According to Freddie Mac's Primary Mortgage Market Survey® (PMMS®) for the previous week, the market has rolled back a small portion of the large increases in mortgage rates that were recorded over the past weeks.

Frank Nothaft, Freddie Mac vice president and chief economist said that "Mortgage rates eased this week due to market concerns that the housing market will be a longer drag on the economy," "May's housing starts to fell for the first time in four months, while homebuilder optimism in June fell to a sixteen-year low."

The survey pointed out the following:

The 30-year fixed-rate mortgage (FRM) rolled back to 6.69 percent in the most recent week which had increased from 6.15 percent to 6.74 percent between May 10 and June 14. Fees and points increased from 0.4 to 0.5 for the week.

The 15-year FRM decreased six basis points to 6.37 percent from its 2007 high of 6.43 percent the week before. Fees and points increased from 0.4 to 0.5 for this product as well.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.31 percent for the week with an average 0.6 point. In the previous week it averaged 6.37 percent with 0.5 point.

The biggest decline was in the one-year Treasury-indexed ARM which averaged 5.66 compared to 5.75 the previous week. Points were unchanged at 0.7.

As with the Freddie Mac survey, the greatest change was the average contract interest rate on the one-year ARM which dropped 19 basis points to 5.51 percent.

As for the Mortgage Bank Association’s survey the average contract interest rate for the 15-year FRM was down from 6.28 percent the last week to 6.24 percent this week.
 

Reference: FreddieMac, Primary Mortgage Market Survey® (PMMS®), www.freddiemac.com

Home prices have shown positive growth but slowest in ten years. These are based on actual comparisons of sales prices or appraisal figures for homes purchased or refinanced over the past 32 years. If a house has had two mortgage closings through Freddie Mac (Federal Home Loan Mortgage Corporation – FHLMC) or Fannie Mae (Federal National Mortgage Association - FNMA) during that period, it is included in the transaction data base. A limitation of this methodology is that if a home sale goes through a different funding source, seller financing or other sub-prime market or is purchased with cash, they will not be included in the survey population.

The advantage of this methodology is it comparing apples to apples. A house purchased in 1986, refinanced in 1992, sold again in 2000 and refinanced in the first quarter of 2007 will have four data points in the system upon which to build a picture of the changes in sale prices.
The disadvantages of course are that there is no way to account for property improvements which would make home price increase further than the general escalation in the area and higher priced properties are not included in survey as they are financed in some instances by other companies.

OFHEO Director James B. Lockhart said "Although some forecasters expected to see a drop in the HPI, nationwide house prices continued to rise in the first quarter of 2007, albeit at the lowest rate in 10 years. As always, real estate prices are local with seven states showing double-digit annual appreciation rates and seven with rates less than 20 percent. Seven states, including Florida and California, also showed home price depreciation in the first quarter."

Still, house prices grew faster over the past year than prices of non-housing goods and services. The 4.3 growth in home price appreciation compares favorably to the non-housing Consumer Price Index of 1.6 percent.

Data on hundreds of large and medium sized metropolitan areas are included in the OFHEO study. To see how your locality ranks over the last quarter, year, and/or five year period in terms of house price appreciation, you can visit the website www.ofheo.gov.

"Mortgage rates moved sharply upward this week, with rates on 30-year fixed-rate mortgages jumping more than 20 basis points, the largest upward movement in over three years," said Frank Nothaft, Freddie Mac vice president and chief economist. "These moves parallel rising yields on Treasury securities, as concerns about inflation pressures and continuing strength of consumer and business spending have dimmed hopes for an interest rate cut."

"Higher mortgage rates may weigh on the housing market's gradual recovery. While demand appears to have stabilized, inventories of new homes remain high, putting downward pressure on

Freddie Mac's Primary Mortgage Market Survey® (PMMS®)concluded there was a double digit jump in the rates of each of the four products the survey tracks particularly the following:

* 30 year Fixed Rate
* 15 Year Fixed Rate
* 5 Year Adjustable Rate
* 1 year adjustable Rate

The 30-year fixed-rate mortgage (FRM) had an average contract interest rate of 6.74 percent. This is the highest the 30-year FRM has been since July 20, 2006 when it averaged 6.80 percent. Based on the previous week, this is an increase of 21 basis points.

The 15-year FRM averaged 6.43 percent with 0.4 point compared to the previous week when it averaged 6.22 percent with 0.4 point. The last time the 15-year rate was higher was also July 20 when it averaged 6.44 percent.

Adjustable rate mortgages (ARMs) were up a little less noticeable than the fixed-rate products. The five-year Treasury-indexed hybrid ARM averaged 6.37 percent, an increase of 13 basis points from the week ended June 7. Fees decreased from 0.6 to 0.5. This is the highest rate for the 5/1 since July 6 when it averaged 6.39 percent.

The one-year Treasury-indexed ARM averaged 5.75 percent compared to the previous week when it averaged 5.65 percent. Fees were unchanged at 0.7 point. During the week ended July 27, the rate averaged 5.78 percent.

reference: FreddieMac, Primary Mortgage Market Survey® (PMMS®), www.freddiemac.com
 

“Do It Yourself” home improvement also has hidden costs. They can find themselves in a situation where the budget for the renovation or remodeling is exceeded during the course of the project.

DIYers, more often than not think only of the materials needed and forget about the permit fees.

A variety of permit can be applied for depending on the type of work to be done on the house. As an example, if there are to be changes in the structure of the property, a building permit is needed by the building inspection authorities before starting the project.

Other permits that may be needed, depending on the project, are for electrical, mechanical and plumbing work. Often, there is an application fee in addition to the cost of the permit.

Permit costs are generally based on the estimated construction cost of the project.

Another area a DIYer might underestimate in doing a project is the needed tools and supplies. There might be no more problems when the job has been done before but chances are there is a piece of equipment the DIYer will forget to list or there is a tool that might make the job easier. If the type of project is done the first time, an allowance over the total budget should be in order to give the DIYer a breathing space.
Another unforeseen event or cost would be the sudden breaking of something and it is beyond the skills of the DIYer. For this reason, it's important that the DIYer is very knowledgeable about a project before attempting to do it. He/She should do research and ask around.

The DIYer should think not only if the project is within the budget but also his/her level of expertise so no additional cost will be paid to a contractor to do a follow up or clean up.

A home-improvement project can be one of the most rewarding and fulfilling investment project on the house a homeowner can make. But when coming up with the budget, the owner should make sure there is an allowance for any unexpected costs that are likely to come. In that way, the DIYer is prepared for any additional cost, have the needed materials and tools at the earliest possible time, less worry on how he is going to pay for the improvement and finish the project at the soonest time. – Then relax and enjoy the renovation early. 
 

Why Credit Piggybacking?

It is for the simple reason of improving one’s credit by riding on another person’s credit to the betterment of one’s own credit history.

When the credit history is improved, the interest rates for the mortgage are reduced and the possibility of loan approval is increased.

How do we do this?

There are person’s who allows that their credit history be used by another person. These people are usually friends and relatives of the borrowers.

So the borrower just has to look for one who is willing to contact their credit card company and make the borrower an “authorized user”. By becoming an “authorized user” of someone’s credit card, the credit history is also transferred to the “authorized user”. The borrower should make sure that the person he/she chooses has a good credit history on that particular card.

What can happen?

With this process, the borrower’s credit history is improved.
A downside perhaps is when the credit card owner stopped paying and become delinquent on the credit card, and then the credit history of the “authorized user/borrower” will also be negatively affected.

Sometimes, if the person who is allowing someone to be an “authorized user” is not so keen about the arrangement, the “authorized user” can give him the credit card upon receiving it. In other words, for this system to improve the borrower’s credit, he/she does not have to do anything except piggy-back on the other person's past and continued good payment history.

This technique of building credit has been around for years and is often used by parents to help their children beef up their credit scores.

If the borrower can not find a friend or family who is willing to let their credit be used, there are institutions that specialize in repairing credit and ensure that the interest rates for the loan will be lower. People avail of their services because as the credit score improves, the lower the interest rate will be. The lower the interest rate, the less money will be paid and more money will be saved.

From a family activity, this has been commercialized and institutionalized with web sites offering to act as intermediaries in brokering borrowed credit arrangements. It is generally making lenders and credit reporting agencies foolish but is rapidly and significantly increasing credit scores of those that participate and at the same time provide additional income for credit worthy persons who allow their credit to be piggy-backed.

Implication to lenders

Lenders are concerned that while they are tightening credit standards in response to problems with subprime lending those improvements are being undone by piggy-backing. The practice is currently legal but perhaps not ethical and the Federal Trade Commission and several states are looking into it.

Piggybacking: Up to when?

The phenomenon may not last long. FICO will issue in September an updated version of its credit score system, the authorized user category will no longer have an impact on credit scores. It appears that this change will be retroactive, thus rolling back the scores of "authorized users.”

That’s why FICO was very positive when they announced last June 12 that piggy-backing will soon come to an end on its watch.