Interesting chart from Mortgage News Daily:

Each line represents a different 30 year fixed mortgage note rate. The numbers on the right vertical axis are the origination closing costs, as a percentage of your loan amount, that a borrower would be required to pay in order to close on that note rate. If the note rate graph line is below the 0.00% marker, the consumer may potentially receive closing cost help from their lender in the form of a lender credits. If the note rate line is above the 0.00% marker, the consumer should expect to pay additional points at the closing table to cover permanent buydown costs and origination fees.

Read the complete article, and note the disclaimer, here.

Last Thursday the U.S. House of Representatives passed the FHA Reform Act, establishing some new Federal Housing Administration (FHA) regulations and authorities. The bill will strengthen FHA’s capital base by raising mortgage insurance premiums, and will crack down on FHA-approved lenders.

According to a statement released by House Democrats, the reforms outlined in the bill will “rebuild the American dream of homeownership,” while reducing federal spending by $2.5 billion over the next five years and holding FHA accountable.

The FHA Reform Act is supported by a wide coalition of organizations, including the National Association of Realtors, Mortgage Bankers Association, and National Association of Home Builders.

Robert E. Story, Jr., CMB, chairman of the Mortgage Bankers Association, commented, “The reforms contained in this bill will help stabilize FHA’s finances by allowing the agency to raise its annual premiums and better take corrective action against lenders who are putting the program at risk.

Construction and manufacturing sectors lost 5,500 jobs from February 2009 to February 2010, according to Texas Workforce Commission statistics reported in the Austin American-Statesman. The leisure and hospitality sector gained 5,000 jobs over the same period. The statewide unemployment rate was 8.2 percent last month, holding steady, a sign that the labor market has bottomed out. Austin and Texas are starting to feel some of the economic pain of the recession.

Meanwhile the Obama Administration is revising its plan to prevent foreclosures. Borrowers will get help in three ways: Jobless homeowners can get a three- to six-month break on their mortgage payments. Banks will get financial incentives to reduce mortgage balances for underwater borrowers. And lenders can offer refinanced loans backed by the Federal Housing Administration to these borrowers.

There’s a specific program for unemployed homeowners:

Borrowers will have three to six months in which they’ll have to spend no more than 31 percent of their monthly income on their mortgages. If you do find a job during that time, you will be evaluated for a loan modification that could permanently reduce your payments.

The story links to the National Foreclosure Mitigation Counseling Program.

If you are struggling to make your monthly mortgage payments you should contact a HUD-approved housing counseling agency for free advice and help working with your mortgage servicer. Trained professionals are available to help you explore loan modification or refinance options, including those offered through the Making Home Affordable program.

That site has a foreclosure counselor lookup.

If you’re in danger of foreclosure, one possible remedy is a short sale, where the mortgage lender agrees to accept less than is owed. These are complex transactions, but new measures that go into effect next April might make them easier. Meanwhile it remains a slow process, and lenders prefer loan modifications to short sales. [Link]

The new guidelines “focus on a range of elements in the short sale process. They suggest,
for instance, that lenders offer second-lien holders up to $3,000 of
the short sale proceeds, with Treasury reimbursing lenders up to $1,000
for doing so.”

Under the guidelines, homeowners who are considering a short sale
are encouraged to speak with their lenders early in the process about
an acceptable sales price for the house, rather than simply contacting
a lender when a buyer has made an offer.

And owners who complete a short sale will receive $1,500 from the federal government for relocation costs.

Selling a home below the current moertage amount create a “short” sale. This minimizes the damage to the seller’s credit and minimizes the financial loss of the lender, as well as minimizing the fall of the local market prices. Good for all, right? Except it takes a long time, and many buyers can’t or won’t wait.

The new Treasury Department rules may improve the situation for some, but in most cases don’t go far enough to have real impact, such as the $1,000 offer to lenders to cover their admin costs, or the $3,000 offer to cover losses of second mortgages, which can be hundreds of thousands of dollars.

It will be some help for pricnipal residences, delinquent loans, and loans made before 2009.

“Thirty-year fixed-rate home mortgages averaged 4.78% during the week of
Nov. 23, an all-time low, according to Freddie Mac’s weekly surveys.” [Link]

This is good news for home buyers and potential sellers, especially given the extension of tax incentives. If you’re thinking about buying or selling, now might be the best time! Prices are low now, too, and there are foreclosures available on the market that are really good buys. Besides, experts say every home sale adds over $40,000 to the economy.

The way I understand it, the Fannie Mae/Freddie Mac decline would cripple the housing industry if left to flounder on its own. 40% loss in share value in three days – OMG! If banks and credit unions are the only lenders left standing after the air clears – interest rates will be much higher, and only the best applications for credit will be approved, meaning the vast majority of Americans will be unable to finance a home. (Business Week compares Fannie and Freddie to fast food – which is the better buy?)

PMI Mortgage Insurance Company has released its Winter 2008 Risk Index. Good news: Austin (along with Houston, Dallas, Fort Worth, and San Antonio) is among the lowest-risk MSAs. The highest were Riverside, CA (94 percent), Las Vegas (89 percent), and Phoenix (83 percent).

Is George Bush trying to bolster his falling ratings, support major investors in mortgage securities, or do the right thing?

If he intends to do the right thing by all the homeowners out there who wanted “a piece of the American Pie,” he should broaden his plan for a bailout. It could be a lifesaver for those few – some say only 25% of the 10% locally who bought with subprime mortgages – who will be affected. Many or most of the others are still caught in the mess. Today a loan officer relayed the story of someone whose loan adjusts by $700 a month, beginning this month. Because his adjustment is in December instead of January, he’s ineligible for the rate freeze.

Another person was late on only one payment in the last twelve months, but he in ineligible because of that one payment.

What is needed is a broad plan for all homeowners, because the overall effects will spread into the economy as a whole and that will have long term consequences that will affect everyone: homeowners, investors, renters, and the general public.

We are lucky to be living in Austin. We had relatively few subprime loans here, our real estate market is healthy with stable or slowly rising prices, and the local job market continues its steady growth.

Hate the economy? Having trouble making mortgage payments? Our Texas Attorney General, Greg Abbott, recommends calling the mortgage company before you miss a payment, or when you first start falling behind.

Lenders have various options that may help you either temporarily or long term. There are also counseling organizations, but be sure to find one that is recommended by Department of Housing and Urban Development (HUD).

There are also lots of scammers, especially this year. Two nonprofit groups have been especially helpful, Home Ownership Preservation Foundation and Neighbor Works America. And, of course, you can always contact me. Remember, you don’t need to go it alone. Get help early.

Read more: Mortgage Fraud Blog; How Mortgage Fraud Functions