American Banker (02/17/11) P. 10 Collins, Brian

Washington Post (02/02/11) P. A12 ElBoghdady, Dina

Federal Housing Administration or the FHA, since its inception in 1980, has allowed streamlining refinances on FHA mortgages. The word “streamline” refers to the fact that opting these kinds of loans will reduce the borrower’s paperwork to almost half of that, what is required by any other kind of refinancing bank. Before applying for the loans, one can learn about certain essentials of FHA refinance program.

The Basic Requirements For Streamline Mortgage Refinance Are:

1) The mortgage which has to be refinanced should be FHA insured.
2) The property should be legal.
3) The monthly installment should reduce the borrower’s monthly principal amount and interest payments.
4) No money can be drawn on refinanced mortgage.

The Benefits of Streamline Mortgage Refinancing:

1) People facing credit problem can relax, as for FHA credit evaluation is not required.
2) The borrower has to carry out minimal paper work.
3) No income verification, no employee verification is required.
4) oan tenure can be increased or decreased as per the individual’s requirement.
5) Interest rates are comparatively lower than other mortgage refinances.
Beside all the above, very little or zero initial expenses are involved.

www.Mortgage11.com

“The significant rise in loan origination volume during the second quarter reflects the surge in first-time homebuyers seeking to take advantage of the tax credit before the deadline expired,” said Marina Walsh, MBA’s associate vice president of industry analysis. “Higher production operating expenses typically are associated with purchase production compared to refinances. But in this case, fixed costs were spread out over more loans and lenders experienced higher pull-through rates. These factors help explain why operating expense dropped on a per-loan basis by $470 per loan between quarters.”

However, average profits in the second quarter of 2010 were significantly lower than the profits in the second quarter of 2009. Walsh said, “A year before, quarterly production volume averaged $280.9 million and the refinancing share was over 60 percent. The heavy volume and refinancing share helped lower per-loan operating costs to $3,414 per loan and profits soared to $1,358 per loan.”

Among the additional key findings of MBA’s Quarterly Mortgage Bankers Performance Report are:

►The purchase share of total originations ($) for this sample of independent mortgage bankers and subsidiaries rose to 65 percent in the second quarter of 2010, compared to 56 percent in the first quarter of 2010 and 38 percent in the second quarter of 2009.

►The average pull-through (the number of closings divided by the number of loan applications) was 72 percent in the second quarter of 2010, compared to 68 percent in the first quarter of 2010.

►The “net cost to originate” dropped to $2,611 per loan in the second quarter of 2010, from $2,945 per loan in the first quarter of 2010. The “net cost to originate” includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.

►Total personnel expense dropped to $3,017 per loan in the second quarter of 2010, compared to $3,296 per loan in the first quarter of 2010. In the second quarter of 2009, personnel expenses averaged $2,283 per loan.

►Eighty-five percent of the firms in the study posted pre-tax net financial profits in the second quarter of 2010, compared to 75 percent in the first quarter of 2010 and 96 percent in the second quarter of 2009.

MBA’s Mortgage Bankers Performance Report offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions.

►More than 70 percent of the 312 companies that reported production data for this report were independent mortgage companies.

For more information, visit www.mortgagebankers.org

The yield on the 10-year note zoomed to 3.11% from Monday’s 3.05%.  Yields and prices move in opposite directions.

Weak retail sales in June ignited strong buying in bonds on Wednesday.  Sales fell for the second straight month — down 0.5%.  That afternoon the minutes of the Fed’s June 22-23 meeting showed the Committee lowered its GDP forecast for 2010 to 3% -3.5% from 3.2% – 3.7%, raising further concerns about the economy.

Treasuries continued their rise on Thursday, with four of the five reports supporting the theory of a slow economic recovery.  The day began on an up note with first-time unemployment claims dropping by 29,000 to 429,000 — a two-year low.  The four-week average also fell to 455,250.  This had some economists thinking this may be the first in a series of declines.

The rest of the reports, however, were bond-friendly.  The producer price index, which looks for signs of wholesale inflation, fell 0.5% in June, while the core index, which eliminates volatile food and energy prices, rose by an expected 0.1%.  Traders had nothing to fear on the inflation front.

Manufacturing was also hard hit.  The Philly Fed index of July manufacturing conditions fell to 5.1 from 8 in June.  The May index hit 21.4.  The July NY Empire State manufacturing index plunged to 5.1 from 19.6 in June.

Separately, nationwide industrial production rose 0.1% — weaker than May’s 1.3% increase.  Capacity utilization was unchanged at 74.1%.

These reports renewed concerns about economic growth — pushing the specter of a rebound further into the future.  Money headed back to the safe haven of bonds, and the yield on the 10-year fell below 3.0% again, closing at 2.98%.

Friday began with the consumer price index showing no signs of inflation in retail prices.  The index itself rose 0.1%, while the more closely watched core rate rose 0.2% — slightly more than the predicted 0.1% increase.  Bond prices remained flat.

The week’s final report showed consumer sentiment hitting its lowest level since August.  The University of Michigan said that its preliminary July survey slid to 66.5, down from the June reading of 76.  Buying in bonds picked up, driving the 10-year note yield down to 2.95%.

Mortgage applications continue to decline, according to the Mortgage Bankers Association.  For the week ended July 9, the refinance index fell 2.9%, while the purchase index dropped 12.7%.

The recent trend of slow week/busy week continues, with only four economic reports on this week’s docket.

With earnings season heating up, Wall Street might influence trading in the bond markets as much or more than the reports would.  Better-than-expected quarterlies from influential corporations can ignite buying in equities, and bonds will sell.  But disappointing reports would likely have the opposite effect.

On Tuesday housing starts and building permits for June are due.  Both categories came in far below estimates in May.

Starts are expected to fall to an annual rate of 563,000 from 593,000.  Building permits, which shine a light on future starts, are predicted to fall to an annual rate of 555,000 from 574,000 in May.  These two reports, however, are subject to huge revisions.

More housing data come out Thursday with the release of existing home sales in June.  They are expected to drop to an annual rate of 5.10 million units versus a May rate of 5.66 million units.

First-time jobless claims for the week ended July 17 could be watched more closely than usual.  Were analysts correct in thinking last week’s big decline in claims was the beginning of the long-awaited turn around in employment?  Another big decline would no doubt bring about selling in bonds, but an increase would usher in a sigh of relief.

The final report, the index of leading economic indicators for June, is expected to fall 0.5%.  It had been heading upward for months indicating good economic times ahead.  This would be a setback.  Although bonds would like it, this report isn’t a big mover.

Based on the rate at which homes are selling nationwide, it would take 11.2 months for the existing housing supply to be exhausted.

For home buyers, this is an opportune time for negative news on housing.

First, sellers know that between now and the Super Bowl, housing activity will be light.  The general scarcity of buyers may force a seller to accept a bid he wouldn’t have accepted otherwise.

Second, the economy is showing weakness and that, too, can concern a home seller.  Buyers are less likely to extend themselves during times of economic uncertainty, further reducing the buyer pool and, again, putting pressure on the seller to “make a deal”.

And lastly, because the government has been trying to force mortgage rates down as a way to stimulate the economy, the weak housing data is actually making it cheaper to finance a home.  This means that a well-qualified home buyer can better stay within budget.

Each 0.500 percent rate reduction saves $33 per $100,000 borrowed.

It is important to remember, though,  that the U.S. housing market is not national — it’s highly localized.  This is one reason why national real estate reports can be misleading.  Just as figures from Phoenix have little to do with statistics from St. Paul, even data from neighboring ZIP codes can vary.

The universal truth, however, is that a home that is priced fairly will sell more quickly than a home that is not.  And, until the Super Bowl passes in 45 days, expect fewer buyers to be out there competing for them.

(Image courtesy: The Wall Street Journal Online)

The paperwork, signed by both parties, includes provisions for things like:

• The interest rate
• The length of the loan
• The amount of money to be borrowed

But, like all loans, a mortgage loan can be paid off at any time.  So, when market interest rates fall, homeowners will often exercise their right to an “early payoff” by securing a new loan that pays off the old one.

This process is most commonly known as a refinance.

A refinance is the changing of the loan terms against a property, often for a better interest rate or a lower monthly payment.  When the refinance process is complete, the original lender’s loan is paid in full using the money from the new lender’s loan and the former’s relationship is officially terminated.

There’s no rule against how many times a person can refinance, nor is there an easy way to determine whether or not a refinance makes sense.  In general, if you can reduce your monthly payment while limiting your closing costs, to refinance is a smart decision.

However, there are other reasons to refinance, too, including:

1. To convert from an ARM into a fixed rate mortgage (or vice versa)
2. To extract equity for paying off third-party debts or for cash
3. To extend a loan from 15 years to 30 year for payment relief

Because there are fewer third-parties involved with a refinance, it’s often simpler and less expensive than a comparable purchase transaction.  The paperwork stack is often smaller, too.

And although gas prices vary by locale, the cost of a fill-up is worthy of national news.

The main reason why national gas prices matter is because of something called the Wealth Effect — people’s tendency to spend more money when they have a perceived feeling of being worth more.

Low gas prices can amplify the Wealth Effect, leading to higher levels of consumer spending nationwide — the primary driver of the U.S. economy.

But more important than the Wealth Effect is the reverse Wealth Effect.  That’s when consumers have a perceived feeling of being worth less and their spending reflects it.  This past summer is a terrific example of it.

Soaring gas prices, Wall Street troubles, and negative campaigning constantly reminded Americans of what was wrong with the economy.  It follows, therefore, that retail sales figures plunged in September and October.  Once the election passed, however, and gas prices fell, a gentle optimism returned.

Not surprisingly, consumer confidence rose in November.

All of this matters to real estate because as Americans regain their confidence and feel more “wealthy”, they will be more likely to make “move up” purchase, buy new home appliances, and take other actions that propel the economy forward.

Oh, and mortgage rates trolling at 3-year lows certainly helps, too.

(Image courtesy: GasBuddy.com)