Take Advantage of the Historically Low Interest Rates!

On August 19 Freddie Mac released the results of its Primary Mortgage Market Survey, showing mortgage rates, fixed and adjustable, reaching all-time record lows. The 30-year fixed mortgage rate averaged at 4.15% (the lowest rate in 50 years), while the 15-year fixed averaged at 3.36%.

With the most affordable interest rate in 50 years, many home owners are taking advantage of the low mortgage rate environment. They have already began approaching their banks to refinance their loans.

According to Freddie Mac's reports, 34% of the borrowers have changed their mortgage length from 30 years to 20 and 15 years - it is the highest level or mortgage length shortening in 7 years!

Some financial experts argue that it is more beneficial to the home owners to take on a 30-year rate at low rates and invest the rest of their money in their retirement plans. However, home owners these days prefer to pay in shorter term because they just want to have a mortgage free life at an earlier time.

Buyers are also realizing that lower terms can literally save thousands, even tens of thousands of dollars in interest costs, while some borrowers who financed at historically low rates have been able to refinance at 15-year rates without raising their mortgage payments. Take note of the illustration below, with 2% increase in interest rates, it increases your monthly payments by $250. Just imagine, home much you can save in the long run if you take advantage of the current low interest rates.

Now is the time to take advantage of the all time low interest rates! If you need more information about the current mortgage rates, you may contact me.

Join the Alaska State Fair and Get a Chance to Win "One Republic" Concert Tickets

Every year, around 300,000 people gather around at the end of each summer for the Alaska State Fair held in late August to early September.  The event provides a setting for Alaska’s last blast of summer, a showcase of Alaska’s uniqueness and beauty.  This year, the Alaska State Fair will celebrate its 75^th birthday with the theme “75 Years and Growin”.  It will begin its 11 days of festivities on the 25^th of August and end on Labor Day, the 5^th of September.  The Alaska State Fair is for all ages (for the young or young at heart).  

There will be farm exhibits, carnival games, rodeo, concerts, contests, food and much much more. Contests will run from the 3^rd Annual Legendary Karaoke Contest to the Alaska’s Got Talent show, the Moose Calling competition and the Parent-Child Look-like Contest, there’s a competition for everyone at this year’s Alaska State Fair.  Visit the 16^th Alaska State Fair Cabbage Weigh-off for a look at some of the biggest and best cabbages in the state.  The concerts will include some big-name performers such as Colbie Caillat and One Republic and more! To win free tickets to the One Republic concert, click here!

The Daily Fair schedule will be as follows: (Click on the event, to get more information)

Thursday, August 25 - $2 Buck Thursday

Friday, August 26 – Kids’ Day

Saturday, August 27 - Family Day

Sunday, August 28 – Experience Alaska Day

Monday, August 29 – Healthy Living Day

Wednesday, August 31 - Senior Day

Thursday, September 1 – Alaska Grown Day

Friday, September 2 – Wellness Day

Saturday, September 3 – Mining Day

Sunday, September 4 – Alaska’s Native Cultures Day

Monday, September 5 – Alaska Airlines Day

This year’s Alaska State Fair will be held at 2075 Glenn Highway Palmer, Alaska. You can contact the fair offices at 907-745-4827 or visit  http://www.alaskastatefair.org for more information.  Admission ticket on weekdays is $9 and on the weekends is $11, seniors and children can get them for $5-$6 depending on the day. Concerts and shows range from $10 to $75 depending on the show.   Don’t miss this annual Alaska event! I guarantee you will have fun! See you there!

Increased FHA Loan Limits - Expiring on Sept. 30, 2011

On his August 4 Podcast, NAR President Ron Phipps encouraged homeowners to talk to their Congress about extending the FHA loan limits which is set to expire this coming 30th of September 2011.  This may potentially affect 42 cities and 690 counties.

Prior to 2008, the FHA loan limits restrict the size of mortgages that can be insured by the Federal Housing Administration or FHA.  The National Housing Act, required FHA mortgage limits be set at 95% of the median house price in that area not exceeding 87% or go lower than 48% of the conforming mortgage limit established by the Government Sponsored Enterprises or GSE in any given area. For the high-cost states and territories such as Alaska, Guam, Hawaii and the Virgin Islands - the allowed mortgage limits is set at 150% of the national ceiling.

To control the effects of the economic crisis and the sharp reduction of mortgage credit availability from private sources, the Congress temporarily increased FHA loan limits in 2008. The Economic Stimulus Act (ESA) enacted in February 2008 stipulated that FHA loan limits be set temporarily at 125% of the median house price in each area.  The FHA loan limits could not exceed 175% of the 2008 GSE conforming mortgage limit of $417,000; nor be lower than 65% of the same 2008 GSE conforming loan limit for a residence of applicable size for any given area. Also, ESA stipulated that mortgage limits for Alaska, Guam and the Virgin Islands be adjusted up to 150% of the national ceiling. (Source: portal.hud.gov)

The Congress has set-up Federal Housing Finance Administration or FHFA to establish the conforming mortgage limits for the nation and for high cost areas.  Since 2009, the national conforming mortgage limit has been set at $417,000. Mortgage limits under THE Housing and Economic Recovery Act or HERA are set at 115% of the county with the highest median house price within that MSA but cannot exceed 150 percent nor be lower than 65 percent of the GSE conforming mortgage limit. Similar to previous

regimes, Section 214 of the National Housing Act applies in HERA. This section allows mortgage limits for Alaska, Guam, Hawaii and the Virgin Islands to be 150% higher than the ceiling.

Maximum Original Principal Balance for Loans Closed in 2011*
	Contiguous States, District of Columbia and Puerto Rico		Alaska, Guam, Hawaii and the US Virgin Islands
Units	General	High Cost*	General	High Cost*
1	$417,000	$729,750	$625,500	$938,250
2	$533,850	$934,238	$800,775	$1,201,163
3	$645,300	$1,129,275	$967,950	$1,451,925
4	$801,950	$1,403,413	$1,202,925	$1,804,388

* The limit may be lower for a specific high-cost area. These limits are the same as the 2010 high-cost area loan limits and apply to all loans originated on or before September 30, 2011. Loans originated on or after October 1, 2011, will use the "permanent" high-cost area loan limits established by FHFA under a formula of 115% of the 2010 median home price, up to a maximum of $625,500 for a 1-unit property in the continental U.S.  

FHA mortgages are popular with many buyers, particularly for their first homes, because the loans feature attractive interest rates and down payments as low as 3.5%. Last year, FHA insured more than 40% of home-buying loans in the US.

Once the loan limits are in effect, it is likely that the number of home buyers will be reduced and cause sellers to cut their prices if they want to attract FHA buyers.

If you want to know more about the loan limits expiration, please refer to

https://www.efanniemae.com/sf/refmaterials/loanlimits/pdf/loanlimitsexpiration.pdf

From AAA to AA-plus Credit Rating - Another Crisis?

According to BBC News report, late on Friday, Standard & Poor (S&P) has dowgraded the United States' credit rating from AAA to AA-plus for the first time in history.  According to S&P, "the downgrade reflects their view of the effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges.”

The downgrade happened just few days after President Obama signed into law a last minute compromise plan to raise nation's $14.3 trillion debt ceiling, narrowly averting what could have been an unprecedented default with calamitous economic consequences.

Last Monday, August 1, the U.S. House passed the compromise measure by a 269-161 vote, overcoming opposition from unhappy liberal Democrats and tea party Republicans.  Then the Senate passed the plan, which imposes sweeping new spending cuts over the next decade, on a 74-26 vote on Tuesday afternoon. (Source: CNN, August 2, 2011)

What is S & P?

S & P or Standard & Poor’s provides investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions.

Reasons for the downgrade?

Critics of the new Budget Control Act note that $2.1 trillion in cuts won't significantly slow the growth in U.S. debt.  And it doesn't explicitly tackle the drivers of the country's long-term solvency problem -- the ultimately unaffordable entitlement programs and a tax code that doesn't generate enough revenue to match the country's appetite for spending.  Those are the reasons why S&P chose to downgrade the United States.

The Effects of the downgrade?

CNN Money says that Wall Street had experienced its worst day today since the 2008 financial crisis, as fearful investors reacted to the United States losing its most precious AAA credit rating.

Wall Street Journal reported that Gold, which is seen as a safe investment in times of economic uncertainty, jumped to a new record high of $1,713.20 an ounce.  Meanwhile, the price of oil slipped further, reflecting concerns that weak global growth could lead to a fall in demand.  US light crude ended down $5.57 to $81.31 a barrel - its lowest closing position since November of last year.

The Treasury claims that S&P’s conclusion, will likely cause the dollar to sink and push up domestic interest rates.  Days after S&P announced the clipping of US' credit rating, there is a growing concern that the interest rates will rise for anyone borrowing money - from credit cards to mortgages to auto loans.  Today,  mortgage rates are breathtakingly low - just over 4% on a 30-year fixed.  According to an interview conducted by CNN on a home buyer, "Now is the time to invest in properties before the interest rates change". 

President Obama said: "Markets will rise and fall.  But this is the United States of America, no matter what some agency may say, we've always been and always will be a triple-A country."

President Obama said he would now be putting forward a new plan, including higher taxes for the biggest earners, and reduced spending on Medicare.(Source: Bloomberg, August 8, 2011)

National Debt Ceiling Update

Bloomberg reported that the House of Representatives approved the legislation to raise U.S. debt limit by at least $2.1 trillion and cut federal spending by $2.4 trillion or more, one day before a threatened default.  Representative Steny Hoyer, the second-ranking Democrat in the House said that, “Default for the United States of America is not an option. This would affect all of the people I represent and all of the people of this country.”

According to CNN report, the agreement revolves around a two-stage process.

The first stage includes $917 billion in savings, including a roughly $420 billion reduction in the national security budget. The cuts would be accompanied by a $900 billion increase in the debt ceiling.  Because of the pending Tuesday deadline, President Obama would have immediate authority to raise the debt ceiling by $400 billion, which will last through September, according to the White House.

The remaining $500 billion increase in the debt limit would be subject to a congressional vote of disapproval that can be vetoed by President Obama.

In the second stage, a special joint committee of Congress would recommend further deficit reduction steps totaling $1.5 trillion or more, with Congress obligated to vote on the panel's proposals by the end of the year.

The committee would comprise 12 members: Six from each chamber, equally divided between Democrats and Republicans. The panel's recommendations would be due by November 23 and guaranteed an up-or-down vote without amendments by December 23.

Benefits from entitlements including Social Security, Medicaid, Medicare -- as well as veteran's benefits -- will be exempt from any immediate cuts.

Today, the Senate is scheduled to vote on the same legislation, where it is expected to pass.  Without legislation in place by the end of Tuesday, the Treasury will not be able to pay all of its bills which could interrupt payments to investors in Treasury bonds, recipients of Social Security pension checks, anyone relying on military veterans' benefits and businesses that do work for the government. Administration officials say a default would ensue that would severely damage the economy.