The World of Mortgage Blog - According to Kimberly and Cathy

Focus On Listings!

Happy Friday

Yesterday Evergreen Home Loans celebrated our 25^th Anniversary with a little campaign and… reflection!  Each year has its own challenges.    Right now it’s LACK OF GOOD INVENTORY for you all to sell.  

The owner of our company, Don Burton said that as a young realtor in the 1980s he didn’t know anything about why high interest rates would make it difficult to sell homes.  He had a strategy for focusing on where the business is and letting the rest go: 

“Pick up the Quarters and Dimes… Leave the nickels and pennies”

The “Quarters” right now are listings:

• Sellers that have equity in their homes
  • Check out neighborhoods that have had recent sales that bring values back up.  One of the guys in our company bought a home at the height of the market in a new neighborhood.  Values have of course dropped since then, but recently a home sold in the area at a price comparable to about what he bought his home for….don’t you know, a couple weeks later 2 more ‘for sale’ signs popped up in his neighborhood.  Be that listing agent.
  • Divorces – align yourself with a family practice attorney or two.  Their clients will likely need to sell their home.
  • New Babies/recent marriages – talk to your past clients.  Whether it’s them, or their kids/friends kids someone might need more space. 

While many lenders are focusing on the new HARP2.0 loan right now,  we’re focused on our purchase business…last year it was 82% of our closings.  Let us know what we can do to help you. 

Rates are still ridiculously low, with no signs of reversing that trend.    

Fun Facts about the Real Estate/Mortgage Market

In 2011 investors purchased 1.23 Million homes.  This is up 64% from 2010.

• Investment purchases made up 27% of all the activity in 2011
  • ½ were cash purchases. 
  • ½ were distressed homes
• In a recent survey by Transunion, a troubled homeowner is more likely to let their house payment slip BEFORE they are late on their auto loan or credit cards! Yikes!
  • 9.5% of the troubled homeowners were late on their auto loans and 17.3% were late on their credit cards
  • 40% of them were late on their mortgage.
• In January, more short sales were closed than foreclosures.  This means the banks are agreeing to more deals – good sign!
  • Short sales accounted for 24% of sales
  • Foreclosures accounted for 20% of sales
• The average loan closed in March has a FICO score of 749, and LTV of 77% and a debt-to-income of 35%. – that’s a nice loan. J
  • The average loan denied was a FICO of 699, 85% LTV and a DTI of 43% - this is surprising. 

 

What’s Driving Mortgage Interest Rates?

Mortgage Rates continue to remain low – here’s why. Various European countries continue to struggle with their debt. As they do, US Bonds look more appealing to investors…as they’ve got to park their money somewhere. Mortgage rates benefit when investor’s flock to our bonds. This is likely the largest factor influencing our low mortgage rates these days. When will rates go up: when Europe looks stable and the news comes out that their debt issues have been resolved. Inflation (officially) remains in check. When will rates go up: If (when) inflation takes hold. Those bond holders (holders of mortgage debt) will want a better return on their money once inflation cuts into their margins. Rumors as still swirling about additional Quantitative Easing (QE3) – This is when the Fed buys up mortgage debt. The possibility of this happening keeps mortgage rates low. If the Fed rules it out completely, rates would likely move up.

Programs That Save Deals...

Want to Lower House Payment:  We allow a buyer to buy out of paying monthly Mortgage Insurance….makes the house payment much lower.

 

Low Credit Scores:  FHA will allow 600 minimum score if the buyer has their own 3.5% Down Payment (no gifts)

 

Need $ for Down Payment:  Utilize USDA Zero Down Programs, Utilize State Bond $10,000 Down Payment Assist Funds.  Ask Seller to pay closing costs, or raise the interest rate to cover the closing costs.

 

No Income:  Utilize FHA with parents co-signing on loan.  Try one of our Asset Based loans.  If the buyer has a ton of cash in their own savings. 

 

Stretching Buying Power:  Pay off debts, utilize a 5/1 ARM with lower rates, Get a co-signer on FHA. 

 

Interest Rate update. 

Rates are improving and staying steady because of the possible need for a bailout for Spain. This means investors believe investing in US Treasury Bonds is more safe….making rates good for us all.

 

FHA Changes and Exciting New Programs

Exciting New Programs – We can offer loans with the following situations: 

• Revocable or Irrevocable Trusts. 
• LLC, Partnerships and Corporations
• Job Transfers when job has NOT started.  Just need signed offer letter.
• Foreign Nationals – Requires a sizeable down payment.
• Asset-based loans for people who have a lot of cash and not job income.

FHA Changes: 

FHA buyers need an FHA Case Numbers before April 9, 2012 or they will be subject to the new higher upfront MI fee.  Increasing from 1% to 1.75% upfront MI that is added to buyer’s loan amount.  AND the monthly will increase from 1.15% to 1.25% monthly.  That will increase their monthly payment by approx $17 per month.

Interest Rate Chart!

We hope this chart can provide food for thought for anyone wondering if now is a good time to get off the fence regarding a home purchase or refinance.

Click Here for the 200 Year Historical Rates On 30-Year Fixed-Rate Mortgage Chart.

(Feel free to share and use this with customers.)

Please give us a call or email if there's anything we can do for you!

**Alert Your Clients To A Potential Increase In Loan Costs From Fannie Mae And Freddie Mac!

We were alerted this morning that Fannie Mae and Freddie Mac will be worsening their base pricing by approximately .50 effective for loans with settlement dates on or after April 1, 2012.  This change is a result of the Temporary Payroll Tax Cut Continuation Act of 2011 which directs Fannie and Freddie to increase their fees.  Both agencies said that they will monitor these changes and they may announce plans for additional pricing changes in the future.

While April 1 is over 2 ½ months away, keep in mind that banks and mortgage companies be incorporating these increases into their pricing modules at various speeds over the next 30 days.   SO….  If you have a buyer that is wondering whether or not to lock in and protect an interest rate now or float it for a while to see if it will improve – use this knowledge the help them make an informed decision.    

This change will be applied to Conventional loans and High Balance loans only.   These changes do not apply to Jumbo,  FHA, VA or USDA products.

Mortgage Market Forecast for 2012

Happy New Year to you and your family!

 

Many of you are familiar with Barry Habib of the Mortgage Market Guide – he provides us daily updates on the stock and bond market as well as events happening around the whole that impact mortgage rates.  It helps us tremendously in our efforts to guide our clients in interest rate lock/float decisions.  The following is a summary of his forecast for 2012.  If any of you would like more information we’re happy to talk through this in greater detail.  His forecast is 8 pages long…we’ll try to be a bit more brief.  J

 

Events that will likely affect interest rates in 2012

€        The European Debt situation – This is an enormously important issue for the world in general but it’s specifically interesting for us in the real estate/mortgage industry as it could have a significant impact on mortgage interest rates.  As The European nations continue to struggle, our mortgage interest rates benefit.  As Barry put it in the forecast, “we’re still the cleanest shirt in the dirty laundry”.  As a result, investors looking for a safe place to put their money are flocking to our bonds.  This helps mortgage rates.

€        Unemployment Rate - He forecasts that unemployment will continue “north of 8% throughout 2012” with more gains in the private sector offsetting losses in government jobs.  With little change in this rate, it won’t be a driver of interest rates for 2012.

€        Quantitative Easing 3 (QE3): The Fed is considering another round of QE under the guise of helping to boost the housing market.  When QE2 was announced (in 2010), rates went down on the rumor but once the program started actually went up.  The current rumor is that there is a 50/50 chance of this happening in the spring - So, rates should currently be benefiting by this rumor for another several months. 

€        The Housing Market forecast:

• o        Delinquency rates have declined and they will continue to do so. 
• o        Home prices will likely decline modestly (1 to 2%) in the first ½ of 2012 and then recover in the 2^nd 1/2  
• o        Rental/Investment properties will make up a larger portion of the market in 2012

 

Interest Rate Forecast

€        He sees interest rates moving ‘a leg’ lower in the first part of 2012 as QE3 rumors swirl

€        These lower rates, as we talked about above, would likely quickly reverse after QE3 actually gets implemented.

€        If the Fed doesn’t do QE3, rates will continue to be attractive through the first part of the year, moving a bit higher towards the end of 2012 as the economy picks up.

€        Rates may dip down near 3.5% and rise somewhere in the mid-to-high 4’s in 2012 but not likely higher than that unless inflation starts to spike higher. 

 

We find this whole topic fascinating, but understand that not everyone does…so we’ll leave it there.  If you’d like have a deeper understanding of how any of the issues above may affect the real estate/mortgage market give us a call. 

 

Reducing Closing Costs Options

Seattle Mortgage Minute: 

Here are some tips to help you reduce your buyer closing costs:  Check out this video:   

How to Reduce Your Buyer Closing Costs Options:

Ask the seller to participate in paying a portion of your loan fees.  Gift funds from a blood relative are always allowed and lastly, don't forget to check out State Bond Down Payment Funds.

 

Should you pay points to lower interest rate?

Seattle Mortgage Minute.  Are you refinancing or purchasing a home and wondered if it makes sense to pay extra fees to lower the interest rate?  Check out our one minute video on "Should you pay points to lower interest rate?"