Over the past week, even though MBS prices have been fluctuating, there has been little movement in rates. However, mortgage rates will remain volatile until the Feds meeting which is scheduled on June 19th. With hints of reducing QE3 and the current bond buying of $80 billion per month, the final decision by the Feds will still be influenced by the job market. The economy added 175,000 jobs in May which was close to expectations. However, the unemployment rate increased to 7.6% due to more people entering the workforce. With an increase in the unemployment rate, it seems unlikely that the Feds will do anything at this time.
According to the most recent survey of wholesale and direct lenders performed by FreeRateUpdate.com, current conforming 30 year fixed mortgage rates are as low as 3.500%, 15 year fixed mortgage interest rates are as low as 2.500% and 5/1 adjustable mortgage rates are as low as 2.250%. Low rates require that borrowers have good credit and qualifications that meet lender guidelines. According to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey, mortgage applications decreased 11.5% on a seasonally adjusted basis for the week ending May 31st.
The seasonally adjusted Purchase Index dropped by 2%. With news of rates possibly on the rise, the Refinance Index fell 15% and reached the lowest level since the end of November 2011. The refinance share of total applications fell to 68% and was at the lowest level since July 2011. HARP loan activity remains stable and unchanged at 32%. HARP refinances are for underwater mortgages that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009. The HARP program runs until the end of 2015.
FHA 30 year fixed mortgage rates are as low as 3.250%, FHA 15 year fixed rates are as low as 2.750% and FHA 5/1 adjustable mortgage rates are as low as 2.750%. Even though FHA has gone through guideline changes, home buyers will continue to use them because of the numerous benefits they offer, including accepting lower credit scores than conventional mortgages. FHA closing costs (APR) are high because of the upfront mortgage insurance premium and other FHA fees, but seller concessions up to 6% can still be used for this purpose. With the FHA streamline refinance program, homeowners can move to a better mortgage without the need of an appraisal, a credit history or other documentation. Borrowers who have loans that were endorsed prior to June 1, 2009 can use the streamline program and will receive reduced upfront and annual mortgage insurance premiums. This offer is available until the end of 2013.
Jumbo 30 year fixed mortgage rates are as low as 3.625%, jumbo 15 year fixed rates are as low as 3.000% and jumbo 5/1 adjustable mortgage rates are as low as 2.500%. Obtaining low jumbo rates requires that borrowers have excellent credit and substantial qualifications. These loans require substantial documentation and, very often, two appraisals due to the high cost of the property. While jumbo loans may be more difficult to obtain as compared to conventional loans, there are more lenders available which has increased competition. Borrowers who need jumbo loans must do their homework ahead of time in order to obtain the best loan and rates available.
MBS prices (mortgage backed securities) continued to be volatile over the past week. Mortgage rates move in the opposite direction of MBS prices. The April trade deficit rose to $40 billion which was below what was expected. The ADP forecast for May for private sector jobs was at 135,000 which was well below forecast of 170,000. Jobless claims dropped to 346,000 which was slightly below consensus.
by Ed Ferrara