Mortgage Rates Move a Bit Lower

Mortgage rates moved a tad-bit lower over the past week or so, basically remaining in a holding pattern.

Freddie Mac says the average rate on a 30-year fixed-rate mortgage in the week ending Aug. 29 was 4.51 percent, down from 4.58 percent the previous week. 30-year rates are still close to 1 percent higher than they were a year ago. Mortgage rates still remain low by historical standards.

A 15-year fixed averaged 3.24 percent in the week ending Aug. 29, up from 3.21 percent last week. A one-year adjustable-rate mortgage averaged 2.67 percent, up from 2.63 percent.

Separate reports on housing last week may indicate higher rates have sidelined some buyers.
New home sales fell more than 13 percent in July, while pending sales of existing homes declined 1.3 percent last month.

The Mortgage Bankers Association reports a continued decline in mortgage applications, with applications to refinance an existing mortgage at a two-year low last week.

Mortgage rates have been rising because they tend to follow the yield on the 10-year Treasury note. The yield also has surged on speculation that the Fed's stimulus will slow. But the rate on the 10-year note declined last week to 2.78 percent from 2.90 percent the previous week.

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Will Flood Insurance Cost You More?

Last year Congress passed, and President Obama signed, the Biggert-Waters Flood Insurance Reform Act of 2012. The law extended the National Flood Insurance Program for five years and calls on the Federal Emergency Management Agency (FEMA) and other agencies to make a number of changes to the way in which the National Flood Insurance Program (NFIP) operates. Some of the required changes have occurred already, while others will be implemented in the coming months and over time.

The most important provisions of the legislation are aimed at putting the program on a more solid fiscal foundation and building a catastrophic reserve fund to provide for claims in years with unusually costly flood disasters. To strengthen the NFIP financially, the new law requires FEMA to begin charging rates that reflect true flood risk. The vast majority (81%) of NFIP policies will not be affected by the new law, because their premium rates already accurately reflect their flood risk.

For more information about changes to FEMA’s Flood Insurance Rate Maps (FIRM) and to see if your property is affected, click here.

Rate Changes Already Underway:
Full-risk rates now are being applied to newly purchased property, to property not previously insured, and to policies that are re-purchased after a lapse.

Premiums for older (pre-FIRM) non-primary residences in Special Flood Hazard Areas (SFHA) will increase by 25% annually until they reflect the full-risk rate.

Beginning October 2013:
Premiums for pre-FIRM business properties, severe repetitive loss properties (1–4 residences) and properties on which claims payments exceed fair market value will increase by 25% annually until they reflect the full-risk rate.

Routine rate revisions will include a 5% assessment to build a catastrophic reserve fund.

Anticipated in Late 2014:
Premiums for properties affected by map changes will increase by 20% each year to reach full-risk rates.

Who Won't Be Affected:
Owners of primary residences in SFHAs will keep the subsidized rates until the home is sold; the policy is allowed to lapse; a new policy is purchased; or a string of severe losses is experienced.

Post-FIRM rates for all zone classes will be unaffected by Section 100205 of the Biggert-Waters Act.

Phase-out of Other Discounts:
The new law calls for phasing out discounts, including grandfathering. Grandfathering allows homes that were constructed according to an earlier standard to retain that insurance rating when new maps are issued. Because of the complexity of this issue, FEMA is conducting an analysis before full implementation can take place, scheduled for late 2014. Many discussions are taking place in Congress that may further affect the implementation of this provision.

Premiums also will increase for properties insured by the Preferred Risk Policy (PRP) Eligibility Extension, which had allowed structures mapped into a high-risk area to remain insured at lower PRP rates.

Phase-out of both grandfathering and the Preferred Risk Eligibility Extension will begin in 2014. Rates are anticipated to rise 20% per year over a 5-year period until they reach full risk rates. The CRS discount rates will not be affected by the Biggert-Waters Act..

Preparing For The Next Big Storm

So far, the 2013 hurricane season has been eerily quiet. There's no telling whether the rest of this hurricane season will bring anything like Superstorm Sandy, which flooded more than 150,000 homes, killed more than 140 people, and left about 8.5 million homes in 20 states without power. A relatively minor storm can also cause major damage if it includes high winds, heavy rain, or tree-snapping ice or snow.

Even a simple blackout can happen at any time and last for days. More than a half-million residents were still without power three to four weeks after Sandy struck. And if you think most homeowner insurance policies cover disasters, think again: Flood insurance is just one of the "extras," assuming it's even available in your area.

Some areas are obviously more prone to hurricanes and tropical storms than others. But whether it's hurricanes, tornados, earthquakes, or just a plain old severe thunderstorm, no one is 100 percent immune from Mother Nature. There are some things you can do well in advance of a hurricane, or other super storm.

Things To Do Now, Well in Advance of the Next Big Storm:

Build an Emergency Kit

It should have a whistle to attract help, dust masks for each member of your family, duct tape, a wrench or pliers to turn off water if needed, flashlights and batteries, and local maps. Plan on 1 gallon of drinking water per person per day for at least three days. Include moist towelettes, garbage bags, and plastic ties for personal sanitation. Also consider changes of clothing and sleeping bags or blankets.

Be Prepared for Injuries

A first-aid kit should be stocked with bandages in various sizes, sterile dressings and gloves, hand sanitizer and antibiotic towelettes, a thermometer, pain medicines, tweezers, and scissors.

Check Your Fire Extinguishers

You should have one with a minimum classification of "2-A:10-B:C" on each floor. Check the dial or pop-up pin for adequate pressure each month. Professionally repressurize extinguishers older than six years, and replace any older than 12 years.

Have the Right Phones

Keep at least one corded phone because cordless phones require AC power. A post-Sandy survey also found that cell phones were more reliable than landline phones, though we lack data on differences for fiber and cable vs.older copper-wire systems. Be sure cell phones are charged. And have an out-of-town contact you can call, because long-distance phone service can be more reliable than local service during and after a storm. Be sure to have emergency numbers already pre-programmed into your cell phone. You don't want to be scrambing around trying to find emergency numbers when an actual emergency occurs.

Have Some Ready Cash

Banks and ATMs could be out of service, assuming you can get to them.

Stay Safe During a Storm

Find the safest place. Stay in a central room without windows. Have kids? Ease the fear factor with books, a toy or two, and if you have power or a generator, some movies and video games.

Avoid Electrocution Risks

Don't use any plug-in device if flooding or wetness is nearby. Landline phones can also be a shock hazard in an electrical storm. If you must make a call during a storm, use a cell or cordless phone if possible—or use a land­line phone's speaker mode to reduce contact with the handset. Avoid baths and showers until the storm passes. And watch out for downed power lines and live wires.

Use Cars Safely

Obey emergency crews and follow designated routes. If your vehicle stalls in water, shut off the ignition and seek higher ground; the leading cause of Sandy-related deaths was drowning.

Next month in our October newsletter, we're going to cover additional items related to storms, like "Damage Control After A Storm", and "Home Insurance: Are You Really Covered?"