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You already know that what the Federal Reserve does with interest rates has a huge impact on the housing market.   I’m Russ Boyd and what you might not know is that the Fed influences housing prices in another significant way—through its purchasing of mortgage-backed securities (MBS)—and now the question is that when the Fed stops buying those securities in the near future, how will it affect the housing market?
Some background will help explain what is going on. Let’s start with a definition. An MBS is a group of mortgage loans that are pooled together and sold as a bond.

Part of a Pool

It is easy to understand how MBS come about and how they work. When you go to a bank or mortgage broker to borrow money to purchase a home, the home is collateral, and your mortgage—the promise you’ll pay principal and interest each month—is the anticipated cash flow the lender receives from you.
That bank or broker then sells your loan to an entity that aggregates your loan with a bunch of other loans into a big “pool” of various types of loans with various maturity dates (fixed, adjustable rate, one-year, 30-year, good credit, bad credit, etc.) The aggregator then issues these pooled mortgages as bonds, the MBS, which promise investors an attractive stream of interest payments.
Who are these aggregators?
They are government sponsored entities (GSEs). One large group is the Federal Home Loan Banks (FHLB), a private corporation made up of 8,100 member banks. All of the member banks must own stock in FHLB in order to participate in its loan program.  Other GSEs, which have become household names are Fannie Mae, Freddie Mac, and Ginnie Mae
To recap,  an MBS is a pool of home loans sold as a bond. And we know who issues them: government sponsored enterprises such as Freddie and Fannie, etc. So, how does this help us understand where real estate prices are going?

Easier to Get a Home Loan

Well, most banks have neither enough money, nor any desire, to hold a large number of home loans for an extended period of time. Absent a place for the banks to sell them, as many of us found out over the last year, it then becomes difficult for us to get a new loan. Thus, the MBS market is currently providing us all with an important means of loan supply, albeit indirectly via our bankers and mortgage brokers. The easier it is for banks to sell our loans to MBS aggregators, the easier it is for us to get a home loan. The more difficult it is, the harder (and more costly) it is for us to get a mortgage.
When the entire financial system found itself on shaky ground the housing market was affected big time. Anticipating a big increase in homeowners defaulting on their mortgages, investors no longer wanted to own their existing MBS, let alone buy newly issued MBS.
With no buyers for those securities, the GSEs couldn’t sell them or issue more. As a result, the supply of mortgage loans all but came to a screaming halt.
To the rescue came the Fed. Last November, as part of its efforts to get the economy moving again, the Fed announced it would buy $500 billion in mortgage-backed securities. In March of this year it raised its target to $1.25 trillion, and it has followed through on its pledge.  These purchases have undoubtedly provided much needed liquidity to the MBS market and helped keep the long-term mortgage rates at historic lows.

Behind the Higher Rates

O.K., let’s get back to the original question: What’s next? Well, just as it has been with interest rates, the Fed has been transparent about its intentions toward MBS. It has said it will stop buying MBS once it fulfills its commitment of buying those $1.25 trillion worth of bonds. It will complete that purchase sometime during the first quarter of next year.
That means that, sometime within the next five months, the Fed will be withdrawing a prop under the housing market.
What remains to be seen is how other investors react as the Fed slows—and then eliminates—its purchase program.
My expectation: As the Fed pulls out, private investors will demand a higher interest rate for such securities—to compensate for their concern people will continue to default on their mortgages—and thus long-term mortgage rates will rise. The real question is how fast and how high.
The real estate and mortgage markets are more complex than ever.  I encourage all interested buyers, sellers and homeowners to work with an agent that they can trust, an agent that values their business and an agent that has the skills and experience to provide counsel and guidance in this complex market.



If you are in the San Francisco Bay Area, I invite you to start at our Resource Center, www.AboutBayAreaHomes.com. There you will find links for active home listings, including bank owned and short sales, home loans, market activity reports, home seller strategies, staging and decorating,  a suite of 19 calculators, plus my book, “Let’s Make a Deal, The insiders Guide to Buying and Selling Real Estate” and more.  Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They serve clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real

Article From Yahoo! Geithner Comments On U.S. Financial Situation

I guess this is lazy of me, but I cannot hold great information from the public, so here, again, is an article from Yahoo! in which the Treasury Secretary Timothy Geithner comments about the economy.  Here is a snapshot:

“The financial and economic recovery still faces significant headwinds,” he said, citing high unemployment and home foreclosure rates, tight credit and impaired securitization markets, especially for mortgage-backed securities.

Geithner laid out a strategy for winding down the bank bailout program but also defended his decision on Wednesday to extend it past a scheduled year-end expiry, until next October 3, as a necessary guard against a sudden economic relapse.

“History suggests that exiting too soon from policies designed to contain a financial crisis can significantly prolong an economic downturn,” he said.

Agree or not with the extension of the TARP program (until Oct 2010), this article lays out his idea for our economic future.

I like money, so my two cents is simple.  I do think large entities should be allowed to FAIL if they cannot manage the own assets wisely.  If I don’t manage my assets wisely, I lose them.  Why should large corporations be exempt? 

Now, that doesn’t mean I think that TARP shouldn’t be extended.  Frankly, it’s too late now, and it “kind of” had to be extended in order to continue with recovery. 

My opinion, however, still remains that Real Estate is this country’s most important economic standard.  The problem we face now is getting values increased.  One way to do that is for the FED’s to step in and mandate that appraisals NOT USE FORECLOSURES in price valuation.  Instead they should use the most recent sales (which they do), even if the sales were 2 years ago.  Take a regional average of decline in values, and then adjust the past sales according to that percentage. 

That is how to get accurate values. 

My final word on values on home purchases is simple:  homes are worth what someone is willing to pay. 

Click the link below for Geithner’s take, and have a great evening.

Geithner: don’t declare victory too soon in crisis – Yahoo! Finance.

The Senior Reverse Mortgage Program Has Evolved Over the Years and is More Attractive Today
By [http://ezinearticles.com/?expert=Tim_G_Robbins]Tim G Robbins

Since the beginning of the federally insured Reverse Mortgage in 1988 when the government started regulating them, the program has gone through many changes that have not only created more security for the senior homeowner, but reduced fees and increased borrowing limits. Also not to mention increased the options that are available for the senior to choose from or change too over the years.

Unlike any other program in the mortgage industry there is no program that even comes close to the Reverse, it is designed to have the most flexibility, and the safest to all seniors who own their home and are over 62 years of age. Now in 2009 where more and more seniors are seeing the true value of a Reverse Mortgage, and that it is not just for the seniors who are poor, it is just about for everyone who is concerned with having security in these troubled economic times! Yes security simply because the statistics show the 78% of all seniors who elect to take out a Reverse Mortgage utilize the Equity Credit Line which is built into the adjustable rate program.

Now in addition; there is a program for the person who has fear of adjustable rate mortgage which is understandable they can elect to have a fixed interest rate that stays the same forever, but they must receive all of the money at the time of closing. There are no other options at this time. So I guess you are wondering why that is, well it is because of the investor market for selling mortgage backed securities. When investors are looking to invest they look for the greatest return over time, and buy investing in a fixed interest on the return and a fixed amount of the total debt there is not inflationary rate of return. As with the adjustable the rate of return can be much greater over the life of the loan, which can be upwards of 20 to 30 years depending on how long the senior lives. This is important simply because the Reverse Mortgage is a long term investment, and there are no payments over the years until the senior ceases to live in the home as their primary residence or the past away.

Over the years that the Reverse Mortgage has been in existence, the Fannie Mae has been the purchaser of mortgage backed securities of the Reverse Mortgage, but now they are mandated by the treasury to reduce the balance sheets over the next two years, so the industry bankers will be looking for new ways to attracted investors. In doing so they must be able to package up these securities and make them attractive to the investors. This will only be accomplished by increasing the margins that are charged on each loan, the higher the margin I.e. fixed profits.

For instance; today the margins that are added to the index to come up with the effective interest rate are something like this Margin 225 tied to the Libor, 250 tied to the CMT or ( Constant Maturity Treasury) or 275 CMT, just to name a few. Not to mention the fixed rate, this is regulated by the bond market just like conventional mortgages!

In the near future will see the margins start to increase to maybe 3-4-5% to make them more attractive to the independent investor who is looking for security and rate of return. See unlike traditional mortgage securities the Reverse Mortgage is a protected investment, and the reason being the lose factor is almost non-existent. The money that is loaned out the senior is insured that it will be returned to the bank over a period of years, because the one thing that is certain is that the senior is going to die at some point in the future. This is determined by the actuarial tables that also determines how much monies will be available at what age of the senior.

A person at age 62 will receive for less then a senior who is 80 years old, because the life expectancy is less for the 80 year old person then that of the 62 year old person. Remember the senior stays in the home and makes no mortgage payments of any kind until the cease to live in the home as their primary residence, by death or the sale of the home.

Flexibility

Within the Reverse Mortgage the senior is in total control as the how they receive the money from the mortgage and how the spend the money. The options are only restricted by the plan that they choose to use!

· They can take all of the money

· They can take a portion of it and leave a portion of it in the credit line

· They can take a monthly amount for a term period

· They can what is called a Tenure for life

· They can take Tenure for a portion and have credit line.

· They can change the program from time to time.

· Then can withdraw lump sums at anytime.

As you can see the possibilities are endless these are just a few ways that a senior can utilize the mortgage. Also if at anytime they decide or have the means to payoff the loan they can do so without any prepayment penalties.

TODAY’S ECONOMY

In these uncertain times unlike anytime in history it is more important to have a security instrument in place for the unexpected twist and turns that our lives may take in the future simply because of he unprecedented world of the economy. If a person does not need the funds currently they will have the option of having a credit line that is sitting in the wings, growing over time by .50% more then the interest rate of the loan balance, available to them if and when they ever need it.

The one thing that we all can expect is change and that change can be dramatic and it can be devastating so if you are concerned and you are a senior homeowner over the age of 62 stop listening to uninformed people who give wrong advice and speak to a professional who understands and is knowledgeable about the   rel=nofollow Reverse Mortgage and secure your future today before the margins increase to 3-4 or 5% plus the indexes and if inflation starts to come back and it will you will not be able to maximize your portfolio act now.

Tim Robbins, Sr is a senior Reverse Mortgage Specialist with Equitable Reverse Mortgage. The main goal is to provide the best education resources available and to all place the seniors first and foremost.

My website is designed to give you all available information which you can review either in print or video by visiting http://bestmortgageplans.com for all you senior resources you may need for a good life.

Also contact me Toll free at 800-610-3599 for a Free Report on Reverse Mortgages

Article Source: http://EzineArticles.com/?expert=Tim_G_Robbins http://EzineArticles.com/?The-Senior-Reverse-Mortgage-Program-Has-Evolved-Over-the-Years-and-is-More-Attractive-Today&id=2150854

The holidays are upon us and if you haven’t already, you will likely soon be hearing the song, “The 12 Days of Christmas”, or seeing any one of a number of “Top Ten Things You Need to Do in 2010″ lists. While you won’t find 12 things, or even 10 things here to think about when considering a mortgage, you will find several things you need to be aware of when seeking mortgage financing.

We May Never Pass This Way Again
It is said all good things must come to an end. While this may not be true in all areas, with phenomenally low interest rates, it is true. Mortgage rates have been artificially low for the last twelve months, thanks to support from the Federal Reserve and U.S Treasury.

Last November, liquidity in the financial markets nearly evaporated in many respects, leaving mortgage companies with few buyers of mortgage backed securities (MBS). On many days the interest rate for a 30-year fixed rate mortgage was at or above 7.00% for a zero point loan depending on the lender.

The Federal Reserve announced a program where they would purchase $1.25 trillion of MBS on 11/28/08, causing mortgage rates to plummet. This program is scheduled to end in March, 2010 and the ultimate impact on interest rates is unknown. However, you can expect that rates will return to “normal” at some time in the future.

While it is not expected that rates will return to the average rate since 1971, a throat grabbing rate of 9.00%, many lenders are currently debating business plans for rates potentially increasing significantly from current levels next year.

Know Your Numbers
During the boom, it was not uncommon for prospective home buyers to discover they could qualify for a housing payment that, in conjunction with their other monthly debt, would consume a majority of their income.

Examples of this could have included total monthly obligations that could meet or exceed 60% of one’s monthly income. Obviously, this could and did create issues for people when the joy of owning a new home was quickly replaced by the sinking feeling that their mortgage payment was now causing extreme financial hardships.

In the month of December, many home lenders are pulling the maximum amount of monthly debt that someone can qualify for, including a housing payment, at 45% of monthly gross income. For many folks, this amount may still be too high based on other payments including child care, insurance or other routine payments not inclusive of normal qualifying debt.

While lenders may have a maximum amount you can allocate to housing, no one knows what you are comfortable paying more than you. To ensure you won’t get into trouble later, express to your mortgage professional what you are comfortable paying and use that number to back into the maximum house you can buy.

Credit – Know Thy Score!
During the boom, obtaining a mortgage with a FICO score in the low 500 range was not unreasonable. In fact, provided you were willing to accept the payment, you could even do so with little money or no “skin” in the game.

In much the same way you cannot get yesterday back, if you have a FICO score that needs, shall we say, improvement, you may be unable to get a mortgage today. Depending on your lender, the amount of your down payment and the mortgage program you are applying for, the minimum standards for qualifying could be the lowest FICO score of either borrower, with a minimum score of 680.

For those applying for a loan guaranteed by the FHA, lower scores could still get you in that home but standards have risen there as well and can vary by lender.

The best path to take before you sign a purchase contract or apply for financing could warrant having your credit profile checked out by your lender in advance. If you need assistance improving your score and credit profile, they may be able to recommend a company or individual that can provide you educational assistance.

Ratios a Little High?
If you have just submitted your offer on your first home, you may be inclined to make an offer that might be a little over your “comfort” zone with either what your payment will be, what you qualify for, or what will make you a little short in the wallet.

One way to help your cause is to ask for a little help, and this doesn’t necessarily mean hitting up mom and dad for some extra cash. Turn your request to the seller instead and you may find that not only will you get what you need but you might get a little more “juice” as well.

You should know that both qualified first time home buyers and move up buyers are eligible for a “gift” from Uncle Sam in the form of a tax credit. So, you may be getting some money a few months after you close. But, did you know if the seller pays to lower your interest rate, which could help you either qualify or make it a little easier to make your payment each month, that you could be eligible for an additional tax deduction?

The IRS treats “points” or fees paid to lower your interest rate as an item which is deductible on your income taxes and it doesn’t matter who pays them. So, let’s say that your seller agrees to pay two points toward lowering your interest rate, which could drop your rate by approximately half a point as an example.

If the amount paid is $4,000, or two points on a $200,000 loan, you will not only get a lower rate but potentially another $4,000 deduction on your income when you file your tax returns, potentially putting additional money in your pocket after you file.

The key here is to make sure when you are negotiating your purchase contract, you ask the seller for a concession for buying down your interest rate. The concession can be either in the form of a dollar amount requested, a percentage of the sales price, or a percentage of the loan amount. Ask your mortgage professional for additional guidance as to the best path for you to follow.

Short Some Cash?
There is a lot of chatter in the media how people need to put more money down when buying a home. While down payment requirements have increased for some programs, it is still possible to buy a home with less than five percent and also NO money down. Yes, you did read you can buy a home without a down payment.

The loan program that allows for you to qualify with as little as 3.5% down is one that is guaranteed by the FHA and the ones that allow for no down payment are those guaranteed by the VA and USDA.

Granted, there are restrictions with each of these programs that can include maximum loan amounts based on your location with FHA loans, income and property requirements for those offered by the USDA, and your qualifying status as an eligible Veteran. However, the ability to purchase a home with less than five percent down is still a possibility for millions of Americans.

Also, keep in mind that sellers may still offer concessions in the form of paying closing costs which can also decrease the amount of funds you may be required to have to purchase your next home.

When Was the Last Time You had a Checkup?
Most people have no qualms about making an annual trek to their family physician to check their health. However, when was the last time you had your mortgage checked out? As a mortgage is often the single largest payment someone makes each month, it can also be the cornerstone in which a financial plan is based.

With interest rates near all time lows, many people may still be able to restructure their mortgage to free up cash that can be appropriated to other asset building investments or debt relief.

Pick up the phone and call your mortgage professional this month to determine if the mortgage you have still matches with your short and long-term financial goals. At a minimum, you may find that you are in great shape and no changes are needed. However, you may also find that you may be able to improve your situation.

In either case, you should be able to sleep better at night just knowing that you have checked to ensure that you are still on the path to where one day, you will either no longer need a mortgage or will have enough liquid assets to help you manage the situation to the best of your abilities.

© Copyright 2009. All About News, Inc.

For more information on building, buying, selling or leasing commercial or residential property anywhere in the world, contact Nicole Tucker, licensed agent with Keller Williams, Dallas Preston Road office at 972-992-8204 or visit my website at http://www.NicoleRE.com.
Nicole Tucker ~ Making Real Estate Real Easy!

Mortgage Bonds are near unchanged so far today – and it may be a slow news day, with no economic reports or Fed speakers scheduled.  With no scheduled reports, Mortgage Bonds are more likely to respond to technical factors.  At the moment, Bond prices remain below a strong ceiling of resistance, and we are maintaining our bias towards locking.

Yesterday, the Treasury announced they will unload $118B in securities next week, starting with a record $44B in 2-Year Notes on Monday, a record $42B in 5-Years on Tuesday, and another record…$32B in 7-Years on Wednesday.  This is an enormous amount of supply, and the market’s ability to sop it all up will be tested next week.

Stocks are trading lower for the third consecutive day, as the US Dollar has stabilized from its freefall.  Stocks have been a beneficiary of the falling Dollar – this is because our Stocks appear cheaper for foreigners.  Additionally, large multinational corporations that trade on the exchanges will increase their exports and bottom line, as the goods that they ship appear less expensive to places around the world with stronger currencies.  Stocks have been due for a pause, but it remains to be seen whether the slide in Stocks will continue here, or if even higher levels will be reached through the end of the year before a more meaningful correction takes place.

The Federal Reserve purchased $16B in Mortgage Backed Securities last week, bringing the total to $1.023T out of the $1.25T allotted for the program.  This is up slightly from last week’s purchases of $13.5B.  However, with the rationing of the purchase program underway and the end of the program in sight, rates will edge higher over time.