Home loan requests climb 2.9% last week as interest rates fall

Home mortgage applications rose 2.9% during the week ending May 9, according to trade group Mortgage Bankers Association's weekly application survey.

Finally good news: The MBA's application index increased to 674.4 during that week, compared with 655.4 one week earlier.

Refinance level increased 6.5% during the week, while purchase volume fell 0.7%. The refinance volume accounted for 48.7% of total mortgage requests during the week ending May 9.

The MBA's application index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume obtained on March 16, 1990, the first week the MBA tracked application volume. A level of 674.4 means mortgage application activity is 6.744 times higher than it was when the MBA began tracking the data.

The MBA's application index provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all home retail mortgage originations each week.

The application volume rose a little as interest rates declined during the week. The average rate for a traditional, 30-year fixed-rate mortgage fell to 5.82% from 5.91% the previous week.

The 15-year fixed-rate mortgage, a popular option for refinancing a loan, fell to 5.38% from 5.49%.

The average interest rate for a one-year adjustable-rate mortgage fell to 6.6% from 6.77%.

The worst part of the subprime crisis could be history!

The nastiest part of the subprime crisis, which has prompted banks to tighten credit and led the U.S. Federal Reserve (Fed) to come to the rescue of Bear Stearns, could be history if we rely on what the short-term borrowing rates is showing us.

The difference between the yield of treasury bills of three months and the rate of loans denominated in U.S. dollars in London, an indication of credit risk, has narrowed by 7 basis points to 0.93 basis points, the smallest gap since February 25 last. This gap had risen to 2 percentage points on March 19.

"It indicates that at the very least, the worst is past," said Theodore Ake, head of trading in treasury bills at Mizuho Securities USA in New York, one of 20 brokers doing business in the primary market and trading directly with the Fed.

"There was a lot of panic integrated into these transactions, and it will continue to unwind, he adds. There has been a massive movement towards quality "

Ben S. Bernanke, Fed chairman, supports confidence in the credit markets after cutting interest rates seven times since last September, supported the takeover of Bear Stearns and injected over 900 billions US in the financial system.

These measures have helped to ease disruptions while there was loss and impairment losses related to mortgage-backed securities and loans disclosed by banks to the tune of 329 billion U.S. dollars.

Mr. Bernanke has reduced the target rate loans a day between banks by 3.25 percentage points since last September, including two cuts by three quarters of a point this year.

The Central bank has provided U.S. $ 29 billion of funding to ensure that JP Morgan Chase buys Bear Stearns. Loans were also offered to brokerage houses as part of the largest credit expansion since the Great Depression.

1 new rule for home buyers

My wife can't keep a secret!!!

It’s written with large letters, but people don’t seem to be able to read it: The house you purchase today will more than likely be worth less next year (ouch).

That could get you thinking about trying to time your purchase with the bottom of the curve. Resist. It's harder to do than you think, and right now... is the best buyers have had it in two decades, with inventories up and mortgage rates low.

Pace yourself, find the perfect place and make a super hard bargain: Pay no attention to the seller's asking price and bid over 10% below what comparable properties are selling for. If the seller complains, just move on.

Remember that if you're selling too, your home could sit. So make sure you sell before you buy, home prices are et their lowest now.

Real estate seizures: The Fed's chairman asks Congress to react

The chairman of the U.S. Federal Reserve Ben Bernanke warns against the dangers that cast on the economy the late payment of mortgage loans and increasing real estate seizures in the USA. He urges Congress to take additional steps to defuse the problem. Foreclosures are not the solution.

"High levels of delinquency and seizures may have significant negative effects on the real estate market, financial markets and the economy in general," said Ben Bernanke in a speech Monday evening. "It is in everyone's interest" to do what is necessary to avoid preventable seizures, "he added.

The Fed's chairman was speaking at the Superior School of Commerce, Columbia University, New York.

According to Warren Buffett: The enterprises victim of the financial crisis deserve their fate

OMAHA, Nebraska - The American billionaire Warren Buffett and Charlie Munger believe that the difficulties faced by many financial institutions because of the credit crunch are well deserved.

The chairman and vice-chairman of the holding company Berkshire Hathaway (BRK.A) reported Sunday that financial companies who abused mortgages at high risk and who now record large losses do not deserve much sympathy.

Buffett said that the current financial crisis was a consequence of a system that encouraged managers to "make nice drawings."

Buffett and Munger spent almost three hours to answer questions from reporters Sunday, during their only press conference scheduled for this year. The press conference was part of the annual meeting of shareholders of Berkshire Hathaway held Saturday in Omaha, Nebraska and attended by 31 000 people.

Home Foreclosures: at year-end, over a million bank-owned homes in the market

RealtyTrac quarterly report on “foreclosure activity,” shows some pretty nasty numbers nationwide, as expected, with activity up 23 percent quarter to quarter and 112 percent year over year.

What is surprising is when you break down the sub-categories, you see that the number of bank-owned properties is rising faster than ever before. “Typically you’ll see about 20 percent of the foreclosure filings being bank-owned,” RealtyTrac’s Rick Sharga told in an interview this morning. “We’re getting to a point now where it’s well over 1/3 and aiming at 40 percent, so that just suggests that a lot of these homes can’t even be sold to investors at auctions” Why? Because there’s just no equity in the properties.

Some estimates that by the end of this year there will be over a million bank-owned homes in the market. That's a million of about four million properties listed on the Multiple Listing Service (MLS), so a quarter of the homes would be bank-owned. Last week a casual survey found that 18 percent of the homes on the MLS are foreclosed homes.

It is very interesting, with all the programs supposedly helping owners in default and all the banks claiming that they are doing what they can to help them, a growing number of homes are still going back to the bank.

U.S. Home Prices Plunge Like a Rock

If the remedy for America's housing crisis is a big enough drop in prices to stimulate the real estate demand, the market got a big dose of over the counter and under the counter medicine on Tuesday.

The National Association of Realtors reported a much worse-than-expected 2.0% drop in sales of single-family homes and condos in March, compared with February, to a seasonally adjusted yearly rate of 4.93 million units. That was 19.3% under the year-ago level. The middle price of an American home sold last month dropped to $200,700, a decline of 7.7% from the middle price a year ago.

Joseph A. LaVorgna, a chief economist at Standard & Poor's, said in a note to investors yesterday that falling home prices are not such a bad thing, "On one hand they are causing negative wealth effects and forcing some new mortgages underwater; but on the other hand, this is a necessary, albeit unpleasant, prescription for restimulating housing demand," he said.

Sales were expected to drop another 1.6% to a seasonally adjusted annual rate of 4.95 million units, down from 5.03 million in February, according to the last forecast of Wall Street economists surveyed by Thomson Financial.

On a personal note, I wonder if M. LaVorgna owns a house (or a condo)? How happy would he be if he learned that the value of his home dropped 40% just before he wanted to sell it? How many foreclosures can we have?