[MR77]

I bought back in August because I was certain the market couldnt drop any lower. WRONG. Should have waited, but I was so sick of renting that I'm still glad I made the move.

Prices will not shoot back up overnight, so if you are worried about it just sit and wait for home prices to start climbing again. They will still be low enough for you to jump in. If you have to resign a lease, see if you can do a 3 or 6 month lease as opposed to a year.

GOOD LUCK!!!!

[VegasChick]

What do you guys think about the 4.5% mortgage rumor? Not a chance?

[Daddys///M3]

Originally Posted by VegasChick

What do you guys think about the 4.5% mortgage rumor? Not a chance?

Actually there could be a very good chance, but not for the same reasons that you have been hearing about. I will try to explain but without a minimal understanding of the mortgage bond market it may be difficult to understand so if there are any questions or anyone needs clarification let me know and I will try to explain the best I can.

The leak yesterday talked about a plan for the Treasury to buy artificially low mortgage bonds at 4.5% (essentially price fixing but that is another discussion) which would allow banks to extend rates ranging from 4.5% to 5% or so depending on credit, loan to value, loan amount, loan type, etc.

Over the last couple of weeks the Fannie Mae 5.0 (5%) bond has been trading at levels between 100-16 and 100-29 or so, which is why you have seen rates in the mid 5% range for excellent credit and low loan to value borrowers. This bond activity was spurred by the Treasury's announcement that they were going to buy upwards of $600 billion of mortgage bonds to reintroduce some much needed liquidity into the market. Just like the negativity has been, this bit of positive news has been sort of a self fulfilling prophecy, or has had a domino effect if you will. Due to the Treasury's announcement, investors started buying mortgage bonds (nothing like a government guarantee to make an investor feel warm and fuzzy). As investors buy mortgage bonds, rates go down spurring activity and in turn make mortgage bonds more attractive and more investors buy into them, bringing rates down, and the dance goes on.

As of this morning, the FNMA 4.5 is trading at 100-07 and the FNMA 5.0 is trading at 101-06. You won't see 4.5% rates yet from this, as it would not be profitable to anyone to start delivering that rate until there was at least 0-50 or so to play with. I have seen some very aggresive lenders price out at 4.875% this morning, with excellent credit and lower loan to values. I truly believe that once the TARP money actually starts to flow into the mortgage bond market, we will see rates come down some more although I could not venture a guess as to how much.

[VegasChick]

Thanks! Great information.. Is it your best guess rates will continue to drop in the next few months?

[Daddys///M3]

I do believe so if the market is allowed to operate as normal. If there is an official announcement from the Treasury regarding the plan to price fix mortgage bonds then we may see mortgage application volume drop due to everyone hopping back on the fence and waiting for 4.5% rates, in which case bond investors may sell off bringing rates back up. Of course I thought that the story leaked yesterday would hurt us. It may still, given some time.

Please keep in mind that I am certainly no expert in the mortgage bond market. I do try and keep myself educated as it really is my bread and butter, but even the best educated experts (especially in this volatile environment) can't make any solid predictions. My guesses are based on the data and how I feel or think the market will react to the data, so please don't take it as the gospel.

[VegasChick]

Thanks Daddys. Definitely just getting some opinions.. I would be an idiot to base my home buying decisions around some strangers on the internet, but I do like to get some outside opinions to supplement what I'm hearing from my own mortgage officer, articles, the news, etc.

[nvrdun]

What is a "short sale" ? Ive seen it in some listings, but do not fully understand what it means.

I am also looking to buy around Mar-May time frame so this thread interests me greatly.

[sheriwx]

What's a REPO? (please forgive my ignorance)

[VegasChick]

In layman's terms:

Short sale: The owner is trying to sell the house for less than what they owe on the mortgage (ie a person has $500k left on their mortgage balance and is trying to sell the house for $400k). The bank must approve this, and it takes approximately 30-90 days for the bank approval process. I was told by my realtor approx 10% of these actually go through.

REPO: Bank reposession/foreclosure.

[olecapt]

Definitions -

Short or short sale. The home is being sold for less than the mortgage amount owed on it. To happen the lender must agree to take less than the lender is owed. Sometimes it is much less...some homes in Vegas are now selling at 50% and less of the mortgage on them.

Note that the lender must agree to a short and is not forced to do so. If the lender refuses the home generally ends up foreclosed.

REPO - short for REPOSSESSED, The house has been foreclosed or otherwise returned to the ownership of the mortgage holder. The Realtor community uses REPO almost exclusively. Note that it has a large overlap with REO...which is Real Estate Owned by a lender or someone else in due course.