The RealtyTrac report shows that foreclosure filings, which include default notices, scheduled auctions, and bank repossessions declined 2 percent from January. A total of 308,524 properties in the United States received one of the listed notices during the month. This equates to 1 house in every 418. Compare that to January’s ratio of 1 in every 409. That works out to a 10% month over month improvement. However, when comparing data from one year ago (Feb 2009), the ratio is 6% worse. 

James J. Saccacio, chief executive officer of RealtyTrac says, “The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity.”

He also noted that this leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk of foreclosing and gave much credit to foreclosure prevention programs, legislation and other processing delays, which are in effect capping monthly foreclosure activity – albeit at a historically high levels that are not likely to slow in the extended future.

Foreclosure prevention policies and government legislation may be artificially distorting supply and demand equilibrium in the housing market. Because banks are allowing delinquent borrowers to remain in their homes, the actual amount of existing homes inventory is unknown or not reflecting these would be foreclosures (shadow inventory).  From an economic perspective it is much more efficient for a bank to allow the homeowner continue to occupy the property, that way it is kept in a condition that allows for faster liquidation at a future date. This gives  the bank it’s best opportunity to recover lost principle and it’s certaintly a better option than sending the property to auction.

With demand still recovering in the housing market, banks may continue to hold inventory until market demand is more accommodating of new supply.  The question is, will the number of qualified and willing buyers be there to support the market if there is an influx of “shadow inventory”?

We had a couple of scheduled economic reports that were released early enough to sway the direction of mortgage rates on Thursday.  First we got Weekly Jobless Claims from the Department of Labor.  This report provides three measures on the health of the labor market:

1. Initial Jobless Claims:  totals the number of Americans who filed for first time unemployment benefits
2. Continued Claims:  totals the number of Americans who continue to file for benefits due to an inability to find a new job
3. Extended Benefits:  totals the number of Americans who have exhausted their traditional benefits and are now receiving emergency benefits

Since our economy is driven by consumer spending, market participants track employment data to get a sense of economic momentum.  While an increase in jobless claims is a bad sign for the economy, weak data generally helps mortgage rates move lower.  Lender rate sheets came in just slightly worse than yesterday, they are really unchanged for the most part. 

The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified borrowers.  To secure a par interest rate you must have a FICO credit score of 720 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.   If you are seeking a 15 year term, you should expect rate in the 4.25% to 4.50% range.  You may elect to pay less in fees but you will have to accept a higher interest rate. 

Friday morning we have Retail Sales, Consumer Sentiment and Business Inventories reports.  Of the three, the Retail Sales report has the highest potential to affect the markets and mortgage rates. Better than expected results would move rates higher while worse than expected results would only improve mortgage borrowing costs slightly.  I continue to advise clients to lock now as rates continue to hold at the best levels of the year and the market shows no willingness to drive mortgage rates lower.

Initial Jobless Claims were better than the prior period, so we snapped the three week trend of ever-increasing new claims. We were also very close to the market estimates. This is typically bad for mortgage rates and would cause them to rise.  However, offsetting that is the Productivity Report. Greater productivity offsets inflation, so interest rates love a good Productivity Report. And we had a positive report with productivity gains at 6.9% which was much better than the market expectations and we saw improved interest rates/pricing late Wednesday into Thursday. 

 The most impactful report is to come on Friday (Unemployment Rate/Non-Farm Payroll) and will have an impact on mortgage rates for sure.  It seems as though lenders are positioning themselves with the expectation of negative numbers (lower mortgage interest rates).  Although if we see better than expected numbers we’ll definitely kiss those 4.75% rates goodbye and say hello to the 5’s again.  Stay tuned and if there’s surprises or big numbers I will post about it.   

For those of you planning to purchase or refinance in the upcoming months, I still encourage you not to wait until rates in the 4’s are a thing of the past which may come as soon as the end of the month with the Fed’s exit from supporting mortgage backed securities.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

Note that a .5% increase in the interest rate from 4.875% to 5.375% would result in roughly a $25,000 decrease in purchasing power!  That could be a huge difference in properties to choose from or leave the buyer with limited negotiating flexibility.  With the home buyer tax credit, buyers have one reason to purchase in the upcoming months; the increase in interest rates that is likely to come is another to take into consideration.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

The big news in the Madison Park real estate market last month was the report by the Northwest Multiple Listing Service (MLS) that the median price of Seattle homes sold in January was actually higher than in the same month a year earlier. For the city as a whole, this represented a 2.63% increase over the past year (houses and combos combined). It is the first time in almost two years that there has been a year-over-year increase in Seattle’s residential property values. The rest of King County did not fare as well, however, with home values continuing their downward trend.

But how did prices hold up in our neighborhood? Madison Park itself is a market that’s a bit too small for year-to-year median price comparisons to be meaningful (seven total home sales in January 2009 and only five this year). But for our general area of the City (MLS Area 390, which also includes Capitol Hill, Montlake, Madison Valley, Madrona, and Leschi), the news was pretty good. There was a modest 2.1% increase in value between January last year and this. This improvement, however, perhaps has more to do with a year over year change in the mix of sales (houses versus condos) than a real move up in home values.

Nevertheless, it’s a good start to 2010. Whether this welcome news means we’re on an upward trajectory will only become evident when we’ve got a few more months of sales data in hand. It’s just possible, however, that for our area of Seattle—like for the rest of the City—the downward slope of real estate values has been arrested. At minimum, the rate of decline seems to have abated.

Thanks to Bryan Tagas for providing this article. To read more, click here to see the full piece on his website.

For more information on Madison Park real estate, please contact Rob LeRoy at eXp Realty at 206.883.6668, or by e-mail at rob.leroy@exprealty.com

BUT we started out Tuesday with some mortgage rate positive information in the form of the monthly Consumer Confidence Index which came out at a 10 month low.  The FDIC then announced that the problem bank list grew 27% from 552 banks to 702 banks in Q4 2009. That is the highest number of banks on the list since 1993 and doesn’t bode well for the overall industry despite the large banks being quite profitable.  At the same time again, the National Association of Realtors put out notice that we likely see no meaningful recovery in commercial real estate before 2011. Lawrence Yun, Chief Economist at the NAR said, ”Because of the lingering impact from the deep recession over the past two years, vacancy rates will trend higher. With the job market expected to turn for the better later this year, we’ll see rising demand for office and warehouse space, but that isn’t likely before 2011.”   That’s three separate items which are all bond-friendly and positive for lower mortgage rates.  We saw the affects in the late part of the day as many mortgage lenders I send loans to were offering improved pricing and/or lower rates.

The rest of the week has major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Conventional and Government mortgages. 

I will be watching these reports and the effects they have on mortgage rates this week.  If there are any major surprises or changes to the market I will post about them.  In the meantime, we were around a “par” interest rate of 4.875% for 30 Year Fixed Conventional loan as of Tuesday’s close.   For those of you planning to purchase or refinance in the upcoming months, I encourage you not to wait until rates in the 4’s are a thing of the past.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

The rate increases really got going on Wednesday, when the FOMC (Federal Open Market Committe) of the Federal Reserve Board January 28th meeting minutes came out.   In those meeting minutes there was NO mention of continuation of the purchasing of Mortgage Backed Securities which is set to end on March 31st.  That was pretty much expected, but if the possibility of continuation was expressed mortgage rates would likely have dropped.   What’s important to note is that those purchases by the Fed have accounted for approximately 80% of the marketplace over the past year.  Once you remove that artifical market from the table, volatility is bound to follow.  The minutes also included a re-affirmation of their previous guidance that GDP (Gross Domestic Product) will continue to grow and we won’t have a double dip recession.  Positive economic growth and inflation always tend to push mortgage rates higher.

On Thursday we started the day with higher than expected initial and continuing unemployment figures.  Which would normally be good for mortgage rates, although PPI (Producer Price Index), which is a key measure of inflation, increased by 3 times from the December readings and was much higher than the market estimated.  This show of economic growth was considered more important than the jobless claims and continued to push mortgage rates even higher on Thursday.  

So those two days of rate increases left us starting Friday with some of the worst rates/prices we’ve seen in the last several weeks.  The good news is Friday has been fairly positive so far with CPI (Consumer Price Index) figures at expected levels.  So while we haven’t seen much improvement in rates from Thursday we haven’t seen continued increases. 

Rates are still hovering around an average of 5% for 3o Year Fixed loans, which is historically low.  While we have seen some increases this week we still do not have the volatility expected after March and the likely higher rates that will ensue as the market for Mortgage Backed Securities is dominated by investors rather than the Fed. 

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

On a daily basis mortgage originators, whether they are direct lenders themselves or brokers who originate loans to a wholesaler, have rate sheets listing loan products, rates for those products and prices or rebates for each rate.   Those prices/rebates are part of how compensation is earned in the mortgage industry, the other being direct fees that are charged (“points, origination, processing, etc.).   Higher rates pay more in rebate while lower rates cost more in discount.  In the middle is what’s called the “par” rate. 

• For example if the “par rate” for a 30 Year Fixed Loan is 4.875% on a particular day then it’s likely that 5% would have a rebate being paid to the originator while 4.75% would have a cost (loan discount) in order to obtain. 

Since most loan originators have to make money on the loan they will generate their compensation around this.   If a borrower wants a loan with lower fees then it will likely result in a higher rate so that the originator is compensated.   If a borrower wants a loan with higher fees and a lower rate, they may be offerred a “par” rate or perhaps a rate below par with costs included for loan discount (buying the rate down). 

When a borrower has the intention of getting a lower rate or one that is below par it’s not unusual to see loan quotes that include both origination related fees plus loan discount costs.  That can get quite pricey and means more dollars coming out of your pocket. 

So how can you save on paying extra fees AND get a lower mortgage rate?  

First off you need a loan originator or lender that isn’t going to pull a fast one on you by charging more fees than it takes to get that lower rate.  The newly created 2010 Good Faith Estimate helps to show you more details about how much you’re being charged for a loan but not all lenders disclose on it equally (that’s a whole other blog post about deciphering the new GFE version).   Make sure your originator is disclosing to you how much you’re paying to buy the rate down vs. how much you’re paying them directly!

A key question is looking at the total fees that you’re paying whether it’s loan discount, loan origination, points, etc. and how much of an improvement you’re getting in an interest rate for those extra fees vs. a “par” rate loan.  If it makes sense and the amount your saving from the lower interest rate outweighs the extra fees you’re in great shape.  

Although if you really want to get the ultimate combination of lowest rate and lowest fees on a purchase loan you need to work with a Loan Originator, such as myself, who is also a Realtor and whose goal isn’t necessarily to make money off your loan but to get you the lowest rate with the lowest fees.

How is that possible? 

Simple, if I’m working with a client on both the real estate and mortgage aspects of their purchase transaction I get paid a commission by the seller of the property you buy.   Therefore I don’t need to get paid on the mortgage side of the transaction and can pass along that lower rate/fee combo to my clients.   Instead of charging origination fees, I typically will setup a loan at the “par” rate.   Or I will set it up with discount fees to get the lowest rate possible BUT then have those costs paid for by the seller!  So the borrower gets the lowest rate possible and doesn’t have to pay the fees that other lending sources charge to do so.  

So that’s my tip or input on how to get a lower mortgage rate – Feel free to contact me with any questions you have about this and hopefully you’ll save on your next home loan!

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

So what’s on tap for this week?  Monday was a fairly uneventful day but the rest of the week should hold more volatility.  Tuesday has a Treasury Auction of 3 Year Notes and Wednesday has an auction of the important 10 Year Notes.  Both of which could potentially have an impact on mortgage rates.  In the wake of treasury auctions, volatility in the mortgage market can typically be quite high.  That means there’s the potential for mortgage rates/prices to get worse over the next couple days.  On Thursday there are economic reports due out for Retail Sales and Jobless Claims.  Economic reports can impact the mortgage market if the details are different than what the market expects.  If the reports show the economy improving and money flows into stocks from the bond market then we see mortgage rates rise.  Given what’s taken place on Friday afternoon and the start of this week I’d expect that we will see slight increases in mortgage rates/prices as this week goes on unless we get some surprisingly negative economic reports.  Most of the quotes we’re currently making for 30 Year Fixed Loans are at 4.75%.  If you’re a borrower considering “locking-in” your rate, I’d lean towards doing so if you’re happy with the rates/pricing you’re seeing.  

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit us at www.tacomapowersearch.com

Early in the week 4.75% for a 30 Year Fixed Conventional loan was requiring origination fees in most cases, but by Friday that is no longer the case and it’s even possible to get into 4.625% with less than a half point in origination fees.  That’s better rates/pricing than we’ve seen at any point in 2010!   

Whether these rates hold next week or not is hard to tell as the mortgage market has been volatile within a small range lately and the overall economic signals are still mixed.  That’s why it’s essental  for you to work with a mortgage professional who is on top of things and can get you the best rate/pricing for your loan.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit us at www.tacomapowersearch.com