Fed finds housing, banking conditions improved

By Greg Robb

WASHINGTON (MarketWatch) - Home real estate markets and banking conditions are improving across most of the nation, according to the Federal Reserve's latest Beige Book reading of economic conditions released Wednesday. Overall, the report found a modest, moderate expansion underway, with only New York the only one of the dozen Fed districts to report slower activity through mid-February. Most economic conditions are similar to past reports. Manufacturing and nonfinancial services are expanding and reports of consumer spending were positive. Prices remained stable and there was no wage pressure, the report said.

Mortgage fees are on the rise

Mortgage fees are on the rise
And chances are that more of them are on the way, some say

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — Higher fees are sneaking into the overall cost of most mortgages. But given ultralow interest rates these days, it’s likely few borrowers will notice.

Mortgage rates are clinging near record lows, with the 30-year fixed-rate mortgage averaging 3.95% for the week ended Feb. 23, according to Freddie Mac’s weekly survey of rates for conventional mortgages.

Still, consumers should pay attention to any fee increases because they could be a sign of what’s to come: increasingly higher costs to get a government-backed mortgage, whether it’s a conforming loan sold to government-sponsored entities Freddie Mac and Fannie Mae or a loan backed by the Federal Housing Administration, said Guy D. Cecala, publisher of Inside Mortgage Finance, a trade magazine for the residential mortgage business.

“The message there for consumers is even though none of this stuff is going to have a big impact right away, the cost of getting government [backed] mortgages is going to go up,” Cecala said.

Paying for tax cut

The guarantee fee that lenders must pay to Fannie Mae and Freddie Mac for securitizing loans will rise by one-tenth of a percentage point on April 1, a cost that will get passed on to borrowers through interest rates that are about an eighth of a percentage point higher, said Bob Walters, chief economist for online lender Quicken Loans.

That fee increase was part of the payroll-tax cut deal reached in December.

For the most part, lenders already have factored those costs into the interest rates they’re quoting now, mainly because it will take a while before they sell the loans to Freddie and Fannie, said Walters. Lenders assume it will take 45 to 60 days to close a loan and another 15 to 30 days before they deliver the loan to Freddie or Fannie, he said.

While this fee increase is slight, some think it could signal more fees to come. Freddie Mac and Fannie Mae need to be profitable, said Karen Mayfield, national mortgage sales manager at Bank of the West in San Francisco. “Let’s face it, the higher fees give them more revenue.”

Annual mortgage-insurance premiums for FHA-backed loans are also set to rise by one-tenth of a percentage point on April 1, Mayfield said. That’s about $200 more a year for mortgage insurance on a $200,000 FHA-backed mortgage, she estimates. Premiums will go up another quarter point for mortgages greater than $625,500, affecting borrowers in high-cost markets like California.

“The government is taking a look at what they think the cost of insurance should be,” said Walters, “and the general consensus is that it should be higher.”

Some borrowers will face another cost when they go to file their 2012 taxes in 2013. That’s because the 2011 tax year is the last in which borrowers can deduct the mortgage insurance they paid either through a private insurance company or through the FHA.

Watch for junk fees

Despite the threat of rising costs, the current low-rate environment is causing borrowers to feel little urgency when it comes to locking in a low rate for a home purchase or refinancing.

“For the last two years, everyone has been predicting at the beginning of the year that interest rates would rise and they’ve done the opposite — they’ve fallen,” Cecala said. “No [borrower] is expecting that they are going to lose their window of opportunity for the foreseeable future.”

But if you’re in the market for a mortgage, be wary of what Cecala calls “junk fees.”

Over the past three years, mortgage lenders have been “making more money on the loan-origination side than they have in the past,” Cecala said. “They find opportunities for building in fees,” though lenders might argue about what is and isn’t a junk fee.

Look for costs such as origination fees, processing fees, document-preparation fees and any other fee that the lender is charging — as opposed to third-party fees, including those for title insurance and appraisals, which are set costs that the lender does not control.

Many of these “junk” fees are negotiable.

Also, keep in mind that it takes longer these days to get a mortgage approved, so consider getting an interest rate locked in for as long as possible, Cecala said. Any agreement pertaining to lock extensions should be in writing.

Sometimes, lenders will say they’ll extend the interest-rate lock at no cost if the loan doesn’t close on time — getting that promise in writing could save you some money, Cecala said.

Amy Hoak is a MarketWatch reporter based in Chicago.

Average 30-Year Fixed-Rate Mortgage Up From All-Time Record Low

Average 30-Year Fixed-Rate Mortgage Up From All-Time Record Low

In Freddie Mac's results of its Primary Mortgage Market Survey® (PMMS®), fixed mortgage rates moved off their at- or-near record lows for the first time in three weeks amid recent data showing the housing market continues to improve.

·  30-year fixed-rate mortgage (FRM) averaged 3.95 percent with an average 0.8 point for the week ending February 23, 2012, up from last week when it also averaged 3.87 percent. Last year at this time, the 30-year FRM averaged 4.95 percent.

·  15-year FRM this week averaged 3.19 percent with an average 0.8 point, up from last week when it also averaged 3.16 percent. A year ago at this time, the 15-year FRM averaged 4.22 percent.

·  5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week, with an average 0.7 point, down from last week when it averaged 2.82 percent. A year ago, the 5-year ARM averaged 3.80 percent.

·  1-year Treasury-indexed ARM averaged 2.73 percent this week with an average 0.6 point, down from last week when it averaged 2.84 percent. At this time last year, the 1-year ARM averaged 3.40 percent.

According to Frank Nothaft, vice president and chief economist, Freddie Mac:

"New data releases this week suggest the housing market is continuing to gradually improve. Loans that were seriously delinquent (90 days or more past due plus the foreclosure inventory) fell to 5.3 percent of prime mortgages at the end of 2011, representing the lowest quarterly share since the start of 2009, according to the Mortgage Bankers Association. The Census Bureau reported new residential construction starts in January outpaced the market consensus forecast, led by condominiums and apartment buildings, and December's figures had upward revisions. Finally, existing home sales were at the strongest pace in January since May 2010, according to the National Association of Realtors®"

Tight-fisted mortgage lenders pressure home sales

By John W. Schoen, Senior Producer

Home prices have fallen by a third since 2006, creating tremendous bargains for home buyers. Mortgage rates are at rock-bottom lows, making houses more affordable than they have been in decades. Yet home sales last year fell to the lowest levels since the government began keeping records in 1963.

One big reason is that mortgage bankers have gotten a lot choosier about who they’ll approve for a loan, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn. By some measures, they're pickier than they were before the housing boom took off.

With anecdotal evidence showing that home mortgages are harder to get, the economists crunched Federal Reserve data to show just how much tighter lending standards have become. Using the results of the Fed's survey of loan officers, the report found that lending standards rose sharply after the mortgage market collapsed and the financial system imploded in 2008. Since the recession ended in 2009, lenders haven’t eased their tight grip on mortgage money.

Part of the reason is that there’s less money available to lend. During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up. That market has all but vanished; 90 percent of new mortgages written today are backed by the government.

The new mortgage pipeline also has slowed because it is clogged with paperwork. These days, you’ll have to fill out many more forms and produce a lot more documentation, on average, just to get your loan considered.

The percent of loans that required “full documentation” declined steadily from 2000 through 2006, hitting a low of less than 60 percent. Those “no-doc” loans were a big part of the reason mortgage bankers made the bad underwriting decisions that created the mortgage mess. Today, nearly 90 percent of mortgage applications require full documentation. That’s much higher than the pre-bubble level.

You’ll also have to show a much higher credit score than you did in the go-go days of the housing boom. In a separate report, Mortgage Marvel, an online mortgage-shopping website, analyzed data from more than 700,000 mortgage applications filed last year and found that the average FICO score was 730. That’s a significant jump from the days when borrowers with scores in the high 500s were routinely steered to high-cost subprime loans.

Applications with highest credit scores concentrated in California, Oregon, Wisconsin, District of Columbia and Hawaii, the company said. The states with the lowest credit scores were Mississippi, Arkansas, West Virginia, Louisiana and Oklahoma.

Responsibilities of Being the Executor of an Estate

Did you agree to be the executor of someone’s estate, and you’re not sure what you got yourself into? Or do you expect someone will ask you in the future, and you don’t know if you should say “yes”? Being an executor is much more than an honorary title, and if you take on this role, it is important to understand the duties it entails. The executor is the person named in a will who is responsible for executing it and otherwise settling the deceased person’s estate. It typically involves: Locating and inventorying the deceased person’s assets and safeguarding them until they are given to the heirs. Petitioning the court to probate the will. (Probate is the legal process of validating the will, settling debts, and transferring the assets to heirs, although some assets, such as jointly owned property and life insurance, don’t go through probate). Giving notice of the death to the deceased’s person’s creditors, financial institutions, and service providers. Paying any outstanding bills with the assets from the estate. Filing the deceased person’s last federal and state income tax return. If applicable, filing the federal and state estate tax return (only an issue for larger estates). Paying any taxes due with assets from the estate. Locating the heirs and distributing the remaining assets according to the instructions in the will. As the executor, you are not required to pay any of the estate’s liabilities out of your own pocket. However, you have a “fiduciary duty” to act in the best interest of the deceased person. If you don’t (e.g., you keep all the assets and don’t give them to the heirs), you can be held personally financially liable for your actions. How demanding the role of executor is largely depends on the estate itself. For example, if you are the only child and heir to your parents’ estate, they own very little, and have no debts, the process should be fairly painless. However, if you are one of five children, the will says that four children inherit the assets (including an ill-taken-care-of house filled with furniture from the 70s) without specifying who gets what, and there are multiple creditors, you could be dealing with a headache that won’t resolve itself for months. If you are on the fence, looking at the will can give you a good sense of how complicated settling the estate will be. Keep in mind that you can hire a professional, such an estate planning attorney, to help you. However, if you don’t feel up to the task, don’t feel guilty about saying “no”. Ultimately, the estate is best served by an executor who is fully capable and willing to carry out the deceased person’s wishes, whatever work that may entail.

30-year mortgage rate at record low 3.88%

By Ruth Mantell

WASHINGTON (MarketWatch) - The average rate on the 30-year fixed-rate mortgage ticked down to a record low of 3.88% in the week ended Jan. 19 from 3.89% in the prior week, Freddie Mac said Thursday in its weekly report. These data go back to 1971. A year ago, the 30-year rate was at 4.74%. "Mortgage rates were nearly unchanged this holiday week" amid mixed economic reports, said Frank Nothaft, Freddie's chief economist, in a statement. To obtain the latest rate, payment of an average 0.8 point was required, according to Freddie, a buyer of residential mortgages. A point is 1% of the mortgage amount, charged in prepaid interest. The 15-year fixed-rate mortgage ticked higher to 3.17% in the latest week from a record low of 3.16% in the prior week. These data go back to 1991. Meanwhile, the average rate on the 5-year Treasury-indexed hybrid adjustable-rate mortgage remained at 2.82%, matching the record low set in the prior week. These data go back to 2005. The 1-year Treasury-indexed ARM fell to a record low of 2.74% from 2.76%. These data go back to 1984.