How To Buy Foreclosure: Updated February 2010

How to buy foreclosures in today’s economy. We’ll as you all know I have many many years of experience with FHA Loans. I just saw a really interesting post that I actually think is going to help our neighborhood’s.

Starting today home “Flippers” are now welcome at the FHA.

That’s right, with a glut of foreclosures plaguing the nation’s neighborhoods, the FHA is temporarily removing restrictions on investors who buy and sell homes within 90 days.

It’s just for one year, but Flippers are no longer persona non-grata with the government.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” FHA Commissioner David Stevens wrote in a statement last month. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

So the FHA wants to encourage flipping and turn first-time buyers, who are already getting a tax break, into new real estate speculators? Nope, they just want to get as many foreclosed properties as possible off the market. This opens up a whole new bundle of buyers to current real estate investors who previously couldn’t flip the home to a low-income borrower.

The FHA is lifting the ban for just one year and there are some rules.

Here’s why.

1. FHA Guidelines are alot more complete that a few years ago with sub-prime investor loans, and purchase-rehab loans.
2. Our neighbors are really going to be able to get revitalized because now that you have added the incentive for an individual to make a profit, it changes the ball-game.
3. With FHA 203k… if the rehab loan is above $35,000 then it’s no longer considered a streamlined (k), and a consultant needs to step in. Which will insure that people aren’t just buying these home and getting the rehab money and then running off with the cash.

FHA Home Loan Rates (Dec. 9)

FHA Home Loan Rate Recommendation: If I were closing on an FHA Home Loan anytime within the next 60 days I would lock in my FHA home loan rate. *

Tuesday’s bond market has opened flat with no relevant economic news scheduled for release today.  The stock markets are mixed with the Dow down 103 points and the Nasdaq up 12 points.  The bond market is currently nearly unchanged from yesterday’s close, but we will still see an increase in this morning’s mortgage rates of approximately .250 of a discount due to weakness late yesterday.

This week is moderately busy in terms of the number of economic releases scheduled for release. There are four on the agenda but two of them are considered to be very important that can heavily influence the markets and mortgage pricing.  In addition, there is a 10-year Treasury Note auction Thursday that may hurt or help boost bond prices, depending on how strong of a demand there is in the sale.  Since all of the data is scheduled for release Thursday and Friday, the most movement in rates will likely be the latter part of the week.

There is no relevant economic news scheduled for release today or tomorrow. The first data is October’s Goods and Services Trade Balance report early Thursday morning. This report gives the size of the U.S. trade deficit, but it is the week’s least important release. It is expected to show a $54.0 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect it to affect mortgage pricing.

Friday brings us the release of all of this week’s important data with November’s Retail Sales and Producer Price Index (PPI) being posted.  I am expecting to see the most movement in rates Friday, but I believe the general atmosphere for mortgage rates is still negative.

* This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

The Government’s Mortgage Bailout Plan

FHA home loans just got a booster shot in the arm… The US Fed has just announced that it will inject $600 Billion into Mortgage Backed Securities, and they will also use $200 billion to defrost the consumer credit market.

Today’s announcement by the fed that it will purchase was a move that I had been screaming for months, ever since the initial talk of the first $300 Billion Bailout plan.

This decision by the Feds should increase credit, while reducing FHA home loan rates. Rates has already dropped dramatically today… So far as Mortgage Bonds are up 128 basis points and it looks like it might continue to get better.

Transcipts of this video included below

Today the treasury and the Federal Reserve are announcing a facility to finance the issuance of non-mortgage asset backed paper in order to support lending to consumers and small businesses, which is vital to our economy.

The consumer asset backed securities market is a source of liquidity to financial institutions to provide federally guaranteed small-business loans and consumer lending such as auto loans student loans and credit cards.

Issuance of AVS in these areas reach 240 billion in 2007 our credit markets stresses led to a steep decline in the third quarter of 2008 in the market essentially came to a halt in October as a result millions of Americans cannot find affordable financing for the basic credit needs and credit card rates are climbing, making it more expensive for families to finance everyday purchases.

This lack of affordable consumer credit undermines consumer spending as a result weakens our economy to address this need and support the return of consumer lending. The treasury will provide 20 billion of credit protection to the Federal Reserve in connection with its $200 billion term asset backed securities loan facility.

By providing liquidity to issuers of consumer asset backed paper the Federal Reserve facility will enable a broad range of institutions to step up their lending and enabling borrowers to have access to lower-cost consumer finance and small-business loans.

The facility may be expanded over time, and eligible asset classes may be expanded later to include other assets such as commercial mortgage-backed securities non-agency residential mortgage-backed securities rather asset classes.

Throughout this financial market term oil our focus has been to stabilize the system and support the lending that is vital to our economy. Toward that and we’ve taken steps to strengthen the capital position of our financial institutions to stabilize a system to enable them to increase lending to American consumers and businesses.

Similarly we’ve enacted to stabilize a GSE’s and to purchase GSE mortgage-backed securities. In order to increase the availability of affordable mortgage credit throughout our nation today initiative is to support small business and consumer finance market is similarly aimed at increasing the availability of affordable lending.

Today’s announcement by the Fed that it will purchase direct debt obligations of Fannie Mae Freddie Mac and the Federal Home Loan Banks and also mortgage-backed securities guaranteed by Fannie Freddie and Ginnie Mae underscores our support for the housing market.

Nothing is more important to getting through this housing correction in the availability of affordable mortgage finance. It will take time to work through the difficulties in a market in our economy and new challenges will continue to arise I and my regulatory colleagues are committed to using all the tools of our disposal to preserve the strength of our financial institutions and stabilize our financial markets to minimize the spill over into the rest of the economy.

FHA Home Loan Rates

FHA Home Loan Rate Recommendation: If I were closing on an FHA Home Loan anytime within the next 20 days I would lock in my FHA home loan rate. *

Tuesday’s bond market has opened sharply higher following more bailout news from the Fed that is being received as very favorable for bonds and mortgage rates.  The stock markets are in negative territory with the Dow down 5 points and the Nasdaq down 18 points.  The bond market is currently up 50/32, which will likely improve this morning’s FHA home loan rates by approximately .750 of a discount point over yesterday’s rates.

There were two important pieces of economic data released this morning, giving us mixed results.  The first revision to the 3rd Quarter Gross Domestic Product (GDP) came in at –0.5%, which was close to latest forecasts.  This means that economic activity during the 3rd quarter was weaker than analysts had predicted last month but close to their latest projections.  Accordingly, this data has not had much of an impact on this morning’s FHA home loan rates.

November’s Consumer Confidence Index (CCI) was also released this morning, showing a reading of 44.9. This was much higher than the 39.5 reading that was expected, indicating that consumers were more optimistic about their own financial situations than many had thought.  This is considered negative news for bonds and FHA home loan mortgage rates because rising confidence usually means consumers are more apt to make large purchases in the near future.

Today’s news from the Fed amounts to a more direct support of the mortgage market than the previous moves.  In short, the Fed is going to pump $600 billion directly into mortgage lending that should significantly increase cash flow to make FHA home loans to homeowners and homebuyers.

The previous announcements were directed more at shoring up the banking side of financial system and somewhat ignored the mortgage side.  Today’s news is being considered great for future FHA home loan activity, and therefore, hopefully will help stabilize home prices.

There are four important reports scheduled to be posted tomorrow morning. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items. It is expected to show a 2.5% drop in new orders. A larger decline would be good news for the bond market and mortgage rates.

The second is October’s Personal Income and Outlays data. This data is thought to measure consumers’ ability to spend and their current spending habits. It is expected to show that income rose 0.1% and that spending fell 0.7%. Smaller than expected readings would be good news for bonds and could lead to improvements in FHA home loan mortgage rates.

The revised November reading to the University of Michigan Index of Consumer Sentiment will also be posted late tomorrow morning. Analysts are expecting to see little change to the preliminary reading of 57.9. Unless we see a significant variance from the forecasted reading, I don’t think this data will cause much movement in mortgage rates tomorrow.

The fourth is October’s New Home Sales, but I don’t expect it to have any impact on the bond or mortgage markets.  Keep in mind that the bond market will close early tomorrow ahead of the Thanksgiving Day holiday, so we may see additional volatility as traders protect themselves over the long weekend.  Many traders will by keeping a skeleton staff Friday, meaning tomorrow is really the last relevant trading day until Monday morning.

* This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

FHA Mortgage Rates (Nov 21)

FHA Mortgage Recommendation: 30 year fixed rates are already pretty attractive right now, and it’s appearing that they might go even lower. Over the past 16 years I have help individuals understand the difference between the 10 year note and mortgage bonds.

Just two days ago the 10 Year Note had risen by 285 basis points… while Mortgage Bonds rose 12 basis points. I’m sure you are saying to yourself what does this mean for me?

Let me help you understand, but first let me explain what happened. The Fed minutes from the October Fed meeting was released. The minutes basically expressed some concerns over the health of the economy. Their future predictions or targets for employment and growth were lowered.

After many years of being concerned with inflation… Now the feds are concerned about deflation. This news has shocked the financial markets, which pushed Stocks lower and directed money flow into an ultra Safe treasury note.

Deflation is when prices drop, due to increases in money supply and credit. And we are definitely seeing problems with credit right now… and with the economy slowing, we are hearing some people say we are in a deflationary recession.

In a deflationary environment, investors flee into fixed instruments like bonds because the fixed payment received would actually buy them more goods and services over time.

If you can recall, back in the Spring of 2003, Alan Greenspan mentioned a deflationary recession and mortgage bonds rallied 400 basis points in a couple of weeks, which sparked a refinance boom.

But things are much different right now, but stay tuned, should more investors wake up to the value of Mortgage Bonds, we could see an improvement in FHA mortgage rates.

So get ready now, all refinance booms have a limited timeframe. And this time will certainly be more challenging as there are fewer programs with stricter guidelines, but can you guess what the biggest hurdle of all is going to be? You guessed it, property values.

Please keep in mind that with the new government stimulus package combined with several other solutions, we can help most people refinance even if they owe more than what their property is currently worth.

Mortgage Bond prices have barely peaked above the 200 day moving average. We will continue to float our FHA mortgage rates, but be mindful that things can change quickly. And a reminder about 2003, when Alan Greenspan can back later and said there is no threat to deflation, the refi boom quickly ended and rates shot up dramatically higher.

Stay tuned we are living history.

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