Experts predict that interest rates will either increase or stay the same in the coming weeks. As rates increase it will cost buyers more money for the same house, not good for buyers. As rates increase fewer buyers will be able to qualify, not good for sellers.
In addition, lending guidelines continue to tighten. This reduces the pool of potential buyers which is also not good for buyers or sellers.
Nov. 18, 2009 (Bankrate.com)
Will rates rise or remain relatively unchanged?
Industry experts and analysts provide their insights.
- 0% of respondents expect rates to fall in the coming weeks
- 45% predict a further increase in mortgage rates while the remaining
- 55% forethat mortgage rates will remain more or less unchanged
FHA Reserves Fall Far Below Minimum Required By HUD
Nov. 14, 2009 (Wall Street Journal)
The Federal Housing Administration's capital reserves have fallen to razor-thin levels, increasing the likelihood the agency will eventually require a taxpayer bailout from Congress, and adding fuel to the debate about how much support the U.S. should provide to the mortgage market.
The FHA has said for months that its reserves for unexpected loan losses would fall short of the required 2% level by this fall. But an audit of the FHA released Thursday showed that reserves have been depleted much faster than the agency and analysts had expected.
The FHA doesn't make loans but insures lenders against defaults on mortgages that meet standards set by the agency. The volume of loans insured by the agency jumped 75% in the 2009 fiscal year, which ended Sept. 30, as lenders shied away from risk and as policy makers used the agency to help jump-start the ailing housing market. During the second quarter, the FHA backed nearly half of all mortgages made to first-time home buyers, and today it accounts for around half of all new home loans in some of the nation's hardest-hit housing markets.
The FHA's rising losses reveal one of the hidden costs of the U.S. government's extraordinary efforts to rescue the housing market, raising questions about how much more support the U.S. should give to the mortgage market. A sharp pullback by the FHA could undo recent stabilization in the housing market, but the agency's outsize role in the mortgage market could make it harder to attract private lenders back to the market.
Even if the FHA doesn't ask Congress for money, the agency probably will need to raise the insurance premiums it collects from borrowers. Officials said a final decision on premiums hadn't been made.
The FHA has been particularly exposed to the economic downturn, because it allows borrowers to finance purchases with down payments as low as 3.5%. In a declining housing market, that means borrowers could soon end up owing more than their homes are worth, and raises the risk of default when borrowers face job loss or other hardships. More than half of all FHA-insured loans outstanding had an initial loan-to-value of 95% or more.
Rep. Scott Garrett (R., N.J.) introduced a bill last month that would raise minimum down payments to 5%, something that the agency opposes. "Others are beginning to see that this could be the next major bailout," he said.