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.
Monday, January 18, 2010
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
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