Interest rates recently rose slightly, raising the question of what affect they will have on Metro Atlanta mortgages. Rates increased for the first time in more than two months, creating a sell-off in the U.S. Treasury bond market. Mortgage interest rates have traditionally been tied loosely to the 10-year Treasury bond yield. While the increase in interest rates was only .125% (1/8th of a percentage point) the uptick was enough to adversely affect stocks in the nation’s homebuilding industry.

Despite the impact the interest rate increase had on Wall Street, its relationship to Metro Atlanta mortgages is expected to be minimal. Let’s take a look at the various forms the rate rise will likely have throughout the nation. Historically, a slight uptick in interest rates – if anything – has signaled the end of rate drops, causing prospective home purchasers to finally make a move to buy before rates go even higher. When rates are low and could be expected by some to inch even lower, potential homebuyers often wait in the wings for rates to get even better before they decide to buy.

A mortgage industry spokesperson said that when rates move upward – even the slightest amount upward – there is always room for concern. He called the interest rate increase “a serious threat to low, stable mortgage rates until proven otherwise.” Mortgage interest rates have been at near-record lows for most of the summer, so it’s likely that a movement upward has raised more than a few industry eyebrows – especially among those in the business of making Metro Atlanta mortgages.

Regardless of the amount of the increase, the simple truth is that higher mortgage rates add to the already-expensive cost of home buying. As mentioned, the rate rise could push some homebuyers into action as they scramble to buy before their costs rise. In addition, higher interest rates may startle some sellers into cutting their asking prices in an effort to offset the news. It’s one of the few ways sellers can combat the chance of losing interested buyers.

What it means for homeowners with existing Metro Atlanta mortgages is this:

It may finally be the time to refinance. Despite interest rates being low for months, experts say there are hundreds of thousands of borrowers who have procrastinated or otherwise not refinanced.

If the Federal Reserve decides to raise its funds rate at their next meeting, mortgage rates still may not move much higher. Remember, when the Fed made its first increase last December, mortgage interest rates only increased slightly and then leveled off just as quickly. Industry insiders familiar with Metro Atlanta mortgages say the longer-term rates such as 10-year U.S. Treasury yields and mortgage interest rates do tend to move with expectations of Federal Reserve rate increases – not the Fed’s actual decision to hike rates. The experts use December 2015 as their most notable example. The Fed increased their rate slightly and mortgage rates dropped. Why? Because the market had spent much of the preceding period in anticipation of a rate hike by the Federal Reserve. In this scenario, the threat or expectation of an interest rate increase caused less concern than when the actual increase occurred. Therefore, the market adapted ahead of time to whatever interest rate changes were headed its way.

Let’s assume rates on Metro Atlanta mortgages rise slightly in the expectation of a Fed rate increase. Historically, there has been a remote chance that mortgage rates would move a full point upward. Need more reassurance? Mortgage rates have only increased by .5% (or half a percentage point) 14 times in the past 45 years, according to a report issued by John Burns Real Estate Consulting. The firm further predicts rates will stay below 4% through 2018. Burns had this to say about the effects that interest rate increases on Metro Atlanta mortgages will have on various segments of housing. “Historically, they have hammered builder stocks, hurt new home sales bad, hurt existing home sales a little, and had very little impact on home prices unless there was a recession too,” noted Burns. “My conclusion is that investors are right to punish the stocks, but often punish them too hard.”

In addition, most experts say that even if rates were to make another move upward, the housing market has bigger issues to worry about. Supply is still a major consideration, and the lack of homes for sale continues to move home prices higher and higher, adversely affecting affordability for most Americans – a problem that is more severe than slightly higher mortgage interest rates. While homebuilders work hard to increase production, they are doing so in the face of rising costs for developable land and higher labor costs. Plus, intrusive construction regulations and restrictions have made homebuilding more challenging than ever.

In conclusion, nobody likes to see interest rate increases – especially among Metro Atlanta mortgages – but the resulting impact will probably only hurt the housing industry minimally, at best. Interest rates have been very low for a long time, and there’s little reason to think that increases – even if they do occur – will be large enough to make a difference in the housing market. The additional principal and interest payment that even a 1% increase would have is less likely to prevent buyers from staying put in their existing homes or for renters to continue to pay rent at ever-increasing rates. Simply put, as is the case with many movements in the marketplace – interest rates among them – the effects vary from situation to situation and market to market. Furthermore, for purchasers who have their eye on moving out or moving up, home prices are far more likely to get their attention than small increases in rates affecting Metro Atlanta mortgages.

You can find more articles pertaining to Metro Atlanta mortgages and the overall mortgage market in the Atlanta Mortgage Info section of our site below Atlanta Real Estate Categories in the column to your right.

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Metro Atlanta mortgage rules may be about to take a big change, and the jury is still out as to whether it could be bad for the mortgage industry in the long haul.

If changes announced recently by Fannie Mae catch on, the process of having to fork over your pay stubs could go the way of 8-track tapes and cassettes.

Need a Metro Atlanta Mortgage – Fannie Says Forget the Pay Stubs

Fannie Mae announced recently that it would allow lenders to use employment and income information from a database operated by credit bureau Equifax to verify borrowers’ creditworthiness rather than requiring lenders to rely on collecting physical copies of pay stubs and tax data, which has been the time-honored tradition when trying to buy a home.

Other Metro Atlanta mortgage rules may also be changing with the intent of broadening mortgage access for some borrowers. Fannie said it will ease the lender process for granting loans to borrowers who don’t have a credit score. Later in mid-2016 Fannie Mae will also require lenders to begin collecting "trended" credit data from Equifax and TransUnion, which includes longer-term borrower credit histories.

The extra information will help Fannie see if borrowers are paying off their credit card bill every month or just making the minimum payment or if they’re letting balances rise. Borrowers who are making the full payment could see perks then.

Some minority groups have had a hard time obtaining loans in recent years, in part because those groups also tend to have lower incomes or less money for a down payment but also because they sometimes don’t have traditional credit histories. The new Metro Atlanta mortgage rules are designed to hopefully change all this.

Advocates and industry groups have been pushing the Federal Housing Finance Agency, which regulates Fannie and Freddie, to allow the companies to use alternative credit-score models that take into account utility or rent payments for potential borrowers who may not have a credit score. Borrowers who have a traditional score calculated by Fair Isaac will still need to meet the 620 minimum, on a scale of 300 to 850.

Stay tuned, we'll keep you up to date on these potential new Metro Atlanta mortgage rules and how they may affect the Metro Atlanta home buying market.
 

The number of delinquent Metro Atlanta mortgages continues to fall, but the foreclosure crisis is still taking its toll on thousands of borrowers locally, and hundreds of thousands nationwide.

Nationally, of the approximately 952,000 borrowers who are 90 or more days past due on their monthly payments but not yet in foreclosure, 62 percent have already been through some form of home retention program, according to Black Knight Financial Services. They are, it seems, beyond help. Home retention programs were established by lenders and the government to work with borrowers to enable them to keep their homes.

In 2010, homeowners on average could have received a $530 monthly payment reduction. That has dropped to a $450 range today.  Larger payments are now looming for many people who participated in federal mortgage relief programs and for many who took out home equity lines of credit before the housing crisis.

Banks More Aggressive With Delinquent Metro Atlanta Mortgages

Banks are getting more aggressive in pushing delinquent Metro Atlanta mortgages through the foreclosure process, rather than offering more modifications. As home prices rise and demand surges, banks can sell the homes more easily in today’s market than they could during the height of the foreclosure crisis. Retention actions are down 42 percent over past two years, but of the new modifications or payment plans, 70 percent have already been through one or even more modifications that failed.

Banks are also favoring short sales more, rather than taking the home to final foreclosure and selling it. A short sale is when the bank allows the home to be sold for less than the value of the mortgage.

The ongoing shift away from final foreclosure sales is a driver of improving home prices since bank-owned properties typically sell at a larger discount than short sales. Distressed homes accounted for 12 percent of March home sales, down from 39 percent at the peak of the foreclosure crisis.

Although the number of both delinquent Metro Atlanta mortgages and those in active foreclosure is down dramatically, they are still two and three times their precrisis norms, respectively,

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The Federal Housing Administration (FHA) is exploring alternative credit scoring models for those seeking Metro Atlanta mortgages. The alternative credit scoring models could expand access to mortgage credit for responsible borrowers who may have thin credit histories or extenuating circumstance like medical debt.

Many Unable to Obtain Metro Atlanta Mortgages

Due to restrictive lending many of the qualified Metro Atlanta borrowers are not able to enter the housing market because they can't get Metro Atlanta mortgages.

The National Association of Realtors (NAR) first called on federal regulators and the credit and lending communities in 2011 to reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks.

Work by the Harvard University Joint Center for Housing Studies indicates that borrowers with lower incomes as well as minorities face higher rejection rates on applications for Metro Atlanta mortgages. A NAR analysis of mortgage data from 2007 to 2013 indicates that the share of rejected loans due to credit scores was significantly higher for African Americans and American Indians.

The newer credit scoring models put less emphasis on the impact of unpaid medical bills, and the effect of missed payments on debts that have subsequently been paid off is eliminated. FICO 9 and VantageScore 3.0 incorporate public utility and rental housing payments, information that helps lenders to evaluate younger persons and minorities who might not have a history of credit use. FICO estimates that its new model could improve scores by 25 to 100 basis points.

The biggest limitation to borrowing is tight credit standards. These conditions are exacerbated by outdated credit scoring models that don't take into account the unique spending and savings patterns of Hispanic borrowers. Alternative credit scoring models need to consider these patterns so creditworthy borrowers are not turned away from obtaining Metro Atlanta mortgages, and along with that, the American Dream of homeownership.

We will keep you posted right here on our website about this potential change in scoring by the FHA, and how it may affect those trying to get Metro Atlanta mortgages.

Saving up to buy a Metro Atlanta home might not be as much of a challenge as it used to be, now that the Federal Housing Finance Agency (FHFA) will allow some first-time homebuyers to make down payments of as little as 3 percent on Metro Atlanta mortgages.

Why Down Payments on Metro Atlanta Mortgages Are Going Lower

The goal is to make homeownership more accessible than it has been in a tight post-recession mortgage market. These low-down-payment loans apply to 30-year, fixed-rate Metro Atlanta mortgages guaranteed by Fannie Mae and Freddie Mac. The agency regulates Fannie and Freddie, which guarantee the majority of U.S. mortgages.

If you want to buy a Metro Atlanta home but don't have enough cash on hand for a down payment and closing costs, you might be able to qualify for an affordable home loan. Keep in mind lenders will require you to pay private mortgage insurance (PMI) if you pay less than 20 percent upfront, a cost homebuyers often overlook when determining how much they can pay.

One of the first things you'll want to look at before applying for any of the various types of Metro Atlanta mortgages is your credit score.

Credit Scores When Applying for Metro Atlanta Mortgages

There are a lot of different credit scores out there, and this has naturally led many consumers to ask: Which credt scores should I pay attention to, and what's my real credit score? People gravitate to the well-known FICO score, (FICO) by all accounts is the market leader in credit scores (meaning more banks use FICO scores than other scores). In fact, many refer to non-FICO scores as "FAKO" scores, but is that really an accurate assessment?

Most lenders have a baseline credit score by which they largely make their decision to approve or deny applicants for Metro Atlanta mortgages. The maximum credit score is 850 (though a score of 850 is rare, indeed. Only about 10% of applicants have a score over 800). Any score in the 700s or above is excellent and will get you a loan with the lowest interest rate. When you get into the 600s it starts getting dicey. A score of 680, for example, is still considered good, but when you get below 660, some lenders start saying, "No."

Most people don't realize they have more than one credit score, and just because you pay for your "Fico Score" doesn't necessarily mean you're seeing the same score a lender may be pulling and using to determine whether you qualify for any of the Metro Atlanta mortgages they may offer.

Your credit standing not only affects the mortgage rate you may qualify for, it also impacts how much you must pay in PMI. You can also get rid of PMI after you've built a certain amount of equity in your home, among other requirements, but it's on you to go through the process of removing PMI from your loan.

With the new directive from the FHFA, buying your first Metro Atlanta home may be more attainable, but the decision requires just as much careful thought as it would if you needed to put down 20 percent of the home's value to get a mortgage. Consider the overall impact on your life of buying a home, and make sure your credit is in good shape before applying for any of the many Metro Atlanta mortgages available from most area lenders.

Get more information about becoming a Metro Atlanta homebuyer and news affecting mortgage rates and qualifications in our section on Atlanta Mortgage Info to your right under Atlanta Real Estate Categories.

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Mortgage giants Fannie Mae and Freddie Mac announced recently that first-time Metro Atlanta homebuyers may be seeing a game changer with lower 3 percent down payment requirements. This is designed to expand credit for qualified home shoppers who may have been sidelined the last few years because of higher down-payment requirements.

A recent examination of what’s holding back Metro Atlanta homebuyers argues that the down payment is the biggest challenge for first timers.

These loans will meet Fannie Mae’s usual eligibility requirements, including underwriting, income documentation and risk management standards. These loans will require private mortgage insurance or other risk sharing, as is required on purchase loans acquired by the company with greater than 80% LTV.

Any Metro Atlanta homebuyers can take advantage of Fannie’s loans as long as at least one co-borrower is a first-time buyer.

New Option Not Just for Metro Atlanta Homebuyers

Eligible homeowners who wish to refinance their Fannie Mae-owned mortgage but do not qualify under the Home Affordable Refinance Program can refinance their loan up to the 97% LTV level under a limited cash-out option.

Fannie Mae says it has implemented prudent risk management practices to ensure that loans the company acquires are appropriately underwritten, including mortgages with lower down payments. These include essentially eliminating risk-layering on purchase money loans, requiring income documentation to avoid “low-doc” or “no-doc” lending, and requiring income verification.

Fannie Mae has also worked to provide lenders with greater clarity on what circumstances would result in a loan repurchase request. Some lenders have said that uncertainty around these requests has led to them curtailing mortgage availability. This new clarity is intended to help lenders make mortgages to more creditworthy borrowers.

Similarly, Freddie Mac announced its Home Possible Advantage program, an affordable conforming, conventional mortgage with a 3% down payment to help more first-time Metro Atlanta homebuyers jump into the market.

Get more information about becoming a Metro Atlanta homebuyer and news affecting mortgage rates and qualifications in our section on Atlanta Mortgage Info to your right under Atlanta Real Estate Categories.

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In October, Fred Watt, the director of the FHFA, announced that he plans to allow 3% down payment mortgages for the many financial institutions that Fannie and Freddie guarantee. He states that his intention is to include more minorities and people who had their savings wiped out by the Great Recession re-enter the housing market. This comes at a time when U.S. homeownership rate has fallen to 64.4% from 69.2% in 2004 as blacks, Hispanics, and first-time buyers struggle to qualify for loans. Is this just more huge mortgage mistakes about to happen all over again? Many think so.

Repeating the Same Mortgage Mistakes Again

Some financial industry executives and lawmakers, Republicans in particular, are calling Watt's move an irresponsible opening of credit floodgates that could contribute to the same mortgage mistakes made before, and another economic meltdown. The chairman of the House Financial Services Committee (Jeb Hensarling) stated that Watt's plan returns to the policies that originally caused the housing crash. He went on to say "an invitation by government for industry to return to slipshod and dangerous practices that caused the mortgage meltdown in the first place and wrecked our economy."

The CEO of home builder Toll Brothers, Douglas Yearley, a New York Stock Exchange traded company, called Watt's plan "a really dumb" idea. Paul Wallison, a former Treasury official under Ronald Reagan and currently at the American Enterprise Institute wrote an article critical of Watt's plan that was widely distributed, including being published by the Wall Street Journal. Part of  Wallison's article stated, "Since the taxpayers are still standing behind Fannie and Freddie, it's clear who will have to pay the bill when these mortgage mistakes result in defaults in the future."

The director of Housing Finance Policy for the Urban Institute in Washington, Laurie Goodman, believes lowering the down payment requirement and keeping the other rules in place is a good first step in expanding the number of people qualifying for home loans.

One of the important rules that applies to low down payments is the requirement that borrowers obtain private mortgage insurance for any mortgage with less than a 20% down payment.

The goal is to ease lending to people with high credit scores but small savings accounts since credit scores are more important for staying current with a mortgage than the size of the down payment you made to get that mortgage.

What do you think? Is this heading in the direction of making the same mortgage mistakes again that thrust us into the recession in the first place? We'll keep you posted on the progress of this lowering of the down payment requirements.

Metro Atlanta home equity loans have nearly doubled this year, partly due to the continuous increase in the price of homes. The rise in home values has pulled more and more borrowers out from underwater.

While the share of borrowers that cashed-out some Metro Atlanta home equity has increased considerably over the past year, the refinance volume has also fallen sharply, resulting in a relatively small amount of equity cashed-out. Nationally, the volume of cash out refi's is roughly $8 billion, which is less than one-tenth of what we saw at the peak in mid-2006.

Metro Atlanta Home Equity Loans Save on Interest

The good news, to put it into numbers, those that lowered their payment by refinancing into a cheaper mortgage rate will save more than $1.5 billion in interest payments over the next 12 months of their new loan.

On average, that's an interest rate reduction of about 1.3 percentage points — a savings of about 24% On a $200,000 loan, that translates into mortgage interest savings on average of about $2,700 during the next 12 months.

Freddie Mac released these figures recently about Metro Atlanta home equity:

• Of borrowers who refinanced during the third quarter of 2014, 36% shortened their loan term, a 4% decline from the previous quarter. From 1990 through 2013, on average 28% of borrowers shortened their term.
• About 72% of those who refinanced their first-lien home mortgage maintained approximately the same loan amount or lowered their principal balance by paying in additional money at the closing table, unchanged from the previous quarter. Twenty-eight percent cashed-out some of their Metro Atlanta home equity, the highest share in five years; the peak on cash-out share was 89% during the second and third quarters of 2006.

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Anyone who has applied for a Metro Atlanta mortgage recently knows how elusive the best interest rates, loan terms and ultimate mortgage loan approval can be. The good news is that steps can be taken to vastly improve the odds, but you need to take some of the steps for getting that Metro Atlanta mortgage before you even apply.