Opening Titles and Closing Remarks

Federal credit market stimulus is clearly evident when examining mortgage recordings in Monroe County in the first two months of 2009. What is also apparent are those parts of the market that are not benefiting from any government action.

The 729 total mortgages securing loans between $50,000 and $500,000 are the most in this dollar range in the first two months of any of the last seven years. Mortgages in this range tend to be overwhelmingly residential first mortgages. I believe that this increased activity is indicative of the fact that Monroe County homeowners are taking advantage of the lower interest rates resulting from various government actions that began in early December 2008. Judging from new order counts in my company, this trend is still continuing.

On the flip side, mortgages outside that range are down significantly. Mortgages under $50,000 fell 46 percent from year ago levels (195 then, 104 now). These mortgages historically have been primarily home equity credit lines or piggy back purchase seconds. This segment has steadily declined during the last two years. Dollar value of loans over $500,000 (primarily jumbo and commercial) declined over 60 percent from year ago levels (after factoring out one $40 million mortgage securing school bonds). Are the declines in these two market segments reflective of tighter credit standards for loans deemed more risky than high equity first mortgages? I think so.

Monroe County benefits from the lowest unemployment rate in Indiana. The community's primary employers are Indiana University, the health care industry and medical supply industry. All three are not immediately affected by the state of the national economy.

The market is not flooded with vacant foreclosed homes and good values exist in all price ranges. Property values in Monroe County are also faring better than most other places. The worst that can be said in this regard is that values are not current increasing. The Office of Federal Housing Oversight ranks Bloomington for 2008 as the 72^nd best market out of 292 nationally with an appreciation rate of 0.64 percent during last year.

Next month I'll look at the first quarter numbers for a variety of measurements including recorded deeds and foreclosures. If you'd like to be added to our mailing list and receive a complimentary copy of our monthly statistical package, please contact me or Tammy Walker through the link to our company home page.

Tuesday I attend a presentation by representatives of Federal Home Loan Mortgage Corporation (Freddie) in which they discussed their new Relief Refi program. This is program is a big step in the right direction that will help the many families that are living responsibly within their means and making their mortgage payments.

I've posted here before lamenting the fact that many mortgage borrowers are prevented from taking advantage of the current low interest rates because they no longer qualify for the same loan someone made them two or three years ago. In the brave new world of tightened loan underwriting guidelines their credit scores are no longer good enough or their property value has declined to less than they owe on their mortgage.  The Relief Refi program will help in many of these situations.

The program is based upon the common sense principal that if people are making their payments at 6 ½ percent interest they probably will make them at 5 or 5 ½ percent interest as well. In most instances, the lender will not need to re-underwrite the loan. One of the few requirements of the program is that during the previous twelve months, the borrower must be current on all their mortgage payments.

The property value issue is addressed by Freddie's willingness to accept the loan up to 105% of the valuation indicated by their automated appraisal tool. Closing costs and pre-paids may be added on top of the loan up to $2500. Cash-out refinances are not part of this program and all subordinate liens must be re-subordinated.

The program is Freddie Mac's contribution to President Obama's Making Home Affordable plan announced a couple of weeks ago. It is for any loan that is owned by Freddie and is serviced (who the payments are made to) by the lender who sold it to Freddie. You can read the full press release here.

Federal National Mortgage Association (Fannie) also announced two programs of their own. One for existing lenders and one for lenders working to refinance loans made originally through another lender. George Suoto summarized their programs quite well here. Fannie's 18 page announcement can be found here.

Fannie and Freddie both require that eligible loans be closed on or before June 10, 2009 (see correction below) I encourage homeowners to contact their mortgage company to see if their loan qualifies.

By the way, Claire mentioned to me that you'll want to be at the front of this line. If these programs are as popular as we think they will be, the entire system is going to be swamped by the deadline. 

Because Freddie and Fannie are now essentially owned by the federal government, the Relief Refi program is in actuality the way for us average Joes to get a piece of the stimulus package. So be patriotic. Do your part to help the economy recover. Take advantage of the Relief Refi and then go out and spend your monthly savings. Seriously. We'll all benefit in the end. 

Correction March 14, 2009. I'm having one of those moments wondering what the heck I was looking at and I'm feeling kind of stupid. The sunset dates on these programs are June 10, 2010 - not 2009. I apologize for the misinformation. So I'm certain that there's enough time and capacity in the system to accommodate most borrowers. At least I can take comfort that anyone acting on my misinformation will only save money sooner, than later.