30 Year Fixed @ 4.375% on 417,000 or less purchase #mortgage

The theme of volatility is ongoing. Loan pricing has moved in the opposite direction from the previous day for 6 sessions in a row now. The increases seen yesterday in home loan borrowing costs were erased the next day, leaving things slightly worse than average vs the last 2 weeks, but about middle of the road when comparing to the last month.
The only bet that has a decent probability of success in this environment is that no bets are clearly better than any others. This should continue to be the case until at least some semblance of resolution makes its way to the debt-ceiling debate. This makes for plenty of volatility in the meantime.
Rather than change rate sheets with each rapid movement in the secondary market, it's not only easier on all parties involved, but downright necessary for lenders to be extra conservative with rate sheet offerings.
The Federal Reserve plans to provide guidance to banks soon on how to handle the potentially turbulent financial waters if the United States exhausts its borrowing authority August 1. "We have been engaged in operational planning with the Treasury," Fed spokeswoman Barbara Hagenbaugh said on Thursday. "We expect to be able to give additional guidance to financial institutions when there is greater clarity from the Congress and when Treasury outlines its specific operational plans."

30 year fixed - 4.375% + .0 points for rate
20 year fixed - 4.00% + 0 points for rate
15 year fixed - 3.50% + 0 points for rate
10 year fixed - 3.250% + .705% lender credit points for rate
5/1 ARM - 2.625% - 0 points for rate
7/1 ARM - 3.125% + 0 points for rate

FHA/VA
30 year fixed - 4.250% + .500 points lender credit for rate
5/1 ARM - 2.875 + 0 points for rate
7/1 ARM - 3.250 + 0 point for rate

Jumbo - over 729,000
30 year fixed - 4.99 % with 0 points for rate
15 year fixed - 4.50% + 0 points for rate
5/1 ARM - 3.375 % + 0 points for rate
7/1 ARM - 4.00% + 0 points for rate
10/1 ARM - 4.50% with + 0 points for rate

Rates and Market Updates

This week was filled with housing-related news. The modest pop in housing starts - new construction (led by multi family), was positive though most analysts believe that there is little reason to believe that the U.S. will see a real pickup in home construction any time soon. The most recent data from the Census Bureau shows 13.4 million vacant homes, roughly 3 million above a normal market. Much of this is from the big increase in vacancies that we saw in 2005-2006 when overbuilding hit its peak. The fastest-growing category of vacancies is in homes that the owner would like to sell or rent but are currently "held off"the market, and it is yet another form of shadow inventory that will eventually have to be absorbed.
We also had the FHA Home Price Index increase by .4% in May, the second consecutive monthly increaseand better than the expected 0.1% increase. April's results were revised downward to a 0.2% increase from an initial estimate of a 0.8%increase.   Year over year, home prices were still down 6.3%, and the index remains 19.6% below its peak in April 2007 and roughly equal to the level of January 2004.
Rates crept up during the latter half of the week, mostly due to speculation that Greek bonds will receive some type of European guarantee. Just as investors move money during a "flight to safety," they move it out again when risk is reduced - and that is what we saw Thursday. The EU side of the debt drama appeared to be making some progress as opposed to the US debt ceiling impasse. The 10-yr closed at 3.01%,and traders reported higher selling of mortgage-backed securities on the sell-off. There are no economic releases scheduled for today, Friday July 22. The markets will stay focused on the deals being reached in Europe and in the US with an eye on what our stock market is doing. 
An apparent consequence of Dodd Frank, MetLife Bank is for sale - but not the mortgage company. In a quote that tells it all, "MetLife Bank represented just two percent of MetLife Inc.'s first quarter 2011 operating earnings, and we do not believe it is appropriate for the overwhelming majority of our business to be governed by regulations written for banking institutions," said Steven Kandarian, president and chief executive officer of MetLife Inc. MetLife Inc. said that it is considering the sale of its Met Life Bank N.A.'s depository business and eliminating the company's status as a bank holding company. The firm said it will still offer residential mortgages through its MetLife Home Loans business.

30 year fixed - 4.50% + 0 cost points for rate
20 year fixed - 4.250% + 0 points for rate
15 year fixed - 3.625% + .50 points for rate
10 year fixed - 3.250%  0 cost points for rate
5/1 ARM - 2.750% - 0 points for rate
7/1 ARM - 3.250% + 0 points for rate

FHA/VA
30 year fixed - 4.375% with 0 points for rate
5/1 ARM - 3.00 with 0 points for rate
7/1 ARM - 3.50 with 0 point for rate

Jumbo - over 729,000
30 year fixed - 4.99 % with +.50  points  for rate
15 year fixed - 4.625% + .250 cost points for rate
5/1 ARM - 3.50% - 0 points for rate
7/1 ARM - 4.00% - 0 points for rate

What does it mean to qualify for a mortgage loan program?

What does it mean to qualify for a mortgage loan program?

When a mortgage loan officer talks about a mortgage loan programs, they are taking about the different types of mortgages. Each mortgage program Fixed or ARMS have different and strict requirements or loan parameters you must meet. The guidelines include a minimum: Credit Score, income, assets and down payments or loan to value - in order to qualify for the loan programs offered, unless you and your loan officer can show compensating factors and have an “exception” granted for one of the factors that are not in the minimum loan program requirements.
Fixed rate mortgages, loans with rates that are fixed for the life of the loan have some of the most stringent requirements. The longer you ask the bank to lend you money at a fixed rate, the higher the cost is to you and the stricter the banks requirements are to qualify for the loan program.
Credit Score – A lower (than 620 in most cases) credit score will disqualify you from a fixed rate mortgage at application (exception - FHA).
Debt to Income, or DTI. – There is a front end and back end DTI. The “front-end” debt to income for a fixed rate loan needs to be about 36 % or less, exception FHA. This amount is your proposed monthly housing expenses (principal, interest, property taxes, any common charges for condo or co-ops and homeowner’s insurance) divided by your gross monthly income. The “back-end” DTI includes your monthly housing expense, plus all other debts on your credit report, divided by your gross income. Fixed rate loan programs back end DTI needs to be about 45% or lower exception FHA. Again, exception for compensating factors – such as you have assets that exceed your loan amount.
FHA loans, which are available to all borrowers, not just first time home buyers – have lower credit score requirements (580 or higher) and allow higher DTI – up to 50% with compensating factors. .

Loan to Value, or LTV ratio - The down payment initially determines your LTV. If you put 20% down, your loan to value ratio will be 80 percent. If you put 10 % down, your loan-to-value is only 90 percent. Less than 20 % down, you may have the option of a second mortgage to reach the desired 80 percent loan-to-value ratio or you’ll likely have to pay at least a one time mortgage insurance premium, or an annual policy with monthly premium to protect the lender should you default. Exception, there are loans with lender paid premiums which is a cost to you in a higher loan rate.
Compensating factors – these are circumstances that allow the underwriter to grant an approval to a loan with numbers that do not meet the minimum loan guide lines. Working with a loan officer who will take the time to ask you to tell your story with regard to any compensating factors that affect your Credit Score, Income, Assets or property type can make the difference in getting you the right loan for your long and short term financial needs and goals.

New Legislature today to extend loan limits for 2 years!

As part of the 2008 Stimulus package, Freddie and Fannie - the government run agencies who purchase almost all mortgage debt, have enacted and used a temporary expanded conforming loan limit for one year duration, subject to renewal. The program allowed a lower cost of borrowing for designated high cost areas. In Fairfield County CT the expanded amount is 709,000. The conforming loan limit has been 417,000 and less,  and the jumbo conforming loan limit (or expanded conforming limit) has been a maximum of 729,500 for high cost areas.  The number used for the loan limit is determined by a government agency and is based on a formula using the actual prices of homes sold in geographic areas. The difference in rates between the two loan limits is often less than .250% in the rate - if a 417,000 30 year fixed is 4.50% - a 729,500 30 year fixed would be 4.750%.  Before the stimulus package,  any loan over 417,000 was considered a jumbo loan and often the rate price increase was more than 1% above the conforming loan limits for fixed rate.

 Ever year there is buzz and speculation about the loan limit amount being extended for another year. The temporary loan limits for the jumbo conforming (or expanded conforming) expire October 1, 2011 - which means if your loan over 417,000 and more than the new lower expanded loan limits and is not closed and funded by Friday - September 30, 2011, your loan will have a price increase.  Fir the first time since 2009, banks and lenders are gearing up to change their rate sheets to price and reflect non expanded limits -  and are informing their loan officers to expect the loan limit to return to 417,000 for conforming and in Fairfield Count CT - the new perennate limit for expanded limits is reduced from 709,000 to a maximum of 635,000. 

It now takes some lenders as long as 45 - 60 days to close a purchase loan. Most real estate contracts ask for at least 60 to 90 days for occupancy. Knowing the time frame from accepted offer to the close of a loan - it is 76 days from July 15 to September 30,2011.

The breaking news is - on Friday July 15, 2011 Representative Campbell (R) and Ackerman (D) have introduced a bill to extend the higher 2008 government loan limits for two more years.

It is imperative that consumers are aware of the risk, and more importantly for all lenders to be aware of the new expiration date and closely watch this new legislation.


30 year fixed - 4.375% + .375 cost points for rate
20 year fixed - 4.1250% + .250 points for rate
15 year fixed - 3.625% 0 points for rate
10 year fixed - 3.250%  with .250% credit for rate
5/1 ARM - 2.750% - 0 points for rate
7/1 ARM - 3.125% - 0 -points for rate

FHA/VA
30 year fixed - 4.375% with 0 points for rate
5/1 ARM - 3.00 with 0 points for rate
7/1 ARM - 3.375 with 0 point for rate

Jumbo - over 729,000
30 year fixed - 4.99% with 0  points  for rate
15 year fixed - 4.50% + .250 cost points for rate
5/1 ARM - 3.50% - 0 points for rate
7/1 ARM - 4.00% - 0 points for rate

Loan Limits they are a changing ... and rates

For the last several years Freddie and Fannie - the government run agencies who purchase almost all of the major lenders mortgage debt have had a temporary expanded conforming loan limit. The conforming loan limit has been 417,000 and less, and the jumbo conforming loan limit (or expanded conforming limit) has been a maximum of 729,500 for high cost areas. The number used for the loan limit is determined by a government agency and is based on a formula of the actual prices of homes sold in specific determined areas. The difference in rates between the two loan limits was often less than .250% in the rate - if a 417,000 30 year fixed is 4.50% - a 729,500 30 year fixed would be 4.750%. . This was part of the original stimulus package to lower the cost of borrowing for areas of the country, such as Fairfield County CT, so more people would be encouraged to purchase a home. Before the stimulus package, any loan over 417,000 was considered a jumbo loan and often the rate price increase was more than 1% above the conforming loan limits for fixed rate - thus the popularity of ARMs for Jumbo Loans - their prices were often more in line with conforming 30 year fixed - or lower. The temporary loan limits for the jumbo conforming (or expanded conforming) expire October 1, 2011 - which means if your loan over 417,000 and less than 729,500 (in some areas) is not closed and funded by Friday - September 20, 2011, your new loan will have a price increase. This year, more and more banks and lenders are now gearing up to change their rate sheets to non expanded limits - and are informing their loan officers to expect the loan limit to return to 417,000. And very very soon, to lock loans with the new guidelines in place. It now takes some lenders as long as 45 - 60 days to close a purchase loan. And most real estate contracts ask for at least 60 to 90 days for occupancy - so the banks and lenders are gearing up for the deadline - knowing the time frame from accepted offer to the close of a loan, and 75 days from July 14 is September 27,2011.
If you are considering purchasing a home before September 30, 2011 - and you have not made an offer or locked in your loan - the window of time is getting more and more narrow and the time to act is now.


30 year fixed - 4.375% + .375 cost points for rate
20 year fixed - 4.1250% + .250 points for rate
15 year fixed - 3.625% 0 points for rate
10 year fixed - 3.250% with .250% credit for rate
5/1 ARM - 2.750% - 0 points for rate
7/1 ARM - 3.125% - 0 -points for rate

FHA/VA
30 year fixed - 4.375% with 0 points for rate
5/1 ARM - 3.00 with 0 points for rate
7/1 ARM - 3.375 with 0 point for rate

Jumbo - over 729,000
30 year fixed - 4.99% with 0 points  for rate
15 year fixed - 4.50% + .250 cost points for rate
5/1 ARM - 3.50% - 0 points for rate
7/1 ARM - 4.00% - 0 points for rate

Mortgage loan notes can approve your loan

Can your Mortgage broker’s “loan notes” cause your good loan to be denied?
Loan notes are written by every good mortgage officer when a loan application and all supporting documents are submitted to underwriting. Loan notes tell the borrowers story, why the loan makes sense, and explains any situations that may not make sense on the paperwork submitted.
An attorney gave me a call and asked me to look at a loan file to see if I could help him and his client understand why their refinance loan was denied. His client was very upset. They had given the other loan officer a non refundable application fee and appraisal fee for a denied loan. I looked at the income documents, more than enough income on tax returns for these self employed borrowers to qualify. I looked at the FICO scores, almost 800! I looked at the appraisal, value over 600,000 for a 300,000 loan. The property is residential according to the report, on 2+ acres with a pool and has a horse stable, with horses. What happened? When I looked at the other lenders appraisal I was confidant I knew why the loan was denied, the use of the property and the income from the use of the property. One of the borrowers gives ridding lessons to children – using the horses she owns. The other Loan Officer did not write notes to the underwriter and tell the story about the horses on the property and show that the income from the ridding lessons was not needed for the borrowers to qualify for the loan. It was as simple as that. Best bet, when this file went into underwriting with the first lender, the property was determined to be a commercial horse farm and not residential in her opinion – thus, the loan was denied. I just closed and funded this loan. The rate reduction saved this borrower more than $400.00 per month. How? When I submitted the file the loan notes documented the horses were owned by the borrowers, and showed with a current P&L statement the income from ridding lessons was not needed for the borrower to qualify for the new mortgage. Make sure your Mortgage officer submits complete and correct loan notes with your loan file!

Rates and Market update

With all the up and down this week in rates and economic news from raising the debt ceiling limit - to employment numbers, - I wanted to wait for a re price for the better (due this afternoon) based on the jobs report - it just seems a bit insane - for lack of a better word for my linear thinking logical mind - that there are fewer jobs - more houses available for purchase - and lowest mortgage rates in decades - because/when there are fewer jobs the investment money moves from the Stock Market to Bond Market for security - the lesson is - if you want to own a home, primary, second home or investment property - and you have income and down payment money - this is the time to buy!

Turmoil and change has been a constant in the mortgage industry and we've always worked our way out of it. Much of what drives our industry is not of our own making or easily managed but we somehow find a way to develop products that both serve the customer and keep our doors open.  It is easy to vilify the mortgage industry, even when the root causes lie far afield as it was with Enron's collapse due to accounting issues. Caution, be careful of what you wish for - you may actually get it. For political, economic and accounting - remember: capital will flow into an arbitrage opportunity, be it a rate arbitrage or a credit arbitrage, until that arbitrage opportunity no longer exists, after which it will not flow at all.  Many, if not most, of the proposals floated to reform real estate finance seemingly forget this basic fact and, if implemented, would be pro-cyclical  - meaning they would serve to provide too much mortgage capital during boom periods and too little during times of slowdown.  Before we wish away Fannie or Freddie or GNMA, we'd be wise to remember this...


30 year fixed - 4.50% - .50 points for rate
20 year fixed - 4.250% - 0 points for rate
15 year fixed - 3.750% 0 points for rate
10 year fixed - 3.250% 0 points for rate
5/1 ARM - 3.00% - 0 points for rate
7/1 ARM - 3.50% - 0 -points for rate
Jumbo - over 729,000
30 year fixed - 4.99% .50 points for rate
15 year fixed - 4.50% .50 points for rate
5/1 ARM - 3.50% - 0 points for rate
7/1 ARM - 4.00% - 0 points for rate

FHA/VA
30 year fixed - 4.375% - .375% points for rate
5/1 ARM - 3.250% .125% points for rate
7/1 ARM - 3.625% - .250 points for rate