Mortgage rates break all records

This post comes from Marilyn Lewis of MSN Money.

Interest rates on fixed-rate mortgages broke all-time record lows, Freddie Mac said today, announcing the results of its weekly mortgage survey.

• 30-year fixed-rate mortgages: The average 30-year home loan was 3.84%. Borrowers paid an average 0.8 point (a point is 1% of the loan amount). That's down by 0.04 of a percentage point from last week. This week last year, 30-year rates averaged 4.71%.
• 15-year fixed-rate mortgages: Borrowers scored an average rate of 3.07% on 15-year loans, paying 0.7 point. That's a 0.05 drop from last week. This time last year 15-year rates averaged 3.89%.

These rates are the lowest Americans have seen "since long-term mortgages began in the 1950s," says The Associated Press. (Post continues below.)

While the rates sound terrific, remember that they're averages. The rate you are offered may differ a little or a lot. FoxBusiness explains why that might happen. (Should you refinance? Try MSN Money's calculator.)

Bidding wars

These low, low rates still aren't causing a stunning change in home sales numbers, at least nationally. Sales of new and previously owned homes fell between February and March, although sales this March were better than the year before. Writes the AP, "Analysts suspect some of that (March) weakness reflected a warm winter, which pulled sales into January and February that would normally occur later, in the spring buying season."

Pending home sales -- the record of contracts, not closed sales -- show improvement, though, reports the consistently optimistic National Association of Realtors. 

Despite the sluggishness of national numbers, a few markets are downright hot again. You may recognize some as boom markets from years past. Bidding wars are erupting over some homes for sale in cities like Seattle; Sacramento, Calif.; Reno, Nev.; San Francisco; Washington, D.C.; and Miami, writes The Wall Street Journal. The Phoenix market "is on fire," according to John Burns Real Estate Consulting.

Tight inventory -- the number of homes for sale -- is causing the increased competition at some price points in some cities. Massive purchases of foreclosures by investors have helped gobble up much of the excess. But while sales volumes are increasing, prices aren't yet showing much, if any, increase, the Journal says.

Recession effect

The recession's effect on the housing market is far from over. Two big issues remain:

• The difficulty of getting a mortgage.
• Lackluster demand caused by people doubling up instead of creating new households.

Immigration -- another piece of the demand for housing -- also is down, says The Washington Post in an article about slow demand. 

Some 2 million fewer homes are occupied today because of the recession. The Post writes:

Although the number of new households has begun to recover over the past year, its growth rate continues to lag behind its historic pace, according to Census Bureau statistics.

More than one in five adults between ages 25 and 34 live with their parents or in other "multi-generational"​ living arrangements, the highest level since the 1950s, according to the Pew Research Center.

The National Association of Home Builders attributes housing market problems less to overbuilding than to this drop in demand, the Post says.

Human vetting revived

Access to mortgage credit is a continuing problem, for the economy and for would-be homebuyers. Says MSN Real Estate: 

"People with FICO scores under 700, which is still good credit, are getting cut from the market because the government is being so tough on the banks over mortgages that went bad. And the banks are like, 'I'm not going to loan to these people anymore,'" says Paul Miller, mortgage analyst with FBR Capital Markets & Co.

Much of the difficulty comes from banks' reliance on a scientific, "rules-based" approach to screening mortgage applications.

"Servicers are huge operations that use mathematical models for decision-making. They apply the same criteria to everyone. There's no room for personal judgments," says Douglas Evanoff, vice president at the Federal Reserve Bank of Chicago, where he oversees research into banking and financial institutions.

But the pendulum is swinging, at least a little. This week Wells Fargo announced it will bring back human judgment for at least some mortgages. Human-based decision-making was largely exiled in favor of the scientific approach after the mortgage bubble burst.

American Banker reports (subscription required):

Wells is touting the new strategy, which it calls "judgment underwriting," as part of an effort to attract borrowers that may not qualify for conventional mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration. Mortgages that the San Francisco bank underwrites using these new guidelines will not be sold to the government-sponsored​ enterprises; instead, Wells will keep them in its "held for investment" portfolios.

It will take time and considerable training to get the new strategy off the ground, a Wells spokesman said.

Human vetting of loan applications is not new. Some larger banks and many community banks  have offered portfolio programs all along. Ask lenders and mortgage brokers when you're applying for a mortgage.

If your finances are strong but your mortgage application has a glitch -- maybe you're self-employed, or your credit rating was brought down for a time by medical bills or a period of unemployment -- you might benefit from this more-personal review of your application. You'll probably have to pay slightly more for a portfolio loan.

More on MSN Money:

• Today's lowest mortgage rates
• Go bankrupt, keep your home?
• Calculator:How much house can you afford?
• Estimate your credit score for free
• Should you buy a foreclosure?
• Calculator:Should you rent or buy?