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Mortgage rates break all records

Meanwhile, bidding wars are erupting in some cities, and human judgment makes a comeback as lenders look for ways to safely approve more mortgages.

By MSN Money Partner May 3, 2012 3:57PM

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

Image: Miniature home on sheet of percent signs© Comstock/Getty ImagesThese 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:


May 3, 2012 10:24PM


I have recently moved to Las Vegas from Florida. My partner and I have purchased a home and are in the process of obtaining a mortgage. During the process a credit report was pulled on my partner's credit. Having always had a perfect credit score, JUST UNDER 800, we did not see any problems. Our mortgage broker called and informed us, that his credit score had dropped 122 points due to a dispute with ATT. The history of the account is as follows. Final bill was paid in full. A month later a $50.00 bill is received. ATT was called for an explanation of the bill. After many hours on the phone, ATT could not explain what the charge was for. ATT stated if not paid, the bill would be sent to collections. The bill was paid even though ATT could provide no explanation for what the $50.00 was for. It was paid, in an attempt to protect my credit. A month later ATT sent a refund check for the $50.00. The next month, we received a collection notice, for the same $50.00 bill and were advised that it need to paid or a letter was need to dispute the bill. A letter was sent to the collection agency explaining the circumstances and requesting and explanation of the charges. No further correspondence was received from the collection agency. When we received the notice about the credit score dropping the collection company was called and they informed us the case was under review and they could do nothing about the credit score. They stated they could remove the dispute on the credit reporting agency report, if the bill was paid in full. As a retired law enforcement officer, can you please advise me why this does not meet the criteria for the crime of EXTORTION. ATT is basically saying, we can send you a bill, we do not have to explain what it is for, but if you don’t pay us, we will ruin your credit. The citizens of the United States deserve protection from these corporate predators.


May 3, 2012 7:54PM
Who cares.  Until the ****es in Washington figure out that we could influx billions of dollars into the economy simply  by letting people who are upside down and making their payments regularly (not deadbeats) refinance to a lower rate, we are spinning our wheels.  There are tons of people who can afford to and are making their payments as promised.

Obama finally got this one right for those 60% who are owned by Freddie or Fannie.  The rest of us are screwed!  I am over $250K upside down (more than half the value).  I would love to refinance, but until someone looks at those of us who ultimately got screwed by lenders, appraisers, etc... by overvaluing the market and then gouging us in the back end... I can't!  I have two optons... 1) Hang on to something that will never get back it's value or 2)walk away, screwing my credit up... and screwing an investor, my neighbors and anyone else who happens to be involved.

I have already taken a 10% cut at work and have tightened my belt... attempted a loan modification and been denied (because I have $250 available at the end of the month... Have they seen gas and food prices lately), and am still hanging on by a thread.

Get a fricking clue you idiot elected politiicians who really have no idea who they serve other than themselves.
May 3, 2012 9:20PM
The wonderful government programs that Mr. Obama pats himself on the back about do not benefit those who have tried to do the right thing. Our house is underwater by maybe $100K. I don't want a reduction in the amount I owe, just a fixed rate. When I call my lender and ask about their participation in a particular program, I am always told I don't qualify or we aren't participating in that program, etc. When you ask didn't your bank get bailout $$? They give you attitude and say "Yes" (as if to what!). The only way the bank wants to help is by asking for another $50K. I don't have that sitting around. It is extremely frustrating to know that the ppl that shouldn't have qualified in the first place are getting bailed out and those that continue to make timely payments and "do the right thing" get the short end of the stick.
May 3, 2012 7:55PM
Before every one jumps on the bandwagon of how great interest rates are, you need to think of the downside.  Low interest rates for loans also mean low returns on the basic investments most Americans use, such as CDs, savings accounts, money market funds.  If you think the Fed is keeping interest rates low to help the economy, take a good look at it.  Remember, if it sounds too good to be true, it is.
May 3, 2012 9:34PM
My situation exactly, only my loss is about $150k.  Bank holding mortgage is not going to help me or my neighbors (they financed the whole project, over 150 loans).   Some relief for those of us making payments and remaining in our homes in Calif central valley would be nice,  Prioperty values dropped 50-70% in 2 years!
May 3, 2012 8:42PM
I got 4.0% with 700 credit rating (and only 6 years of credit history) with 10% down. Not sure where or why you are having those problems grey, try another bank IMO.
May 3, 2012 10:29PM
Parents are teaching their children as we speak not to ever buy a home, banks are Evil..
May 3, 2012 8:23PM
this is such propoganda........election year.......just try to get those rates and see how far you get....we have a 750 credit rating, a low ratio, good employment history, putting 20 percent down and we cannot get those rates...the banks are not turning the money loose at those rates......we were told that you had to have a credit rating of 790 or higher and at least 40 to 50% down to qualify for those rates. Yes, it has been 10 years since we have attempted to acquire a loan.....ok, things have changed, but it is rediculas.......And lord, the hoops we have to jump through to even get 4.5%..... we have missed our closing date twice because of last minute "must haves" we are furious, and it makes me even more irritated that the damn government thinks the american people are falling for this crap. We have now hired an attorney to finish this circus called getting a home loan.....guess who the prospective lender is????? 
May 4, 2012 6:52PM
everyone should know by now, doing things honorably is not the american way. our government wants to take care misfits, school and house illegal's as well as arm and feed our enemies, cause is the moral thing to do, help the helpless. so many have come here from other lands (so someone could get their votes), most of them (not all) did not earn the right to be my country man. yet they are getting all the kick backs they could ask for. letting a 80 year old lady from wherever become an american because her son/daughter got a green card morally right but she starts collecting SS and other benefits, several families in a single home all collecting. though they never contributed to america, not one dime. still comes here and has a steady income. (the income of course comes from us and pays for their home. whatever extra they have gets sent back to whatever country to help that economy). if you disagree with this moral obligation then you are evil. that is what america has become, bail everyone. as long as some are doing the honorable thing it will work out....there are too many poor people for welfare to fail and far too many Chinese people in china that need jobs (among many other nations), the honorable people must keep paying up, its the american way.
May 4, 2012 3:18AM

bo and his buddies found a new low rate.fat chance anyone will qualify.

May 3, 2012 11:04PM
the fed is giving the banks money at near zero interest rate and the tax payers are paying for this.  We will all pay for this soon and it will not be good for the country! Thanks Ben and Obama for bankrupting us.
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