Mortgage Applications Spike, Biggest Gain in Six Years

A sharp drop in interest rates, combined with new reduced costs for the market's most popular mortgage products, sent mortgage applications soaring last week.

Total volume increased 49.1 percent from the previous week on a seasonally adjusted basis, according to a weekly survey by the Mortgage Bankers Association (MBA) for the week ending January 9, 2015.

The jump was fueled by a seasonally adjusted 66 percent increase in applications to refinance, which are now at the highest level since July 2013. Applications for interest-rate-sensitive jumbo refinances more than quadrupled from the previous week.

Applications for a loan to purchase a home rose a seasonally adjusted 24 percent from the previous week and are now two percent higher than they were a year ago, the first annual gain in over a year. A new 3 percent down payment loan option at Fannie Mae for borrowers with high credit scores contributed to the gain, according to the MBA.

"Purchase application volume was at its highest level since September 2013...and notably increased across most loan size categories, particularly for the conforming, middle of the market loan segments that had been weak for much of the past year," said Michael Fratantoni, chief economist for the MBA.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.89 percent, the lowest level since May 2013, from 4.01 percent, with points decreasing to 0.23 from 0.28 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. 

"In addition to the drop in rates, and news of improvement in the job market, there was additional positive news for prospective homebuyers with evidence that credit availability has increased somewhat, and with FHA's announcement of a decrease in their mortgage insurance premiums," added Fratantoni.

The FHA does not originate, but insures loans with down payments as low as 3.5 percent. The drop in FHA premiums of a half percentage point does not go into effect until January 26th, but borrowers will be able to cancel their current case numbers and reapply on the 26th, meaning that if they lock in a low rate now, they can take advantage of the premium reduction later.

"It might make perfect sense. There is no cost to cancel and no cost to reapply," said Brian Sullivan, a spokesman for the Department of Housing and Urban Development.

Sullivan, however, warned that for those who already have FHA loans in process, there could be hidden costs to reapplying, especially if their closings are before or close to the date of the premium change.

"If your closing is too soon it might cost you in the moving van, shifting the closing date, extending the rate lock. It could impact the appraisal that underwrites the property, which may have an expiration date," added Sullivan, who suggests borrowers contact their lenders to get all the necessary information.

While FHA loan applications rose far less than those for loans backed by Fannie Mae and Freddie Mac, that may change in the coming weeks, as borrowers who already have FHA loans seek to refinance under the lower premiums. FHA already offers a streamlined refinance program for loans it currently backs, cutting out much of the costly paperwork.

"It's a really big deal. Current FHA borrowers would need to refinance, but in most cases, it will be well worth the trouble. The monthly savings from a 0.5 basis point drop in mortgage insurance is substantial," said Matthew Graham of Mortgage News Daily. "The fact that rates are at long-term lows is the clincher. If rates were significantly higher than the past few years, it would only be a benefit for new purchases."

The refinance share of mortgage activity increased to 71 percent of total applications last week from 65 percent the previous week, according to the MBA. The new FHA premiums could push that share even higher, and create considerable new business for lenders. A spike in business, however, could allow lenders to push interest rates slightly higher.

Last week I wrote about my four predictions for housing, now I write about a market that hits a little closer to home. 

The Dallas-Fort Worth region will be one of the top real estate markets in the country in 2015, according to forecasts from industry insiders. 

As a mortgage provider serving the area (among others), we are keeping a close watch on the market, and here's what we've learned about what to expect. 

For the second year in a row, Dallas-Fort Worth ranked as the fifth best area in which to build or invest in real estate, according to the "Emerging Trends in Real Estate" report from the Urban Land Institute and PricewaterhouseCoopers.

The region's strong economy and its potential for growth and expansion get the credit for the strength of the DFW housing market. The region has become a hot bed for attracting businesses that bring jobs and spur housing demand. To date this year, Texas has gained the most jobs of any state, 421,900, according to the Bureau of Labor Statistics. Among the 12 largest metro areas, the Dallas-Fort Worth-Arlington MSA ranks second for the rate of job growth and third for the number of jobs added.

Are You Trapped in Debt? Here's How to Get Out!  

by The New York Times

For many people, the worst part of the holiday season is the hangover -- the debt hangover, that is. Debt has become such a burden that according to a recent survey by CreditCards.com, 13 percent of all Americans believe they will never get out of debt, and another 8 percent believe they'll be in debt into their 70s. That's 21 percent of Americans struggling with debt that they believe will last throughout their working lives. On top of that, nearly a third of Americans have new debt as a result of this holiday season.

Now that the season of giving has ended, it's time for the season of digging to begin -- digging out of debt, that is. If you're part of, or worried about becoming part of, the 21 percent of Americans struggling with long-term debt,now is the perfect time to get yourself on track to make that debt a part of your past -- and not your future.

Why Debt Can Be Trouble -- and What You Can Do About It

Your debt represents money you're paying now for things that happened and decisions that you made in the past. Every dollar in debt is a dollar you're expected to pay back, probably with interest, and that interest adds to the total you need to pay just to get yourself back to even 

1.Figure out where your money is going. For at least a month, track where your money is going. Use Quicken, Mint.com, a spreadsheet, or even a piece of paper and a pencil. Write down every penny -- whether it's an automatic payment, a planned purchase, an emergency expenditure, or a spur-of-the-moment buy. On top of that, jot down an estimate for expenses you don't pay monthly but do expect, like holiday shopping, car insurance, and property taxes.

2. Review and prioritize where your money went. Look at your list of where you spent your cash, and mark each of those expenses as "Have to," "Want to," or "Can live without." "Have to" expenses are ones that are necessary to keep you alive and/or that you can't quickly change or get out of. "Want to" expenses are ones that improve your quality of life or are nice-to-haves but that you don't strictly need. "Can live without" expenses are those you look back on and say, "Why did I spend my money on that?"

3.Cut the tail. Take your "Can live without" expenses and make a commitment to yourself that you will live without them -- at least until your debt is gone. If that's not enough to get you cash-flow-positive, start working your way up the "Want to" expenses as well, slashing those that are lower on your priority list until you at least see some money at the end of the month.

4. Negotiate every remaining expense you can. Feel free to keep cutting out the "Want to" priorities if they matter less to you than getting out of debt, but by now, everything in your budget should be a "Have to" or a higher-priority "Want to." As long as you're in control of your money, you can spend a little bit on things that matter to you the most, but that doesn't mean you have to waste your cash. Nearly every expense is negotiable -- even medical bills and interest payments -- but you need to ask. If you can approach it from the perspective of "What's in it for the other person?" you might find your bargaining power is stronger than you thought. If times are really tight, even something as simple as, "I'm struggling to make ends meet. If you could help me by lowering the cost of what I'm paying you, it'll help keep me out of bankruptcy and allow me to keep me paying you" could make the difference.

5. Snowball down your debts. Line up your debts in priority order, either by highest to lowest interest rate (the mathematically fastest way) or by lowest to highest balance (the most psychologically rewarding way). Then, start paying them off one by one, making the minimum payments on everything but your top-priority debt and throwing every penny you can against that top-priority one. Once that's paid off, repeat the snowball on the next debt in order, and so on, until they're all gone.

Free Yourself From the Trap of Debt

By following those five simple steps, you can free yourself from the trap of debt that's threatening to ensnare more than one-fifth of Americans. Perhaps best of all, as part of following those five steps, you're putting your money where your priorities are. As a result, once you're out of debt, you'll already be in a great position to truly enjoy your newfound financial freedom.

After all, if your needs and highest-priority wants are covered, you have no debt, and you've got money left over at the end of the month, then the world truly is your oyster. Keep that goal in mind, and get started now. Once you've put your debt behind you, you'll be incredibly glad you did.