Thursday, January 22, 2009

Re-fi frenzy

Re-fi frenzy
By Richard Bammer/
Posted: 01/11/2009 01:05:41 AM PST

Interested in buying a home or refinancing? All signs seem to be saying it's time to make a move.

Vacaville mortgage lenders, citing national trends and the lowest borrowing costs in five years, report a rise of applications to buy a home or refinance the loan.

Bobbi Stokes, manager of the mortgage department at Kappel & Kappel Inc. on Main Street, said the number of applications to buy or refinance in December was nearly double the amount that crossed her desk in November.

Likewise, Nolan Solano, a mortgage broker and president of Norcal Home Loans, said it was a favorable time to buy or refinance a home, condominium or farm.

They attributed the rise to a hefty drop in loan rates for a conventional 30-year, fixed-rate mortgage, which earlier this week fell below 5 percent -- that is, for those with good credit and at least a 720 score out of 850 points.

Solano, who works out of his office at 187 Butcher Road, said the opportunities for borrowers "are the best I've seen in 18 years" in the mortgage loan business.

Their cheery outlook comes on the heels of recent good-news, bad-news reports from the U.S. Mortgage Bankers Association and the National Association of Realtors.

In late December, the MBA reported the average rates on a conventional 30-year, fixed-rate loan dropped to the second-lowest level on record, giving owners a chance to lower their monthly payments, while the industry trade group's refinancing gauge rose 63 percent and purchases gained 11 percent. The MBA also reported late last month that the share of homeowners seeking to refinance a loan jumped to a record 83.2 percent from 76.9 percent a week earlier.

At the December rate for mortgages, roughly 5 percent, monthly borrowing costs for each $100,000 of a loan, for example, would be about $540, almost $100 less than in mid-July, according to MBA figures.

But analysts noted that even with the increase in purchase applications, the gauge was still close to an eight-year low, suggesting the sales slump would last well into the new year.

Yet the grim national home-sales reports are at odds with Solano County figures cited earlier this week by local real estate agents.

Kathleen Ramos, a realtor with Kappel & Kappel, said the number of for-sale residences tops 400 in Vacaville. Some 200 residences are in escrow and 245 have been sold in the last 90 days, she noted.

The president of the Solano Association of Realtors, George Oakes, said sales increased markedly in 2008 compared to the previous year. An agent with Twin Oaks Real Estate in Vacaville, he noted that in December 2007, 173 units were sold countywide compared to 504 last year, as the median sales price dropped from $392,000 in 2007 to $261,000 last year.

"We had nothing below $400,000 three years ago in Solano County," added Stokes, an air of disbelief in her voice.

As home prices drop amid the recession, and while the U.S. dollar remains weak and foreclosures and bank-owned sales increase, Solano said, "Mortgages are plentiful and we can refinance all kinds of people here."

He said that even for those who cannot obtain a conventional loan, Federal Housing Administration (FHA) loans offer "much more flexibility in the down payment and credit score ... the debt-to-income qualifying standards are a little bit looser."

Additionally, for those financing through the Veterans Administration (VA) home loan program, loan limits have risen from $240,000 to $417,00, an amount more in line with housing costs in California and other populated areas of the nation, noted Solano.

"What's helping out right now is the direct purchase (by the federal government) of mortgage-backed securities," said Solano, noting the Treasury Department's recent infusion of billions of dollars into the market.

President-elect Barack Obama has promised a $1 trillion economic stimulus to restore growth and, on Dec. 13, pledged to limit home foreclosures, noting that 1 in 10 American families who own a home are in financial distress.

Any such stimulus would be a boon to the cash-hungry securities markets, said Solano, adding that it would "create the desire to own the mortgage-backed securities," because the yields would rise.

But Stokes said many banks -- many of which have received millions through the U.S. government's Troubled Assets Relief Program (TARP) -- have been reluctant to back mortgages.

"Last year, none of the lenders were willing to work with the homeowner's (FHA) program," she lamented. "As far as what the government has done, I've seen nothing. The investors, the banks, are not working with their clients. The way it is being perceived -- they'd rather foreclose on the property."

While the rise in mortgage applications is hopeful news, it comes as job losses persist and the global economy continues to spiral downwardly, with the pain likely to stretch well into the new year, many economists predict.

Additionally, Treasury Secretary Henry Paulson last week said mortgage-packaging giants Fannie Mae and Freddie Mac, in U.S. government conservatorship since September, cannot be allowed to operate as they were before the housing bubble burst.

"My concern is, what is going to happen in the next six months," said Solano. "We've got a little inventory (of unsold homes on the market) and a lot of people are under water (owe more on their current loans than the home is worth) and the values are not going to return to anywhere to what they were any time soon."

The newly low mortgage rates, he said, "are a bright spot and people need to take advantage of it but it's not going to last."

"I think it's going to last through the spring," added Stoke