of the Hammer Museum, in a foreword to the book that accompanied a retrospective exhibition of Lautner’s work at the Los Angeles museum last July.
Only after he died in 1994 did Lautner’s original designs start to receive attention and recognition as an influence on current architecture luminaries — such as Frank Gehry and Zaha Hadid — whose work displays an organic, earthy bent.
One project that contains many Lautner hallmarks — a difficult site, a modest entrance concealing a soaring space, rooms that flirt between inside and out — is also one that represents the contradictions between his designs and how they were originally perceived. The Elrod House on Southridge Drive in Palm Springs, built in 1968 for interior designer Arthur Elrod, is memorable for its enormous domed concrete roof, with wedge-like sections cut out to accommodate skylights and provide indirect light.
Designed to shield the home from the intense desert sun, the roof rests on curved concrete walls. Black slate tile floors add drama, as does an indoor-outdoor swimming pool and boulders massed in the living room. When Lautner saw rocks exposed on the 23-acre site from grading, he directed the contractor to dig 10 feet deeper, uncovering massive rocks that would became an integral part of the interior design.
The general public knows the house primarily as the ultimate bachelor pad from the 1971 James Bond film Diamonds are Forever and as a location for Playboy photo shoots. Instead of a realization of Lautner’s emphasis on the relationship between space and nature, for most of its existence, the house was considered a symbol of Hollywood excess.
During Lautner’s lifetime, critics and the public seemed not to know what to make of his oddly shaped, back-to-nature structures. The longtime Los Angeles resident retained a deep longing for the north Michigan woods of his youth, designing homes that were alternately cave-like and open to the sky. In a career that spanned 55 years, he backed up his daring designs with extraordinary feats of engineering. (As he was said to have put it, "You’re wasting your time if you don’t know how to hold up the roof!")
Faced with impossible sites, harsh climates, or both, Lautner time and again invented solutions. In the Elrod House, for example, the pavilion-like living room originally was ringed with floor-to-ceiling glass arranged in a zigzagged curtain wall. Shortly after the house was built, a desert sandstorm broke the panes. Lautner reacted with something even more outrageous: He installed two 25-foot-wide hanging glass curtain walls that retract to open up the living room completely to the outside at the touch of a button.
The 8,901-square-foot house is now praised for its relationship with its mountain landscape and its sense of drama. Contemporary critics, warming to Lautner’s designs, consider the home one of the architect’s most important works. The curators of Between Earth and Heaven: The Architecture of John Lautner, the Hammer Museum retrospective, looked at 300 of his projects and selected 50 to feature in the exhibition. Of those, they gave six projects particular emphasis, commissioning videos that were projected next to newly built large-scale models of the structures. One was the Elrod House.
The exhibit, which closed at the Hammer in October, moves to Glasgow, Scotland, in March; heads to Florida International University in Miami in October; and runs at Palm Springs Art Museum from Feb. 20 to May 23, 2010.
Beguiled by the home’s audasity, a real estate investor who divides his time between Hermosa Beach, Palm Springs, and West Hollywood admired it for a year before buying it in 2003. Since then, he has brought back some of the project’s original staff to care for the treasure. The owner later purchased the two adjacent Southridge houses (both architecturally significant), creating a portfolio of unusual houses that he is preserving in a way that also honors their use as lived-in spaces, ones made available to friends, family, business associates, and for special occasions.
The owner felt a special bond with the Elrod House; Lautner is the favorite architect of his father, an aeronautical engineer.
The main floor includes a kitchen, hidden from the living room by a long, curved wall. The generous master bedroom (originally only of only two in the house) features a bar and refrigerator tucked behind walls of exotic wood, with carefully matched grains. Elrod was a wizard at organization, wanting everything in its proper place, and Lautner obliged by filling multiple closets with row after row of pullout Lucite drawers. The closets are lined with cork so that jewelry or other accessories can be pinned up.
The sunken tub in the master bath is exposed to the outside, with only a glass wall standing between the T-shaped tub and a tidy row of bamboo. The area is unprotected but private, thanks to the remote site and the natural screening of a boulder.
A guest house and servants quarters, reached down a spiral staircase from the pool deck, was added two years after the main house was built.
Gardens around the house interweave formal and casual plantings: a moss area, fern patch, bamboo garden, paths of crushed rock ringed with cactus, and perennials that Elrod used to make potpourri to give to house guests. In a room carved into the cliff face, his many bins for dried flowers remain, with his hand-lettered labels: arrow, tansy, cornflowers, bergamot, roses.
The current owner managed to get a tour of the house in 2002 and couldn’t get it off his mind. "I walked out muttering, ‘That’s the best expression of space I’ve ever encountered,’" he says. "I muttered for over two months and began writing offers."
He bought the house from supermarket magnet Ron Burkle, who had poured millions into the house during the years he owned it.
"I give Burkle full marks," says the current owner. "He did all the thankless stuff you never see, basically renovating all the mechanical systems and furnishing it in a manner that’s true to the space." Lautner visited the house during that restoration and approved of the work.
Even at $5.5 million he paid for the house, the owner thinks it was undervalued. "You’ll never find the site again. You’ll never get the approvals again. And you had true simpatico between the client, architect, and contractor — something impossible to count on and critical to the best results."
He hired a contractor; housekeeper; pool man; manager; and Ricardo Flores, the son of the man who installed and maintained the original Lautner landscape. The staff also cares for the two other Southridge properties he bought: the former Steve McQueen house designed by Hugh Kaptur and "Boat House" designed by Michael P. Johnson for race-car driver James Jeffords.
As for the Elrod House, the owner says he discovers "fantastic sight lines and subtle design details" every time he stays in the house. "I really love the space," he says. "At the end of the day, environment impacts mood. And one of the best ways to shape mood is good design."
This article appears in the February 2009 issue of Palm Springs Life
link to article:
http://www.palmspringslife.com/Palm-Springs-Life/February-200/DaringDesign/index.php?previewmode=on
link to article:
By Allison Engel
An apprentice to Frank Lloyd Wright early in his career, John Lautner eschewed the cool, severe geometry of his midcentury minimalist peers. Instead, he spent a lifetime as an iconoclast, alternately overlooked or miscast by critics. Several of his best-known projects — including the iconic Googie coffee shop on Sunset Boulevard — have been wrongly celebrated as Atomic Age or Hollywood kitsch.
"Lautner’s fascination with new shapes and structures had nothing to do with Space Age futurism, or movieland glamour, or virtuoso engineering, but came from his determination to humanize the spaces of the built world and create an endlessly varied organic poetry. This was a profoundly serious agenda," wrote Ann Philbin, director of the Hammer Museum, in a foreword to the book that accompanied a retrospective exhibition of Lautner’s work at the Los Angeles museum last July.
Only after he died in 1994 did Lautner’s original designs start to receive attention and recognition as an influence on current architecture luminaries — such as Frank Gehry and Zaha Hadid — whose work displays an organic, earthy bent.
One project that contains many Lautner hallmarks — a difficult site, a modest entrance concealing a soaring space, rooms that flirt between inside and out — is also one that represents the contradictions between his designs and how they were originally perceived. The Elrod House on Southridge Drive in Palm Springs, built in 1968 for interior designer Arthur Elrod, is memorable for its enormous domed concrete roof, with wedge-like sections cut out to accommodate skylights and provide indirect light.
Designed to shield the home from the intense desert sun, the roof rests on curved concrete walls. Black slate tile floors add drama, as does an indoor-outdoor swimming pool and boulders massed in the living room. When Lautner saw rocks exposed on the 23-acre site from grading, he directed the contractor to dig 10 feet deeper, uncovering massive rocks that would became an integral part of the interior design.
The general public knows the house primarily as the ultimate bachelor pad from the 1971 James Bond film Diamonds are Forever and as a location for Playboy photo shoots. Instead of a realization of Lautner’s emphasis on the relationship between space and nature, for most of its existence, the house was considered a symbol of Hollywood excess.
During Lautner’s lifetime, critics and the public seemed not to know what to make of his oddly shaped, back-to-nature structures. The longtime Los Angeles resident retained a deep longing for the north Michigan woods of his youth, designing homes that were alternately cave-like and open to the sky. In a career that spanned 55 years, he backed up his daring designs with extraordinary feats of engineering. (As he was said to have put it, "You’re wasting your time if you don’t know how to hold up the roof!")
Faced with impossible sites, harsh climates, or both, Lautner time and again invented solutions. In the Elrod House, for example, the pavilion-like living room originally was ringed with floor-to-ceiling glass arranged in a zigzagged curtain wall. Shortly after the house was built, a desert sandstorm broke the panes. Lautner reacted with something even more outrageous: He installed two 25-foot-wide hanging glass curtain walls that retract to open up the living room completely to the outside at the touch of a button.
The 8,901-square-foot house is now praised for its relationship with its mountain landscape and its sense of drama. Contemporary critics, warming to Lautner’s designs, consider the home one of the architect’s most important works. The curators of Between Earth and Heaven: The Architecture of John Lautner, the Hammer Museum retrospective, looked at 300 of his projects and selected 50 to feature in the exhibition. Of those, they gave six projects particular emphasis, commissioning videos that were projected next to newly built large-scale models of the structures. One was the Elrod House.
The exhibit, which closed at the Hammer in October, moves to Glasgow, Scotland, in March; heads to Florida International University in Miami in October; and runs at Palm Springs Art Museum from Feb. 20 to May 23, 2010.
Beguiled by the home’s audasity, a real estate investor who divides his time between Hermosa Beach, Palm Springs, and West Hollywood admired it for a year before buying it in 2003. Since then, he has brought back some of the project’s original staff to care for the treasure. The owner later purchased the two adjacent Southridge houses (both architecturally significant), creating a portfolio of unusual houses that he is preserving in a way that also honors their use as lived-in spaces, ones made available to friends, family, business associates, and for special occasions.
The owner felt a special bond with the Elrod House; Lautner is the favorite architect of his father, an aeronautical engineer.
The main floor includes a kitchen, hidden from the living room by a long, curved wall. The generous master bedroom (originally only of only two in the house) features a bar and refrigerator tucked behind walls of exotic wood, with carefully matched grains. Elrod was a wizard at organization, wanting everything in its proper place, and Lautner obliged by filling multiple closets with row after row of pullout Lucite drawers. The closets are lined with cork so that jewelry or other accessories can be pinned up.
The sunken tub in the master bath is exposed to the outside, with only a glass wall standing between the T-shaped tub and a tidy row of bamboo. The area is unprotected but private, thanks to the remote site and the natural screening of a boulder.
A guest house and servants quarters, reached down a spiral staircase from the pool deck, was added two years after the main house was built.
Gardens around the house interweave formal and casual plantings: a moss area, fern patch, bamboo garden, paths of crushed rock ringed with cactus, and perennials that Elrod used to make potpourri to give to house guests. In a room carved into the cliff face, his many bins for dried flowers remain, with his hand-lettered labels: arrow, tansy, cornflowers, bergamot, roses.
The current owner managed to get a tour of the house in 2002 and couldn’t get it off his mind. "I walked out muttering, ‘That’s the best expression of space I’ve ever encountered,’" he says. "I muttered for over two months and began writing offers."
He bought the house from supermarket magnet Ron Burkle, who had poured millions into the house during the years he owned it.
"I give Burkle full marks," says the current owner. "He did all the thankless stuff you never see, basically renovating all the mechanical systems and furnishing it in a manner that’s true to the space." Lautner visited the house during that restoration and approved of the work.
Even at $5.5 million he paid for the house, the owner thinks it was undervalued. "You’ll never find the site again. You’ll never get the approvals again. And you had true simpatico between the client, architect, and contractor — something impossible to count on and critical to the best results."
He hired a contractor; housekeeper; pool man; manager; and Ricardo Flores, the son of the man who installed and maintained the original Lautner landscape. The staff also cares for the two other Southridge properties he bought: the former Steve McQueen house designed by Hugh Kaptur and "Boat House" designed by Michael P. Johnson for race-car driver James Jeffords.
As for the Elrod House, the owner says he discovers "fantastic sight lines and subtle design details" every time he stays in the house. "I really love the space," he says. "At the end of the day, environment impacts mood. And one of the best ways to shape mood is good design."
This article appears in the February 2009 issue of Palm Springs Life
link to article:
http://www.palmspringslife.com/Palm-Springs-Life/February-200/DaringDesign/index.php?previewmode=on
link to article:
Friday, January 23, 2009
Swindlers find growing market in foreclosures
As home values across the country continue to plummet, the authorities say a new breed of swindler is preying on the tens of thousands of homeowners desperate to avoid foreclosure.
Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as "foreclosure rescue companies" that charge upfront fees to modify loans but often do nothing to stave off foreclosure. The Federal Trade Commission brought lawsuits last year against five companies representing 20,000 customers, and state and local prosecutors have brought dozens more. In Florida, Attorney General Bill McCollum recently sued a company that he said had more than 600 victims.
"There's no way for the consumer to sort out the legitimate companies," said Mr. McCollum, who added that he had limited resources to fight what he called "a sheer volume question."
The companies under suspicion typically charge an upfront fee of up to $3,000 to help borrowers get lower rates on their mortgages from their lenders. But borrowers often cannot afford the fees, the service can be bogus and, in the worst cases, the homeowners lose their chance to renegotiate with their bank or to file for bankruptcy protection because of the time wasted. There are companies that provide legitimate foreclosure services, but the industry is largely unregulated, making it difficult for homeowners to separate the good from the bad. Some of the fraudulent companies - often run by former real estate agents or mortgage brokers - are local; others are national. Many have official-looking Web sites that suggest that the companies have government affiliations and give homeowners a false sense of security.
Source: By John Leland, The New York Times
Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as "foreclosure rescue companies" that charge upfront fees to modify loans but often do nothing to stave off foreclosure. The Federal Trade Commission brought lawsuits last year against five companies representing 20,000 customers, and state and local prosecutors have brought dozens more. In Florida, Attorney General Bill McCollum recently sued a company that he said had more than 600 victims.
"There's no way for the consumer to sort out the legitimate companies," said Mr. McCollum, who added that he had limited resources to fight what he called "a sheer volume question."
The companies under suspicion typically charge an upfront fee of up to $3,000 to help borrowers get lower rates on their mortgages from their lenders. But borrowers often cannot afford the fees, the service can be bogus and, in the worst cases, the homeowners lose their chance to renegotiate with their bank or to file for bankruptcy protection because of the time wasted. There are companies that provide legitimate foreclosure services, but the industry is largely unregulated, making it difficult for homeowners to separate the good from the bad. Some of the fraudulent companies - often run by former real estate agents or mortgage brokers - are local; others are national. Many have official-looking Web sites that suggest that the companies have government affiliations and give homeowners a false sense of security.
Source: By John Leland, The New York Times
Saturday, January 17, 2009
30-Year Rates Fall Below 5%
Mortgage rates dropped to their 11th straight weekly decline, reaching new record lows, according to Freddie Mac.
Interest rates on 30-year, fixed rate mortgages averaged 4.96 percent this week, down from a previous week's 5.01 percent.
The low rates have caused a spike in home refinancing loans and a welcome relief to cash-strapped home owners facing a slowing economy and rising unemployment rates.
"The fact that interest rates have dropped to a record low is an important development since more affordable home financing could help bring buyers back to the market and prevent some of these foreclosures," says Lawrence White, professor of economics at New York University's Stern School of Business.
Other rates were mixed for the week:
15 year fixed rates: averaged 4.65 percent, up from 4.62 percent.
1-year adjustable rate mortgages: fell slightly averaging 4.89 percent from 4.95 percent last week.
5/1 ARMs: averaged 5.25 percent compared with 5.49 percent last week.
Mortgage rates have continued to drop ever since the Federal Reserve announced a plan in December to buy up $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae—the government-sponsored enterprises.
Freddie Mac started recording mortgages in 1971.
Source: Reuters, Julie Haviv (1/15/09)
Interest rates on 30-year, fixed rate mortgages averaged 4.96 percent this week, down from a previous week's 5.01 percent.
The low rates have caused a spike in home refinancing loans and a welcome relief to cash-strapped home owners facing a slowing economy and rising unemployment rates.
"The fact that interest rates have dropped to a record low is an important development since more affordable home financing could help bring buyers back to the market and prevent some of these foreclosures," says Lawrence White, professor of economics at New York University's Stern School of Business.
Other rates were mixed for the week:
15 year fixed rates: averaged 4.65 percent, up from 4.62 percent.
1-year adjustable rate mortgages: fell slightly averaging 4.89 percent from 4.95 percent last week.
5/1 ARMs: averaged 5.25 percent compared with 5.49 percent last week.
Mortgage rates have continued to drop ever since the Federal Reserve announced a plan in December to buy up $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae—the government-sponsored enterprises.
Freddie Mac started recording mortgages in 1971.
Source: Reuters, Julie Haviv (1/15/09)
Friday, December 19, 2008
6 Things to Know About the Fed Rate Cut
The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent. The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy--which has been mired in a recession since December of last year--than the prospect of stoking inflation. “Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined,” the rate-setting Federal Open Market Committee said in its statement. “Financial markets remain quite strained and credit conditions tight.”
Here’s how the Fed’s actions affect you:
1. Fixed mortgage rates: Today’s rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee’s reach, says Keith Gumbinger of HSH Associates. “Any change in the rate has little to do with long-term mortgage rates,” he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.
2. Prime rate: The real impact of today's cut will be felt by consumers with products that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. "The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime," says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these products could see their interest rates decline.
3. Home-equity savings: Home-equity lines of credit averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed's half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around--but not everyone will be able to take advantage of them. That's because many of the interest rates on these products are already at their minimums and are contractually prohibited to go any lower. So check the terms of your home-equity line of credit to see if you are eligible to cash in on the decline.
4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks’ cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today’s credit conditions have changed all that. Although the Fed’s target rate stood at 1 percent before today’s cut, such funds were actually being traded in the market at much less than that--just 0.18 percent as of yesterday before the Fed’s action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. “Any juice that you would get from a funds rate cut in a normally functioning market, you’re not really going to get that here,” Larson says. “It’s not going to lower the banking industry’s cost of funds, because the banking industry’s cost of funds is already below the target rate anyway.” That means that interest rates tied to the federal funds rate won’t decline as much as they otherwise would have.
5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. “The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January,” Behravesh said in a recent report, issued before today’s announcement. “Once the overnight rate is at zero, the Fed may have to engage in ‘quantitative easing’ [direct purchases of long-term Treasuries].” Even if it doesn’t bring rates all the way to zero, the Fed signaled Tuesday that it’s not about to push rates higher anytime soon. “The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the Fed said in the statement.
6. Expect more unexpectedness. With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. “The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity,” the Fed said in the statement.
taken from C.A.R. article
Here’s how the Fed’s actions affect you:
1. Fixed mortgage rates: Today’s rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee’s reach, says Keith Gumbinger of HSH Associates. “Any change in the rate has little to do with long-term mortgage rates,” he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.
2. Prime rate: The real impact of today's cut will be felt by consumers with products that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. "The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime," says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these products could see their interest rates decline.
3. Home-equity savings: Home-equity lines of credit averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed's half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around--but not everyone will be able to take advantage of them. That's because many of the interest rates on these products are already at their minimums and are contractually prohibited to go any lower. So check the terms of your home-equity line of credit to see if you are eligible to cash in on the decline.
4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks’ cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today’s credit conditions have changed all that. Although the Fed’s target rate stood at 1 percent before today’s cut, such funds were actually being traded in the market at much less than that--just 0.18 percent as of yesterday before the Fed’s action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. “Any juice that you would get from a funds rate cut in a normally functioning market, you’re not really going to get that here,” Larson says. “It’s not going to lower the banking industry’s cost of funds, because the banking industry’s cost of funds is already below the target rate anyway.” That means that interest rates tied to the federal funds rate won’t decline as much as they otherwise would have.
5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. “The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January,” Behravesh said in a recent report, issued before today’s announcement. “Once the overnight rate is at zero, the Fed may have to engage in ‘quantitative easing’ [direct purchases of long-term Treasuries].” Even if it doesn’t bring rates all the way to zero, the Fed signaled Tuesday that it’s not about to push rates higher anytime soon. “The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the Fed said in the statement.
6. Expect more unexpectedness. With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. “The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity,” the Fed said in the statement.
taken from C.A.R. article
Thursday, December 18, 2008
It's a great time to buy!!
Interest Rates have dropped which make it a great time to buy!
30 year fixed rates today for a $250,000 loan:
5.250 at 0 points
4.813 at 1 point
This information is from our local Loan Officer or Mortgage Advisor.
I encourage all inquiries to be directed to me.
It's a Great time to buy!
30 year fixed rates today for a $250,000 loan:
5.250 at 0 points
4.813 at 1 point
This information is from our local Loan Officer or Mortgage Advisor.
I encourage all inquiries to be directed to me.
It's a Great time to buy!
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