I was in my insurance agent’s office yesterday and in casual conversation he asked where the interest rate was.

Good question, because mortgage interest rates have been volatile over the past number of weeks, but those reasons are for another post.

I told Mike there was no easy answer because it’s a matrix of things that revolve around the specific homebuyer. For example, credit scores, down payment (or loan to value – LTV), back end ratios, loan amount, points paid – the list goes on.

But with a little bit of homework, a serious homebuyer can get a good handle of what rate they should be getting. Take a look at a rate sheet.

Intimidating? A little bit, but Google “how to read a rate sheet” and you’ll quickly figure it out!

Today’s Saturday, and having just come back from New Orleans, I’m catching up on stuff at the office.

Leslie saved all my Wall Street Journals and the LA Times (I love reading the papers) and the main article in the Business section of last Friday’s LA Times caught my eye. It said the tax exemption on principal reduction (such as on short sales) expires December 31st and “struggling homeowners who obtain reductions in their mortgage debt face a new obstacle starting next year – a bill for taxes on that aid”.

Many of us Realtors have known about this for quite a while and have been beating the drum in warning homeowners about this huge, potential “gotcha”.  Realtors are pushing hard to get this law extended, but with the election in November, gridlock in Congress, a potentially new President, etc, no one is sure what will happen.

If you are wondering about your own personal situation, don’t delay understanding these implications and determining your course of action. If the law expires, and you obtain mortgage debt relief in 2013, you may be taxed on that debt relief as though it were cash income to you. As always, Realtors can not provide legal or tax advice so please consult with your own tax adviser.

Ultimately – it’s all for political show and virtually worthless. When the President announced the settlement, and I saw arrayed behind him a flank of bureaucrats and politicians, that’s what I thought – lots of thunder and fire, but ultimately not a lot of bang.

The politicians had to “do something” about the housing crisis and after over a year of negotiating, this is what we got:

People who lost their homes will get a check for maybe $1,500 – 2,000, but only if it was through one of the 5 banks. Underwater homeowners maybe can get $15,000 knocked off their loan balance through a loan mod, but again, only if their loan is with one of those 5 banks. Fannie Mae and Freddie Mac loans don’t qualify.

In reality, for troubled homeowners in Ventura County who were maybe looking to somehow save their homes through this “breakthrough settlement”, it doesn’t do much. Reducing a loan balance by $15k means a payment reduction of about $80 a month ($20k at 5% over 30 years = $80.52). Reducing it by $20k saves a little over $100 a month. Not to minimize those savings, but when a homeowner has payments of $2,500 to $3,000 a month (mortgage, taxes and insurance) on a home that’s $150,000 underwater or more, $100 a month isn’t going to save that home.

But all the politicians from the states involved (Kamala Harris of CA) and the federal government can add this settlement to their political resume. Ultimately, the banks escaped serious damage. This settlement is going to be slowly played out as the economy continues to improve, allowing the 5 banks to absorb these costs gradually over time.

Should “something” have been done with banks? Absolutely. Will this help the housing crisis in Ventura County? I don’t think so. I believe what ultimately will heal this mess is job creation and the continued building of consumer confidence. It will be “we the people” who will solve this and solve it we will.

Most people understand their home is their most important asset, emotionally and financially. More young people in their 20s and 30s will come into the market as they seek to have their own nest. Growing families will need to move into larger homes. As incomes become stronger and wage earners feel more confident in their job security, they’ll want to move up. It’s just the way things are.

So I admit I’m a cynic going into this political cycle. I just hope the public is too.

Being in the business, we get this question from time to time – and it’s impossible to answer in a sound bite! The short answer is that there are too many variables for a quick number like 4%.

What kind of loan? Conventional, FHA? What’s the loan to value (LTV)? What’s your credit score? Do you want an interest rate lock? For how long? How much is the loan? Over the $417k conforming limit? What’s your back end ratio (debt to income ratio)?

Let’s take a look at a recent matrix to see how, with conventional financing, variations in FICO scores and loan to value (LTV) amounts affect interest rates…

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Starting tomorrow, the loan limit will drop from $729k to $598,000 ($625k in other markets) as Fannie and Freddie attempt to reduce their financial risks in the shaky housing market. Taxpayers have kept the 2 giant organizations afloat with billions of $$, and policy makers are trying to wean the wobbly real estate industry away from further subsidies.

But with billions having already gone to bankroll the banking and other industries (GM), a lot of us in the real estate industry think now’s not the time to reduce the loan limits in the expensive east and west coast markets.