2011 Mortgage Trends Spell Continued Recovery

15 02 2011

2011 Mortgage Trends: Jumbo Loans, Cash Buys

The number of mortgage applications for home purchases is expected to become a bigger part of the mortgage market this year as home prices stabilize, predicts the Mortgage Bankers Association. Refinancing has mostly dominated in recent months as homeowners looked to lock in low-interest rates, but experts predict refinancing to slow as new mortgage shoppers dominate.

Real estate analysts predict the other following trends in the mortgage market for 2011:

• The Mortgage Bankers Association predicts mortgage rates to rise slightly in 2011 and hover around 5 percent. They expect rates to increase to about 6 percent in 2012.

• Jumbo loans (loans over $417,000 in most housing markets and above $729,750 in high-cost housing-markets) are expected to pick up pace in the next few months. Jumbo loans often have higher-mortgage rates than conforming loans.

• All-cash purchases represented about a quarter of all existing-home purchases in the last four months of 2010, according to NAR (National Association of Realtors®).

Mortgage Applications Jump as Rates Ease

The Mortgage Bankers Association’s index of loan demand climbed 2.2 percent overall for the week ending Jan. 7, to its highest level in nearly a month. The group’s index of refinancing applications rose 4.9 percent, while its gauge of loan requests for home purchases fell 3.7 percent.

Pending Home Sales Continue Recovery

Pending home sales rose again in November of last year, with the broad trend over the past five months indicating a gradual recovery into 2011, according to NAR.
The Pending Home Sales Index, a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October. The index is 5.0 percent below a reading of 97.0 in November 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Fannie, Freddie Win $3.3 Billion in Settlements

Looking to resolve one of its major mortgage headaches, Bank of America Corp. on Monday said it has paid $2.8 billion to settle claims related to soured Countrywide Financial Corp. mortgage loans. Ally Financial Inc., formerly known as GMAC, also settled for almost $500 million. The agreements with mortgage giants Freddie Mac and Fannie Mae reduce uncertainty over the banks’ mortgage liability. But Bank of America, the nation’s largest bank, still faces claims from other investors who bought questionable home loans from Countrywide and the Charlotte bank during the housing boom. Mortgage repurchase claims are one of the many problems still plaguing banks in the wake of the nation’s financial meltdown. During the housing boom, banks sold off many of the loans they made to investors, allowing them to make even more loans. In certain circumstances, however, the investors who bought the loans can require banks to buy them back when the mortgages go bad.

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