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The mortgage market is unpredictable, and always has been. Some days, mortgage rates zig. Some days, mortgage rates zag. Mortgage guidelines, loan programs and underwriting standards are similarly wayward.
We can't predict the future, but we can have opinions. Here are some of them.
Just before the end of the year, I went to Twitter and posed a basic question :
I want to hear your mortgage predictions for 2012. I'll collect and publish on my site. Send via @ reply. All prognosticators welcome. Thx.— Dan Green (@mortgagereports) December 28, 2011
I want to hear your mortgage predictions for 2012. I'll collect and publish on my site. Send via @ reply. All prognosticators welcome. Thx.
— Dan Green (@mortgagereports) December 28, 2011
The replies that came back ran the gamut from optimism to pessimism, and more than a few calls for low mortgage rates in 2012.
Industry insiders expect low mortgage rates to continue into 2012. The combination of a weak global economy and direct mortgage market intervention here at home and helped push conforming and FHA mortgage rates to levels never seen before in history.
When 2011 kicked off, mortgage rates were on a tear; rising through 5 percent and headed for 6.000%. Then, a fear of Greek sovereign debt default grabbed the market by its tail and never let go.
11 months later, we're still wondering when the next Euroshoe will drop. Until there's a way forward, mortgage rates should remain low.
The strange side-effect of these persistently low mortgage rates, though, is that Americans have almost come to demand them.
Buyers and would-be refinancing households from La Jolla, California to Christiansburg, Virginia are accustomed to sub-5 percent mortgage rates and would likely question the "value" of a rate in the mid-5s or higher.
Putting today's rates in historical perspective, it seems ludicrous to think that mortgage rates north of 5.000% could seem "too high", but today's market conditions are a huge class of borrowers who believe it.
Another common theme among insiders is that low mortgage rates spur 2012 home sales. And, while there is no proven, direct link between low mortgage rates and home sales, there seems to be a correlation to the sense of urgency to "get something done".
Since September 2011, home inventory has dwindled to multi-year lows, approaching the often-cited "market balance point" of 6.0 months. This trend has transcended all home types, including existing home sales and new home sales alike.
Not surprisingly, mortgage rates have been on a downward trajectory during the same timeframe. It's not a direct cause-effect relationship, but the average 30-year fixed rate mortgage first fell south of 4 percent (with discount points!) in October 2012.
There's something about low mortgage rates that brings out buyers.
Low mortgage rates bode great for first-time buyers and move-up types in 2012, but real estate investors are also expected to play an outsized role in housing.
In 2011, real estate investors purchased roughly 1 in 5 homes sold -- often paying cash either because (1) the home's purchase price was low enough to warrant it, or (2) mortgage financing was unavailable.
In 2012, investors may find more banks more willing to lend, especially as the 5-10 Properties program enters its third year. With the 5-10 Properties program, real estate investors with more than 4 properties financed can apply and get approved for a mortgage.
They can also apply the Delayed Financing Rule which allows a buyer to pay cash for a home, and then extract that cash va a cash-out refinance as soon as one day post-closing.
Mortgaging a home in disrepair will remain elusive to investors in 2012. For homes like that, cash is king.
The U.S. government either launched or modified dozens of mortgage market programs in 2011, including the Federal Reserve's "Operation Twist" and a re-expansion of FHA loan limits to $729,750 in high-cost areas such as Montgomery County, Maryland and Marin County, California.
Some insiders think the government will reach deeper to help families still outside "normal" mortgage loan guidelines. As owners with home equity and/or down payments get the "best deals" in mortgage, modifications to existing government program give help to underwater households and buyers with no down payment.
The new, revised HARP II program is a terrific example of this. HARP gives underwater homeowners the ability to refinance, no matter how extreme their underwater situation is. Unlimited LTVs are available, and -- often -- HARP mortgages come with lower mortgage rates than a comparable 30-year fixed.
This is because HARP waives most loan-level adjustments. Non-HARP borrowers must pay them.
Of course, the HARP program could go a bit farther; it stops short of helping every underwater homeowners. To use HARP, your mortgage must be backed by Fannie Mae or Freddie Mac, and it must be securitized prior to June 1, 2009.
This specifically disqualifies excludes huge numbers of homeowners -- including everyone who's bought a home in the last 30 months.
Predictions for 2012 were remarkably consistent -- mortgage rates stay low, housing continues its recovery, and the government adds more grease to the engine. These are ideal conditions for both buyers and sellers, and would seem to benefit would-be refinancers, too.
Let's hope we're right.
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Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator click to get a free, no-obligation rate quote.
You can also find Dan on Twitter and Google+.
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