Mortgage Informer

Current mortgage rates are finally at about the same level as a year ago. All year we’ve been able to say, no matter where mortgage rates have been, that rates are well below levels of a year ago. Finally, we’ll have to stop saying this as 1 year ago 30 year fixed mortgage rates averaged 5.12%. Today’s mortgage rates average 4.99%, according to Freddie Mac. Reality is 30 year fixed mortgage are available much lower than that. Par rates are the lowest available mortgage rates that do not require additional points and fees known as a buy down to be paid. 30 year fixed mortgage rates at par are as low as 4.75% today, their lowest level in weeks but still up from all time record lows of a few months ago.

After rising steadily just before the end of last year in what some feared was the start of a continuing upward trend, interest rates on home loans have dropped for three consecutive weeks in January, according to reports from both Freddie Mac and Bankrate Thursday.

For the week ending January 21, 2010, Freddie Mac reported that the 30-year fixed-rate mortgage (FRM) averaged 4.99 percent (0.7 point), down from the previous week when it was 5.06 percent. Last year at this time, the 30-year FRM averaged 5.12 percent in the GSE’s study.

Wall Street firms are loosening terms of their lending to mortgage-bond investors as markets heal, an RBS Securities Inc. executive said.

Repurchase agreement, or repo, lending against the debt has expanded so much since freezing in late 2008 that some banks now offer as much as 10-to-1 leverage and terms as long as one year on certain securities backed by prime jumbo-home loans, said Scott Eichel, the Royal Bank of Scotland unit’s global co-head of asset- and mortgage-backed securities.

“It’s getting very competitive,” Eichel said in a Jan. 14 interview at Bloomberg headquarters in New York. “We’re at the point where I don’t think we would feel comfortable if things go too much further.”

Bank of America Corp. (BAC) said it finished processing and underwriting more than 20,000 additional mortgage modifications under the government’s Home Affordable Modification Program to help prevent foreclosures during the housing crisis.

Nearly 3,200 applicants have actually completed the process.

Jack Schakett, credit loss mitigation strategies executive of Bank of America Home Loans, said the U.S. government’s decision to extend the deadline to submit documentation to convert to completed modifications from trial ones has allowed mortgage servicers to “significantly increase the number of modifications headed toward completion.” The bank expects the conversion rate to continue to rise.

As many homeowners find their property values underwater, some are finding relief by deliberately walking away from their mortgages and choosing to pay other debts first. While some may consider voluntarily defaulting on a mortgage as unethical, some experts argue that walking away from a property that is significantly underwater is a smart business decision that can assist homeowners in retaking control of their financial lives.

A growing number of homeowners are doing what was once unthinkable – strategically walking away from mortgages, and the trend is showing huge signs of increasing with the approval of academia.

American International Group Inc.’s mortgage insurance unit removed 45 geographic areas from its riskiest underwriting category, saying housing markets in those regions are improving.

The mortgage insurer, United Guaranty Corp., removed the locations from its list of markets where it says borrowers are more likely to default on loans, the Greensboro, North Carolina- based unit said yesterday on its Web site. United Guaranty also added two areas to the list of declining markets where it uses tighter underwriting standards on its policies.

You can almost hear the collective sigh of relief emanating from the Federal Reserve Board in Washington, and the nearby offices of Alan Greenspan, to Fed chief Ben Bernanke’s elegant, econometric argument that low interest rates didn’t cause the housing bubble.

The Fed, in other words, is guilty of one count of regulatory oversight failure. As to the charge of using interest-rate policy to inflate the housing bubble that burst and destabilized the entire financial system, the defendant is not guilty.