Foreclosures, Short Sales & REO's

Hawaii Mortgage Rates Reach New Lows but is Credit Easier for Your Island Home?

As the Kauai and Hawaii markets continue their trend to improve and stabilize, interest rates remain at historic lows. In fact, as the LA Times reported today, “the benchmark 30-year mortgage rate dropped this week to an average of 3.35%, its lowest rate in four months and within a whisper of its record low of 3.31% in fall, Freddie Mac said Thursday.

The 15-year fixed mortgage, popular with homeowners refinancing loans, set a record low for the second straight week, falling from 2.61% to 2.56%, Freddie said in its weekly tally of what lenders are offering to solid borrowers.” You can read the LA Times article in its entirety.

Is it Getting Easier to Get a Mortgage These Days?

The pendulum of mortgage underwriting which went from the extreme of issuing SISA (stated income stated asset) and NINA (NO income NO asset) loans 6 to 9 years ago to a tightening of credit that felt like the penultimate “vice grip” has been easing, but only slightly over the last few years.

The low rates have been engineered as a stimulus to the economy by the Federal Reserve. The Fed announced Wednesday it would hold steady on the rock-bottom rates by continuing its “quantitative easing” program of buying $85 billion of Treasury and mortgage-backed securities each month.

The KCM Blog provides further insights today in a post entitled Lending Standards…are they loosening where they note:

“In a March article published on MSN Money entitled, Mortgage Borrowing Is Getting Easier, it was revealed that:

“Credit is not raining down on would-be borrowers, but it will be a bit more accessible this year.”

The article bases it findings on the Federal Reserve’s January Survey of Loan Officers. Dan Greene of the Daily Mortgage Report addresses the survey:

“The Q4 2012 survey marks the ninth straight survey in which fewer than 10% of banks tightened standards. Many more are loosening instead. It’s a good sign for the 2013 home purchase market, which has shown strong buyer demand and rising home prices. Despite what you may hear from friends and neighbors, the nation’s banks are no longer tightening their respective mortgage lending standards.”

In the article, Cara Hawkins, a production manager at Ameripro Funding also weighed in on the subject:

“There are more players in the mortgage buying ‘game’ than in past years, which opens the door to looser credit standards because the appetite for loans on the secondary market is higher. While it is still fairly black and white when it comes to mortgage qualification, I am seeing an increase in more approvable loans than in past years because of the market opening up.”

Why Are Lending Standards Easing?

The FICO/PRMIA report revealed two reasons for the industry’s current comfort with the housing market:

  1. 83.7% believe that the level of mortgage delinquencies will decrease or stay the same, a significant improvement over last quarter.
  2. 70.8% feel that home prices were rising at a sustainable pace.

What Will This Mean for the Real Estate Market?

Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, said it best:

“The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery. Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn’t be surprised to see lenders cautiously expanding their mortgage and home equity lending businesses.”

An easing of standards will be advantageous to those second home buyers and retirees who desire to be Living on Kauai. There are certainly no shortage of great programs for first time local island buyers like USDA loans, VA loans, and Fannie Mae Homepath Loans.

The Homepath loans require 3% down and have no mortgage insurance and also require NO APPRAISAL of the Fannie Mae approved REO property. But for more conventional loans, the easing of standards will allow purchasers to make the wise decision to buy while the rates are so low and the market prices have not yet risen to their previous elevated levels.

If you need more information on local lending and rates, shoot me an email. We’ve got great lenders on Kauai.

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