Home Buyer Incentives
HomePath® Buyer Incentive: June 14 – October 31
Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through October 31, 2011. A $1,200 selling agent bonus is also available to selling agents who close on an owner occupant property and meet all eligibility requirements and terms and conditions.
Terms and Conditions:•Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer.
•Initial offer must be submitted on or after June 14, 2011 and close by October 31, 2011. Initial offers made prior to June 14 are not eligible for the June 14 – October 31 incentive.
•Sale must close on or before October 31, 2011. No exceptions will be made to this deadline. (Note: Initial offers submitted after September 15, 2011 may not close by the incentive deadline of October 31, 2011.)
•Buyers must be purchasing a HomePath property to use as their primary residence to receive closing cost assistance. Second homes and investment properties are excluded from the incentive.
•Sales closed via the retail channel are eligible, including those utilizing public funds. Pool and auction sales are ineligible.
•Buyers must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
•Buyers with total closing costs under 3.5% are not eligible to receive the difference as a credit.
•Properties where Fannie Mae acquired the property in connection with financing under a reverse mortgage are not eligible. Ask the listing agent for details.
•Buyers should consult their lenders for guidance on financing. Lenders and mortgage products may impose their own limitations on the use of the 3.5% incentive. For example, the lender may consider the incentive a Seller Contribution and limit the amount to 3.0%. In those instances, the remaining 0.5% will no longer be available to the buyer.
•Fannie Mae reserves the right to remove any property from promotion or end the promotion at any time. Any dispute over the payment of the incentive shall be resolved by Fannie Mae in its sole discretion.
Real Estate Market Commen
Mortgage bond prices fell last week pushing mortgage interest rates slightly higher. There were large swings throughout the week. Rates were pressured higher Monday morning. Bonds rallied mid week following Fed Chairman Beneranke’s comments about weakness in the economy which helped stabilize rates. Unfortunately strong stocks and a weak 30Y Treasury auction Thursday erased the improvements seen Wednesday. Mortgage bonds ended the week worse by about 1/8 of a discount point.
The inflation data this week will be significant. If inflation exceeds estimates on the consumer or producer side we could see a spike in mortgage interest rates. Tame inflation readings are always welcome.
LOOKING AHEAD
Economic
Indicator Release
Date and Time Consensus
Estimate Analysis
Retail Sales Tuesday,
June 14,
8:30 am, et Up 0.4% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Producer Price Index Tuesday,
June 14,
8:30 am, et Up 0.6%,
Core up 0.2% Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Consumer Price Index Wednesday,
June 15,
8:30 am, et Up 0.4%,
Core up 0.2% Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Industrial Production Wednesday,
June 15,
9:15 am, et Down 0.1% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization Wednesday,
June 15,
9:15 am, et 76.9% Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower mortgage interest rates.
Weekly Jobless Claims Thursday,
June 16,
8:30 am, et 430k Important. An indication of employment. Higher claims may result in lower rates.
Housing Starts Thursday,
June 16,
8:30 am, et 520k Important. A measure of housing sector strength. Weakness may lead to lower rates.
Philadelphia Fed Survey Thursday,
June 16,
10:00 am, et 3.8 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday,
June 17,
10:00 am, et 74.1 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Leading Economic Indicators Friday,
June 17,
10:00 am, et Up 0.1% Important. An indication of future economic activity. Weakness may lead to lower rates.
OIL
Inflation fears tied to rising energy prices remain on the minds of traders. OPEC failed to raise production levels and many are preparing for large price spikes throughout the rest of this year as demand increases and supplies remain the same. Recent forecasts call for prices to skyrocket off the already high levels. That would be a disaster for the wobbly economy. The fate of mortgage interest rates in a scenario like that is even more uncertain. A US representative cautioned that the use of the US Strategic Petroleum Reserve might be necessary to “head off an economic collapse from continued high gas prices.”
Chico Real Estate Market Comment
MARKET COMMENT
Mortgage bond prices rose last week pushing mortgage interest rates slightly lower. Rates received an initial shock higher early in the week tied to Goldman Sachs and JP Mortgage predictions for oil prices to exceed $130/barrel this summer and gas prices to hit $5/gallon. Fortunately rates eased off those highs helped by weaker than expected data. Consumer confidence, ISM Index, ADP employment, factory orders, and the employment report all failed to meet expectations and helped rates stay low. Mortgage bonds ended the week better by about 1/8 of a discount point.
The Treasury auctions will be significant this week. If foreign demand for US debt remains solid rates will likely remain low. However, eroding foreign demand could result in short term volatility.
LOOKING AHEAD
Economic
Indicator Release
Date and Time Consensus
Estimate Analysis
3-year Treasury Note Auction Tuesday,
June 7,
1:15 pm, et None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Consumer Credit Tuesday,
June 7,
3:00 pm, et $5.5b Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
10-year Treasury Note Auction Wednesday,
June 8,
1:15 pm, et None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed “Beige Book” Wednesday,
June 8,
2:00 pm, et None Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Weekly Jobless Claims Thursday,
June 9,
8:30 am, et 425k Important. An indication of employment. Higher claims may result in lower rates.
Trade Data Thursday,
June 9,
8:30 am, et $47.5b deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
30-year Treasury Bond Auction Thursday,
June 9,
1:15 pm, et None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
WEAK EMPLOYMENT
The employment report is one of the biggest, if not the biggest, data releases each month. Last week’s employment report came in mixed with the headline figures initially buoying the mortgage-backed security market and pushing rates lower. The employment situation had shown recent promise with continued job increases. Last week’s release jolted the outlook. Unemployment came in at 9.1%, higher than the expected 8.9% mark. Payrolls rose 54,000, weaker than the expected 150,000 increase. This was the smallest gain in payrolls seen in some time. In addition, there were downward revisions to the data from prior months.
One piece of the report that caused concern was the higher than expected average hourly earnings component, which rose 0.3%.
The data was initially received well by the bond market as stocks slid lower. However, mortgage bonds sold off the highs as trading progressed throughout the morning and profit taking ensued. This was a prime example of the volatility that often occurs with major data releases.
This data is not likely to be enough to cause the Fed to panic with any additional moves to stimulate the economy. However, if these employment trends continue there will be pressure for the Fed to do more.
Fannie Mae and Freddie Mac Update
Fannie Mae and Freddie Mac Update
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In September 2008, Fannie Mae and Freddie Mac — two government-sponsored enterprises (GSEs) that facilitate residential lending in the U.S. — were financially rescued by the U.S. government and placed into conservatorship with the Federal Housing Finance Agency (FHFA).
This crisis swayed Congress to gradually reduce the role of Fannie and Freddie in the U.S. housing market. The House of Representatives’ Capital Markets and Government Sponsored Enterprises Subcommittee recently approved a series of bills toward this end.
The legislation seeks to hold Fannie and Freddie to the same standards as any other mortgage market participant with regard to risk retention rules. Cumulatively, the legislation will suspend the compensation packages for executives and place all other employees on a government pay scale; reduce the size of their loan portfolios; gradually increase the fee requirements; and end the companies’ mandates to back mortgages for lower-income people. These bills will now be sent to the House Financial Services Committee in the House of Representatives.
The Treasury Department has also issued a list of recommendations for Fannie and Freddie. These include three options:
1. Limit tax payer exposure to risks in the mortgage market and relegate the government to more narrowly targeted loan programs, such as the FHA and VA.
2. Develop a “backstop mechanism” to ensure homeowners had access to credit during a crises.
3. Have a group of private companies provide guarantees on mortgage securities with the Treasury providing reinsurance on these securities.
Analysts believe comprehensive reform of the two GSEs will be years in the making. Treasury Secretary Tim Geithner said whatever plan Congress chooses, it would take between five and seven years to implement.
HUD Homes general sales conditions
HUD Homes are sold in their “as-is” condition. HUD does not warrant the condition of its properties and will not pay for the correction of defects or repairs. Since the new owner will be responsible for making needed repairs, HUD strongly urges every potential homebuyer to get a professional inspection prior to submitting an offer to purchase. Because of HUD’s as-is policy, HUD Homes can often be a great opportunity for those homebuyers in search of a “fixer-upper”. Not every HUD Home needs fixing up, but when one does, it can be a real bargain. For example, HUD’s asking price on the home reflects the appraised value in its current (“as-is”) condition, unless otherwise specified.
While HUD does not provide direct financing for the rehabilitation of REO properties, FHA does provide rehabilitation financing assistance through the 203(k) Rehabilitation Loan Program. Also, keep in mind that on most sales the buyer can request HUD to pay up to 3% of their financing and closing costs.