Since 2007, foreclosures have dominated real estate news.  You can’t turn on the news or open a paper without some foreclosure-related story.But for all of the discussion, foreclosures continue to be geographically concentrated.

Adding up the latest stats from RealtyTrac.com, more than half of the country’s foreclosure actions from March occurred in just 3 states — California, Florida and Nevada.

Those 3 states represent just 19 percent of the nation’s population.

Despite the local concentration of foreclosures, however, they remain a national problem.  This is because mortgage lenders lend in all 50 states — not just 3 of them — so the impact of mortgage defaults in one region can quickly spread to others.

In part because of foreclosures are higher, the following has happened:

• Mortgage guidelines have tightened
• Downpayment requirements have increased
• Private mortgage insurance has become more expensive

That’s an important set of changes for a would-be borrower.  In some cases, it can keep a person from qualifying.

Search the March 2009 foreclosure report for yourself on RealtyTrac.com’s website.

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It’s Tax Day today and who among us doesn’t love a legitimate tax deduction?The IRS expects to process 138 million tax returns this year and accompanying those returns will be a melange of tax deduction requests.

Most will be run-of-the-mill including such staples as mortgage interest, vehicle mileage, and child care deductions. Others, however, will be less ordinary.

On its website, TurboTax pays homage to some of the most off-the-wall, offbeat tax deductions through the years permitted by the IRS.

Among the “weirdest deductions allowed“:

• A bodybuilder’s body oil so his muscles would glisten in competition
• A private airplane for owners of investment properties
• Landscaping for a sole proprietor that meets clients at home
• A swimming pool for a man with emphysema

Tax deductions are prized by U.S. taxpayers. Hopefully, your 2008 tax returns included some good ones, too.

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Shopping for low mortgage rates is a game of luck.Some days, mortgage rates are favorable.  Other days, they’re not.  And while you can sometimes make an educated guess about where rates might be headed, you’re not always going to guess right.

Even the experts get it wrong more often than they’d like.

But some parts of the rate shopping process can be predicted and one of them is the future of mortgage guidelines.

In general, the more often homeowners default on their respective mortgages, the harder it is for future mortgage applicants to be approved.

This is why “now” may be the best time to apply for a FHA mortgage.  Defaults are climbing, suggesting that FHA underwriting guidelines are about to tighten.

Indeed, the FHA has implemented two major changes since last summer:

1. The minimum downpayment requirement was raised by a half-percent to 3.5%
2. Cash out refinances are now limited to 85 percent, down from 95 percent.

These changes create barriers to entry for potential FHA borrowers, improving the overall quality of the FHA loan pool.

For a taxpayer-funded agency like FHA, loan performance is an important goal.  Therefore, as the number of defaults grows, expect FHA guideline to get tighter.

The problem is, though, we can’t predict just where the FHA will tighten.  Maybe the FHA raises its minimum FICO score requirement, or maybe it gets tough on seller-paid closing costs.  A hike in loan fees isn’t out of the question, either — that’s the path Fannie Mae took, after all.

Whatever the FHA does, fewer people will qualify for FHA mortgages once it’s done.  So, if you’re planning to buy a home and your downpayment is limited, or your credit scores are suspect, or there’s some other “red flag” in your profile, consider moving up your timeframe to act.

Mortgage rates may rise or mortgage rates may fall, but neither is going to matter if you can’t get qualified for a home loan.  And, for FHA mortgage applicants, tougher mortgage guidelines are only a matter of time.

(Image courtesy: The Wall Street Journal Online)

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For the second week in a row, mortgage markets started the week strong and then ended with a fizzle.  In the holiday-shortened week, rates were exactly flat overall.There wasn’t much economic data to move rates last week, incidentally. The market’s up-and-down action was largely based on two events:

1. A reputable analyst said banking-sector optimism may be premature
2. Wells Fargo reported a record $3 billion in first quarter earnings

It was the first item that dropped rates Monday and Tuesday; the second item, in part, led them back up.

This week, data returns.

Tuesday, we’ll get a look at Retail Sales.  Because consumer spending accounts for two-thirds of the economy, a lower-than-expected figure for Retail Sales would dampen Wall Street’s current optimism for the U.S. and that would likely lead mortgage rates lower.

Next, on Wednesday, the government will release a closely-watched ”cost of living” measurement called the Consumer Price Index.  At its roots, CPI is an inflation gauge for the economy so — because inflation is bad for mortgage rates — a higher-than-expected CPI number is expected to push mortgage rates higher.

Then, on Thursday, Housing Starts is released.

Housing Starts measures the number of new homes on which the nation’s builders broke ground last month.  If starts are up, it may mean that builders are optimistic for housing — a good sign for the economy.  However, if starts are down, it should help reduce housing inventory over the next few months — also a good sign for the economy.

Meanwhile, 3 of the country’s biggest financial firms — Goldman Sachs, JPMorgan Chase, and Citigroup– are due to release first quarter earnings this week.  If the filings show strength like Wells Fargo’s did, expect mortgage rates to rise like that did after the Wells Fargo report.  What’s good for stocks right now may prove to be bad for mortgage rates.

Goldman Sachs reports on Tuesday, JPMorgan Chase on Thursday and Citigroup on Friday.

(Image Courtesy: Wall Street Journal Online)

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When conforming mortgages adjust, they’re often tied to an interest rate index called LIBOR.

LIBOR is an acronym for London Interbank Offered Rate. But what LIBOR stands for isn’t as important as the role it plays.

LIBOR is an interest rate at which banks borrow money from each other.  Therefore, when banks feel the banking system as a whole is unsafe, LIBOR rises to compensate.

It’s why LIBOR spiked last October after Lehman Brothers failed.  Financial institutions wondered what other institutions would fail and that added risk to the system.

Since October, however, and because of massive government interventions worldwide, LIBOR has been on a steady retreat.  Moreover, with close to $30 billion in conforming mortgages scheduled to adjust by Labor Day, the timing couldn’t be better for homeowners with conforming ARMs.

Typically, a Fannie Mae- or Freddie Mac-backed mortgage adjusts once annually.  The adjusted interest rate is always equal to some constant — usually 2.250 percent — plus the rate of LIBOR on the date of adjustment.

As a math formula, the ARM formula might like this:

New Mortgage Rate = LIBOR + 2.250 percent

In October, when LIBOR was above 4 percent, a homeowner’s ARM may have adjusted to 6 1/2 percent.  Today, that same ARM would move to four-and-a-quarter.

As a strategy play, it might make sense to let your ARM adjust because the rate will remain low, but with fixed rate mortgages hovering near 5 percent, locking up a long-term rate may be smart, too.

Talk to us to review all of your choices.

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There are 138 million taxpayers in the United States and, according to the IRS, 20 percent of them file their taxes within 7 days of April 15.  In a holiday-shortened week, that means that 27 million people had better get a move on.

And while a portion of this year’s last-minute filers will file with storefront operations like Liberty Tax Service or H&R Block, many others will self-prepare with the help of tax software from TurboTax or TaxCut.

If you’re a member of the do-it-yourself crowd, consider taking a review of this year’s tax law changes before starting your returns.  The stimulus package signed into law this past February made a profound impact on tax liability and the list of changes may be helpful for you.

A few of the new, allowable income tax deductions for 2008 include:

• Mortgage debt forgiveness in the event of a short sale
• An additional standard deduction on real estate taxes paid
• $8,000 tax credit for homes bought since January 1, 2009

TurboTax offers 4 tax filing choices online, ranging in price from $100 to free.  If you’re among the 27 million yet to file, choose whichever program fits best – just choose it before April 15.

Filing could take several hours.  Plan accordingly.

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April 4, 2009, marked the official start of the Making Home Affordable refinance program.Expected to help 5 million homeowners, the Making Home Affordable program “looks the other way” with respect to falling home values, approving mortgage applications based on borrower payment history and benefit to the homeowner.

Not every homeowner is eligible for a Making Home Affordable refinance, however.  There are 3 basic criteria that must be met.

First, your existing home loan must be backed by either Fannie Mae or Freddie Mac.  Thankfully, both companies provide online lookup services.  Start with the Fannie Mae site because Fannie has a greater market share and because Freddie Mac’s site requires your social security number.

Next, you must have a perfect mortgage payment history over the last 12 months.  Even one payment made 30 days late disqualifies you from participating in the Making Home Affordable program.  It is okay, however, if you were 20 days late on your payment and incurred late fees.

And lastly, the balance on your mortgage cannot exceed your home’s value by more than 5%.  The math formula is (Mortgage Balance) / (Home Value).  If the quotient is greater than 1.05 then your loan-to-value exceeds 105% and you are not eligible for Making Home Affordable.

Now, assuming you meet the criteria, there are some noteworthy details of the Making Home Affordable program:

1. If you didn’t pay mortgage insurance prior to refinancing, you won’t have to pay it after refinancing — even if your loan-to-value exceeds 80%.
2. All refinances require income verification — even if the original mortgage was a stated income loan.
3. Second mortgages cannot be paid off using loan proceeds — they must be subordinated

There are other guidelines, too, and both Fannie Mae and Freddie Mac have dedicated portions of their website to the Making Home Affordable program. To the layperson, unfortunately, the information may be a bit technical.

Even the government’s fact sheet can be a little dense at times.

Therefore, if you have specific questions about the Making Home Affordable program and your own eligibility, first check to see if Fannie or Freddie is backing your loan.  If they are, pick up the phone and call us to plan next steps.

The program ends June 10, 2010.

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Mortgage markets were up-and-down last week as rates fell Monday and Tuesday before surging higher from Wednesday through Friday.In some case, after touching all-time lows, conforming mortgage rates added a half-percent in the second half of the week, ruining some homeowners’ chance to refinance.

It was the second week in a row that mortgage rates worsened.

One reason why mortgage rates are up is because investors are turning bullish on the economy, even as it sputters.

From investors’ perspective, the data is weak, but not as weak as it has been — or could have been.  It’s a glass-is-half-full approach and it’s the opposite of how Wall Street worked in 2008.

For example, from last week:

1. Consumer Confidence measured a paltry 26.0 — but the reading was up from February’s all-time lows
2. The Case-Shiller Index showed a big drop in home prices — but the report ignores strong housing data from the last 60 days
3. Unemployment rates reached 8.5 percent nationally — but employment is a lagging indicator for the economy

In time, we’ll learn whether investors were on-time or premature in their bets for an economic turnaround but, for now, the mere belief that the economy is improving is leading mortgage rates higher.  And until Wall Street’s sentiment changes, rates should continue in that direction.

This week, there won’t be much chance to change traders’ minds.  For one, it’s a holiday-shortened week.  Secondly, there’s just one release of importance to markets — Wednesday’s release of the March Fed Minutes.

Mortgage rates may not rise for the third week in a row this week but long-term momentum is working against rate shoppers.  If you see a rate you like, consider locking it.  Before long, it might be gone.

(Image courtesy: The Wall Street Journal Online)

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Thursday morning, homeowners in different parts of the country awoke to find similar-sounding newspaper headlines:

• Rates on 30-year mortgages sink to 4.78%, a new low (LA Times)
• Mortgage rates at record low for 2nd week (Miami Herald)
• Mortgages hit another record low (San Francisco)

The underlying story was that Freddie Mac’s weekly Primary Mortgage Market Survey showed the lowest, average 30-year fixed rate mortgage in its 38-year, rate-tracking history.

Once again, however, the headlines came too late for homeowners.

Prior to Thursday’s market open, mortgage markets had already worsened from their record-setting levels.  Slowly at first, and then with momentum.  The shift pressured rates higher so that when lenders issued their Thursday morning rate sheets, most showed an 1/8 increase from Wednesday’s close.

The negative momentum carried into the afternoon, too, forcing a second increase of an 1/8 percent.

The Freddie Mac survey may have been accurate when the sun came up Thursday, but by the time the sun went down, it wasn’t even close.  It’s why you can’t do your rate shopping by watching newspaper headlines.  Mortgage markets are volatile and rates often change without notice.

Thursday, they did it twice.

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The number of homes under contract to sell is rising, another signal that the housing market may be regaining its footing.As reported by an industry trade group, the Pending Home Sales Index gained 2 percent in February.  The report measures MLS-listed homes in “pending” status — sold but not yet closed.

Pending Home Sales is not a perfect statistic, though, by any means.

For one, the Pending Home Sales Index doesn’t account for non-MLS listed homes including For Sale By Owner properties and mass foreclosure auctions.  In certain markets nationwide, these two categories represent a large percentage of the overall transaction volume.

Secondly, Pending Home Sales samples just 20 percent of all MLS-based transactions — hardly a complete listing.

But most importantly, a “pending” home sale is not the same as a closed home sale.  A lot of things can go wrong between the time a home goes under contract and the supposed closing date.  For example, the home inspection could fail, the contract could fall apart, and/or the buyer’s financing could be denied in underwriting.

All things equal, though, Pending Home Sales is a fair forward-looking indicator for the housing market as a measurement of buy-side demand for homes.

When Pending Home Sales rise, it’s tells us that buyers and sellers are matching up, clearing out market inventory.  And actual home sales often follow “pending” ones — 80 percent of Pending Home Sales will close within 60 days.

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