Mortgage rates will remain stubbornly unpredictable.
That is one of several trends in mortgages and real estate over the next quarter, according to mortgage professionals.
After a lackluster summer selling season, Bankrate asked several mortgage pros to look into their crystal balls and forecast whether things will improve during the next three months. Here are their predictions.
Mortgage rates
Often experts can guess fairly accurately whether rates will be higher or lower in three months. This year, no one has been right.
As 2010 dawned, the Federal Reserve was buying hundreds of billions of dollars’ worth of mortgage-backed securities. Those purchases stopped at the end of April. Many experts predicted mortgage rates would rise by about half a percentage point through May and June, and then another half-percent in the final six months of the year.
Instead of rising in May and June, mortgage rates fell to lows not seen since the 1950s. Then, rather than rebounding, rates remained relatively stable in July. The consensus prediction of steadily rising mortgage rates was wrong.
Why didn’t the Federal Reserve’s withdrawal from the mortgage market trigger an increase in rates?
“The economy hasn’t rebounded, the housing numbers look very bad, unemployment remains in the double digits,” says Paul Anastos, president of Mortgage Master, a lender in Walpole, Mass.
That last point is an exaggeration; unemployment was 9.5 percent in June. But it felt higher.
The average rate on an outstanding mortgage was 5.979 percent in this year’s first quarter, according to the Bureau of Economic Analysis. With the rate on the 30-year fixed lingering at around 4.75 percent all July, it would seem most homeowners could benefit from a refinance.
But people are keeping their higher-rate loans. A lot of folks want to refinance and have tried to refinance, but don’t qualify because they have little or no equity. When their homes dropped in value during the housing crash, they lost their ability to refinance. They can’t borrow more than the house is worth.
Seller contributions
Home sellers are allowed to chip in some money to help buyers afford their mortgage fees or moving costs. Many loan programs limit these seller contributions to 3 percent of the purchase price.
For a long time, the Federal Housing Administration’s limit has been twice that: Sellers could contribute up to 6 percent of the home price.
That is expected to change in the middle of August, when the FHA halves the maximum seller contribution to 3 percent, in line with industry practice.
Industry analyst Sylvia Alayon of Capital Markets Assessment Corp. in Fort Lauderdale, Fla., warns that FHA lending might fall by as much as two-thirds because of the change.
“The one segment that appears to be moving is the FHA market, and that’s about to collapse,” she says.
Loan process
The impact of a 2008 law called the SAFE Mortgage Licensing Act is being felt in a growing portion of the country. The law regulates brokers and loan officers who take mortgage loan applications.
“The intent of the SAFE Act is to protect consumers from shark-infested waters,” says Anthony Hsieh, CEO of LoanDepot in Irvine, Calif.
But some sharks are more equal than others. The SAFE Act treats loan officers differently, depending on their company.
Mortgage brokers — and loan officers for mortgage banks that don’t take deposits — must pass state licensing tests. Many first-timers fail.
Loan officers for federally regulated depository institutions, such as banks and credit unions, don’t have to take the tests. They merely need to register with federal authorities.
