Upgrade!: Bigger Can Be Better

9 remodeling tips to make your home feel bigger

Josh Garskof, Money Magazine, January 20, 2012, link

home remodeling

For a few hundred to a few thousand dollars, you can make your place “live” bigger without actually making it bigger, says architect Sarah Susanka, a small-space specialist and author of “Not So Big Remodeling.”

Call it thinking inside the box; here are nine creative solutions for cramped homes.

1. Multitask the dining room …

Cost: $500 to $2,000

If you have an eat-in kitchen, your dining room is probably used for special occasions only.

“Why have a prime spot sit vacant except for two or three holidays a year?” says Susanka.

Use it every day as an office or homework room without giving up dinner-party capabilities. Install doors ($300 to $500 each, with labor); add shelves or a cabinet for supplies; and invest in fitted pads to protect the tabletop.

For more flexibility, try a table like homedecorator.com’s $629 Mission Table Cabinet, a sideboard that — amazingly — telescopes into a full-size dining table.

2. … and the guest room

Cost: $100 to $3,000

Stop dedicating a whole room to infrequent out-of-town visitors.

With a decent air mattress, futon, or pull-out couch, you can lose the spare bed and use the room for day-to-day needs. (If you go with an air mattress, make sure to choose one with a built-in reversible motor to simplify the inflating and deflating.)

Add furniture, and what was only a guest room can double as a media or game room or home office.

3. Add a powder room

Cost: $3,000 to $6,000

Adding a first-floor powder room is simple if you have an unfinished basement or crawlspace for running the new pipes. Look for an existing room — a coat closet, say — and you won’t have to build walls.

To save more, forgo the tile. The minimum space required by code is typically 2½ by 4½ feet, but you can often get an exemption to go even smaller.

4. Build a home office closet

Cost: $100 to $3,000

If your family is already bursting the seams of your abode, a home office might seem out of the question. But every household needs at least a small desk for paying bills and to anchor a wireless Internet system — and you can often fit it all in a closet or armoire.

At its simplest, all you need are five or six deep, sturdy shelves made from wood or a composite product, which can total less than $40 at a home center. In a closet, set the lowest shelf at 30 inches high so you can wheel up a chair.

5. Bring the laundry upstairs

Cost: $5,000 to $7,000

Hiking up and down the stairs with laundry is enough to make anyone wish she could trade up. Instead, just move the machines.

Today’s full-size high-efficiency washers and dryers are all designed to stack. You can steal the space — a little more than four square feet — from a closet, hallway, or nook.

You’ll need to run new pipes and wiring, so being near an existing bathroom helps keep costs down, says Raleigh, N.C., architect Tina Govan. Make sure to include a drain pan to collect overflows or spills.

6. Open the floor plan

Cost: $2,000 to $4,000

A choppy layout of undersize rooms can make any house feel claustrophobic.

“People like the look of older homes, but not the way they function,” says Seattle architect Thomas Lawrence.

To open your floor plan without major expense, remove doors from rooms that don’t need them. Interior walls can come out for $2,000 to $4,000, unless they support the building or contain pipes — in which case a window or pass-through may be a more feasible solution.

7. Use built-ins to replace a closet

Cost: $4,500 to $6,000

If you choose to eliminate a closet to expand or enhance your living space, create some built-ins to get back the lost storage. A run of four- to 10-inch-deep shelving along a wall has almost no effect on the size of a room, says Corvalis, Ore., architect Lori Stephens.

And it can handle many times the capacity of a closet. You might spend $4,000 removing the closet and another $2,000 on new built-in cabinetry, or just $500 if you use assemble-it-yourself home-center cabinetry, such as the Billy collection from Ikea.

8. Build a bump-out

Cost: $6,000 to $12,000

Another trick to expand a home without a full-blown addition is called a bump-out. You hang extra space off the side of the house, sort of like an oversize bay window.

0:00 / 1:57 Prohibition home was once a speakeasy

Structurally, it can’t extend more than about three feet from the existing exterior wall, but it can run nearly the whole length of the building — enough space to add an eating area to your kitchen or a closet to your master bedroom suite.

Because there’s no foundation work, a bump-out costs about $150 a square foot — or just $100 if you can tuck it under an existing roof overhang.

9. Finish non-living spaces

Cost: $15,000 to $30,000

Converting a full-height basement or garage into living space gets you an addition at half price. You’ll need a floor, ceiling, walls and more, but no structural work, no foundation, and no roof, so it’ll cost $50 to $100 a square foot — vs. about $200 for a true addition.

Attics are fair game, too, but more complicated because you may need to add a stairway and probably extend the plumbing, heating, and cooling systems a flight up. Doing all that brings the cost to around $150 a square foot.

Foreclosures Up Front: Figuring out the Fraud

Foreclosure deal with banks is ‘very close,’ HUD’s chief says

Legal settlement over alleged foreclosure abuses could help about 1 million

Reuters, January 18, 2012, link

WASHINGTON — The government and banks are “very close” to reaching a legal settlement over alleged foreclosure abuses that could help about 1 million underwater borrowers get mortgage relief, U.S. Housing and Urban Development Secretary Shaun Donovan said on Wednesday.

“We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” Donovan said in response to a question during a forum at the Winter Meeting of the U.S. Conference of Mayors in Washington.

Talks between federal and state officials and major lenders aimed at resolving allegations of illegal foreclosure practices have dragged into their second year.

Some states, including California and New York, have criticized negotiators as being too lenient on the banks and suggested the proposed settlement would not provide enough relief to the housing market.

But the Obama administration has seen the broader foreclosure settlement as an opportunity to help reach more borrowers struggling financially as the five-year drag in housing persists. Currently, banks have granted at-risk borrowers principal reductions on a limited basis.

“Principal reduction can have a substantial impact on the housing market nationally,” Donovan said.

He said about 1 million write-downs are expected, and a number of families would also “get direct compensation as a result of the settlement.”

Foreclosures Up Front: Falling Numbers

Foreclosures fall to lowest level since 2007

Les Christie, CNNMoney, January 12, 2012: 8, link

NEW YORK (CNNMoney) — Foreclosure filings and repossessions fell to their lowest level since 2007 last year.

Total filings, including default notices and bank repossessions were down 33% for the year to 2.7 million, according to RealtyTrac, the online marketer of foreclosed properties.

One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That’s a significant improvement from the peaks reached in 2010 — when 1.05 million homes were repossessed — and the lowest levels seen since 2007.

More than 4 million homes have been lost to foreclosure over the past five years.

While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the “robo-signing” scandal that broke in late 2010.

During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.

“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac.

0:00 / 2:47 Giving foreclosure families a second chance

However, Moore said there were “strong signs” during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011’s level but remain below the peak hit in 2010.

Low rates offer some help for homeowners

Early in 2011, many forecasters were predicting a wave of foreclosures due to resetting adjustable-rate mortgages, but low mortgage rates helped many borrowers refinance into more affordable loans, said Moore.

The government helped as well, through efforts like the Home Affordable Refinance Program (HARP), which made refinancing easier for borrowers who owe more on their mortgage than their homes are worth.

Government foreclosure prevention programs, including HARP and the Home Affordable Modification Program (HAMP), have started about 5.5 million mortgage modifications since April 2009, according to the U.S. Department of Housing and Urban Development.

“Programs like HAMP and HARP have definitely made a dent in the foreclosure problem,” said Moore “However, they are certainly not living up to their billing of preventing several million foreclosures. In addition, many [HAMP] homeowners fall back into foreclosure later on.”

Of course, there were still plenty of factors working against homeowners in 2011, including the continued erosion in home prices. Falling prices rob homeowners of home equity, which they can tap if they need emergency cash.

Foreclosure hot spots

Hot spots for foreclosures remain mostly in “bubble states,” where speculative investors helped drive up home prices beyond their fundamental values during the mid-2000s housing boom.

Nevada, where one out of every 16 households received some kind of default notice during the year, was the worst hit of all, a distinction it has held for the fifth consecutive year.

Arizona had the second highest foreclosure rate and California came in third. Florida, which had been running neck-and-neck with the other “Sand States” in past years, fell to seventh, behind Georgia, Utah and Michigan.

Among metro areas, Las Vegas suffered from the highest foreclosure rate in 2011. California put seven cities in the top 10, led by Stockton in the second slot. Other cities in the top 10 included Phoenix, which finished sixth, and Reno, Nev. was eighth.

Foreclosures Up Front: Rental Opportunities

Turning foreclosures into rentals

Tami Luhby, @CNNMoney, January 10, 2012, link

foreclosures, rentalsThe government wants to turn foreclosures into rentals.

NEW YORK (CNNMoney) — Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.

The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) to investors in bulk. The properties would then be converted into rentals.

The initiative began back in August, when the Federal Housing Finance Agency, the Treasury Department and the U.S. Department of Housing and Urban Development announced they were seeking suggestions on ways to dispose of repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration.

In addition to getting the properties off the government’s books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.

The agency is not releasing details on how the rental program would work, instead saying it is “proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012.”

Administration officials said they are continuing to work with the agency to develop the program.

Until now, most foreclosed homes have been sold individually because investors have demanded bigger discounts to buy large numbers of properties.

But federal officials are warily eyeing the expected surge in foreclosures as banks ramp up their action against delinquent homeowners. The process had been stalled since late 2010 when banks’ shoddy paperwork practices came to light.

There are close to 2 million homes in the late stages of delinquency, according to Lender Processing Services. Since foreclosed properties often sell below market value, they can wreak havoc on home prices.

0:00 / 2:33 Should you buy a home in 2012?

Converting these homes to rentals can both help the neighborhood and minimize losses to Fannie, Freddie and the FHA, which hold about 250,000 properties, Bernanke told lawmakers last week.

He urged lawmakers to ramp up their efforts to fix the housing market, placing particular emphasis on the problem of vacant homes on the market.

“Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery,” he said.

Bernanke’s comments launched a full-court press by Federal Reserve officials last week to raise awareness of the continuing problems plaguing the housing market.

His proposals were quickly followed by Fed Governors Sarah Bloom Raskin, who spoke on ramping up enforcement of mortgage servicers, and Elizabeth Duke, who said Fannie Mae and Freddie Mac could do more to help heal the housing market.

Meanwhile, New York Fed President William Dudley gave a speech that touched on a wide range of housing policies — including principal reduction and mortgage refinancing — that he believes will boost the economy.

The Fed has already tried to boost real estate sales by pushing mortgage rates down to record lows through massive bond-buying programs.

But the renewed push for housing help indicates that the Fed, which has basically run out of monetary policy ammunition to revive the real estate market, is urging the federal government to ramp up its efforts.

“The Federal Reserve is signaling in even stronger terms the need for the government to do more to help housing,” said Jaret Seiberg, a policy analyst with the Washington Research Group.

More apartments for the Pleasanton area…

Pleasanton Council OKs plan to allow another 2,200 high-density housing units here;
Action meets court order to bring more mixed-use rentals to Pleasanton for moderate-to-lower income tenants

Jeb Bing, Pleasanton Weekly, January 6, 2012, link

Facing a packed meeting room but with almost no objections, the Pleasanton City Council approved a final plan Wednesday night that will allow 73 acres in various parts of the city to be rezoned for high density housing.

The two- and three-story apartment complexes would provide “affordable” housing on 11 separate building sites scattered around the city.

The council will ratify its vote, as required by law, at a second reading of the new housing ordinance at a special meeting at 7 p.m. next Tuesday in its Civic Center council chambers. The public will then have 30 days to file any legal objections before the final document becomes part of the city’s General Plan and is filed with both the Alameda Superior Court, which ordered the added housing in Pleasanton, and the state’s Department of Housing and Community Development (HCD) which concurred.

The actions by both the City Council Wednesday and the city’s Planning Commission earlier followed the court’s ruling that declared the city’s 1996 housing cap of allowing no more than 29,000 homes and apartments here to be illegal.

When the additional affordable housing units are built, along with some 650-800 units already approved in the Hacienda Business Park, the total number of homes and apartments in Pleasanton will add up to about the 29,000-unit maximum that voters in 1996 wanted. Another wave of new housing requirements expected to be imposed by the state in 2014, however, will force Pleasanton to allow far more than 29,000 units.

Wednesday’s action also marked a turning point in the city’s long politically-motivated policy of slow growth that has been in place since the election of Mayor Ben Tarver in 1982. Mayor Tarver, who died Jan. 4, 2010, was Pleasanton’s first “slow growth” mayor, actively supporting measures to slow down new home construction and an outspoken advocate of saving open space and the Pleasanton hills from business and residential development.

As mayor, he championed the 1996 housing cap ordinance that was approved by more than 80% of Pleasanton voters. He was succeeded in office by Tom Pico, and then by the city’s current Mayor Jennifer Hosterman, both of whom also supported the housing cap at the time it was approved by voters.

Forced by a court order and state housing authorities to drop the cap and to now vote for a pro-growth rezoning measure, Hosterman and the other council members find themselves in charge as Pleasanton re-opens the housing growth tap. With a population based on the 2010 Census of just under 70,000, adding another 3,000 housing units, which the council has now approved and with most of the units likely to have at least two-bedrooms, could bring another 9,000 residents to Pleasanton based on an estimated three-people for each new rental unit.

Council members, recognizing the overall population increase their action will mean, expressed concern over its impact on schools.

At one time, the Pleasanton school district planned to build a 10th elementary school on a 13-acre site it owns on Vineyard Avenue to serve Ruby Hill and newer home developments in the vicinity. That plan was dropped for lack of funds. However, among the 9,000 new residents projected to fill the new affordable housing projects are expected to be a large percentage of younger couples with school-age children, and council members noted that more elementary schools may be needed.

“A lot of these new units will be occupied by younger families, so we need to understand the possibly dire needs our school district will face (by this rezoning action),” said Councilwoman Cheryl Cook-Kallio. “We need to work with the district to identify the sites where those needs will be,”

Councilwoman Cindy McGovern agreed, asking city staff to make sure guidelines are in place to provide space for news schools and to make sure room for playgrounds are part of the high density housing complexes to serve the children who will live there.

“The number one reason people move here is for our excellent schools, and we don’t want to lose that,” McGovern said.

City Manager Nelson Fialho said that while he and others on the city staff will work with the school district in analyzing the impact, the city and school district are separate governing agencies with no authority to co-mingle funds. He also pointed out that the court-ordered additional housing gave the city design review authority, but stipulated that few other requirements, such as special school construction fees, could be imposed.

Even though the council chambers were filled for Wednesday night’s council meeting, only 10 spoke during the public comments portion of the meeting, and only one objected to the plan. That was Pat Costanzo, who represented the Kiewit-owned acreage northeast of the Valley Avenue-Stanley Boulevard intersection. Kiewit had asked to be included as a site for rezoning to allow high density housing, but was excluded pending the city’s study of an East Site Specific Plan.

Other speakers said they would have liked to see changes in either the location of some of the sites or the numbers of housing units those sites could accommodate, but otherwise applauded the council’s final considerations.

“Collectively, this is a very comprehensive piece of work,” said Scott Raty, president of the Pleasanton Chamber of Commerce. “Let’s now move forward by preparing and adopting a specific plan for the east side so that we’ll never be in the position again where we’re forced to make housing decisions by the state or its (Department of Housing and Community Development).”

It’s been more than year, since October 2010, that Pleasanton officials have been addressing the city’s share of the region’s housing needs, which both the Association of Bay Area Governments (ABAG) and the HCD have long said was inadequate.

In fact, critics addressed the city’s lack of so-called workforce housing shortly after the 1996 housing cap was approved. The HCD insisted that the city rezone more land to accommodate the city’s need for affordable housing nearly a decade ago, and eventually reversed its approval of the city’s housing element plan because the city failed to meet those requirements. A local affordable housing group, Citizens for a Caring Community, has repeatedly asked the council to provide more housing for those who can’t afford the cost of most homes and apartments here.

One of its members, former Councilwoman Becky Dennis, told the council Wednesday that the city should raise its requirement for affordable units from 15% to at least 20% for each new development so as to reduce the need for more housing requirements by the state.

In a letter to the HCD, Dennis and Pat Belding, the Caring Community organization’s chairwoman, urged the state agency to raise the city’s requirement for housing units for the very-low income group much higher.

Citing the city’s zoning approval for an affordable housing complex in Hacienda Business Park, the organization’s letter stated: “Zoning for an additional 305 (very low income) units should be added back for a total unmet need of 844 VLO residential units.”

Still, Urban Habitat, an Oakland-based affordable housing coalition that successfully pursued a suit again Pleasanton over both its housing cap and unmet affordable housing needs, and the HCD appear to be satisfied with Wednesday’s council actions. It’s likely that after next Tuesday’s ratification and the 30-day waiting period for legal objections, that city staff can proceed with the actual rezoning actions.

Although the city, itself, will not build any housing, the rezoning will enable developers to have an easier time in obtaining permits for multi-family, two- and three-story developments on the properties.

In the council’s latest action, the sites will be rezoned to accommodate 1,884 apartment units at a ratio of 30 units per acre, with 400 more at 40 units per acre. Most apartment structures in Pleasanton are in the range of 20-25 units per acre.

SF to LA rail sees setback…

Halt state funding for high-speed rail; Peer-review group finds flaws in business plan for high-speed rail, urges Legislators not to use bond funds for project

Gennady Sheyner, Pleasanton Weekly, Palo Alto Online Staff, January 4, 2012, link

California’s quest to build a high-speed rail system between San Francisco and Los Angeles suffered a heavy blow Tuesday when a peer-review committee recommended that state legislators not fund the project until major changes are made to the business plan for the increasingly controversial line.

In a scathing report, the California High-Speed Rail Peer Review Group found that the business plan the California High-Speed Rail Authority unveiled in early November offers inadequate information about funding, fails to answer the critical question of which operating segment will be built first and features a phased-construction plan that would violate state law. The group, which is chaired by Will Kempton, recommends that the state Legislature not authorize expenditure of bond money for the project until its concerns are met.

The report deals the latest of several recent setbacks to the project, for which state voters approved a $9.95 billion bond in 2008. Since then, the project’s price tag more than doubled and several agencies, including the Legislative Analyst’s Office and Office of the State Auditor, released critical reports about the project.

High-speed rail has become particularly controversial on the Peninsula, where several grassroots groups have sprung up in the last two years to oppose it. Menlo Park, Atherton and Palo Alto had filed a lawsuit challenging the rail authority’s environmental analysis and the Palo Alto City Council last month adopted as the city’s official position a call for the project’s termination.

In its letter to the Legislature, the peer review group highlighted some of the same flaws that local officials and watchdogs have long complained about, most notably a deeply flawed funding plan. The project currently has about $6 billion in committed funding and the rail authority plans to make up much of the balance from federal grants and private investments — investments that would be solicited after the first major segment of the line is constructed. The peer-review group found this plan to be vague and insufficient.

“The fact that the Funding Plan fails to identify any long term funding commitments is a fundamental flaw in the program,” the report states. “Without committed funds, a mega-project of this nature could be forced to halt construction for many years before additional funding could be obtained. The benefits of any independent utility proposed by the current Business Plan would be very limited versus the cost and the impact on state finances.”

The group also faulted the rail authority’s business plan for failing to choose the “initial operating segment” for the rail line. Though the authority has decided to build the first leg of the line in Central Valley, this segment would not be electrified and would serve largely as a corridor for testing the new line. The first “true” high-speed rail segment would be built later and would stretch either north toward San Jose or south toward San Fernando Valley.

Though the peer-review group acknowledged that a phased approach is the only feasible way to build the system, it also found that this plan violates a requirement of Proposition 1A, which mandates that the rail authority identify funding for the first usable segment of the line before construction begins. The Central Valley segment, the peer report notes, “is not a very high-speed railway (VHSR), as it lacks electrification, a CHSR train control system, and a VHSR compatible communication system. Therefore, it does not appear to meet the requirements of the enabling State legislation.”

The peer review group also wrote in its letter that the authority should have determined in its business plan whether the first “operating segment” would go north or south from the Central Valley. Its letter states that “it is hard to seriously consider a multi-billion dollar Funding Plan that offers no position on which IOS should be initiated first.”

“This indecision may also have consequences in obtaining environmental clearances. We believe that the Funding Plan as proposed should not be approved until the first IOS is selected.”

The report reserves “final judgment” on the funding plan because the rail authority’s business plan is still in draft form and subject to revisions. But it also makes clear that major changes would have to be made before the project warrants state funding. The letter notes that while legislators could potentially come up with a funding source for the project, without such a source “the project as it is currently planned is not financially ‘feasible.'”

“Therefore, pending review of the final Business Plan and absent a clearer picture of where future funding is going to come from, the Peer Review Group cannot at this time recommend that the Legislature approve the appropriation of bond proceeds for this project,” the peer group’s letter concludes.

The new report presents a potentially devastating blow to the rail authority, which is banking on getting $2.7 billion in Proposition 1A funds for construction of the Central Valley segment. The agency has also received $3.5 billion in federal grants.

The state funds are particularly critical given the lack of private investment and increasing local opposition. The authority had acknowledged that private investment would not start coming in until later phases. Future federal funding is also deeply uncertain at a time when many Republicans in the House of Representatives are vehemently opposing the project.

The rail authority responded to the report by disputing many of its findings and by claiming that it “suffers from a lack of appreciation of how high-speed rail systems have been constructed throughout the world.” The authority also said in a statement that the peer-review group’s report “makes unrealistic and unsubstantiated assumptions about private sector involvement in such systems and ignores or misconstrues the legal requirements that govern the construction of the high speed rail program in California.”

Roelof van Ark, CEO of the rail authority, said in a statement that the recommendation of the committee “simply do not reflect a real world view of what it takes to bring such projects to fruition.”

“It is unfortunate that the Peer Review Committee has delivered a report to the Legislature that is deeply flawed in its understanding of the Authority’s program and the experience around the world in successfully developing high speed rail,” van Ark said.

Rail authority officials also argued that the peer-review group’s report could jeopardize federal funding for the project. Thomas Umberg, chair of the authority’s board of directors, said the board takes seriously “legitimate critiques” of the rail program, including recommendations that the authority hire more staff.

“However, what is most unfortunate about this Report is not its analytical deficiency, but that it would create a cloud over the program that threatens not only federal support but also the confidence of the private sector necessary for them to invest their dollars,” Umberg said in a statement.

The authority’s Chief Counsel Thomas Fellenz called the committee’s findings about the project’s inconsistency with Proposition 1A “unfounded assumptions.” The group’s legal conclusions, he said in a statement, are not only “beyond the expertise of the authors, but attorneys at the state and federal government level and the legislative author of the bond measure, profoundly disagree.”

The authority also submitted an eight-page letter to state Legislators responding to the peer-review group’s criticisms. The authority disputed in its letter the peer-review group’s finding that the “initial construction segment” in Central Valley would violate Proposition 1A and argued that the group’s demand for a long-term funding plan fails to consider how major transportation projects are normally built.

“By this measure, none of the unconstrained regional transportation plans of any transportation authority should be pursued,” the letter from Umberg states. “No project, in our experience, has fully identified funding sources for the entire project at this stage and it is both unfortunate and inappropriate for the Committee to apply this test only to high speed rail.”

And we’ll just keep on saying it – rates are great!

Refinancing Gets Even More Attractive

ANNAMARIA ANDRIOTIS, Wall Street Journal, December 31, 2011, link

Homeowners who have resisted the urge to refinance their mortgages until now could be rewarded for their willpower. Mortgage rates have fallen to new lows—and banks are rolling out incentives to win business.

Economic uncertainty in Europe and slow growth in the U.S. are prompting investors to pile into ultrasafe U.S. Treasurys. That, in turn, is pushing down mortgage rates, which are tied to Treasurys.

The average interest rate on a 30-year mortgage fell to 4.05% for the week ended Dec. 23, the lowest in 60 years, according to HSH Associates, a mortgage-data firm. And rates on jumbo mortgages—private loans that in most parts of the country are larger than $417,000—also have hit new lows, averaging 4.61%.


Despite the incentives, many would-be applicants remain sidelined because they can’t meet the long list of qualifications.

“It’s hard to argue rates will get much lower than they are today,” says Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California, Los Angeles.

That’s good news for homeowners. A person who refinanced a $400,000 30-year mortgage in February would pay an interest rate of 5.04% on average, according to HSH Associates, and fork over $2,157 a month; at the current rate of 4.05%, he’d save $236 per month, or $2,830 per year.

What’s more, demand for refinancing is declining, since many homeowners already took advantage of lower mortgage rates. Applications for refinancing are 17% below this year’s peak in September, according to the latest data from the Mortgage Bankers Association.

That and other factors have prompted some lenders to offer incentives to win new business—particularly regional and community banks, which are focusing more on jumbo mortgages, says Stu Feldstein, president at SMR Research, which tracks the mortgage market.

The discounts can be sizable. Regional bank Valley National Bank charges homeowners in New Jersey and eastern Pennsylvania a flat fee of $499 for closing costs on mortgages as large as $1 million. Since average closing costs on a refinance run about 2% of the total loan amount, a person with an $800,000 mortgage could save about $15,500.

A spokesman for the bank says it is aggressively marketing the discount in part to bring in more customers.

While many lenders don’t refinance mortgages that are larger than about $2 million, Union Bank—which has branches in California, Oregon and Washington—refinances up to $4 million at no extra cost. (Many banks that refinance multimillion-dollar mortgages tack up to an extra quarter of a percentage point on the interest rate.)

Since November, Union Bank has also allowed borrowers to roll the costs of a refinance, like the appraisal fee and loan processing fee, into the mortgage. And borrowers whose original mortgage is from Union Bank don’t have to provide all of the income documentation that other customers do in order to refinance.

In part, the bank’s goal is to develop relationships with high-net-worth clients, says Stuart Bernstein, national production manager of residential lending at Union Bank.

Despite the incentives, many would-be applicants remain sidelined because they can’t meet the long list of qualifications.

The home-equity requirement is one of the toughest hurdles, says Mr. Feldstein. Homeowners with at least 10% home equity make the cut, but people with less have a tougher time.

Borrowers with 10% to 19% equity in their home usually have to buy private mortgage insurance, whose cost varies based on many factors, including their credit score. A borrower with 15% equity and a FICO credit score above 720 could pay 0.44% of the total loan amount, says Keith Gumbinger, vice president at HSH Associates. On an $800,000 loan that would be $3,520 a year—eating into the potential savings of a refinance.

In December, the federal government rolled out a revamped version of the Home Affordable Refinance Program with relaxed home-equity requirements, to allow more borrowers to refinance. To qualify, the current mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae, and borrowers need to be mostly current on payments.


For regular refinancing, applicants need a FICO credit score of at least 740 to get the best rates, says Mr. Gumbinger. And they must provide copious documentation, including at least two years’ worth of tax returns and proof of income as well as recent statements for assets such as retirement and brokerage accounts.

After clearing those hurdles, you might wait about 60 days for refinancing to be completed, says Mr. Gumbinger—longer than the typical 45 days. While some lenders are offering 60-day rate locks for free, others charge a quarter of a percentage point of the total loan amount for the service. On an $800,000 mortgage, that’s $2,000.

Or you could opt to take your chances with a free 45-day lock and hope rates don’t spike between day 46 and the date your loan closes. With the euro zone still in economic crisis and global investors rushing to the safety of U.S. Treasurys, housing-market analysts say it could be at least six months before rates rise significantly.