Significant changes occurred in the ARM market in 1994, characterized by a greater variety of ARMs and less standardization, the finance board said. The two most common ARMs at the end of 1993 were those linked to the yield on one- year Treasury securities, with annual adjustments beginning at the end of the first year (30 percent), and COFI ARMs, those linked to the District 11 Cost-of-Funds Index (32 percent).
At the end of 1994, standard one-year Treasury ARMs were 24 percent of the ARM market and COFI ARMs were 17 percent. In contrast, the market share of nonstandard Treasury ARMs and those with periods of at least two years to the first rate adjustment increased to 44 percent of the ARM market from 30 percent.
Two major trends characterized the conventional mortgage market in 1994. First, the average term-to-maturity increased to 27.8 years from 26.6 years. The finance board attributes the increase to the rise in the popularity of ARMs, which have a longer average maturity than fixed-rate loans, and the decline in the popularity of 15-year mortgages.
The second trend is a continuation of the gradual increase in the loan-to- price ratio. During 1994, the average loan-to-price ratio reached an all- time high of 80.8 percent. There has been a decrease in the proportion of loans having loan-to-price ratios of 70 percent or less, and an increase in the proportion with loan-to-price ratios of more than 90 percent, the finance board said.
THE BEST SHELTER A TAX SHELTER
* For people who bought their first houses in 1994, April 15 will be a day to celebrate: They'll be able to deduct a lot more than they could as renters.
Here are three deductions to keep in mind, courtesy of GMAC Mortgage Corp. in Elkins Park:
