The Debt Ceiling! The Debt Ceiling! Is the Sky Really Falling or Just Another Chicken Little?
Categories: Finance, Hoboken Condos
by William Kumpf
If you have been watching anything from CNN to the Today Show, each day we seem to be moving closer to an invisible cliff on August 2nd at which point we are all supposed to hold our breath, hug our loved ones and jump and hope the world as we know it doesn’t come to an abrupt end.
Should we be worried? Think NFL lock out. It’s usually in the final hour, but a deal will get done, as it has in the past, to extend the debt ceiling. So what does this mean for homeowners and homebuyers? Given that bond pricing (and interest rates) have held steady or improved throughout this “crisis”, the market is betting the debt deal gets done too. Bottom line for homeowners, with a weak labor market and sluggish economy we don’t see a catalyst for rates to go higher.
The Bigger Issue – Loan Limit Changes
Of bigger concern for homeowners and homebuyers is the scheduled drop in the conforming loan limits at Fannie Mae, Freddie Mac and the FHA. The current $729,750 loan limit will be reduced to $625,000. Nationally, this affects only 5% of homes, but the percentage is far higher in certain local markets like the New York metro area. While we all love to worry about what the lowest rate is and where to find it, rates across nearly every loan program are still excellent.
As of today, a new buyer can borrow $417,000 for 30-year fixed mortgage at 4.375% and at 2.750% for a 5/1 ARM. Bottom line, that’s cheap! All the talk we hear about debt ceilings has a lot more impact on consumer confidence than interest rates. The take away is in complicated markets (like this one), don’t freeze. Now more than ever, it is critical that you engage a professional. Use the best realtors and mortgage brokers available to ensure you are getting the best deal for your home.
William H. Kumpf has 20 years experience in the financial markets. He has worked as a mortgage banker/broker for the past decade and specializes in helping clients (be it first time buyers or experienced investors) integrate mortgage planning in to their financial goals. William is also a Certified Mortgage Planning Specialist, CMPS and is Vice President of Lending with NorthStar Funding on Hudson Street in Hoboken, NJ. He can be reached at wkumpf@nshomefunding.com
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20% Down Required to Buy in Hoboken?
Categories: Finance, For Buyers, Hoboken Condos
Here is a message from the National Association of Realtors:
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I am not so sure that requiring 20% down is a bad idea. Is it bad for realtors and the real estate business? Sure. But there are way too many realtors out there today and anything that thins the ranks so that only the competent ones survive is a fantastic thing, in my opinion. Is it bad for the economy? How can anyone look at the credit crisis of ‘08 and not realize that risky lending was a huge component of the cause. Of course, the banks were at fault, and the rating agencies and mortgage lenders, too. Yet this sense of entitlement to buy a home even when you can’t afford it does not sit well with me. What do you all think?
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Half of All US Mortgages Underwater By 2011?
Categories: Finance
Deutsche Bank Expects the Worst
A recent article on HousingWire, a blog for the mortgage market, states that Deutsche Bank expects that due to continued declines in home values, 48% of all mortgages in the United States will be under water by the first quarter of 2011 for a total of 25 million homes worth less than the value of the underlying mortgage. Deutsche expects that a bigger number of prime conforming and jumbo mortgages will be part of the mix. 
Of course, this brings up the subject of “strategic default”, or those borrowers who simply choose to walk away from their mortgage even though they might be able to make their payments. While some borrowers resist strategic default on moral and social grounds, it seems that strategic defaults are higher in the 11 states that are “non-recourse”, that is they do not provide for the lender to go after the borrowers’ other assets after defaulting. New Jersey is a recourse state.
For more good news, Fannie Mae’s losses reached $1.2 billion in the 2nd quarter of this year, bringing the total U.S. Treasury funding to $84.6 billion. Fannie said it “does not expect to earn profits in excess of its annual dividend obligation to Treasury for the indefinite future.” No kidding.
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