We have moved our blogging activities over to our new website! Our website will feature better insight and consistent news.

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The new website is designed to be a resource for both clients and the general public.  The website provide daily updates about the economy, interest rates, and the housing market, so that readers can decide when the time is right to act. When ready to act, the site has included detailed information about available loan programs, necessary qualifications, insider tips, and expert advice. Then, the site includes an online application for a home loan, critical forms and documents, and the functionality to transfer critical documents directly to Central Coast Lending loan officers.

It doesn’t stop there. Central Coast Lending will feature its weekly radio program on the website. Mortgage Matters airs every Saturday on KVEC to help keep San Luis Obispo County knowledgeable about real estate, the housing market and the economy.  To learn more about Central Coast Living, follow the site’s SLO County Locals blog for event postings and local hot spots. Using the site, readers can view and sign up for the Central Coast Lending’s newsletter and weekly rate update.

According to the Tribune, county employment numbers have gradually improved over the past three months. Since July, about 2,800 jobs have been added, which is an increase of 3 percent off the bottom.  County employment peaked in 2007 at 104,600 nonfarm jobs. After October’s gains, the number of jobs ticked up to 96,700, which is still down 8.2 percent from the top. Despite the slight increase in jobs, unemployment actually increased to 9.7 percent from 9.6 percent in September.

Rates are favorable this week. We have the 30 year fixed at 3.75 percent (3.884 percent APR) and the 15 year fixed at 3.250 percent (3.489 percent APR).  FHA and VA 30-years look extremely favorable as well, at 3.5 percent (4.543 percent APR) and 3.5 percent (3.736 percent APR) respectively.

The labor market recovery seems to be picking up speed. Weekly US claims for unemployment benefits dropped to a 9-month low last week.  Jobless claims fell to 23,000 to 381,000, down from 404,000 the week before.

Additionally, the nation’s jobless rate fell to 8.6 percent in November. In some ways, the number is misleading. Employers added 120,000 jobs, true, but the 0.4% drop in the unemployment number is also due to the 315,000 people who stopped looking for work and left the workforce.

Rates are favorable this week. 30 Year Fixed 3.750 percent (3.892 percent APR), 15 Year Fixed 3.250 percent (3.503 percent APR), 30 Year High Balance 3.750 percent (3.976 percent APR), 30 Year FHA 3.5 percent (4.600 percent APR), 30 Year VA 3.5 percent (3.764 percent APR).

Some weeks ago, we had a post on here about the announcement of the HARP II loan program, which would modify the first HARP program and broaden the base of eligibility for home refinance.  Last week, Fannie Mae and Freddie Mac released the official guidelines for the program. What follows is a review of the HARP program and a few of the specific changes that are expected to make a difference.

In 2005, the San Luis Obispo county median home price peaked at $581,305. Six years later, the median home price has fallen to $354,842. As home prices drop, a number of homeowners have found themselves owing more than their home is worth. Nationwide, 11 million home loans are underwater.

Meanwhile, interest rates have fallen to the lowest they have ever been. This drop has been a problem for homeowners that want to refinance to lower rates. Banks look at the loan-to-value (LTV) ratio when determining loan qualification and this has left a number of homeowners unable to refinance, even though they are current on payments. 

Enter, HARP. The Federal government passed its Home Affordable Refinance Program in March 2009 to help responsible borrowers who were current on mortgage payments but could not refinance due to an underwater loan. HARP was expected to reach 5 million underwater borrowers, but only reached 894,000.

The FHA went back over the program to fix the issues, and recently made a number of changes in an attempt to address the problem. This is HARP II. 

HARP II was reformed to be more effective than HARP I because it broadens the base of eligible borrowers by eliminating the loan-to-value ceiling of 125 percent, and incentivizes lenders to accept this base by relieving underwriting stress.

One important issue to make note of... for a LTV greater than 125 percent, refinancing will not be available until March of 2012.  For more information on your status here, give us a call at 805.543.LOAN.

The major change made to help lenders was to remove the representation and warrants requirement, which is a fancy way for saying that lenders have been responsible for mistakes during underwriting. This makes lenders reluctant to take the risk of underwriting an underwater loan, because in the case of a mistake, they must take on the cost.  In theory, by removing the reps and warrants rule, lenders will be more likely to underwrite loans with a high LTV.

HARP II is designed to help responsible borrowers refinance despite an underwater loan. Following are some program guidelines.

Guidelines:

No mortgage delinquency in the past 6 months and only one in the past 12 months.

Eliminate loan-to-value ceiling. The previous maximum was 125 percent.

Must re-qualify if payment increases by more than 20 percent.

Borrower benefit requirement. Must reduce monthly payment, reduce interest rate, or reduce the loan amortization term.

Allows for refinancing for the purpose of reducing monthly principal and interest payment.

The program will expire on December 31, 2013.

Home prices fell 1.1% from August to September according to CoreLogic. From September 2010, home prices declined 4.1 percent. These numbers include distressed sales, short sales and foreclosures.

The continued decline in prices caused more American borrowers to fall into a negative equity position, in which they owe more than their home is worth. These “underwater” mortgages are a particular drag on the housing market because it can cause foreclosures, depress consumer spending, and trap potential home buyers and sellers in place.

CoreLogic estimates that 14.6 million borrowers are in a negative equity position. However, as CNBC’s Diana Olick points out, the “effective” negative equity is a lot higher and has hit around half of US homeowners.  This refers to borrowers with so little equity in their homes that they cannot afford to move.  In practice, this means that the negative equity target would be 85 percent (not 100 percent), to give the individual homeowner enough room to pay the realtor, sell the house, and put a down payment on a new property, and all without going out of pocket. 

In other news, Freddie Mac sustained a $4.4 billion loss in the third quarter, and will seek $6 billion in additional funding moving forward.  As the mortgage finance company is government owned, this $6 billion would come from US taxpayers. 

If you recall, Freddie Mac and Fannie Mae were taken over by the government in September 2008 to help avoid collapse.  The companies faced insolvency as mortgage losses piled up.  The government moved to take over the company and shore up finances to protect from the chaos that the failure of the biggest mortgage holders in the US would cause.  Taxpayers have paid the price.  Freddie Mac has drawn $72.2 billion from the government since it was taken over in 2008.

The wealth gap between our younger and older Americans is at its widest on record. According to 2010 US census data, US households headed by a person age 65 years or older has a net worth on average 47 times greater than a household headed by someone under age 35. This gap has doubled since 2005. "Net worth" takes into consideration college and mortgage debts, as well as possession and savings accumulations. Part of the disparity is explained by the likelihood that older individuals would have had time to pay off debts while accumulating investments.

30 year fixed 3.750 percent (3.957 percent APR), 15 year fixed 3.000 percent (3.593 percent APR), 30 year High Balance 3.750 percent (4.032 percent APR), 30 year FHA 3.50 percent (4.621 percent APR), VA 3.50 percent (3.610 percent APR).

After posting large gains last Thursday, the Dow has fallen by over 276 points to move back below 12,000 and end the month of October at 11,995.01. Despite the thudding end, the market enjoyed a positive October. The Dow had its highest monthly gain since 2002, and the S&P 500 had its best month since 1991.

Today's drop was influenced by the bankruptcy filing by MF Global Holdings Ltd due to a bad European debt bet. The bankruptcy is the eighth-largest filing in the US by assets according to Reuters.com. The market was also influenced by renewed concerns about European debt.

New rates for the beginning of the week: 30 year fixed 3.750 percent (3.902 percent APR), 15 year fixed 3.000 percent (3.345 percent APR), 30 year High Balance 3.750 percent (3.896 percent APR), 30 year FHA 3.750 percent (4.609 percent APR), VA 3.750 percent (3.806 percent APR).

Check out our post over at Keith Byrd's Real Estate blog as we go over the developments of last week.

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We have an interesting show planned for tomorrow on Mortgage Matters. Join us for a talk with Tom Bordonaro Jr., the San Luis Obispo County Tax Assessor. We will be discussing local property value trends and home value re-assessment for tax purposes (among other topics). Remember, you can call in and ask questions.

(For those of you who don't know, we host a weekly radio program on Saturdays on KVEC 920 a.m. from 10 a.m. to 12 noon to discuss real estate, finance, and the economy).

Breaking News:  The Federal Housing Agency has eased refinance standards under the Home Affordable Refinance Program (HARP) in order to help homeowners qualify for current low rates.  The modification eliminates the cap of 125 percent loan-to-value ratio, removes the representations and warrants rule, and reduces some of the program fees.  The program is directed at “responsible” homeowners that have a mortgage backed by Freddie Mac or Fannie Mae, and are current on loan payments, but are not able to take advantage of the low rates for refinance due to a loss of home equity.

The original HARP program was passed in 2009 under the Obama Administration and has been underwhelming.  When passed, the program sought to bring relief to 5 million struggling homeowners with Fannie Mae or Freddie Mac backed loans, but only 894,000 have refinanced thus far.  Part of the problem has been that banks are reluctant to fund loans over 105 percent LTV due to an assumed risk, in which banks assume liability for any mistakes during underwriting and must purchase back the loan from Freddie or Fannie.  With the cancellation of this representations and warrants rule, it is hoped that banks will loosen lending standards.

This time around the program has lower standards, and is aiming to enable another one or two million refinances.  With 11 million homeowners underwater, many analysts say that the action is not enough and the impact will be minimal.  Other analysts suggest that there is little reason to think banks will relax lending standards further.  Some are optimistic, stating that refinance to record low rates will free up money for families to spend in other places.

FBR analyst Paul Miller told the San Francisco Chronicle that Fannie and Freddie still have 22 to 23 million mortgages with an interest rate above 5 percent.

Some specifications are as follows:

-         Loan must be owned by Freddie Mac or Fannie Mae on or before May 31, 2009. You can check HERE for Freddie Mac and HERE for Fannie Mae.

-         Eliminates 125 percent loan-to-value cap on refinancing.

-         Must be current on loan payments over last 6 months, and can only be late once over last year.

-         Fees will be waived with refinance to lower loan duration (from 30 years to 20 for example).

-         Elimination of representations and warrants rule for banks to reduce risk for banks and encourage looser loan standards.

-         Qualifying income does not change.

If you have any questions about the program specifics and want to learn more, give us a call at 805.543.LOAN.  Use us as a free resource.

UPDATE: We have had a few questions about the program, and we wanted to provide some clarity.  We have yet to receive the exact details of the program, only the general framework.  As details are released (such as on fee waivers, and so on) we will provide them here.

Federal officials are working with banks to create a mortgage refinancing plan to broaden the availability of lower rates to struggling home owners. The program would be directed towards home owners that are current on mortgage payments, but are not able to refinance because they lack equity in their homes. The plan would be available to home owners with mortgages from Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase, and Wells Fargo.

30 Year Fixed 3.750% (3.902% APR), 15 Year Fixed 3.000% (3.271% APR), 30 Year Jumbo 3.750% (3.896% APR), 30-Year Fixed FHA 3.750% (4.638% APR), 30 Year Fixed VA 3.750%, (3.828% APR).