Now is as good a time as any (if you have equity)

SAN FRANCISCO (MarketWatch) --Freddie Mac said Thursday that the 30-year fixed-rate mortgage average dropped from a week ago to a four-and-a-half year low as bond yields declined. The 30-year fixed-rate average was 5.47% with an average 0.7 point for the week ending Dec. 11, down from 5.53% a week ago. Last year the average was 6.11%. The 30-year average has not been lower since March 25, 2004, when it averaged 5.4%, Freddie Mac said. "Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage rates room to ease back a little further," said Frank Nothaft, Freddie Mac chief economist, in a statement.

Interest Rates are Low

SAN FRANCISCO (MarketWatch) -- Freddie Mac said Thursday the 30-year fixed-rate mortgage average fell to 5.53% -- its lowest since January -- with an average 0.7 point for the week ending Dec. 3. In the previous period, the average was 5.97%, and the year-ago average was 5.96%. The 30-year fixed-rate mortgage has not been this low since Jan. 24 when it was 5.48%. "After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed-rate mortgages took a dive," Frank Nothaft, Freddie Mac chief economist, said in a statement. "The recent plunge in rates contributed to the nearly 150% jump in conventional mortgage applications over the Thanksgiving week, led by almost a 300% surge in refinances, according to the Mortgage Bankers Association. Roughly three out of four mortgage applications were for refinance transactions, up from around half during the prior week."

Fed cuts Rate to 1%

WASHINGTON (MarketWatch) - The Federal Reserve on Wednesday slashed overnight interest rates by a half-point to 1.0%, and left the door open for more reductions which would bring rates to the lowest levels in a half-century.
In its statement, the Federal Open Market Committee said the pace of growth has slowed "markedly" and the extraordinary financial market stress could put the economy at greater risk.
With inflation no longer a threat, the central bank said it will cut rates as needed to boost the economy.
The FOMC said it "will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability."
Importantly, the Fed statement drew no line in the sand at the 1% funds rate target, raising the possibility that rates may move lower.

Are we getting closer to a Real Estate bottom?

WASHINGTON (MarketWatch) - Sales of new homes rose an estimated 2.7% in September to a seasonally adjusted annual rate of 464,000 in September, the Commerce Department reported Monday, close to the 460,000 pace expected by economists surveyed by MarketWatch. Sales surged 23% in the West, bouncing back from a similar decline in August. Nationally, sales in September were down 33% compared with September 2007. The inventory of unsold homes fell a record 7.3% in September to 394,000, the lowest in four years. In the past year, inventories have fallen 25.4%, the biggest drop since the government began tracking the data in 1963. The median sales price fell to $218,400, down 9.1% in the past year.

Mortgage rates are still low.

NEW YORK (MarketWatch) -- U.S. fixed-rate mortgages declined in the latest week, according to Freddie Mac's survey released Thursday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 6.04% in the week ending Thursday, down from last week's 6.46% and the year-ago 6.33%. The 15-year fixed-rate loan averaged 5.72%, down from the week-ago 6.14% and the year-ago 5.99%. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 6.06%, compared with 6.14% a week ago and 6.03% a year ago. One-year Treasury-indexed ARMs averaged 5.23% this week, up from last week's 5.16% and down from the year-ago 5.66%. "Long-term mortgage rates fell this week amid news of tame inflation and a weaker housing market," said Frank Nothaft, Freddie Mac vice president and chief economist.

This is a great opportunity for home buyers in this market. This is also great for those coming close to the end of a fixed term period for refinance. If you have any questions about your specific situation please get in touch with us. We will give you the best advice for you.

Is there hope?

WASHINGTON (MarketWatch) -- Despite a credit crunch that has driven world central banks to slash interest rates, the National Association of Realtors reported Wednesday that an index of sales contracts on previously owned U.S. homes rose 7.4% in August from the prior month. The index, which is considered a leading indicator of existing home sales, was up 8.8% from the prior year. In August pending home sales rose in all four regions, with a gain of 18.4% in the West, 8.4% in the Northeast, 3.6% in the Midwest and 2.3% in the South. The July pending home sales index was revised to a decline of 2.7% from a prior estimate of a 3.2% fall.

These are positive numbers on the surface but there is a lot yet to be considered before any claims of a housing market is on the rebound.

Refinancing can still be a smart decision

Refinancing your home may accomplish a number of financial goals:

Lowering your interest rate may save money on your monthly payment.
Reducing the term of your mortgage may save tens of thousands of dollars over the life of the loan while increasing slightly higher on monthly payments.
Refinancing an ARM or a balloon to a fixed rate may eliminate the uncertainty of shifts in interest rates.

At Cascade Financial & Co., we offer a variety of refinancing packages to suit the needs of our customers, and we welcome the opportunity to work with you to find the right mortgage. The right option for you will depend on a variety of factors pertaining to your specific situation - one of our mortgage professionals will help you choose the best loan package.

Considering the following factors can give you a head start in deciding which type of refinance option to choose:
1. How long you plan to remain in the house?
2. How long you have been paying on your current mortgage?
3. The current rate and term of your mortgage?
4. Whether you have a second mortgage or home equity line of credit?
5. How much equity you have in your home?
6. Whether it will be beneficial to consolidate other debts into your mortgage? (this can depend on the amount of equity that you currently have in your home)

USDA Rural Housing Loans

Todays lending environment has left only 2 options for true 100% financing, the VA loan and the USDA loan. USDA's sole purpose is to provide loan options for borrowers to buy homes in the rural parts of the country in order to further populate areas to support the infrastructure of the United States. Qualifying for this loan option is easy and provides low rates and the guarantee of Uncle Sam that you are getting a great loan option. Call me at (615) 585-5824 if you would like more information on this great overlooked loan program.

Finally — IRS Guidance on Exchanging Vacation Homes Revenue Procedure 2008-16 Provides Safe Harbor

Until now, the issue of whether a vacation home qualifies for tax deferral treatment under IRC §1031 was the subject of much scrutiny and uncertainty. To the delight of many tax practitioners, on February 15, 2008, the IRS eliminated that uncertainty by issuing Revenue Procedure ("Rev. Proc.") 2008-16, effective March 10, 2008, which provides a safe harbor for exchanges of vacation homes (defined as "dwelling unit" in the Rev. Proc.). Now taxpayers can have a clear understanding of the circumstances under which the IRS will not challenge whether a vacation home will qualify as property "held for investment" under §1031.

Vacation Home as Relinquished Property

For a vacation home to qualify as relinquished property, it must meet the following criteria:

• It is owned by the taxpayer for at least 24 months immediately before the exchange ("qualifying use period"); and

• Within the qualifying use period, in each of the two 12 month periods, (1) the taxpayer rents the dwelling unit at fair rental to another person for 14 days or more and (2) the taxpayer’s personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12 month period that the dwelling unit was rented at fair rental value.

The first 12 month period immediately preceding the exchange ends on the day before the exchange takes place (and begins 12 months prior to that day). The second 12 month period ends on the day before the first 12 month period begins (and begins 12 months prior to that day).

Vacation Home as Replacement Property

For a vacation home to qualify as replacement property, it must meet the following criteria:

• It is owned by the taxpayer for at least 24 months immediately following the exchange ("qualifying use period"); and

• Within the qualifying use period, in each of the two 12 month periods, (1) the taxpayer rents the dwelling unit to another person at fair rental for 14 days or more and (2) the taxpayer’s personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12 month period that the dwelling unit was rented at fair rental.

The 12 month period immediately after the exchange begins on the day after the exchange takes place and the second 12 month period begins on the day after the first 12 month period ends.

Personal use is defined broadly. Use by the taxpayer or other person having an interest in the dwelling unit and any family member1 will be considered "personal use" by the taxpayer. Also, any arrangement whereby fair market rent is not paid will be considered "personal use" by the taxpayer. Notwithstanding the foregoing, use by family members will not be considered "personal use" by the taxpayer only if the dwelling unit is rented at fair market rent and the family member uses it as his principal residence.

Fair rental is based upon all of the facts and circumstances that exist when the rental agreement is entered into. All rights and obligations of the rental agreement are taken into account.

Note special rule for replacement property. If the taxpayer files a return reporting a transaction under §1031 based on the expectation that the dwelling unit will meet the qualifying use standards and subsequently determines that the dwelling unit does not meet the qualifying use standards, the taxpayer, if necessary, should file an amended return.

Exchanges of vacation homes outside the Rev. Proc. 2008-16 safe harbor. An exchange of a vacation home may still qualify under §1031 even though it falls outside the parameters of Rev. Proc. 2008-16. Any such circumstance will be subject to greater scrutiny and therefore should be carefully planned and reviewed by the taxpayer’s tax advisor.

FHA Increases Loan Limits

Yesterday, President Bush signed into law the Economic Stimulus Act of 2008, which Congress passed on February 7, 2008. The Act temporarily increases the mortgage loan limits for the U.S. Department of Housing and Urban Development’s (“HUD”) Federal Housing Administration (“FHA”) program, in addition to providing certain tax rebates and temporary increases in the conforming loan limits for Fannie Mae and Freddie Mac. As you know, the National Housing Act limits the maximum dollar amount that FHA can insure, and these maximum amounts vary based on the geographic location of the property securing the FHA loan. With regard to FHA-insured loans secured by single-family residences, the Act would increase the loan limit from 87 percent of the conforming loan limit to 125 percent of the median single-family home price in the geographic area. In certain geographic regions where the cost of housing is very high, the Act increases the FHA loan limit to as much as 175 percent of the conforming loan limit. The Act makes clear that, in calculating FHA loan limits, HUD will use the conforming loan limit in place prior to the Act’s passage, which was $417,000. This change effectively increases the FHA maximum loan amount from $362,790 to as much as $729,750 in certain parts of the country. In less expensive markets, Congress increased the FHA loan limit from 48 percent of the conforming loan limit to 65 percent of the conforming loan limit, which would increase maximum loan amounts in these areas from $200,160 to $271,050. The Act also gives HUD the authority to raise these loan limits by an additional $100,000 if market conditions warrant further increase. The Act’s temporary loan limit increases would apply to FHA-insured loans for which a mortgage lender has issued credit approval on or before December 31, 2008. HUD will likely make an announcement regarding the timeframe for loan eligibility at these higher loan limits. Therefore, lenders should wait for guidance from HUD before originating FHA loans with these increased loan limits.This increase in FHA loan limits should spur interest in FHA-insured loans and make this loan product an attractive option for many Americans in both refinance and new home purchase transactions. According to Congressional Budget Office estimates, implementing these increased loan limits could result in approximately $10 billion in additional FHA loan guarantees through December 31, 2008. As FHA-insured mortgages may become the loan of choice for many homebuyers and refinancing borrowers in the coming months, we have attached a recent Client Alert in which we summarize the FHA single-family program. As FHA loans gain popularity, lenders should be careful to ensure compliance with HUD’s lender and loan eligibility criteria and to keep apprised of new FHA requirements. If you are interested in learning more about the essentials of FHA lending, please let us know

Mortgage Rates are Low and Sellers are Motivated

Get ready for the influx of mortgage commercials bringing back the slogan “Mortgage Rates are at or near the lowest in history” or some variation there of. Truth is Mortgage Rates are very low right now. If you have been looking to purchase or find yourself in a mortgage that is still in the mid to high 6 percent range, now is a great time to purchase or refinance. 30 year fixed mortgages are between 5% and 5.25% as of today 1/15/07. That is very close to historical lows. Sellers are highly motivated right now so buyers have a rare time where they can get great incentives from sellers and still benefit from fantastic rates. The mortgage scene has changed with regards to qualifying. 100% loans are still available but only with good credit, income, and assets. First Time Home Buyers get in while the getting is good. Low competition, Low rates, Low Prices and Motivated Sellers. If you need help with prequalification or just have questions to ask do not hesitate to email me so. trent@callcascade.com