Rate Cut: Will It Affect Your Mortgage, Or Not?

Fed has been cutting the rates and we saw another 3/4 cut today. How does this affect the Mortgage Rates. Will it affect your mortgage, or not. I have been asked this question many times and the article posted on http://www.cnbc.com/ in December of 2007, explains in detail how your mortgage is affected by the Fed rate cut.

So what exactly does that do to residential mortgage rates?

The 30-year fixed: not much. The 30-year fixed is not tied to short-term treasuries. Fixed mortgage rates are tied to long-term bond yields that move based on the outlook for the economy and inflation. True, even as the Fed has lowered rates since the summer, the 30-year fixed has come down, but that’s because of the outlook for slower economic growth in the months ahead. While the decline in treasury yields has helped push mortgage rates lower, the decline in long term rates hasn't been in lockstep thanks to the fact that these mortgages are scrutinized and sold on the global market. Investors now demand a higher risk premium on these mortgages due to higher delinquencies and foreclosures.5-1 ARMs: Yes, this is good news if your 5-year ARM is pegged to a treasury index. The one-year treasury is a common index for many adjustable rate loans, and it has plummeted from 5 percent in July down to now about 3.25 percent. So if you’re facing a reset on, say, a $200,000 loan, you’re now getting a payment increase of about $150 a month, as opposed to $370 a month, which you would have had before the Fed started cutting rates. Subprimers: Nope. Unfortunately if you have a subprime ARM it is more than likely pegged to LIBOR, which has moved in the opposite direction. Because of the liquidity issues in global financial markets, LIBOR rates have actually increased at the same time that treasury and other benchmark yields have been declining, so the Fed lowering rates today would not help too many subprimers. HELOC: Yes, if you have that home equity line of credit that you used to renovate your bathroom/kitchen recently, then when the Fed lowers rates, your rate comes down as well. That’s because HELOCs are predominantly pegged to the prime rate, which moves in step with the Federal Reserve. The cumulative effect of the Fed’s interest rate cuts over this fall have taken the average home equity line of credit from 8.25 percent now down to about 7.5 percent. With an additional rate cut, that will fall lower.

Understanding Foreclosure And How to Avoid Becoming A Victim Of The Process

I had an interesting conversation with a client last night. He had called me for his sister Ann. She is going through some tough times since the beginning of the the year when she lost her job. She owns a home in San Fernando Valley and has been struggling to make the mortgage payments. I gave him some information and shined some light on foreclosure process.

First of all, you are not alone. Many other homeowners for one reason or another are facing the same issue. Many homeowners tend to ignore the situation and others do take action. It is important to take control of the situation as soon as possible.

STEP ONE

You have three full months, plus 21 days to reinstate your loan by paying all past due payments, late charges, and "legal fees." Late charges equal two percent of the monthly payments of FHA loans, four percent on VA loans, and on conventional loans these charges vary. The costs associated with "legal fees, foreclosure fees, service charges, etc." range from $250.00 to as much as $3,000 and more depending on the market value of your home.

THIS THREE MONTH PERIOD IS ESSENTIALLY THE ONLY TIME YOU HAVE TO SAVE YOUR HOME, CREDIT RATING AND ANY EQUITY YOU MAY HAVE. Borrowing and selling both take time, so it's safest to end the foreclosure as soon after the Date of Default as possible. Those who have filed the default will rarely wait for funds to arrive from a lender or for an escrow to close on the sale of your home. In other words, don't expect to delay the foreclosure process, this is how most people are hurt. Don't believe anything that is not in writing!

STEP TWO

This step is called the "Advertising Period." This step is were payments have not been brought current and the lender has ordered the property to be publicly advertised for an action (this is the Trustee's Sale). In this way, the trustee can sell the home to the highest bidder and recover the balance of the money originally lent to you. Usually the one way to save your home at this step is to PAY THE BALANCE OF YOUR LOAN IN FULL. This is virtually impossible because no lender wants to refinance a property in default. Note: if the property goes to the "Advertising Period" and additional charges are added to the amounts.

STEP THREE

The actual action (Trustee's Sale) takes place at this point. Your credit rating is ruined, you lose all equity you may of accumulated and you are evicted.

Now more than ever you have to address your current situation head on! Ignoring it, or hiding from it only hurts and costs you more. You owe it to yourself to fully investigate e the options that are available to you.

North Hollywood, California

North Hollywood , like most of the rest of the San Fernando Valley, was once part of the vast landholdings of the Franciscan Mission San Fernando Rey de España, which were confiscated by the government during the Mexican period of rule. The Treaty of Cahuenga which ended the U.S.-Mexican fighting in California was signed at Tomás Feliz's adobe house at Campo de Cahuenga on Lankershim Boulevard in January of 1847. The area was formerly known as Lankershim, but was subsequently renamed North Hollywood in an effort to capitalize on the glamour and proximity of Hollywood proper. North Hollywood today is extremely diverse.New condominium buildings along a North Hollywood streetToday, North Hollywood is being transformed from a relatively lower-middle class suburb into a regional center, in large part as a result of the construction of Metro Stations for the Red Line and the Orange Line, two lines that have made the city into a regional hub for the San Fernando Valley. Medium- and high-density developments are being built around the Metro Station, particularly in the NoHo Arts District, with the intent of creating a walkable urban village. North Hollywood's landscape has been transformed in recent years, with condominium towers (including a 15-story building on Lankershim Blvd) being built in the midst of older one-story bungalows and small apartment complexes.

San Fernando Valley Home Sales Down in July; Median Price Up

Ongoing turmoil within the home lending industry, tighter qualifying standards for home loans and the negative psychological impact both have on prospective home buyers squeezed the single-family home resale market in the San Fernando Valley during July, the Southland Regional Association of Realtors® reported.
A total of 61 7 single-family homes changed owners during July, down 23.7 percent from the 809 sales of a year ago and 10.6 percent lower than the June tally. Reflecting more activity in higher price ranges, the single-family median price of $630,000 was up 3.8 percent in July compared to a year ago. However, it was off 3.8 percent from the record-high of $655,000 that was set this June.
There are still plenty of loans available at decent interest rates, yet many lenders have raised their qualifying standards to a point where some buyers with solid credit history have difficulty getting a loan. It's also taking longer to get a loan approved and processed, which is slowing down the entire process. People who have solid credit, with good FICO scores, and have 10 percent or 20 percent down can readily find a favorable loan.
Realtors® also assisted in the sale last month of 276 condominiums. That total was down 12.9 percent from a year ago, but up 12.7 percent from the June total.
The median price of the 276 condos that changed owners last month was $407,500, up 1.9 percent from a year ago and from the June 2007 figure. The condo median has been hovering around the $400,000 market since the record high of $41 5,000 was set in February 2006.
Davis and Jim Link, the Association's executive vice president, agreed that reports of problems in the relatively small so-called sub-prime sector of the home loan industry has the biggest impact on first-time home buyers. The sub-prime market catered to buyers with a weak or flawed credit history and limited income.
Even some buyers with good credit and money for a down payment are sitting on the sidelines, hesitant to jump into the market because of the negative publicity and unfounded fears that prices may drop.
A total of 7,195 properties were listed on the Association's Multiple Listing Service, up 12.8 percent from a year ago and 5.4 percent higher than the total reported this June
At the current pace of sales, the inventory represents an 8.6-month supply, slightly higher than the 5-to 6-month inventory that represents a balanced market.