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March 2009
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Mortgage Rates Decline as Refinance Applications Rise

Low mortgage rates continue to stimulate refinancing activity and the Obama administration hopes to encourage more first time buyers to seek financing to jump-start the struggling housing markets. Mortgage refinance applications jumped last week, as low mortgage interest rates fueled the increased refinance activity. The Mortgage Bankers Association said Wednesday its weekly application index climbed 21.2 % for the week ended March 13.

KMG Publisher, Jason Cardiff told Mortgage Related News that he anticipates that the FHA mortgage rates could decline to 4.5% or even 4.25%. Cardiff said, “Obama is serious about reviving the cash flow for homeowners on Main St. and the Federal Reserve made another move to pump more blood back into the housing sector.”

The index was 876.9, up from 723.4 a week earlier, the trade group said. Almost 73% of mortgage applications came from borrowers seeking to mortgage refinance loans at reduced interest rates, not home buyers. The lending survey provides a snapshot of mortgage lending activity involving mortgage bankers, commercial banks and thrifts. It covers about half of all new residential home loans made each week. An index value of 100 is equal to the application volume on March 16, 1990, the first week the association tracked it.

Mortgage Interest Rates Drop

Mortgage interest rates dropped based on news that the Federal Reserve has bought a total of $217 billion in securities that were mortgage backed, according to market researcher Wrightson ICAP . The Federal Reserve in New York jumped into that market and started buying debt sold off by the big mortgage finance companies that included Fannie Mae, in January.

The Federal Reserve in New York jumped into that market and started buying debt sold off by the big mortgage finance companies that included Fannie Mae, in January.  It also started buying the mortgage-backed securities bundled by the agencies.

Both steps positioned the Fed as buyer in secondary mortgage markets that had seized up but are vital to enabling lenders to make new home loans. Mortgage lenders sell many of their loans to institutional investors, and higher rates charged by these investors to hold pooled bad credit mortgages make it harder for originators to offer lower rates on new mortgage loans. Conventional and FHA mortgage rates were both slightly lower than the previous week.

In a sign that the purchases are driving down rates and encouraging private investors to also step in, the gap’s dropped in just a few months between Treasuries and the interest rates that the agencies and mortgage-backed securities have to carry to make them attractive. Yields on mortgage-backed debt dropped to 0.87 of a percentage point more than Treasuries, down from 1.90 points in December, and are near the lowest seen since late in 2007, according to a Merrill Lynch index. Request mortgage rate updates for home financing with Fannie Mae, Freddie Mac and FHA interest rate updates online.

Mortgage Rates Holding Steady

The 30-year fixed rate rests at 5.41% as President Obama unveils foreclosure prevention program.

o Current Mortgage Rates

o 30 yr fixed mortgage5.17%

o 15 yr fixed mortgage4.78%

o 30 yr fixed jumbo mortgage6.92%

o 5/1 ARM 4.80%

o 5/1 jumbo ARM 5.33%

Mortgage rates remained flat last week, as President Obama unveiled a $75 billion plan to help prevent foreclosures. The average 30-year fixed mortgage stayed constant at 5.41% for the week ended March 4, according to

The average jumbo 30-year fixed rate reached the lowest level in nearly two years, slipping to 6.77% from 6.87%. The average 15-year fixed rate mortgage ticked up to 4.94% from 4.93%.

Adjustable rate home loans fell, with the 1-year ARM pulling back to 5.43 from 5.58%; the 5/1 adjustable-rate mortgage decreasing to 5.39% from 5.40%.

Mortgage rates are continuing their sideways movement, though they may tilt higher as long-term concern grows regarding how the government will manage its growing budget deficit, according to Weiss Research analyst Mike Larson. “Mortgage interest rates are moving sideways with an upward bias. There are some concerns for how we’ll pay for the stimulus and everything else. And despite the dismal economic news the market is getting, there’s some concern about supply overshadowing that, and that’s impacting bond prices,” Larson said.

President Obama’s $75 billion foreclosure prevention program went into effect Wednesday. The Homeowner Affordability and Stability Plan will help more homeowners refinance into new, low-interest rates and it provides incentives to mortgage lenders and servicing companies to restructure mortgage balances and renegotiate mortgage rates.