Fannie, Freddie To Raise Rates

Borrowers, get ready for higher interest rates on new conforming mortgages.

It’s no secret that rates have already risen as the outlook for the U.S. economy has brightened in recent weeks. But rates on some new home loans are also set to go up regardless of economic activity.

That’s because Fannie Mae and Freddie Mac, the two government-controlled entities that purchase mortgages from lenders, have announced new “loan-level price adjustments,” or LLPAs, which will jack up the “pricing,” aka rates, on certain new loans.

Fannie Mae’s new pricing, announced Dec. 23, 2010, is set to take effect April 1, while Freddie Mac’s new schedule will be effective March 1.

The price increases will be based on the borrower’s loan-to-value ratio and credit score, and even those who have a large down payment and score in the 700s will be affected. That might seem unfair, but the reality is that a price increase that affected only less-qualified borrowers wouldn’t accomplish much, since those borrowers by definition aren’t able to get a new loan.

The rate increases might not show up in the official measures of inflation, but they are, in fact, not unlike recent rises in prices for fuel and food in some respects. Borrowers won’t get anything extra, but will still pay more for the same product. The increases won’t be due to increased demand or manufacturers’ higher costs, but rather as a result of bad bets in the past and more perceived risk in the future. The profit motive is naturally at work as well.

By: Marcie Geffner

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Presidents’ Day

Washington’s Birthday is a United States federal holiday celebrated on the third Monday of February in honor of George Washington, the first President of the United States. It is also commonly known as Presidents Day (sometimes spelled Presidents’ Day or President’s Day). As Washington’s Birthday or Presidents Day, it is also the official name of a concurrent state holiday celebrated on the same day in a number of states.

Today, the February holiday has become well-known for being a day in which many stores, especially car dealers, hold sales. Until the late 1980s, corporate businesses generally closed on this day, similar to present corporate practices on Memorial Day or Christmas Day. With the late 1980s advertising push to rename the holiday, more and more businesses are staying open on the holiday each year, and, as on Veterans Day and Columbus Day, most delivery services outside of the U.S. Postal Service now offer regular service on the day as well. Some public transit systems have also gone to regular schedules on the day. Many colleges and universities hold regular classes and operations on Presidents Day. Various theories exist for this, one accepted reason being to make up for the growing trend of corporations to close in observance of the Birthday of Martin Luther King, Jr. However, when reviewing the Uniform Monday Holiday Bill debate of 1968 in the Congressional Record, one notes that supporters of the Bill were intent on moving federal holidays to Mondays to promote business. Over time, as with many federal holidays, few Americans actually celebrate Washington’s Birthday, and it is mainly known as a day off from work or school, although many non-governmental workers do not take the day off.

Consequently, some schools, which used to close for a single day for both Lincoln’s and Washington’s birthday, now often close for the entire week (beginning with the Monday holiday) as a “mid-winter recess”. For example, the New York City school district began doing so in the 1990s. In return, however, most schools cut back Easter recess, traditionally a two-week break, to a week, or eliminate it altogether (except for, usually, Good Friday) in some years in favor of a “late spring recess” in late April or early May.

The federal holiday Washington’s Birthday honors the accomplishments of the man known as “The Father of his Country”. Celebrated for his leadership in the founding of the nation, he was the Electoral College’s unanimous choice to become the first President; he was seen as a unifying force for the new republic and set an example for future holders of the office.

The holiday is also a tribute to the general who created the first military badge of merit for the common soldier. Revived on Washington’s 200th birthday in 1932, the Purple Heart medal (which bears Washington’s image) is awarded to soldiers who are injured in battle. As with Memorial Day and Veterans Day, Washington’s Birthday offers another opportunity to honor the country’s veterans.

Community celebrations often display a lengthy heritage. Historic Alexandria, Virginia, hosts a month-long tribute, including the longest running George Washington Birthday parade, while the community of Eustis, Florida, continues its annual “George Fest” celebration begun in 1902. In Denver, Colorado there is a society dedicated to observing the day. At the George Washington Birthplace National Monument in Westmoreland County, Virginia, and at Mount Vernon in Alexandria, Virginia, visitors are treated to birthday celebrations throughout the federal holiday weekend and through February 22.

In Alabama the third Monday in February commemorates the birthdays of both George Washington and Thomas Jefferson (who was born in April).

In Arkansas the third Monday in February is “George Washington’s Birthday and Daisy Gatson Bates Day,” an official state holiday.

In New Mexico Presidents Day, at least as a state government paid holiday, is observed on the Friday following Thanksgiving. In 2007 the country celebrated both Washington’s 275th birthday and the 75th anniversary of the rebirth of the Purple Heart medal.

Since 1862 there has been a tradition in the United States Senate that George Washington’s Farewell Address be read on his birthday. Citizens had asked that this be done in light of the approaching Civil War. The annual tradition continues with the reading of the address on or near Washington’s Birthday.

Found at: www.wikipedia .com

The Obama administration is laying out three broad options for overhauling the mortgage lending system, but will let Congress make the final decision.

The Treasury Department says in a report released Friday that the government should withdraw its support for the mortgage market slowly, over five years or more. The report describes a path for winding down the troubled mortgage giants Fannie Mae and Freddie Mac.

The three options are: end the government’s role in guaranteeing most mortgages; support the mortgage market only in times of stress; or provide a government guarantee for mortgage investments created by private companies.

Under any scenario, the private sector will assume a greater role in housing finance as the government scales back its involvement. The government currently owns or guarantees more than 90% of U.S. mortgages.

The bailouts of Fannie and Freddie, which were created by Congress but became public, stockholder-owned companies, have cost taxpayers nearly $150 billion.

The report comes after years of debate about how to end the government’s role in housing. The options have been discussed for years.

By handing the decision to Congress, the administration sidesteps one of the most complex and politically explosive questions facing the financial system. Any of the three options will almost certain force mortgage rates to rise.

Republicans have called for Fannie and Freddie to be abolished. But there is a growing recognition that drastic action would upend the housing finance system, threatening the broader economy.

A near-complete withdrawal by the government could end the popular 30-year fixed rate mortgage or, at least, make it more expensive. Banks would prefer adjustable-rate mortgages that would fluctuate with market interest rates.

Treasury Secretary Tim Geithner says mortgages would be “modestly” more expensive as government withdraws.

However, all three options maintain some level of government support, either through guarantees or through existing agencies,such as the Federal Housing Administration.

Administration officials say the proposals will end the hybrid model of public-private companies that left the public on the hook for billions when Fannie and Freddie failed.

“Under any of the scenarios there’s going to need to be more private capital in the housing system,” said Michael Barr, who recently left his post as assistant treasury secretary to return to teaching at Michigan University Law School. “That’s going to mean more pressure on interest rates.”

The greater the government involvement, the milder the impact on borrowing costs. But more government involvement also places more taxpayer money at risk.

Republicans complained that the administration is stepping back from one of the most consequential, and politically explosive, questions for the financial system.

“It’s disappointing that the administration is abdicating an opportunity to lead and is instead opting to punt,” said Kurt Bardella, spokesman for Darrell Issa, R-Calif., a vocal critic of Fannie and Freddie and chairman of the House Committee on Oversight and Government Reform.

“It’s mind-boggling how the administration is not acting with more urgency to put forward a plan given the multibillion dollars taxpayers have at stake,” he said.

But Republicans, who control the House of Representatives, have offered no specific plan of their own. And even conservative scholars concede that the remedy is less about urgency than it is about stepping away from the reliance on Fannie and Freddie at a moderate pace.

A report prepared by scholars at the conservative American Enterprise Institute, which the Treasury report is expected to allude to, also calls for gradual withdrawal of Fannie and Freddie from the housing finance market over a period of five years.

Mark Zandi, an economist who has advised Democrats and Republicans, proposed the middle-of-the-road option of giving the government a role that insures mortgages only in catastrophic market conditions.

That type of insurance would be paid for by homeowners, he said, and it “would keep rates measurably lower, allow mortgage credit and would preserve the 30-year fixed rate mortgage.”

The report comes as Republicans and Democrats struggle to find a way to find a way to repair the financing system for the nation’s $11 trillion housing market. By offering options and spelling out the advantages and disadvantages of each, the report is designed to have a soft landing on Capitol Hill.

Recognizing that the changes in the system will be gradual, the administration is in no hurry to demand a quick fix.

At a House hearing Wednesday, neither Republicans nor Democrats displayed a desire to push specific plans or timetables for overhauling Fannie Mae and Freddie Mac. Republicans, however, have long argued the two mortgage lenders were central players in the 2008 financial meltdown and have called for their demise.

The report also is expected to call for the gradual reduction of Fannie’s and Freddie’s combined $1.5 trillion portfolios. The administration would like to reduce the government’s mortgage support to somewhere below 50% within five to seven years.

It also would support trimming the maximum size of mortgages they can purchase from the current high of $729,750 to $625,000. Congress set the higher limit in 2008 and it expires in September.

By: Justin Vaught, Alan Fram, and Daniel Wagner
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This Weeks Mortgage Rates Forecast

Mortgage markets worsened last week as Wall Street came to terms with the expanding economy; and realized the Federal Reserve may be trying to induce inflation.

Better-than-expected retail sales and positive job growth buoyed stock markets and sank bonds.

Mortgage rates in Illinois rose for the 4th time in 5 weeks last week, extending a losing streak which dates back 4 months.

Today, fixed, conforming rates are three-quarters of a percent higher as compared to the market’s low point, November 3, 2010. For a $200,000 home loan, that size rate hike equates to an increase in a monthly mortgage payment of $89 per month.

Mortgage rates are at their highest levels of the year and, this week, they may continue ticking higher.

There isn’t much data set for release this week so markets will take their cues from two major events — one economic and one political.

The major economic event is Fed Chairman Ben Bernanke’s testimony to the House Budget Committee late-Wednesday. Chairman Bernanke is expected to speak about employment, but will likely touch on other topics of import including economic growth, the U.S. dollar, and the nation’s debt ceiling.

The Fed Chairman’s comments will move mortgage rates in one direction or the other, so locking in advance of his testimony may be prudent. Mortgage rates have more room to rise than to fall, after all.

The second major event is Egypt’s ongoing political strife. By Thursday of last week, Wall Street had shrugged off the region’s crisis and unwound the safe-haven trades that had helped mortgage rates during the week prior.

If instability returns, mortgage rates, once again, will be pressured lower.

Regardless of your rate-locking plan for this week, it’s important to recognize that, although rates have risen, they’re still well below historical average. Therefore, rates may have a lot of room to move higher, still.

If you’re shopping for a mortgage, or are now under contract, consider locking your rate as soon as possible.

By: Kevin Lanham
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History of Valentine’s Day

Every year, the fourteenth day of the month of February has millions across the world presenting their loved ones with candy, flowers, chocolates and other lovely gifts. In many countries, restaurants and eateries are seen to be filled with couples who are eager to celebrate their relationship and the joy of their togetherness through delicious cuisines. There hardly seems to be a young man or woman who is not keen to make the most of the day.

The reason behind all of this is a kindly cleric named Valentine who died more than a thousand years ago.

It is not exactly known why the 14th of February is known as Valentine’s Day or if the noble Valentine really had any relation to this day. The history of Valentine’s Day is impossible to be obtained from any archive and the veil of centuries gone by has made the origin behind this day more difficult to trace. It is only some legends that are our source for the history of Valentine’s Day.

The modern St. Valentine’s Day celebrations are said to have been derived from both ancient Christian and Roman tradition. As per one legend, the holiday has originated from the ancient Roman festival of Lupercalis/Lupercalia, a fertility celebration that used to observed annually on February 15. But the rise of Christianity in Europe saw many pagan holidays being renamed for and dedicated to the early Christian martyrs. Lupercalia was no exception. In 496 AD, Pope Gelasius turned Lupercalia into a Christian feast day and set its observance a day earlier, on February 14. He proclaimed February 14 to be the feast day in honor of Saint Valentine, a Roman martyr who lived in the 3rd century. It is this St. Valentine whom the modern Valentine’s Day honors.

According to the Catholic Encyclopedia, there were at least three early Christian saints by the name of Valentine. While one was a priest in Rome, another was a bishop in Terni. Nothing is known about the third St. Valentine except that he met his end in Africa. Surprisingly, all three of them were said to have been martyred on 14th February.

It is clear that Pope Gelasius intended to honor the first of these three aforementioned men. Most scholars believe that this St. Valentine was a priest who lived around 270 AD in Rome and attracted the disfavor of Roman emperor Claudius II who ruled during this time.

The story of St. Valentine has two different versions – the Protestant and the Catholic one. Both versions agree upon Saint Valentine being a bishop who held secret marriage ceremonies of soldiers in opposition to Claudius II who had prohibited marriage for young men and was executed by the latter. During the lifetime of Valentine, the golden era of Roman empire had almost come to an end. Lack of quality administrators led to frequent civil strife. Education declined, taxation increased and trade witnessed a very bad time. The Roman empire faced crisis from all sides, from the Gauls, Slavs, Huns, Turks and Mongolians from Northern Europe and Asia. The empire had grown too large to be shielded from external aggression and internal chaos with existing forces. Naturally, more and more capable men were required to to be recruited as soldiers and officers to protect the nation from takeover. When Claudius became the emperor, he felt that married men were more emotionally attached to their families, and thus, will not make good soldiers. He believed that marriage made the men weak. So he issued an edict forbidding marriage to assure quality soldiers.

The ban on marriage was a great shock for the Romans. But they dared not voice their protest against the mighty emperor. The kindly bishop Valentine also realized the injustice of the decree. He saw the trauma of young lovers who gave up all hopes of being united in marriage. He planned to counter the monarch’s orders in secrecy. Whenever lovers thought of marrying, they went to Valentine who met them afterwards in a secret place, and joined them in the sacrament of matrimony. And thus he secretly performed many marriages for young lovers. But such things cannot remain hidden for long. It was only a matter of time before Claudius came to know of this “friend of lovers,” and had him arrested.

While awaiting his sentence in prison, Valentine was approached by his jailor, Asterius. It was said that Valentine had some saintly abilities and one of them granted him the power to heal people. Asterius had a blind daughter and knowing of the miraculous powers of Valentine he requested the latter to restore the sight of his blind daughter. The Catholic legend has it that Valentine did this through the vehicle of his strong faith, a phenomenon refuted by the Protestant version which agrees otherwise with the Catholic one. Whatever the fact, it appears that Valentine in some way did succeed to help Asterius’ blind daughter.

When Claudius II met Valentine, he was said to have been impressed by the dignity and conviction of the latter. However, Valentine refused to agree with the emperor regarding the ban on marriage. It is also said that the emperor tried to convert Valentine to the Roman gods but was unsuccesful in his efforts. Valentine refused to recognize Roman Gods and even attempted to convert the emperor, knowing the consequences fully. This angered Claudius II who gave the order of execution of Valentine.

Meanwhile, a deep friendship had been formed between Valentine and Asterius’ daughter. It caused great grief to the young girl to hear of his friend’s imminent death. It is said that just before his execution, Valentine asked for a pen and paper from his jailor, and signed a farewell message to her “From Your Valentine,” a phrase that lived ever after. As per another legend, Valentine fell in love with the daughter of his jailer during his imprisonment. However, this legend is not given much importance by historians. The most plausible story surrounding St. Valentine is one not centered on Eros (passionate love) but on agape (Christian love): he was martyred for refusing to renounce his religion. Valentine is believed to have been executed on February 14, 270 AD.

Thus 14th February became a day for all lovers and Valentine became its Patron Saint. It began to be annually observed by young Romans who offered handwritten greetings of affection, known as Valentines, on this day to the women they admired. With the coming of Christianity, the day came to be known as St. Valentine’s Day.

But it was only during the 14th century that St. Valentine’s Day became definitively associated with love. UCLA medieval scholar Henry Ansgar Kelly, author of “Chaucer and the Cult of Saint Valentine”, credits Chaucer as the one who first linked St. Valentine’s Day with romance. In medieval France and England it was believed that birds mated on February 14. Hence, Chaucer used the image of birds as the symbol of lovers in poems dedicated to the day. In Chaucer’s “The Parliament of Fowls,” the royal engagement, the mating season of birds, and St. Valentine’s Day are related:

“For this was on St. Valentine’s Day, When every fowl cometh there to choose his mate.”

By the Middle Ages, Valentine became as popular as to become one of the most popular saints in England and France. Despite attempts by the Christian church to sanctify the holiday, the association of Valentine’s Day with romance and courtship continued through the Middle Ages. The holiday evolved over the centuries. By the 18th century, gift-giving and exchanging hand-made cards on Valentine’s Day had become common in England. Hand-made valentine cards made of lace, ribbons, and featuring cupids and hearts began to be created on this day and handed over to the man or woman one loved. This tradition eventually spread to the American colonies. It was not until the 1840s that Valentine’s Day greeting cards began to be commercially produced in the U.S. The first American Valentine’s Day greeting cards were created by Esther A. Howlanda Mount Holyoke, a graduate and native of Worcester. Mass. Howland, known as the Mother of the Valentine, made elaborate creations with real lace, ribbons and colorful pictures known as “scrap”. It was when Howland began Valentine’s cards in a large scale that the tradition really caught on in the United States.

Today, Valentine’s Day is one of the major holidays in the U.S. and has become a booming commercial success. According to the Greeting Card Association, 25% of all cards sent each year are “valentine”s. The “valentines”, as Valentine’s Day cards are better known as, are often designed with hearts to symbolize love. The Valentine’s Day card spread with Christianity, and is now celebrated all over the world. One of the earliest valentines was sent in 1415 AD by Charles, Duke of Orleans, to his wife during his imprisonment in the Tower of London. The card is now preserved in the British Museum.

There may be doubts regarding the actual identity of Valentine, but we know that he really existed because archaeologists have recently unearthed a Roman catacomb and an ancient church dedicated to a Saint Valentine.

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Homeowner vacancy rate up, rental rate down

The percentage of empty privately owned U.S. homes rose in the fourth quarter, while rental vacancies fell sharply, a government report showed on Monday.

The homeowner vacancy rate was 2.7 percent in the final three months of the year, compared to 2.5 percent in the three months ended in September, the Commerce Department said. The rate was unchanged compared to the fourth quarter of 2009.

The residential rental vacancy rate fell to 9.4 percent in the fourth quarter from 10.3 percent in the prior three-month period. The rental vacancy rate was 10.7 percent in the last three months of 2009.

By: Corbett Daly

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The home’s changing role in family finances

Homeownership used to be the bedrock of the American dream, but the economic storm and its lasting effects have radically changed how everyone — no matter what stage of life they’re in — looks at their home.

 Many potential home buyers are now hesitating, taking a closer look at their options. “People are starting to realize that the American dream of homeownership is not right for everyone,” Kim McGrigg, community manager at Money Management International, a non-profit consumer credit counseling service.

 LIFE STAGES: It’s less about what age you are; it’s what stage you are in

  • VIDEO: Economic, lifestyle changes force many to rethink finances
  • PHOTOS: See the faces of our shifting life stages
  • And those who already own homes may have hit a snag or readjusted their expectations. Five years ago, as a young married couple, Joe and Cheryl Shaw bought a charming historic home in St. Charles, Mo. They have a 9-month-old daughter and a 3-year-old son. They want to have more children, but the home is too small.

     Unfortunately, they paid $222,000 for the home and still owe $203,000. Its estimated value is now only about $185,000.

     “We are outgrowing the house, and are ready to move on,” says Joe Shaw, 40, who is an assistant principal in the Francis Howell School District. “But we’re in the hole, so much so that I’m not sure that we can afford to move on.”

     A hole in retirement plans The Shaws are in better shape than homeowners who have lost their homes to foreclosure. And many other families can no longer count on their home value as part of their retirement nest egg.

     Nolan Heiter, a business systems analyst at SunTrust Bank in Richmond, Va., says that his and his wife’s retirement plan always had included their home equity. That has to be adjusted now because the home’s value has dropped.

     “Our vision had always been that we’d be able to sell the house and get enough out of it to pay cash for a smaller retirement home and have no mortgage,” says Heiter, who is now nearly 50 and doesn’t think the value will turn around before he retires. “We may be facing a situation where we have to use some of our retirement income to pay for a mortgage.”

     Mortgage means new family priorities

     Owning a home can mean balancing more priorities. Ask your financial adviser these questions:

     1) How does my mortgage fit into my overall financial picture?
    2) What other insurance needs should I consider?
    3) What changes should I make to my budget?

    Even those who can easily afford a home are rethinking their dreams. The McMansion era may be on its way out. Homes are shrinking: The median size of single-family homes declined from its peak of 2,268 square feet in 2006 to 2,100, according to a study based on Census Bureau 2009 statistics by the National Association of Home Builders.At the same time, multigenerational households are making a comeback. In 2008, a record 16.1% of the U.S. population lived in extended families, with at least two adult generations or a grandparent and at least one other generation, a Pew Research Center found. That is up from 12% in 1980.

    That increase, in part, is because many unemployed adult children are moving back home with their parents. And large family homes are more available to them because many parents are not able to sell them and move to retirement condos.

    “There may be a multigenerational household for a period of time until the financial situation changes and is on more solid ground,” says Elinor Ginzler, AARP senior vice president. But some owners are choosing to live in an extended family.

     About two years ago, when home prices were going down, Dan and Lauri Pratt sold their home in Kaysville, Utah, and bought a larger home in nearby Farmington. It had a large walkout basement, which they have turned into a small apartment for one of their sons, who is still going to college and is married and has a baby. “One reason for the basement was that it would help them save some money on rent and utilities,” says Dan, 51, a construction manager. “And my wife is able to watch our granddaughter without the hassle of dropping her off and paying for day care.” Pratt expects the apartment could be used again for some of their four younger children or his mother-in-law.

     The risks of homeownership Even though it’s a buyer’s market, a growing number of people are deciding to rent. Some have no choice because they do not qualify for a mortgage, while others don’t want the perils of homeownership. In the third quarter of 2010, 59% of renters said they were more likely to continue to rent in their next move, vs. 54% in January, a Fannie Mae study about homeownership found.

     The housing crisis has shown that owning a home comes with risk. “Many who bought homes as investments have gotten quite burned on that,” says Eleanor Blayney, consumer advocate for Certified Financial Planner Board of Standards.

     The changes are not only related to the economic crisis. Some Americans are reinventing their homes to be more energy efficient. Others are looking for ways to make their existing homes safe and livable. About one-third of Americans 45 and older said they have made changes to their current home so they could stay longer, the AARP survey found.

     Even when the economy improves, home buying may not return to normal. “We need to rethink housing in the 21st century,” Blayney says. People should always remember that there is a potential downside as well as an upside. And homes are not a piggy bank. So people should not assume their home value will help pay for their children’s college education or their retirement.

     “It’s a whole new ballgame,” says Sid Davis, a real estate broker and author of A Survival Guide for Buying a Home.

     Factors to consider when making a move. Reasons to rent: 

     • Staying five years or less.

     • Low upkeep costs.

     • A way to try a neighborhood before buying.

     • Security deposit and upfront rental fees are much lower than a mortgage down payment and closing costs.

     • No risk of foreclosure.

     • No property taxes. And no home insurance, although you need personal property insurance.

     Reasons to buy: 

     • Mortgage rates are still low, and in many cities home prices are a bargain. (It now is more affordable to buy than rent a two-bedroom home in 72% of the nation’s 50 largest cities, says, a real estate search engine.)

     • Tax benefit in the mortgage interest deduction.

     • Equity will start building when the market rebounds.

     • Intangible benefits, such as a place to raise a family. The ability to paint and make other changes unless bound by home association rules

    By: Christine Dugas

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    What’s Ahead For Mortgage Rates This Week

    Last week marks the first time this year that mortgage rates fell on a week-over-week basis, and considering why rates fell, it points to the fragile nature of the global economy.

    By all accounts, last week showed that the U.S. economy is in recovery.

    1. Housing data rises to its best levels in 8 months (LA Times)
    2. Consumer sentiment hit a 7-month high (NPR)
    3. Business investment increased 1.4% in December

    Furthermore, the Federal Open Market Committee met last week and said that the economy continues to expand (although the pace is slower-than-optimal).

    Normally, positive news like this would drive mortgage rates higher, and during the early part of the week, it did. But then, as political problems in Egypt grew larger, international investors began to shift money from their risky assets into the relative safety of the U.S. bond market.

    This includes mortgage-backed bonds, of course. The buyer influx pushed up prices and, because bond yields move opposite price, mortgage rates dropped.

    The week ended with rates at their lowest levels of the week.

    Next week, though, rates could reverse. There’s two developing stories rate shoppers should watch.

    The first is related to Egypt. In addition to buying mortgage-backed bonds, investors are gambling that oil prices will rise, too. Egypt is the world’s 21st largest oil producer and a disruption of its supply could send gas prices soaring. This circumstance would be inflationary and inflation is the enemy of mortgage bonds.

    Crude oil jumped 4.3% Friday afternoon. If that continues, mortgage rates should start rising.

    The second is tied to jobs. Last month’s jobs data was weaker-than-expected on Wall Street and it sparked a mini-rally in mortgage rates to start the year. Jobs are paramount to economic recovery so if this month’s figures are lower than the consensus figure of 150,000, expect mortgage rates in Oak Lawn to fall.  If the number is stronger than 150,000, expect mortgage rates to rise.

    By: Kevin Lanham

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    Accessed 01/31/2011

    3 Ways To Increase Your Credit Score

    In Today’s lending environment, a minimum of a 620 is needed to obtain a mortgage. Here are a few of my favorite tips on increasing credit scores quickly.

    •1. Evaluate Collection Accounts – You probably didn’t realize that paying off a collection account can actually lower your credit score. That’s because the credit score software evaluates based on most recent activity date. When you send in a payment to pay off a collection it’s reported reflecting the payoff date as a “paid collection”. Since credit score software reflects the date of last activity, it sees the payoff as recent collection activity and it actually can lower your score. What’s the best way to deal with a collection to maximize your score? Contact the collection agency and explain you are willing to pay off the collection under the condition that all reporting is withdrawn from the credit bureaus. Make sure you request a letter in writing confirming your agreement. Not all collection agencies will remove references to the collection account, but many will. It’s worth the effort as this can dramatically improve your credit score.

    •2. Evaluate Your Credit Balances And Limits – Balances over 70% of your available limit will do the most severe damage to your credit score. Try and at least get it to 50% with 30% or less being your optimum level. You can either pay down your balances or redistribute the balances over several cards to minimize damage.

    •3. Don’t Close A Credit Card Account – Even if you don’t have a use for the card any more, don’t close it out. Your credit history and length of having credit will impact your credit score. Closing a credit card account you payoff will eliminate how the software evaluates how long you’ve had a piece of credit and will actually lower your credit score.

    One more Tip (ok..4 tips!!, who’s counting?)… You can a request a Free Credit Report every 12 months through

    It is wise to check your credit every year to see if there are any posting errors, duplicates of accounts and just to verify the credit liabilities belong to you that are being reported on your credit report.

    By Stephanie Stringer
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    Can Mortgage Rates Go Any Lower?

    Well, here we are on “hump day” and mortgage rates are still detached from the price fluctuations of the secondary mortgage market. Instead, the ups and downs of consumer borrowing costs continue to be driven primarily by the capacity constraints of major lenders, the market makers for mortgage rates.

    One misconception is record low mortgage rates have drawn out a hoard of “fence sitting” borrowers who are bustling with excitement to refinance. Yes, media coverage of record low mortgage rates has attracted attention from some homeowners, but the crowds just don’t compare to the mini-frenzy we witnessed in early 2009. This tells us the capacity constraints of major lenders are not totally due to an increase in loan applications.

    With the larger lenders allocating newly hired labor to loan modification & loss mitigation departments, lending operations staff have been left to “fend for themselves”. Support staff are expected to be multi-tasking, multi-talented, highly productive members of the team. Mistakes can be costly and often times even “kill” a deal. Anxiety is high. Stressing the situation further are recently implemented “quality control” standards. These risk management practices slow the origination process because they mandate an acute attention to detail. Plain and Simple: all i’s must be dotted and all t’s must be crossed. The entire origination process has slowed down a step or two. Consumers, this is why your loan officer may have recommended a 45 day lock period, they have learned to expect the unexpected.

    I’ve been thinking a lot lately about the question: Can Mortgage Rates Go Any Lower???

    I’ve approached the question from several angles. The “double-dip” great recession option is still on the table. That means we can’t rule out the idea that benchmark Treasury yields might return to record lows and take mortgage rates along for the ride. That theory doesn’t hold much water in my opinion though, this is largely due to technical considerations surrounding the securitization of mortgages. But there’s a wild card we haven’t talked about in while: If the economy does “double-dip”, the Federal Reserve has made it clear they will “act accordingly” to prevent the spread of contagion. With the Fed essentially out of conventional policy bullets, the door is open for more quantitative easing, aka more MBS purchases.

    If that scenario played out, the “best execution” 30 year fixed mortgage rate could move as low as 3.875%. The one hang up I have with this outlook is the fact that we already experienced an environment like this and mortgage rates failed to move lower than current levels. Remember last year when the Fed was buying MBS and benchmark Treasury yields were at record lows?

    One reason why this time might be different: the competitive lending environment. A loan pricing war amongst the major lenders…

    Let’s say mortgage rates don’t decline further and refinance demand eventually exhausts itself. If this were to happen and purchase activity didn’t pick up enough to offset the production slowdown, lenders would be looking for ways to stimulate activity and the Fed would be looking for ways to redistribute wealth around the economy. A new wave of refinances would occur if mortgage rates fell to 4.00%. Two birds, one stone?

    This seems like a logical option, unfortunately there is a major mismatch between the credit/collateral demanded by lenders and the credit/collateral supplied by borrowers. So unless we find a way to reduce the risks of origination, many borrowers will remain locked out of the refinance market, even if rates fall to 4.00%.

    With that in mind, we have to start thinking about the idea of another attempt at HARP & DU REFI PLUS. Perhaps we might see the Fed launch some variation of a privately-funded, streamline refinance program that includes a de minimis government guarantee on the loan paper? Either way the government will still be involved in some capacity. One of the biggest reason mortgage rates have been so resilient lately is their implicit/explicit government guarantee. Mortgage-backed securities have benefited from their own “flight to safety”, especially from overseas investors.

    That’s where we go full circle on my “rates going lower” theory. I suppose the first step of this scenario coming true is the “double-dip”. Some folks say the deflationary spiral has already taken hold, others say we’re dealing with a crisis of confidence and the underlying economy is actually building momentum. Working in the housing market I am exposed to excess amounts of negativity, but I also see evidence of a bottom. Either way, I know the Federal Reserve is standing “at the ready” if conditions take a turn for the worse.

    The best 30 year fixed mortgage rates remain in the 4.375% to 4.625% range. The “best execution” rate for a well-qualified borrower is still 4.50%, for both conventional and FHA/VA. No borrower should be quoted a rate over 5.25%

    By Adam Quinones
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