Justin Perry's Mortgage Blog

Mortgage rates are up and mortgage applications are down.   It is becoming increasingly difficult to get approved for a mortgage loan which makes it hard to buy a house or refinance your current mortgage.  Just when I think I have seen it all I find a column like this one from http://www.thetruthaboutmortgage.com/. 

This is getting ridiculous, but according to the Wall St Journal, former Star Search host and sweepstakes presenter Ed McMahon is facing foreclosure.

Per the Journal, McMahon’s Beverly Hills, CA mansion, which is currently listed at $5.75 million, was $644,000 in arrears on a $4.8 million loan as of February 28 when none other than Countrywide filed a notice of default.

McMahon also has a home equity line of credit of $300,000 tied to the residence, although that may have been frozen long ago when Countrywide began limiting borrower’s ability to draw against their faltering property values.

Real estate agent Alex Davis told the WSJ that the property has been on the market for roughly two years, and has yet to attract any buyers despite a price reduction.

According to Davis, McMahon fell behind on his mortgage payments after breaking his neck in a fall 18 months ago, obviously keeping him away from any possible projects.

I found the listing of the home online here, where it is described as a Mediterranean-style celebrity estate in a gated community off Mulholland Drive called The Summit.

According to Wikipedia, McMahon apparently owned real estate worth more than $200 million during the 1990s, largely in Malibu, CA.

While startling, McMahon isn’t the first celebrity to face foreclosure, with the likes of Jose Canseco, Michael Jackson, Marion Jones, and Latrell Sprewell all finding themselves in similar circumstances.

Stay tuned for a bad reality show in which a celebrity attempts to sell their home after receiving a foreclosure notice.

Inflation fears have driven mortgage rates to levels not seen since October 25th, 2007.  One of the biggest contributors was comments made by Fed Chairman Ben Bernanke about the rising fear of inflation.  This left many economists to believe that the Fed will be increasing rates in upcoming meetings. 

The following are average mortgage rates published by Freddie Mac.  Keep in mind all these interest rates come with points so they will appear lower than what you can actually get without paying points for a home loan.   

Freddie Mac (FRE, Fortune 500) said 30-year fixed-rate mortgages averaged 6.32% with an average of 0.7 point in the week ending Thursday, up from 6.09% last week. Last year at this time, the 30-year loan averaged 6.74%.

The 15-year fixed-rate mortgage this week averaged 5.93% with an average 0.6 point, up from last week when it averaged 5.65%. A year ago at this time, the 15-year fixed rate mortgage averaged 6.43%.

The last time the 15-year fixed-rate mortgage was higher was the week ended Oct. 25, when it averaged 5.99%.

Five-year adjustable-rate mortgages (ARMs) averaged 5.70% this week, with an average 0.7 point, up from last week when it averaged 5.51%. A year ago, the 5-year ARM averaged 6.37%.

One-year ARMs averaged 5.09% this week with an average 0.6 point, up from last week when it was 5.06%. At this time last year, the 1-year ARM averaged 5.75%.

If you are looking for some positive news here is some info released by the National Association of Realtors.  They say the number of homes under contract rose 6.3% in April which is due mostly to buyers looking for bargains. 

All throughout New England mortgage rates continue to climb.  Today we are about half a point (.5) higher across the board than we were just one week ago.  This may seem contradictory to all the news as of late, with the Fed cutting interest rates and real estate being stagnant.  But there are more important factors that drive the supply and demand for mortgages.

I have mentioned this to my readers many times but bad economic news is generally good for mortgage rates and on the flip side, news that is better than expected can drive mortgage rates up. The data from recent economic reports has come in better than expected.  One of the biggest pieces of information was related to jobs.  The ADP report showed that the ecomony is actually adding jobs whereas many forecasted a declining jobs report.  Remember, a stronger than expected economy builds faith in the stock market and other growth dependent investments.  So as traders move their money out of the securities that back mortgages (MBS - mortgage backed securities), those who hold them must lower their price in order to sell.  A lower price on these MBS creates higher mortgage rates. 

If you are considering refinancing your current loan I would recommend locking your interest rate today.