Brighter job news boosts mortgage rates

Long-term mortgage rates gained considerably this week following the Department of Labor's stronger-than-expected employment report, Freddie Mac and Bankrate.com reported today.

According to Freddie Mac, the 30-year fixed-rate mortgage rose to an average 6.11 percent from last week's 5.96 percent, and the average 15-year fixed climbed to 5.78 percent from 5.65 percent. Points, or fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.

"November's employment report showed stronger job growth, no change in the unemployment rate and a jump in wages, suggesting to some market participants that the probability of an upcoming recession might be lower than originally thought," said Frank Nothaft, Freddie Mac vice president and chief economist. "This led to a rise in interest rates for U.S. Treasury securities this week and mortgage rates followed.

"However, against that backdrop, serious delinquencies (90 days or more delinquent or in foreclosure) on prime conventional mortgages rose to 1.31 percent in the third quarter of 2007 from 0.79 percent in the same quarter in 2006. And serious delinquencies for subprime loans rose to 11.38 percent from 6.78 percent over the same period, so the housing segment of the economy still has a way to go before bottoming out."

Freddie Mac reported that average rates on adjustable-rate mortgages (ARMs) also rose this week, with the five-year Treasury-indexed hybrid ARM climbing from 5.75 percent to 5.89 percent and the one-year Treasury-indexed ARM growing from an average 5.46 percent to 5.5 percent. Points on the five-year and one-year loans averaged 0.6.

In Bankrate.com's survey, fixed mortgage rates reversed course this week, with the average conforming 30-year fixed mortgage rate rebounding to 6.17 percent, and discount and origination points on the 30-year loans averaging 0.36.

The average 15-year fixed-rate mortgage popular for refinancing increased even more, to 5.89 percent, Bankrate.com reported, and the average jumbo 30-year fixed rate jumped to 7.24 percent. Adjustable mortgage rates were higher across the board, with the average one-year ARM rising to 6.17 percent and the average 5/1 ARM climbing to 6.29 percent.

According to Bankrate.com, mortgage rates erased the previous week's decline after the November jobs report indicated that job growth is slowing, but not tanking. With bond yields priced for a worst-case employment report, the "not-as-bad-as-expected" report led Treasury yields and mortgage rates higher as traders unwound positions. Mortgage rates are closely related to yields on long-term government bonds. The uncertain path of the economy is bound to keep mortgage rates in flux, but rates have dropped notably since the summer. This attracts potential refinancers and prospective buyers that are eyeing both lower home prices and lower mortgage rates.

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Bankruptcy 'cramdown' bill emerges from House committee

A compromise version of a bill that would allow bankruptcy judges to modify the terms of troubled debtors' mortgage loans -- including reducing the principal to reflect a home's actual value -- has emerged from the House Judiciary Committee, where opponents had hoped to scuttle it.

H.R. 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, squeaked by Wednesday on a 17-15 vote.

Critics, including the Mortgage Bankers Association, say that if the bill becomes law, it will increase the cost of all mortgages, because it would undermine confidence in the ability of lenders to collect payments. Interest rates on mortgages might go up 2 percent, some critics have said.

Those who support the bill, such as the Center for Responsible Lending, say bankruptcy courts are already allowed to rewrite the terms of automobile loans and credit card debt, and that giving them such power over mortgages would provide lenders an incentive to modify loan terms before they end up in foreclosure.

The bill that emerged from the House Judiciary Committee represents a compromise with Ohio Republican Rep. Steve Chabot, which would limit bankruptcy judges' "cramdown" powers to existing nontraditional and subprime mortgages originated after Jan. 1, 2000. If the bill becomes law, it would not apply to mortgage loans made after that date.

In addition to reducing a loan's principal, judges would have the power to reduce interest rates and prepayment penalties, and set aside other fees for debtors who file for chapter 13 bankruptcy relief and who lack sufficient income to remain current on their mortgages and cure arrears.

MBA Chairman-elect David Kittle said that the compromise bill would still have the potential to increase the rates on most mortgages by 1.5 percent to 2 percent.

"Giving judges the power to completely rewrite a loan contract between a lender and a borrower brings into question the value of the collateral the loan is made against, which is the cornerstone of our mortgage finance system," Kittle told MBA NewsLink. "The end result will be a major repricing of risk by lenders."

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Judge dismisses antitrust complaint against Realcomp MLS

An administrative law judge today dismissed a complaint filed by the U.S. Federal Trade Commission, which charged that a Detroit-area multiple listing service, Realcomp II, illegally restricted competition by failing to share information about a category of properties with some public Web sites. FTC officials said they will appeal the decision to the full commission.

The FTC "has not demonstrated that Realcomp, despite having market power in the relevant market, unreasonably restrained or substantially lessened competition, thereby resulting in consumer harm," stated Judge Stephen J. McGuire in his Dec. 10 opinion that was made public today.

Karen Kage, executive director for Realcomp, said, "We're pleased with the decision and it's been a very long process," noting that the FTC can appeal the decision.

Patrick J. Roach, deputy assistant director of the Anticompetitive Practices Division for the FTC Bureau of Competition, confirmed that the FTC will seek an appeal to the judge's decision. "We think there are quite a number of errors in assessing the record and in analysis in the administrative law judge's decision. We think the full commission, when it reviews the record, will reach a different conclusion." He added, "We will be pressing forward with a review by the full commission."

In October 2006, the FTC announced actions against Realcomp II and a group of six other MLSs that had similarly set restrictions in the online sharing of information about properties under a specific type of listing agreement. All the MLSs except for Realcomp II, a Realtor association-owned MLS, agreed to settle the FTC's complaints by lifting the restrictions.

The Realcomp and related FTC investigations have focused on MLS restrictions that discriminate against a type of listing agreement known as exclusive agency, under which a seller is not obligated to pay a commission to a broker in the sale of a property if the seller brings in a buyer without the assistance of the broker.

These types of listing agreements, the FTC has argued, are generally favored by companies that offer alternatives to traditional full-service real estate brokerage companies, such as flat-fee, limited-service, low-cost or unbundled real estate services. A more common type of listing agreement, known as an exclusive-right-to-sell agreement, provides that sellers must pay a commission to the listing broker in the sale, regardless of who brings in the buyer.

FTC investigations have also led other MLSs to change their policies, and the National Association of Realtors board of directors in November 2006 approved a policy that requires all Realtor association-owned MLSs "to include all property listings carried by MLSs in feeds distributed to MLS members and national aggregators like Realtor.com. That policy applies to all listings, regardless of the type of listing agreement."

This policy, which was adopted following the FTC's complaint against Realcomp and other MLSs, provides an exception that allows MLSs to ban the transmission of listing information if the listed property's street address or a graphic display of a property's location is publicly displayed and the seller displays a for-sale-by-owner sign on the property or another sign or notice that indicates that the seller is seeking direct contact from buyers.

Despite the judge's finding that Realcomp's restrictions in sharing property information with some public Web sites have a "narrowly crafted, pro-competitive justification," the MLS's policies are still in direct conflict with the National Association of Realtors policy, and Kage said there will be discussions between MLS and NAR officials on this matter. "We're working with NAR to come to some agreement on how they're going to handle that."

The national Realtor group has supported Realcomp's legal fight, approving a maximum $175,000 contribution in November 2006 to aid the MLS's defense and an additional $125,000 in November this year.

Laurie Janik, general counsel for the National Association of Realtors, said that the association is "absolutely delighted" with the judge's decision. "He gave a great deal of thoughtful analysis with all of the testimony and we are delighted with the conclusion."

Janik said she does not believe that the association will revisit the association's own MLS policies related to exclusive-agency listings, as the judge's decision is applicable only to the market area where Realcomp is operating.

"We're very pleased with the policy we have in place. It allows MLSs some optional flexibility if they want it. I could not imagine we would revisit our policy."

Meanwhile, Albert Hepp, a flat-fee broker who serves as president of the American Real Estate Broker Alliance, a national alliance of flat-fee brokers, said he is disappointed with the judge's decision and NAR's stance on the issue.

"We are disappointed in the ruling and urge the FTC to appeal," he said. "Anyone who truly understands the MLS knows that this is a clear-cut case of an MLS hiding the listings of discounters to harm consumer choice. Once again, the NAR has unfortunately chosen to fight competition while claiming to promote it."

The judge's decision focused on Realcomp's policy that blocked the MLS from sharing property listings information for properties under exclusive-agency listing contracts with public Web sites, such as Realtor.com, MoveInMichigan.com and other property-search sites operated through data-exchange agreements among Realcomp members. But the original complaint had focused on other Realcomp policies, too, that were changed prior to the judge's ruling.

For example, an attachment to the judge's decision details an agreement by Realcomp and the FTC over a contested "search function policy" adopted in 2003 that defaulted to a search of exclusive-right-to-sell listings and required MLS users to specifically search for exclusive-agency listings to view those properties. That policy was changed in April 2007, and the agreement provides that Realcomp "shall ... cease and desist from adopting or enforcing any policy, rule, practice or agreement ... that treats exclusive agency listings, or any other lawful listings, in a less advantageous manner than exclusive-right-to-sell listings with regard to the search function in the Realcomp MLS."

Also, the agreement provides that searches in the Realcomp system cannot associate exclusive-right-to-sell listings with full-service offerings, and cannot prevent limited-service and MLS-entry-only listings that are under exclusive-right-to-sell contracts.

Realcomp changed its policy in September to prevent the tying of exclusive-right-to-sell listings with the provision of full services in a real estate transaction, Kage said. The former policy had provided that full-service listings "could only be an exclusive-right-to-sell (listing)," she said. "We realized that wasn't necessarily the case and shouldn't be the case. We separated the listing type from the level of services and made it two entirely different fields and that's the way it works today."

Michigan is among more than a dozen states that have introduced legislation setting a minimum level of services that real estate licensees in the state must perform in a real estate transaction, at least when operating under certain types of contractual agreements with clients. This legislation -- sometimes referred to as minimum-service legislation -- has met resistance from the FTC and U.S. Department of Justice in Michigan and other states.

In addition to the FTC complaint and administrative hearing process, Realcomp is also the subject of a lawsuit brought by company called Home Quarters Real Estate Group LLC that formerly offered low-cost real estate brokerage services in Michigan. That company alleges that Realcomp and MiRealSource, another Michigan MLS, sought to block the company's access to MLS data "as part of their efforts to destroy (its) innovative business model and to thwart competition."

That lawsuit, filed earlier this year, was amended in August, and lawyers for the MLSs have filed a motion to dismiss the complaint.

Jeff Kermath, broker-owner for AmeriSell Realty in Saline, Mich., who offers flat-fee real estate services and is a member of Realcomp and other MLSs in the state, said the judge's decision in the case brought by the FTC was surprising to him.

"The fact that (Realcomp) does not transmit exclusive-agency listings to various sites harms the consumer -- that is obvious. It's not even gray," he said. Because exclusive-agency listings information is not passed along to a number of public-facing Web sites, it ultimately provides less exposure for the homeowner "and in the end decreases the odds of a successful sale."

"If the consumer chooses an exclusive-agency listing, we're forced to enter them into another MLS that doesn't filter the data, which increases our workload. Then the seller has two MLS numbers, which is sometimes a bit confusing," he added.

The judge had stated in his opinion that the Web site policy adopted by Realcomp addresses a "free rider problem" of home sellers under exclusive-agency contracts "who sought to utilize the marketing benefits of such (Web) sites to compete with Realcomp cooperating brokers for buyers, without offering compensation or reciprocal benefits to the cooperative. In addition, it provided one limited efficiency of reducing the bidding disadvantage for buyers who are represented by a cooperating broker."

But Kermath said that his clients typically offer a commission to cooperating brokers who bring a buyer into the sale, which is to the advantage of MLS participants. Sellers under exclusive-agency contracts, he said, "may create an opportunity for a buyer's agent."

He said he believes the Realcomp policy effectively leads participants to seek exclusive-right-to-sell contracts to increase the odds of a successful sale, which discriminates against exclusive-agency representation.

Besides the series of actions against MLSs announced in October, the FTC has also announced similar actions against other MLSs, and on Wednesday announced a settlement agreement with an MLS in Wisconsin.

After considering the appeal, the full commission of the FTC will render a final decision on the matter. If the commission finds in favor of the FTC, that decision can be appealed by Realcomp to a federal court, said Roach of the FTC.

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Sex offender next-door not valid reason to break lease

Q: We've just learned that a registered sex offender lives in our apartment complex. Nothing has happened yet, but we're very concerned for the safety of our children and would like to move. We've got a year's lease; how can we get out of it? --Cathy and Jim C.

A: There are many situations that justify breaking a lease and moving, such as the landlord's persistent failure to keep the property fit and habitable, by not providing essential services such as heat and hot water, for example. And certainly, when the landlord doesn't stop ongoing criminal activity on the property, such as drug dealing, tenants in most states can use any number of legal theories to justify their moving out.

In the situation you describe, however, the resident has not harmed other tenants. This person has an unsavory past, to be sure, but your fear alone that harm will befall you won't necessarily support you if you break the lease and are sued by your landlord for rent for the remainder of the lease term. Unless your landlord told you before you signed the lease that he would screen out registered offenders or that the property would be completely safe for your family, you don't have much legal support for breaking your lease.

You'll surely want to talk to your children and make sure they can recognize and avoid this resident. As you educate your children, you may want to consider these statistics from the U.S. Department of Justice's Center for Sex Offender Management: "Approximately 60 percent of boys and 80 percent of girls who are sexually victimized are abused by someone known to the child or the child's family. Relatives, friends, baby-sitters, persons in positions of authority over the child, or persons who supervise children are more likely than strangers to commit a sexual assault. … Adolescents (ages 13 to 17) account for up to one-fifth of all rapes and one-half of all cases of child molestation committed each year." ("Myths and Facts About Sex Offenders,".)

Q: I've given notice and will be moving at the end of next month. My landlord holds a $2,000 security deposit. I plan on not paying the last month's rent and having her take that rent from the deposit. My landlord has refused. What's the risk of just not paying that last month? -- Walter H.

A: Your plan is a common one, and landlords hate it. From their point of view, taking the last month's rent from the deposit leaves them with less money to use in case you leave the apartment in bad shape (with damage or uncleanliness beyond normal wear and tear). For example, if you don't pay the last month's rent and leave behind $1,500 worth of damage, the landlord will have to sue you in small claims court for the $500 that's not covered by the deposit, or write it off. With a full $2,000 deposit to work with, the landlord would be covered.

However, you may be able to work with your landlord towards a solution. Assuming your apartment is neat, clean and undamaged, ask the landlord if she will do a pre-move-out inspection, a few weeks before you move. If she agrees, you'll be able to show her that she will probably not have to use that deposit to repair damage. True, she won't get as good a look at the condition of the unit as she will when your belongings are gone, and it's possible that you could cause damage after she has inspected. But if you are on good terms, you may be able to convince her that letting you apply at least some of that deposit towards the last month's rent won't leave her with insufficient funds to address needed repairs.

If your landlord refuses to work with you, you may choose to join the legions of tenants who have done what you propose. Your landlord could legally serve you with a notice to pay or quit, and proceed with an eviction lawsuit should you do neither. But most landlords won't take this step, realizing that you'll probably be gone before they get to court. Don't proceed without thinking carefully, however -- in a few states, your ploy is illegal, and pulling it allows the landlord to retain the balance of the deposit. Even if you don't face that dire consequence, keep in mind that any reference you might need from this landlord when renting in the future is likely to be dim.

Q: I'm an elementary school music teacher, and I give piano lessons in the afternoons and weekends. The lease at my new place says that I can use the premises for a "private residence only." I thought this meant that I couldn't rent out a room, and I never imagined that my landlord could use this as a basis for saying that I can't have students come to my flat for lessons. --Catherine P.

A: Your landlord's lease clause is a bit ambiguous, but chances are he wasn't thinking of keeping you from running a hotel open to the public. He was probably focusing on the "residence" part and thinking that this would prohibit tenants from using the rental as a place to do business.

Your afternoon and weekend teaching is indeed a home business, and it will have an effect on the rest of the building. Others will probably hear the piano, encounter your students coming and going, and perhaps compete with them (or their parents) for parking. Your landlord may also be worried about liability; will his policy, designed for a residential, not commercial, setting, cover him if a student is hurt? And even if it will, he'll probably not want the increased risk of claims posed by the added individuals coming to your apartment for lessons.

Before you and your landlord take entrenched positions, try to sit down and talk over the landlord's concerns. It might help to involve a mediator, who will guide the discussion and help you towards a resolution (the mediator won't impose a solution). To find a mediator, call your city manager's office and ask if the city offers landlord-tenant mediation.

If you can't work things out, be prepared for the landlord to serve you with a termination notice, demanding that you stop giving lessons or move, followed by an eviction lawsuit if you do neither. Whether a judge would find that phrase in your lease sufficiently ambiguous to rule in your favor is impossible to predict. On your side is the fact that the landlord, not you, drafted the ambiguous clause. When a contract clause is ambiguous, it's often resolved in favor of the person who did not draft the contract, on the theory that the drafter had a chance to get it right, didn't do so, and should now suffer the consequences.

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source: lendinguniverse.com

Windows, roofs are no place to skimp on quality

As anyone who's remodeled will know, there's practically no limit to how much you can spend on a building project. Now, for people with money to burn -- and judging by the traffic in high-end design showrooms, there are plenty of them -- it may seem perfectly reasonable to blow a few thousand dollars on a Scandinavian dishwasher or a hand-painted Majolica toilet with gold hardware. For the rest of us, though, there are more cost-effective places to invest remodeling dollars.

This makes it all the more puzzling when I come across projects in which budget-conscious homeowners pinched pennies on basic building materials, yet happily shelled out serious money for the latest fluff in countertops or exotic appliances. While this approach may provide instant gratification, it makes little sense in the long run.

If you're portioning out a tight budget, work that's permanent and integral to the quality of the house should take precedence over superficial features that can easily be upgraded later on. Some examples:

* Windows are among the most conspicuous features of any project, and the standard of quality they set -- whether for good or bad -- carries over to everything else. Therefore, regardless of what kind you choose -- wood, metal or plastic, sliding, casement, or whatever -- buy the very best quality you can afford. Your windows ought to last the life of your house, and given their paramount importance to style, function and energy efficiency, they're a lousy place to cut corners.

* Roofs are another in-your-face indicator of quality, not to mention that little matter of keeping out the rain. Despite this, Americans -- unlike almost everyone else on the planet -- still tend to think of roofs as disposable. We choose relatively shoddy roofing materials and then resign ourselves to replacing them every 15 years or so at substantial cost. That's a pity, because in addition to the usual suspects of shingle, shake or tar-and-gravel, there are many kinds of roofing -- concrete tile, clay tile, metal, and natural and artificial stone -- that will last the life of the building. Only you can determine which roofing type will be most appropriate for your project, but don't base your choice on cost alone.

* Exterior finishes, like windows, make a very conspicuous statement about your home's style and quality. You can guess the rest of the story: If you're using stucco, invest in a first-rate plastering contractor -- there's a huge range of quality among them. If you've chosen to use siding, invest in genuine wood rather than plastic or composition wannabes. For wood shingle exteriors, choose the best grade available.

Likewise, use top-quality lumber at exterior window and door trim, bargeboards and fascias. These areas take a real beating from the weather, and economy grades just won't hold up. If you feel guilty about using natural resources such as redwood, as I often do, remember that a quality product installed once is a far better use of resources than a cheap one that has to be replaced again and again.

Now, having blown a big chunk of your budget on topnotch windows, roofing and exterior finishes, where can you save some money without permanently ruining your house? We'll look into that next time.

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source: lendinguniverse.com