Thursday, June 19, 2014
Thursday, December 12, 2013
The 500 Page Mortgage Application?
A CNN Headline this morning caught my attention: The 500 Page Mortgage Application
The "500 Pages" is referring to is all the documentation needed to fund a loan. While, in actuality, its less, it can be overwhelming to new buyers. The income, assets, taxes, etc that Fannie and Freddie now require with the application. As the promise of "QM" in 2014 will only make that more true. The article talks about the need for everything from the borrower including the "source of large deposits" which is something we run into often with borrowers' assets. A lot of this can be avoided, or at least streamlined, at the Pre-Approval Process.
If I can give one piece of advice to you to pass on to your buyers it's this: get the loan officer everything upfront during the pre-approval process. The article reiterates that as well, stating:
"All this amassing and analyzing of documents costs both time and money. And new mortgage lending rules that are going into effect in January will make it even more complicated. 'New rules require you to triple-check everything,' said Jeff Taylor of Digital Risk, a mortgage processing company. 'The best thing you as a borrower can do to help yourself is to have all your documentation together before you apply. Get needed items like your credit report and get any errors corrected so you can get through the process as smoothly as possible.'"
Heres the article if you want to read:
Tuesday, August 27, 2013
FHA eases up on buyers with past short sales or bankruptcy on credit
If you have had a past short sale or bankruptcy there are different
timelines you must meet to buy again based on the new financing you are buying
with. For example, Conventional, (Fannie Mae or Freddie Mac), VA or FHA.
Fannie Mae will lend again 2 years after a short sale with
20% down or 4 years later with 10% down.
If you had a bankruptcy the timeframe is 4 years for a chapter 7 or 2 years
for a chapter 13 (from the discharge date).
VA loans require 2 years on a short sale, 2 years on a
Chapter 7 and 1 year past a chapter 13.
FHA is 3 years post short sale if you had mortgage lates leading
up to the short sale, (no lates the time
is less) and they are 2 years on a chapter 7 and 1 year on a chapter 13 However, FHA is shortening the waiting
period for some borrowers who had had previous short sales, bankruptcies.
For borrowers who meet certain requirements, FHA is trimming
down the amount of time that homebuyers must wait after a bankruptcy or short
sale before they may qualify for a FHA mortgage to 1 year. This is great news as the waiting period had
been 2 years after the completion of a bankruptcy and 3 years after a
foreclosure or a short sale.
Who can qualify under the new “back to work extenuating
circumstance” policy? Borrowers must be able to show their household income
fell by 20% or more for at least 6 months and prove the reduction was tied to
unemployment or another “economic event” beyond their control.
Feel free to contact me with any questions.
Monday, June 10, 2013
Investing in Haiti / Changing Lives
Many of you know I have a passion for the country of Haiti. You have supported my trips and efforts there with donations of supplies, finances and prayer. You often ask me how things are going in Haiti and want updates. The birth of my son and my wife's difficult pregnancy prolonged my visit back. But I have had the opportunity to help here in the US.
As you may know unemployment in Haiti is 80%. The older boys that live at Good Rest Orphanage have completed trade schools - but the opportunity to "go get a job" just isn't there. The result is more poverty and the older boys who want to get married, move out on there own and begin their life end up living at the orphanage instead.
These are young men that I have personally worked with side by side with. I know their abilities and desire to work. They have gone to school and now need to find employment. I have teamed up with Children's Heritage Foundation to help these young men begin their career. Our plan I simple; we are working together to raise funds to help them start their own company. But were not just giving them a hand out. Its a business loan. Once they've established their business they will begin to pay the loan back. Those funds will then be used to finance the next set of trade school graduates at Good Rest Orphanage.
These boys are not looking for a hand out. I personally know what its like to get a helping hand and I know that I am where I am today as a result of those of helped me. If you are interested in investing in these boys lives the return on your investment could be life changing. The posts below are a cover letter and our business plan for this endeavor. If you want to contribute you can contact me directly or review the business plan and see what you think. The final paragraph explains how to contribute.
Were looking for individuals who
are will to contribute financially to this effort. The funds received will go directly towards
the start-up activities of the company. We
have a start date of July 15, 2013.
Please consider making an investment in the economic well-being of these
young Haitians. Please mail your contributions to Children’s
Heritage Foundation and write “Haiti Construction Company” in the
memo. Children’s Heritage Foundation
991-C Lomas Santa Fe Drive, PMB 427 Solana Beach, CA 92075.
Business Plan to help young men in Haiti
Good
Rest – Haiti Construction and Re-development Company
Mission Statement
Our goal is to further the long-term economic well -being for
graduates of Good Rest Orphanage (Good Rest) and the Haitian community through
job creation and skills building.
Background
The unemployment rate in Haiti is currently 80%. For the young adults of Good Rest, more needs
to be done to fight poverty, secure a more sustainable economic future and
ensure a successful transition to independent adulthood. Although education is a top priority, with
such a high unemployment rate, they simply cannot just “go get a job” after
graduation. Children’s Heritage
Foundation, (CHF) in it’s continuing effort to bring an economic
self-sufficiency to the people of Haiti will launch a new construction company
in partnership with graduates of Good rest.
It will be operated by the young adult graduates of Good Rest who have
completed the appropriate construction related training.
Who will this help
and how will it be done?
No other industry in Haiti has more room for growth than
construction. As Port au Prince and
outlining communities rebuild after the devastated earthquake, the opportunity
for work and jobs will become more accessible to those with construction
related skills and knowledge. This work
will be made available through Haitian government funded projects and private sector
development. Each of the eight employees,
who will co-own the company, (referred to here as “employee/owners”) have
completed trade school in their related fields of construction. Mr. Chatlin, a prominent businessman in
Haiti, will mentor the employees/owners. He will use his contacts and broad
network to assist the company with securing a broad range of jobs.
They will also
receive administrative support under the direction of CHF’s American associate
in Haiti, Carl Fielstra. The employee
owned company will establish a trustworthy reputation of hard working,
knowledgeable and well trained employees who each own a share of the
company. Through this model we will to
build a “pride of ownership” in the work performed by the business.
CHF will utilize its contacts and associates, both Haitian
and American, to secure job opportunities across Port-au-Prince. The company will engage in some pro-bono work
in order to build the company’s portfolio and reputation in the industry. For
example, the company will provide the first day of work at no charge on certain
projects in order to give perspective clients a “no risk” evaluation of the employees’
skills and abilities.
Initial funding
The initial funding of the project will provide sufficient
financial support to allow the company to complete the medical building that is
currently under construction at Good Rest.
The completion of this project will not only benefit Good Rest but also add
to their business, a resume. The
project will also allow the employees/owners to refine their construction skills
and build team synergy.
Investing in the Fight Against Poverty
Children’s Heritage Foundation hopes to raise approximately $15,000
to $20,000 in startup capital to seed the business including: provide the
initial equipment and payroll expense while the company grows. Some of the initial startup funds will subsidize
payroll while employees seek to acquire projects and contracts. Salaries will be subsidized on a decreasing
sliding scale over 100 days. The decrease
in subsidized wages is expected to offset by income from news jobs. Eventually, all of the subsidized income will
be phased out.
The itemization of
funds is as follows:
·
Initial
wages for employee/owners $8,000-$9,000
·
Tools
and materials $2,000 - $3,000
·
Transportation
for the company (purchase of truck and its delivery to Haiti) $6,000 - $8,000
Our Measurement of Success
The start-up funds while not a loan, in the traditional
sense; will not be a gift either. The
company’s employee/owners will be expected to become completely self-reliant within
a 6-month period. Employees/owners are
expected to re-pay the initial startup investment over a period of 2 years. These funds will then be used in a modified
“micro-bank” model to fund and support other entrepreneurial endeavors by
current and future residents of Good Rest.
Our goal is to invest in the start up the company for a
limited duration of time. The goal is
for the company to become self-sufficient, teaching and allowing the employees
to be economically independent and self-reliant. As the company grows, builds a portfolio and
reputation of success, it will in turn benefit the community beyond Good Rest;
by job creation and hiring of other Haitians needing work.
Starting Now
Children’s Heritage Foundation is looking for individuals who
are will to contribute financially to this effort. The funds received will go directly towards
the start-up activities of the company. We
have a start date of July 15, 2013.
Please consider making an investment in the economic well-being of these
young Haitians. Please mail your contributions to Children’s
Heritage Foundation and write “Haiti Construction Company” in the
memo. Children’s Heritage Foundation
991-C Lomas Santa Fe Drive, PMB 427 Solana Beach, CA 92075.
My Haitian Friends
Haiti is currently the poorest country in the Western Hemisphere with 80% of the population living under the poverty line and 54% in abject poverty. The country population also suffers from low levels of education and a highly corrupt government. The unemployment rate for young males within the age group 18-35 is about 80%, the highest unemployment rate in the Caribbean.
The 2010 earthquake also dealt a tremendous blow to this poor
nation, from which it will take years to recover. Millions are still without homes & the country is
fighting to achieve some level of economic recover.
Over
the last two-year we have working with a group of amazing Haitian young men on
several volunteer construction project in Port-au-Prince, Haiti. We have had
the privilege of assisting with the development of their construction trades
skills through hands-on training and leadership development through mentoring
and coaching. These young adults have great entrepreneurial drive, demonstrated
construction skills and creative ideas that they hope to use to create jobs for
them and for others.
In
spite of their excellent skills and commitment to hard work, it is almost
impossible for them to find a job in the local labor market due to the 80%
unemployment rate for young men. Therefore, CHF and partners have decided to
helping these young men use their skill and entrepreneurial drive to start a
small construction company. The company will focus primarily on residential
construction.
Children’s
Heritage Foundation is seeking partners (individuals a& businesses) who are
will to contribute financially to this effort.
The funds received will go directly towards the start-up activities of
the company. We have a start date of July
31, 2013. Please consider making an
investment in the economic well-being of these young men and their families.
Children’s Heritage Foundation (CHF) is a Christian
humanitarian charity organization dedicated to working to secure a more
prosperous future for vulnerable children and their families worldwide. Our work is motivated by a desire to show
God’s love through
Friday, June 7, 2013
Whats happening with rates?
Hello. Heres my disclaimer. I didn't write this. An account executive for a lender I work with wrote it. But it sums up whats happening in the market right now nicely. Were seeing rates go up - as result of "positive" things taking place in the economy. Whether its really happening or just psychology we will see... (when he talks bout "price" he refers to the price to buy the rate...so example, if a rate had no points and its a .25 point worse that means that "no point rate" now costs a 1/4 point.)
As a result, we had an uneventful Jobs Report and Unemployment Report. But if you
recall,
I said yesterday that the market would react more vigorously to today's reports
because of all the volatility of late. I also said there was more downside to
upside because signs of a strong economy reinforce Bernanke's new position to
taper QE. So, even though the reports this morning were far from exciting,
traders still reacted to it by selling off bonds.
And so, this morning has not gone according to plan. It's not what I was looking for - that's for sure. I was really hoping for some upward motion in the price of bonds, but alas, my prayers were not answered in that respect. I am also confused as to why the price of bonds increased over the last few days but we did not get an improvement in pricing...very odd that completely omits the logic. However, the good news it appears the harsh drop in bonds has leveled out. Even if we don't get back the 400bps we lost in May we have some hope that things will not get dramatically worse. And I can assure you the Fed will not be eliminating QE any time soon. That's what I'm taking into the weekend....
Jobs Report Has Bonds Down
- Prices Worse The 30-year bond is down after the Jobs Report came in pretty much
as expected. Pricing is worse from yesterday by 0.250 since bonds are selling
off...now down -37bps on the day...Interbank has already priced this fall into
this morning's rates.
The Jobs Report was not too far off
expectations. 170,000 new jobs were expected and it came in at 175,000 new
jobs...not monumental. Nevertheless, since there are more new jobs traders
figure the economy is strong and therefore they sold off bonds to invest in
stocks. When traders sell off bonds the price of bonds drops and lenders'
rates/pricing worsen. To counter the nominal uptick in new jobs was the
unemployment rate which went up slightly from 7.5% to 7.6%. An increase in the
unemployment rate means more people are claiming they don't have jobs...a weak
economic signal. But the increase was so small it had little impact. As a result, we had an uneventful Jobs Report and Unemployment Report. But if you
recall,
I said yesterday that the market would react more vigorously to today's reports
because of all the volatility of late. I also said there was more downside to
upside because signs of a strong economy reinforce Bernanke's new position to
taper QE. So, even though the reports this morning were far from exciting,
traders still reacted to it by selling off bonds.And so, this morning has not gone according to plan. It's not what I was looking for - that's for sure. I was really hoping for some upward motion in the price of bonds, but alas, my prayers were not answered in that respect. I am also confused as to why the price of bonds increased over the last few days but we did not get an improvement in pricing...very odd that completely omits the logic. However, the good news it appears the harsh drop in bonds has leveled out. Even if we don't get back the 400bps we lost in May we have some hope that things will not get dramatically worse. And I can assure you the Fed will not be eliminating QE any time soon. That's what I'm taking into the weekend....
Monday, April 12, 2010
Fed Tax Credit extended for some
The Federal Tax Credit for first time buyers is set to expire here shortly. You need to be in escrow by April 30th and closed by June 30th to receive the credit. BUT - if you are a service member and you were outside of the US for 90 days or more on "official extended duty" your expiration date is year off! Thats right you get an extra year to find a home! You have to be in escrow by April 30th, 2011 and closed by June 30th 2011. There's more info on the IRS website!
Also - The State of California is bringing back (and enhancing) their homebuyers tax credit. See my facebook page for on on that!!
Dave
Also - The State of California is bringing back (and enhancing) their homebuyers tax credit. See my facebook page for on on that!!
Dave
Monday, February 1, 2010
Fannie Mae will help you Buy
BIG NEWS! I have been pitching to you the Home Path program for a while now. It can be good alternative to FHA especially for condos. Because, its a low down payment, (3 to 5% for owner-occupied and 10% for investors), but there is NO PMI and with condos - NO condo cert needed. That means no issues with delinquency, FHA approval or owner occupancy...but just announced Fannie Mae will pay your buyers' closing costs! This announcement came today:
"Fannie Mae Announces 3.5 Percent Seller Assistance on HomePath® Properties
Incentive Part of Ongoing Effort to Stabilize Neighborhoods. Fannie Mae announced today that people purchasing a Fannie Mae-owned HomePath® property will receive up to 3.5 percent of the final sales price to be used toward closing cost assistance or their choice of appliances. The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before May 1, 2010."
I have several Home Path lenders and here at Rancho we are direct lenders on this product too. One other thing about Home Path. If you are putting in an offer on a Home Path property, make sure your buyer is qualified to use Home Path financing. Because most listing agents will want a "Home Path Approved" buyer for that property!
"Fannie Mae Announces 3.5 Percent Seller Assistance on HomePath® Properties
Incentive Part of Ongoing Effort to Stabilize Neighborhoods. Fannie Mae announced today that people purchasing a Fannie Mae-owned HomePath® property will receive up to 3.5 percent of the final sales price to be used toward closing cost assistance or their choice of appliances. The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before May 1, 2010."
I have several Home Path lenders and here at Rancho we are direct lenders on this product too. One other thing about Home Path. If you are putting in an offer on a Home Path property, make sure your buyer is qualified to use Home Path financing. Because most listing agents will want a "Home Path Approved" buyer for that property!
Monday, January 18, 2010
New Rules for Loan Oficers and Good Faiths
Sunday’s paper had an article on the new Good Faith Estimate, (GFE) that went in effect on January 1, 2010. Everyone, including the author of Sunday’s article, seems to be confused by it. To be honest, I am still sorting out all the new changes as well. Although, I can appreciate, and agree with HUD’s effort to try to protect the borrower, the new GFE and rules regarding it will probably confuse more than help; at least initially. (Refinances are a whole other story, and since this is directed to buyers, and their Realtors, I will keep this information towards the purchase side of home lending.)
In the past, after meeting with a client and pre-approving them, I could fire off a GFE to simply show them how much money they would need to come in with or how much they should ask the seller to credit back for closing costs. My practice has always been to estimate high and it will continue to be so….especially when the file is in the beginning stages, (also called an “Address To Be Determined” or “TBD”). Certain fees like the sellers choice of title and escrow and days of prepaid interest or taxes due have to be estimated at this “TBD” stage. It seems more often than not fees, by vendors like the (REO) seller’s escrow are always higher than if I had selected my escrow company. And so, I estimate high.
However, we can no longer give a client the new GFE when the borrower is still in the “TBD” status. We must wait until we have a sales price, loan amount and most importantly an address. The reason is because once the GFE is given, were responsible for those fees. (There will be a lot of re-disclosing during escrow as we put together and learn about any changes in fees.) So unlike before where we could estimate high then and there, our estimate now has to be nearly exact and if its not (and not properly disclosed) that difference comes out of our paycheck. So, you can see why it is impossible to write out a binding estimate of costs to someone who may be 6 months out from getting into escrow. We cannot verify the 3rd party fees, (title, escrow, even the appraiser has not been officially selected yet) nor can commit to rates/points. I can’t tell someone today your rate is 4.875% and you will have to pay 1 point and then hope that, that same rate and point combination is still available six months later once they’ve found a home, (or after the short sale negotiator has finally gotten an answer back).
What I can do, and have always done, is tell the borrower you will have choices when it comes to rates and points. I will explain that they can do a “one point” loan and the rate will be lower than a “no point” loan – but the closing costs will be more (or vice - versa). And I can explain the pro/cons to both and advise which way I think is best for them. I can give them current examples that apply to that day’s market and answer their questions. I just can’t put it on an “official” GFE form until we’re in escrow.
In an effort to comply with these new rules and still be able to advise my client (and their Realtor) of approximate closing costs in the early stages of their home shopping, I will be giving them an estimate – that is not on an official GFE form. And despite the outcry by the author of Sunday’s article in the Union Tribune, this is what we will have to do.
Then, once an offer has been accepted and we have a sales price, a loan amount, an address, a title/escrow company to call and verify fees, and rates that are current for that time frame I will be happy to complete that official Good Faith Estimate and deliver it to the borrower. I will be happy that I can do that estimate with confidence.
I will also be happy to keep my borrower current with changes in rates, points or changes in lending while they are shopping for a home. It’s going to be crucial to keep our potential buyers current and to be available to them to answer questions and provide updates or changes. This has always been my practice and will continue to be so.
What’s good about this new process is that it should weed out, hopefully, all those shady loan officers, (and 3rd party vendors) that right before close of escrow try to surprise the borrower with an extra point or fee into the closing costs. After all, it is because of those individuals that were recreating the Good Faith Estimate wheel now anyways.
In the past, after meeting with a client and pre-approving them, I could fire off a GFE to simply show them how much money they would need to come in with or how much they should ask the seller to credit back for closing costs. My practice has always been to estimate high and it will continue to be so….especially when the file is in the beginning stages, (also called an “Address To Be Determined” or “TBD”). Certain fees like the sellers choice of title and escrow and days of prepaid interest or taxes due have to be estimated at this “TBD” stage. It seems more often than not fees, by vendors like the (REO) seller’s escrow are always higher than if I had selected my escrow company. And so, I estimate high.
However, we can no longer give a client the new GFE when the borrower is still in the “TBD” status. We must wait until we have a sales price, loan amount and most importantly an address. The reason is because once the GFE is given, were responsible for those fees. (There will be a lot of re-disclosing during escrow as we put together and learn about any changes in fees.) So unlike before where we could estimate high then and there, our estimate now has to be nearly exact and if its not (and not properly disclosed) that difference comes out of our paycheck. So, you can see why it is impossible to write out a binding estimate of costs to someone who may be 6 months out from getting into escrow. We cannot verify the 3rd party fees, (title, escrow, even the appraiser has not been officially selected yet) nor can commit to rates/points. I can’t tell someone today your rate is 4.875% and you will have to pay 1 point and then hope that, that same rate and point combination is still available six months later once they’ve found a home, (or after the short sale negotiator has finally gotten an answer back).
What I can do, and have always done, is tell the borrower you will have choices when it comes to rates and points. I will explain that they can do a “one point” loan and the rate will be lower than a “no point” loan – but the closing costs will be more (or vice - versa). And I can explain the pro/cons to both and advise which way I think is best for them. I can give them current examples that apply to that day’s market and answer their questions. I just can’t put it on an “official” GFE form until we’re in escrow.
In an effort to comply with these new rules and still be able to advise my client (and their Realtor) of approximate closing costs in the early stages of their home shopping, I will be giving them an estimate – that is not on an official GFE form. And despite the outcry by the author of Sunday’s article in the Union Tribune, this is what we will have to do.
Then, once an offer has been accepted and we have a sales price, a loan amount, an address, a title/escrow company to call and verify fees, and rates that are current for that time frame I will be happy to complete that official Good Faith Estimate and deliver it to the borrower. I will be happy that I can do that estimate with confidence.
I will also be happy to keep my borrower current with changes in rates, points or changes in lending while they are shopping for a home. It’s going to be crucial to keep our potential buyers current and to be available to them to answer questions and provide updates or changes. This has always been my practice and will continue to be so.
What’s good about this new process is that it should weed out, hopefully, all those shady loan officers, (and 3rd party vendors) that right before close of escrow try to surprise the borrower with an extra point or fee into the closing costs. After all, it is because of those individuals that were recreating the Good Faith Estimate wheel now anyways.
Wednesday, January 13, 2010
interesting article on CNN...(finally we agree on something)
Last chance to refinance below 5%
By Les Christie, staff writerJanuary 7, 2010: 11:26 AM ET
NEW YORK (CNNMoney.com) -- If you want to refinance your mortgage into a loan with a sub-5% interest rate, better hurry. Your window of opportunity is closing fast.
Lenders are still advertising rock-bottom interest rates, but for most borrowers, rates are rapidly rising into the 5%-plus category.
During the week of Jan. 7, the average 30-year, fixed-rate loan closed at 5.09%, according to mortgage giant Freddie Mac. That is significantly higher than the 4.71% it averaged at the beginning of the month, and experts say rates will go higher yet.
"Interest rates are up and they're not going to go down below 5% again," said Mark Zandi, chief economist for Moody's Economy.com, not for a while at least.
While homebuyers are still excited about these low mortgage rates, people who already have a loan and want to lower their costs are scrambling to lock in.
Refinancers act when the difference between the rate they're currently paying and the new one is at least a point or two wide, otherwise the costs of going through the refinancing wipes out any savings. In fact as rates rose in December, refinancings plunged, down more than 30%, according to the Mortgage Bankers Association.
A big reason for the jump is that a government program that has kept rates very low is winding to a close. The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities.
But the Fed's program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates. The Fed has already been slowing its purchasing, and that has corresponded with the recent rate increases.
As Treasurys go . . .
Not just mortgage rates have turned north. Treasury yields have as well, another indication that mortgage rates are headed skyward.
The yield on the benchmark 10-year Treasury has grown steeply over the past few weeks. It stood at 3.2% at the beginning of December and has soared to 3.84% as of Tuesday, a 20% jump.
Mortgage interest does not track Treasury yields in lockstep, but the two tend to mirror each other's movements.
Mortgage securities rates are always higher than Treasury yields because investors demand a premium above practically risk-free Treasurys.
The difference between mortgage rates and Treasury yields is usually somewhere near 1.7 percentage points, according to Keith Gumbinger of HSH Associated, a publisher of mortgage information. The current spread of about 1.2 percentage points is quite narrow.
That's bound to change, according to David Crowe, chief economist for the National Association of Home Builders. He believes mortgage rates will go up to about 5.5% by late summer. But other factors could push them into a larger-than-expected jump.
Economy bouncing back
For example, as the economy improves (it's hoped), businesses will expand production, hire new workers and open new sales outlets. All that requires borrowing in capital markets and the demand for lending will expand interest rates of all kinds.
A recovering economy also boosts corporate profits, making stocks a better bet for investors.
"Stocks tend to do better when the economy improves," said Stuart Hoffman, chief economist for PNC Financial Services. "Mortgage rates will rise to attract investment."
Hoffman's forecast is for rates to stay quite constant the rest of the winter and then elevate gradually during the spring buying season, the busiest time of year for home sales. He said they should hit about 5.5% by the end of June.
After that, the increases will slow, according to Hoffman, but still approach 6% toward the end of the year. He believes they'll cap at around 5.75% and are not likely to fall back to the 5% level again
By Les Christie, staff writerJanuary 7, 2010: 11:26 AM ET
NEW YORK (CNNMoney.com) -- If you want to refinance your mortgage into a loan with a sub-5% interest rate, better hurry. Your window of opportunity is closing fast.
Lenders are still advertising rock-bottom interest rates, but for most borrowers, rates are rapidly rising into the 5%-plus category.
During the week of Jan. 7, the average 30-year, fixed-rate loan closed at 5.09%, according to mortgage giant Freddie Mac. That is significantly higher than the 4.71% it averaged at the beginning of the month, and experts say rates will go higher yet.
"Interest rates are up and they're not going to go down below 5% again," said Mark Zandi, chief economist for Moody's Economy.com, not for a while at least.
While homebuyers are still excited about these low mortgage rates, people who already have a loan and want to lower their costs are scrambling to lock in.
Refinancers act when the difference between the rate they're currently paying and the new one is at least a point or two wide, otherwise the costs of going through the refinancing wipes out any savings. In fact as rates rose in December, refinancings plunged, down more than 30%, according to the Mortgage Bankers Association.
A big reason for the jump is that a government program that has kept rates very low is winding to a close. The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities.
But the Fed's program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates. The Fed has already been slowing its purchasing, and that has corresponded with the recent rate increases.
As Treasurys go . . .
Not just mortgage rates have turned north. Treasury yields have as well, another indication that mortgage rates are headed skyward.
The yield on the benchmark 10-year Treasury has grown steeply over the past few weeks. It stood at 3.2% at the beginning of December and has soared to 3.84% as of Tuesday, a 20% jump.
Mortgage interest does not track Treasury yields in lockstep, but the two tend to mirror each other's movements.
Mortgage securities rates are always higher than Treasury yields because investors demand a premium above practically risk-free Treasurys.
The difference between mortgage rates and Treasury yields is usually somewhere near 1.7 percentage points, according to Keith Gumbinger of HSH Associated, a publisher of mortgage information. The current spread of about 1.2 percentage points is quite narrow.
That's bound to change, according to David Crowe, chief economist for the National Association of Home Builders. He believes mortgage rates will go up to about 5.5% by late summer. But other factors could push them into a larger-than-expected jump.
Economy bouncing back
For example, as the economy improves (it's hoped), businesses will expand production, hire new workers and open new sales outlets. All that requires borrowing in capital markets and the demand for lending will expand interest rates of all kinds.
A recovering economy also boosts corporate profits, making stocks a better bet for investors.
"Stocks tend to do better when the economy improves," said Stuart Hoffman, chief economist for PNC Financial Services. "Mortgage rates will rise to attract investment."
Hoffman's forecast is for rates to stay quite constant the rest of the winter and then elevate gradually during the spring buying season, the busiest time of year for home sales. He said they should hit about 5.5% by the end of June.
After that, the increases will slow, according to Hoffman, but still approach 6% toward the end of the year. He believes they'll cap at around 5.75% and are not likely to fall back to the 5% level again
Thursday, December 17, 2009
Happy New Year! Rates going up?
I read this today, by Barry Habib, and wanted to pass it on..."One very important note – the Fed took the time to reiterate that their Mortgage Backed Security purchase program will end on March 31, 2010 as previously stated. There had been some speculation that the program might continue beyond the March 31st
date, but the inclusion of this reiteration in the Fed’s Policy Statement leads us to believe that the Fed is trying to make it clear that this program will terminate as scheduled. It’s important for us to get the word out to our clients, who may be banking on this program being available for a longer period of time."
Although I have no crystal ball, this does make us believe that we will see rates go up in 2010 if the Feds stop buying MBS. Those of you that have buyers wavering on buying still, (hoping that prices may drop more), may like to know that an increase in interest rates could offset any potential savings in their payment should prices dip. Also, anyone who may be wanting to refi, would probably benefit from doing so now while rates are staying down.
date, but the inclusion of this reiteration in the Fed’s Policy Statement leads us to believe that the Fed is trying to make it clear that this program will terminate as scheduled. It’s important for us to get the word out to our clients, who may be banking on this program being available for a longer period of time."
Although I have no crystal ball, this does make us believe that we will see rates go up in 2010 if the Feds stop buying MBS. Those of you that have buyers wavering on buying still, (hoping that prices may drop more), may like to know that an increase in interest rates could offset any potential savings in their payment should prices dip. Also, anyone who may be wanting to refi, would probably benefit from doing so now while rates are staying down.
Tuesday, December 15, 2009
Rates stay down, Fannie tightens guidelines
Rates continue to stay low with the 30 year fixed under 5%.
Lots of changes coming in for next year...but effective December 12th, Fannie Mae has put a max debt to income ratio of 45% on borrowers. So, buyer's total outgoing debt, including their future mortgage payment, taxes, insurance, HOA will have to be 45% (max) of their household / qualifying income.
This is going to lower a lot of pre-qualified borrowers' approval amounts and make it harder for others to qualify for what they want....but we can still look at portfolio lenders, FHA, VA and possibly some Freddie Mac products that haven't yet implemented this new guideline. So, a good thing to investigate with your borrowers. What they were pre-approved for last month may not be the case anymore.....
Dave
Lots of changes coming in for next year...but effective December 12th, Fannie Mae has put a max debt to income ratio of 45% on borrowers. So, buyer's total outgoing debt, including their future mortgage payment, taxes, insurance, HOA will have to be 45% (max) of their household / qualifying income.
This is going to lower a lot of pre-qualified borrowers' approval amounts and make it harder for others to qualify for what they want....but we can still look at portfolio lenders, FHA, VA and possibly some Freddie Mac products that haven't yet implemented this new guideline. So, a good thing to investigate with your borrowers. What they were pre-approved for last month may not be the case anymore.....
Dave
Tuesday, November 24, 2009
Monday Mortgage Update
Here is your Monday Mortgage Update: (On Tuesday)
1st FHA has pushed back (again) the elimination of “Spot Approvals” on Condos to February 1st, 2010.
Rates have stayed stable and low for most of this year, (and down to record lows again over the last few days) because the Feds are purchasing mortgage-back securities (MBS) weekly. I read an article in Mortgage News Daily this morning that explains what’s going on and the future…Here’s the highlights of the article: The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.
This week's net purchases pushed the Federal Reserve's aggregate total over the one trillion dollar mark. Since the inception of the program in January 2009, the Fed has spent $1.02 trillion in the agency MBS market, or 81.8 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010.
So, the Feds, by purchasing these MBS, are keeping rates stable and low….only $228 billion left.
1st FHA has pushed back (again) the elimination of “Spot Approvals” on Condos to February 1st, 2010.
Rates have stayed stable and low for most of this year, (and down to record lows again over the last few days) because the Feds are purchasing mortgage-back securities (MBS) weekly. I read an article in Mortgage News Daily this morning that explains what’s going on and the future…Here’s the highlights of the article: The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.
This week's net purchases pushed the Federal Reserve's aggregate total over the one trillion dollar mark. Since the inception of the program in January 2009, the Fed has spent $1.02 trillion in the agency MBS market, or 81.8 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010.
So, the Feds, by purchasing these MBS, are keeping rates stable and low….only $228 billion left.
Monday, November 16, 2009
Your Quick Monday Mortgage Update
- Rates continue to stay low!
- The investor community, Wells, Citi, and B of A are all tightening criteria for FHA and VA loans, including raising minimum credit scores. This is most likely the result of changes the FHA is making, and keep in mind FHA has terminated 8 lenders this year.
- California Association of Realtors reports that entry-level housing affordability reached 64 percent in the 3rd quarter of 2009.
Wednesday, November 4, 2009
closer to a tax credit extension
Hello all- Were moving forward towards a tax credit extension. CNN had this report regarding the tax credit extension.....I put the highlights below and a link to the full article below that. Keeping you posted! -
Senate throws a lifeline to the joblessLawmakers pass bill extending unemployment benefits by up to 20 weeks. Legislation also extends homebuyer tax credit into next year.
NEW YORK (CNNMoney.com) --
After weeks of partisan debate, the Senate voted on Wednesday to lengthen unemployment benefits by up to 20 weeks and to extend the $8,000 homebuyer tax credit. The measure now moves to the House, which passed its own benefits extension in September, giving an additional 13 weeks in high-unemployment states. The two bills must now be reconciled, though the House is expected to support the Senate's version. "Now that this legislation has passed the Senate, I will bring it to the House Floor for a vote as early as tomorrow," said House Majority Leader Steny H. Hoyer of Maryland. The bill would then move to the White House for the president's signature. Last week, the administration said it supports extending benefits. The legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30. The Senate's bill also created a $6,500 credit for those who buy a home after owning one for the last five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years. The Senate bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers. See the full article here: http://money.cnn.com/2009/11/04/news/economy/Extending_unemployment_benefits/index.htm?postversion=2009110418
Senate throws a lifeline to the joblessLawmakers pass bill extending unemployment benefits by up to 20 weeks. Legislation also extends homebuyer tax credit into next year.
NEW YORK (CNNMoney.com) --
After weeks of partisan debate, the Senate voted on Wednesday to lengthen unemployment benefits by up to 20 weeks and to extend the $8,000 homebuyer tax credit. The measure now moves to the House, which passed its own benefits extension in September, giving an additional 13 weeks in high-unemployment states. The two bills must now be reconciled, though the House is expected to support the Senate's version. "Now that this legislation has passed the Senate, I will bring it to the House Floor for a vote as early as tomorrow," said House Majority Leader Steny H. Hoyer of Maryland. The bill would then move to the White House for the president's signature. Last week, the administration said it supports extending benefits. The legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30. The Senate's bill also created a $6,500 credit for those who buy a home after owning one for the last five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years. The Senate bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers. See the full article here: http://money.cnn.com/2009/11/04/news/economy/Extending_unemployment_benefits/index.htm?postversion=2009110418
Thursday, October 29, 2009
Progress towards reversing HVCC
We are making progress in reversing HVCC. As most of you know HVCC has been a mess. Its caused so much difficulty dealing with appraisals, home values and has slowed the escrow process. Amendment 3126 will end HVCC. It still has to pass the House, the Senate and be signed off by the President. So, if you believe H...VCC should be reversed and you haven't signed this petition...please do so now. Its so critical to protect our industry and to benefit our clients. Here's the website. http://www.hvccpetition.com/
Article from CNN about the $8000 tax credit
$8,000 home credit still in play
Negotiations about whether and how to extend and expand the tax credit for homebuyers are moving quickly. Here are the latest developments.
NEW YORK (CNNMoney.com) -- Confused about whether lawmakers will extend the $8,000 first-time homebuyer credit and what it would look like?
That's understandable, since the situation is still very fluid.
Here's where things stand.
Support for the credit: There is still bipartisan support in Congress for extending the credit past Nov. 30 and making it available to more homebuyers.
The Obama administration wants the credit extended for a "limited period," Treasury Secretary Tim Geithner and Housing Secretary Shaun Donovan said Thursday. They did not elaborate.
What's on the table now: There appears to be a compromise deal that falls between the most and least generous proposals that have been put forth so far.
"There is bipartisan compromise to extend the credit through spring and expand it to existing homeowners who are stepping up to a different home," financial policy analyst Jaret Seiberg wrote in a research note for Concept Capital's Research Group.
The latest idea under discussion is a credit worth up to $8,000 for first-time homebuyers and up to $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years. (CNN: Senate compromise may be in the works.)
To qualify for the full credit, however, homebuyers must have adjusted gross income of less than $125,000 ($225,000 for married couples filing jointly).
In addition, the credit would only apply to homes sold for $800,000 or less. Contracts to buy a home must be signed by April 30, 2010, and the deals must close by June 30 in order for a buyer to qualify for the credit.
Rationale for extending the credit: Supporters of the credit say it has helped to boost existing home sales in recent months. Extending the credit would help further support sales, stabilize housing prices and generate jobs in the face of an expected rise in foreclosures next year, which is expected to put downward pressure on prices.
If the credit is allowed to expire, they say, the housing market and the broader economy will grow moribund again.
"The most fundamental argument for the credit is that nothing works in the economy if housing is falling -- it hurts household wealth and credit becomes tight," said Mark Zandi, chief economist at Moody's Economy.com. "[The credit] is a good insurance policy. It's vital to stem the housing price declines."
What critics say: Though extending the credit has bipartisan support, it is not without its critics.
Critics, while acknowledging that the credit has helped to generate additional home sales, say it has been poorly targeted and therefore not cost-effective.
They point to estimates that only 10% to 20% of the nearly 2 million homebuyers who will have gotten the credit by Nov. 30 bought solely because of the tax break.
In other words, a large majority of homebuyers who benefited from the credit would have bought their homes without it.
By one economist's estimate, the government may have spent $43,000 for each sale that occurred strictly because of the credit.
In a position paper published this week, the liberal Center on Budget and Policy Priorities said making the credit available to existing homeowners would not help stabilize housing prices or reduce inventory.
"When [they] purchase a new home, they simultaneously put their current home up for sale. As a result, there is no net effect on supply or demand in the housing market."
Timing on a vote: An amendment to extend and expand the credit could be attached to a bill that would extend unemployment benefits and which could pass the Senate by next week.
However, there's a chance the housing credit will be dealt with separately.
The credit could be attached to another piece of legislation or put in a standalone bill with other proposals to extend tax breaks.
Negotiations about whether and how to extend and expand the tax credit for homebuyers are moving quickly. Here are the latest developments.
NEW YORK (CNNMoney.com) -- Confused about whether lawmakers will extend the $8,000 first-time homebuyer credit and what it would look like?
That's understandable, since the situation is still very fluid.
Here's where things stand.
Support for the credit: There is still bipartisan support in Congress for extending the credit past Nov. 30 and making it available to more homebuyers.
The Obama administration wants the credit extended for a "limited period," Treasury Secretary Tim Geithner and Housing Secretary Shaun Donovan said Thursday. They did not elaborate.
What's on the table now: There appears to be a compromise deal that falls between the most and least generous proposals that have been put forth so far.
"There is bipartisan compromise to extend the credit through spring and expand it to existing homeowners who are stepping up to a different home," financial policy analyst Jaret Seiberg wrote in a research note for Concept Capital's Research Group.
The latest idea under discussion is a credit worth up to $8,000 for first-time homebuyers and up to $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years. (CNN: Senate compromise may be in the works.)
To qualify for the full credit, however, homebuyers must have adjusted gross income of less than $125,000 ($225,000 for married couples filing jointly).
In addition, the credit would only apply to homes sold for $800,000 or less. Contracts to buy a home must be signed by April 30, 2010, and the deals must close by June 30 in order for a buyer to qualify for the credit.
Rationale for extending the credit: Supporters of the credit say it has helped to boost existing home sales in recent months. Extending the credit would help further support sales, stabilize housing prices and generate jobs in the face of an expected rise in foreclosures next year, which is expected to put downward pressure on prices.
If the credit is allowed to expire, they say, the housing market and the broader economy will grow moribund again.
"The most fundamental argument for the credit is that nothing works in the economy if housing is falling -- it hurts household wealth and credit becomes tight," said Mark Zandi, chief economist at Moody's Economy.com. "[The credit] is a good insurance policy. It's vital to stem the housing price declines."
What critics say: Though extending the credit has bipartisan support, it is not without its critics.
Critics, while acknowledging that the credit has helped to generate additional home sales, say it has been poorly targeted and therefore not cost-effective.
They point to estimates that only 10% to 20% of the nearly 2 million homebuyers who will have gotten the credit by Nov. 30 bought solely because of the tax break.
In other words, a large majority of homebuyers who benefited from the credit would have bought their homes without it.
By one economist's estimate, the government may have spent $43,000 for each sale that occurred strictly because of the credit.
In a position paper published this week, the liberal Center on Budget and Policy Priorities said making the credit available to existing homeowners would not help stabilize housing prices or reduce inventory.
"When [they] purchase a new home, they simultaneously put their current home up for sale. As a result, there is no net effect on supply or demand in the housing market."
Timing on a vote: An amendment to extend and expand the credit could be attached to a bill that would extend unemployment benefits and which could pass the Senate by next week.
However, there's a chance the housing credit will be dealt with separately.
The credit could be attached to another piece of legislation or put in a standalone bill with other proposals to extend tax breaks.
Senators agree to extend homebuyer tax credit
Senators agree to extend homebuyer tax credit
By STEPHEN OHLEMACHER (AP) –
1 hour agoWASHINGTON —
Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November.Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, said a congressional aide, who spoke on condition of anonymity because he was not authorized to publicly discuss the deal.Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.Majority Democrats have refused to add the amendments.Copyright © 2009 The Associated Press. All rights reserved.
By STEPHEN OHLEMACHER (AP) –
1 hour agoWASHINGTON —
Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November.Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, said a congressional aide, who spoke on condition of anonymity because he was not authorized to publicly discuss the deal.Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.Majority Democrats have refused to add the amendments.Copyright © 2009 The Associated Press. All rights reserved.
Thursday, October 22, 2009
letter to me from Congressman Duncan Hunter regarding the tax credit extension
Dear David:
Thank you for contacting me with your support for extending the homebuyer tax credit. I welcome the opportunity to respond to you on this issue.
I agree with you that the current $8,000 tax credit for first time buyers has had a positive effect on the housing market this year. You will be pleased to know that I am a cosponsor of the Homebuyer Tax Credit Act of 2009, which would, in an effort to stimulate the nation's declining housing market, extend this credit and offer an increased $15,000 credit to all home purchases through 2010.
Like you, I believe that we must be aggressive in addressing the challenges in our housing market and I support providing tax credits for new homes. I agree with you, that stimulating the housing market is one of the best ways Congress can help accelerate the recovery of the economy. A tax credit for individuals to purchase new homes not only contributes to the real estate industry, but also stimulates the construction industry and creates jobs.
Please be assured that I will keep your specific thoughts in mind as we continue to discuss this issue in Congress. Thank you again for contacting me. If you have any further questions or concerns, please do not hesitate to let me know.
Sincerely,
Duncan Hunter
Member of Congress
Please visit my website at hunter.house.gov to sign up for my e-newsletter and receive electronic updates.
Thank you for contacting me with your support for extending the homebuyer tax credit. I welcome the opportunity to respond to you on this issue.
I agree with you that the current $8,000 tax credit for first time buyers has had a positive effect on the housing market this year. You will be pleased to know that I am a cosponsor of the Homebuyer Tax Credit Act of 2009, which would, in an effort to stimulate the nation's declining housing market, extend this credit and offer an increased $15,000 credit to all home purchases through 2010.
Like you, I believe that we must be aggressive in addressing the challenges in our housing market and I support providing tax credits for new homes. I agree with you, that stimulating the housing market is one of the best ways Congress can help accelerate the recovery of the economy. A tax credit for individuals to purchase new homes not only contributes to the real estate industry, but also stimulates the construction industry and creates jobs.
Please be assured that I will keep your specific thoughts in mind as we continue to discuss this issue in Congress. Thank you again for contacting me. If you have any further questions or concerns, please do not hesitate to let me know.
Sincerely,
Duncan Hunter
Member of Congress
Please visit my website at hunter.house.gov to sign up for my e-newsletter and receive electronic updates.
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