Maureen Megowan's Blog


Interest Rates remain steady

Interest rates remained about the same this week, and remain near historical lows. With the volatility in the stock market expected to continue, the flight to safety and bonds is expected to continue, keeping interest rates down The following are some excerpts from this week's newsletter on interest rates from HSH Associates :

"An expanded initiative to help underwater borrowers was revealed this week by the Obama Administration. The Home Affordable Refinance Program will soon be available for borrowers more deeply underwater, with fewer fees, less documentation and hopefully greater success.

Expanding the HARP program to encompass more borrowers may be a key element in boosting the economy. The program was originally expected to help millions of homeowners refinance, but poor implementation and incentives by stakeholders to participate produced an underwhelming response. To date, only about 900,000 HARP refinances have occurred, and only about 75,000 of those were written to borrowers underwater by more than 5%. Lenders were rightfully reluctant to re-write loans that they might be forced to buy back in the future should a "defect" in the process be revealed, and mortgage insurers have also not been very interested in writing policies against homes where a serious lack of equity might leave them losing considerable money in the event of a failure.

Indemnifying lenders and investors against these "put backs" is the key provision in the expansion of HARP. However, hard details of the program won't be released until next month, so it is not yet clear how enthusiastic lenders will be about the program. Borrowers may be somewhat more interested, especially since the program is expected to feature reduced closing costs, possibly fewer risk-based pricing adjustments (which together have made refinancing expensive and less valuable even when it was available to an underwater homeowner) and importantly require only proof of employment (and not verification of income strength) as a criteria for writing the loan. Theoretically, a borrower who is managing to make his or her payments at a higher interest rate will be even better equipped to do so at a lower payment, regardless of the impact of the recession on the income of the household.

Will it work better than the old program? While hard details won't come for a few weeks yet, there is a chance that a greater level of success can be expected, provided A) the word gets out there; B) lenders are prepared, and a good "buzz" that successful refinancings are happening begins to develop and C) homeowners are not so soured on the mortgage process that even saving a hundred dollars (or more) isn't a compelling enough reason to want to put themselves through the ringer just to get there. Although we still prefer our Value Gap Refinance approach, any help for these homeowners will prove valuable.

In a few weeks time, we'll get some clarity on the expanded HARP program and will revisit it. We did note a few weeks ago that we thought the Fed's move back into the MBS arena might be to have a ready buyer in the market for new securities should investors start to turn up their noses at them, especially new securities comprised of refinanced and rebundled underwater mortgages. That may yet turn out to be the case. In the meanwhile, their influence should help to keep mortgage rates lower than they otherwise might be, given any growing optimism about the economy or worries about price pressures. Growing optimism and a pretty fair stock rally over the last few weeks are pressuring rates higher, and mortgage shoppers should be glad to see the steadying and tempering influence of the Fed in play.

Still, the increase in the influential 10-year Treasury this week to levels last seen in August suggest that there may be a little in mortgage rates rise yet to come next week, Fed or no Fed. Poor economic news or a new rift among bailout partners overseas might prevent that, but planning for a few basis point rise in rates next week is probably a good idea."


The following are interest rate quotes from Al Hermann of American California Financial Services:

30 Yr Fixed FHA










Conforming 30 Yr Fixed up to $417000










Conforming Jumbo 30 Yr Fixed $417001 - $625500










Jumbo 30 Yr. to $1.5 Mil










Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)











The following are interest rate quotes from Jan Schott Bank of America, Home Loans 310-802-2300 :

Conforming Loans to $417,000

5 Yr Fixed:         2.625% @ .750/pts                        3.000% @ 0/pts

30 Yr Fixed:      4.250% @ 1.000/pts                      4.500% @ 0/pts


Conforming High Balance to $625,500

5 Yr Fixed:         2.750% @ 1.000/pts                     3.250% @ 0/pts*

          30 Yr Fixed:        4.375% @ .375/pts                       4.500% @ 0/pts


Non-Conforming Loans to $2,000,000

5 Yr Fixed:         3.250% @ .750/pts                        3.500% @ 0/pts

30 Yr Fixed:      4.625% @ .500/pts                         4.750% @ 0/pts


FHA Fixed Loans to $625,500

30 Yr Fixed:      4.250% @ 0/pts


For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 1 commentMaureen Megowan • October 28 2011 10:14PM


Maureen, I'm holding my breath to see if the HARP programs stimulates the market and helps this economy recover.

Posted by Kay Van Kampen, Realtor®, Springfield Mo Real Estate (RE/MAX Broker, RE/MAX) over 7 years ago

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