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Mortgage rates fell to lowest for 10th time, 4.32 percent
U.S. mortgage rate fell to the lowest level for the tenth time in 11 weeks as yields on government debt dropped and investors concerned about the economy.
Freddie Mac (OTCBB: FMCC), a government sponsored enterprise (GSE) of the United States federal government, said Thursday that interest rates on U.S. 30-year fixed mortgage, the most widely used loan, was 4.32 percent the week ended September 2, down 0.04 percent compared to the last week. 4.32 percent is the lowest since The Federal Home Loan Mortgage Corporation (FHLMC) started tracking rates in 1971.
In term of the average on 15-year fixed loan, the rate was down 0.05 percent from the last week. There have been decline in rates since springs as investors have moved to Treasury bonds for the shake of safety, which has lowered their yields. Mortgage rates haves a connection with yields on Treasuries on mortgage-backed securities.
15-year mortgages averaged 4.54 percent, the one-year ARM 4.62, and the 5/1 ARM 4.59 percent a year earlier.
Amy Crews Cutts, Freddie Mac deputy chief economist, said in a statement that the price growth of core personal expenditures in one year kept unchanged at 1.4 percent in July.
Federal Reserve Chairman Ben Bernanke also said that inflation should remain near current readings for some time before rising slowly amid growing economy and reasonably stable inflation expectations.
Refinancing is at its highest level since May 2009. However, a wave of refinancing from borrowers appeared due to the low rates, with almost 83 percent of all new loans.
Mortgage applications increased 2.7 percent last week as investors have been seeking lower rates. Nevertheless, the rock-bottom rates could not lift the slumping real estate market up, offering a glimmer of hope for the market. It has failed to find footing in the aftermath of the expiration of popular home buyer tax credits.
It is over a decade since home sales have been at its lowest level, tumbling in recent months while home prices are forecast to trek downward again due to increasing supply of homes and mounting foreclosures. Potential home buyers are reluctant to purchases amid fragile economic growth and high unemployment rate. They may be waiting for even lower home prices.
Certainly, home sales are greatly impacted by the lowest mortgage rates in decades. However, home purchase demand remains muted, according to Diane Saatchi, senior vice president at Saunders & Associates in Bridgehampton, New York.
The second-largest U.S. mortgage finance company got mortgage rates together from lenders countrywide from Monday to Wednesday of each week to calculate the national average. There is a dramatic fluctuation in the rates even within a given day.
504: the SBAs Shining Star (Page 1 of 2)
The U.S. Small Business Ad-ministrations (SBA) loan programs have garnered much criticism over the years. Some complaints may have been warranted in the past, but these days, the SBA is different.
Increased accountability and newly implemented efficiencies are a terrific development for U.S. taxpayers and for Americas small-business owners. As we see these changes, I think industry members should work to remove the stigma that exists about certain SBA loans.
Many entrepreneurs and far too many brokers, ironically dismiss the SBA because of its more well-known 7(a) lending program. This program is most often in the news and nearly always seems to be in crisis or in need of supplemental appropriations. Whether or not the 7(a)s reputation is deserved, its negative attention has managed to tarnish other effective and lesser-known SBA programs. But 7(a)s parameters do not apply to all SBA programs, despite some brokers thinking otherwise.
In my opinion, the SBA deserves its budget more than $22 billion because of one program: the SBA 504 loan program. It is for small-business owners who want to acquire or construct their own facilities. Despite fallacies surrounding it and the SBA, this little-used program can be an important tool.
The 504 program provides small-business owners with 90 percent loan-to-cost financing for most commercial real estate projects. These loans are structured with a conventional mortgage for 50 percent of the total project cost, combined with a government-guaranteed bond for 40 percent. The remaining 10 percent is the borrowers equity and is usually half as much as traditional lenders require. This lowers the risk for small-business owners as opposed to lowering the lenders risk profile with more capital injected into the real estate.
These loans are meant to finance total project costs. The first mortgage is typically a fully amortizing 25-year term at market rates, while the second mortgage is a 20-year term but with the interest rate fixed for the entire term at below-market rates. For small-business owners, these loans and terms can provide the highest cash-on-cash return available in the commercial-mortgage industry. Still, myths about it exist.
Myth No. 1: SBA loans take too long The SBA is aware of small-business owners time and of how busy they are. Its certified development companies (the SBAs representatives on these loans) now move quickly. They often can examine borrowers underwriting documents in only 48 hours. Once lenders scan their borrowers documents, they can actually drag and drop them onto some of the certified development companys or SBAs secure servers. This technological innovation saves the time of doing overnight mail and is a huge improvement in the slow-adapting commercial-mortgage industry. If an SBA loans approval process takes more time than this, it may be that a particular lender is holding it up.
Myth No. 2: SBA loans have too much paperwork There have been great efforts to streamline the overall application process. In some cases, they can nearly match the paperwork of what any ordinary 80 percent loan-to-value conventional commercial lender would need to approve a loan. Some borrowers find this paperwork is far less than what they had to complete when they refinanced their home loan. Specialized commercial lenders have helped this along, too.