April 29, 2010

It's Tidbit Tuesday . . . so here's a tidbit of what's going on in the market

Ok . . . so I was scouring the internet trying to find out what's going on with the economy and the real estate market because . . . well . . . that's just what I do!  I try to give you a bit of news you can use.  So . . . on this "Tidbit Tuesday" . . . here's a peak at what's going on:

• Mortgage Rates Drop. 30-year mortgage interest rates dipped below 5% (Yippee! But they probably won't stay there, so the time to buy is now).
• Existing-Home Sales Down. According to the National Association of Realtors, existing-home sales for December plunged 16.7 percent (Eek! That's because "first-time buyers rushed to complete sales before the original November deadline for the tax credit." But the good news is that compared to December 2008, prices rose and annual sales improved).
• Unemployment Up. According to the Department of Labor, Licensing, and Regulation, Maryland's unemployment rate jumped to 7.5 percent in December (that's up from 7.3 percent in November and 5.4 percent in December 2008; but Maryland's unemployment rate remains below the national average of 10 percent).
• FHA Change. FHA is changing its policy in order to reduce risk. Currently, FHA insures approximately 30 percent of purchases and 20 percent of refinances. Some of the changes include:
  
  
  
  • Mortgage insurance premium (MIP). Up-front MIP will be increased to 2.25% (that's up 50 bps) to build up capital reserves and promote private lending. Although this increase applies to the up-front MIP, some of the increase may be shifted to the annual MIP to lessen the impact on consumers. The initial up-front increase will be effective in the spring.
  • Minimum FICO scores required. New borrowers will have to have a minimum FICO score of 580 in order to qualify for the 3.5% down payment rate, otherwise they will have to put down at least 10%.
  • Seller Concessions will be reduced from 6% to 3%.
  • FHA Lenders will be watched more carefully via Neighborhood Watch data and enforcement will increase.
  
  
• Largest Mortgage Insurer in Hot Water. Mortgage Guaranty Insurance Corporation (MGIC) is the largest U.S. mortgage insurer. Mortgage insurers are the companies that pay lenders when borrowers default and foreclosure fails to recover costs. Well, these days, that's probably a bad business model. Ya think?!! And since housing prices have fallen and unemployment has risen, MGIC has been getting slammed with claims costs due to increased delinquincies. It has posted a loss for 10 straight quarters and since 2007 has lost $3.5 billion. That's right . . . billion with a "b."
• Chinese Banks Tighten Their Belts. In an effort to fight inflation, protect against credit risk, and prevent bubbles in the real estate and stock markets, Chinese banks are putting the brakes on lending. That means the rate of global economic recovery may slow. We'll have to wait and see. [Sidebar: How did Chinese banks get so much money, anyway? Could it be because so many things are "made in China"?!!]