As a flood of first-time homebuyers rushed to take advantage of the $8,000 tax credit the Rural Development program has been strained to the limit with a year’s allocation of funds expected to be depleted sometime tomorrow. There has been little interest in Congress to extend funding and it now appears that without a last minute vote to re-fund the program, Rural Development will be out of funds on Wednesday. This will leave lenders with only the ability to secure “conditional commitments” from Rural Development. The good news is there are still a few investors out there that will purchase loans with only a conditional commitment from RD. This means that loans currently in process that missed the Wednesday deadline to secure funds will still be able to close – a relief for both lenders and the thousands of RD first-time buyers who were under contract prior to April 30th but not yet closed. Now for the bad news. Any loan that misses the deadline and is forced in a conditional commitment will see their up-front Rural Development Guarantee Fee jump from 2.041% to 3.5%. This is because legislation in the House of Representatives is calling for the RD program to be budget neutral and the higher up-front fee will ensure RD is self-sufficient.
Mortgage Rates continue to benefit from the increased volatility in the stock market as well as lingering concerns over European debt and the effects it could have on the US and global economies. The benchmark thirty-year, fixed-rate stands at 5.00% even and only a .25% point will by you down to 4.875%. The fifteen-year fixed-rate stands at 4.375%. Jumbo rates are also beginning to feel the love as the once frozen secondary market for non-conforming loans is slowly beginning to thaw. The thirty-year Jumbo rate stands at 5.875%. So while some were pointing to a spike in interest rates in the second quarter of this year, it has, thus far, failed to materialize. Despite the $1 trillion bailout for Greece and the Euro, fears remain that the underlying global debt problem could domino into a financial calamity similar to the sub-prime mortgage crisis of 2008. Until those fears are quelled, the demand for bonds should keep yields and mortgage rates low in the short-run.
J. Hunter Palmer