Dennis' Mortgage Blog

Another roller coaster ride in the mortgage markets with relatively flat Monday and Tuesday followed by a very strong and positive Wednesday then a very negative closing on Thursday and Friday.  Despite a poor finish we closed flat for the week on rates.  The economic numbers had a lot of talk of inflation, but with the big drop in crude oil prices in August most “experts” (I love putting quotes around “experts”) feel the price pressures will ease as oil prices come back down.  See if this makes your morning paper:  today oil price per barrel had the biggest one day drop in dollar terms since 1991—I remember 1991, I was doing a lot of FHA mortgages with first time buyers; sort of like today but about 35 pounds ago!

Our forecast for the coming week is more of the same, rates jumping up and down on a daily basis and probably flat week over week.  This week we broke through a trading ceiling on prices on Wednesday, which should have given us a momentum for rates to slowly decline; only to see a floor of resistance broken on Thursday—portending higher rates.  So like a yo-yo our rates are daily up and down.  Plan accordingly. 

Looking ahead I see no reason to move off my position of having clients lock in their rates and terms through the end of escrow as soon as possible to protect from upside volatility.

In looking at the interest rates, a very noticeable change is the FHA rate dropping below the conforming rate last week and holding that position this week.  Note this is for “conforming-FHA” not the “FHA-jumbo”, but still it is significant as it shows the secondary market for government mortgages is stronger than for Fannie Mae and Freddie Mac. 

***ALERT*** NO CHANGE FROM LAST WEEK: Jumbo 30 year fixed rate pricing is not available; the most reasonable quote we have currently from our lenders is 8.5% at cost of 3.5 points.  5/1 and 7/1 ARM pricing is available on loans over $719,000---call for quotes.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 740 AND ABOVE (change from last Friday):

30 year conventional at 1 point 6.375%            ó  FLAT

30 year conforming-jumbo at 1 point 6.5%       ó  FLAT

30 year FHA at 1 point 6.25%                                    ó  FLAT

30 year jumbo at         NO PRICE CALL FOR INFORMATION              

Let me know how my 20+ years of experience can be of assistance to you, your family, friends or co-workers.  It is a great time to buy a new home!

Thanks to everyone for their referrals, it is the best compliment I can receive on my service, experience and products.

Have a great weekend!

Dennis

We had a good week overall in the mortgage rates, down from last week—most dramatically on conventional (Fannie/Freddie) rates.  With some unpopular data coming out today that puts annual inflation rate, the core rate, at 2.4% year over year.  This number exceeds the Fed target of 1-2%, because of this investors react to potential higher rates—causing a bump in mortgage rates.  Overall the news did not affect us as much as I would have thought; this could be for a number of reasons, one of which is that the news came on a day when not a lot of people will be working in the investment markets today.  First plenty of them were in Denver this week, second it is the Friday of a three day weekend so those not in Denver lobbying are in the Hamptons already.  A good day for news like this break and not affect mortgage rates.  This does set up for a busy day on Tuesday however, we could see a volatile market Tuesday morning and early next week.  You know my mantra:  lock ‘em!

We have seen additional tightening in the underwriting of files the past couple of weeks.  For the past several years all lenders to the underwriting conditions provided by the automated underwriting software from Fannie Mae and Freddie Mac.  Recently more and more lenders are saying they may (read “will”) have additional conditions to those from the automated underwriting once a human underwriter reviews the files.  Because of this we are seeing an increase in approvals requiring additional documentation.  This leads to a longer underwriting period and also some added frustration as we go back to borrowers for additional documentation.  I counsel patience and anticipate a slower process than we were accustomed to for the past several years.  Sellers, and buyers, need to start become more comfortable with 45 day escrows on even the files that are seemingly the simplest.

Another phenomenon we have started to notice is the spread between individual lenders from day to day as the mortgage backed securities markets (bonds that determine our rates) fluctuate through the day.  We see a lender significantly lower than others one day, and then higher the next with another lender dropping into the low slot.  Typically most of our lenders are crowded around the same price point for the products, lately there has been a much wider spread between the high rate of the day and the low rate of the day.  As a broker we do not mind this so much as we can take advantage of utilizing the low lender for our locks; from a client perspective it does not have a significant effect but I have found it interesting and thought I would mention it.

***ALERT*** NO CHANGE FROM LAST WEEK: Jumbo 30 year fixed rate pricing is not available; the most reasonable quote we have currently from our lenders is 8.5% at cost of 3.5 points.  5/1 and 7/1 ARM pricing is available on loans over $719,000---call for quotes.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 740 AND ABOVE (change from last Friday):

30 year conventional at 1 point 6.1255%          ê  .250%

30 year conforming-jumbo at 1 point 6.375%            ê  .125%

30 year FHA at 1 point 6.125%                                  ê  .125%

30 year jumbo at         NO PRICE CALL FOR INFORMATION              

What an amazing week in America, with the formal nomination of Barack Obama and the selection of Sarah Palin as John McCain’s running mate we are guaranteed to have a historical election in November.  My hope as we move toward that historic day is that the focus remains on the candidates’ policy positions, ideologies and character and not on their race and gender.

Speaking of history, here is Wikipedia entry on the history of Labor Day.

Thanks to everyone for their referrals, it is the best compliment I can receive on my service, experience and products.

Have a great weekend!

Dennis

Note that as early as next week Fannie and Freddie may start having further tiered pricing for FICO scores raising the “entry” level with no hits to pricing starting as high as 740 middle score.  Stay tuned!

Speaking of Fannie Mae, we were very proud at Stratis Financial this week to have been contacted by Fannie Mae to have a one-on-one meeting with one of Fannie’s senior data analysts who was meeting with just a few brokers in the entire Southern California region.  We were selected because of our long history of using the Fannie Mae Desktop Underwriter software program, our excellent funding record on approved loans and our almost non-existent default record on Fannie Mae mortgages.  The purpose of the discussion was what tools Fannie Mae can make available to brokers such as Stratis Financial to assist us with our clients.  It was a very productive meeting and we are thrilled to be such a positive blip on Fannie Mae’s radar screen. 

Bonds got hammered hard on Monday and into Tuesday as the Russian invasion and occupation of Georgia scared the markets and raised concern about oil and gas supplies in Europe.  Russia is the number two nation in oil exports and far and away the number one nation in natural gas exports—supplying almost all of Western Europe.  With inflation figures out that showed higher prices, mostly centered on oil and gas prices, the markets sold bonds rapidly.  Later in the week things calmed down and we have seen a slight improvement that last few days.  But as always volatility remains the key word for mortgage rates, bonds and stock markets.   

Looking ahead I see no reason to move off my position of having clients lock in their rates and terms through the end of escrow as soon as possible to protect from upside volatility.

***ALERT*** NO CHANGE FROM LAST WEEK: Jumbo 30 year fixed rate pricing is not available; the most reasonable quote we have currently from our lenders is 8.5% at cost of 3.5 points.  5/1 and 7/1 ARM pricing is available on loans over $719,000---call for quotes.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 740 AND ABOVE (change from last Friday):

30 year conventional at 1 point 6.375%            é  0.125%

30 year conforming-jumbo at 1 point 6.5%       é  0.125%

30 year FHA at 1 point 6.25%                                    ó  FLAT

30 year jumbo at         NO PRICE CALL FOR INFORMATION              

Let me know how my 20+ years of experience can be of assistance to you, your family, friends or co-workers.  It is a great time to buy a new home!

Have a great weekend!

Dennis

Our real estate market in Southern California appears to be held together almost exclusively by first time home buyers—and we are thankful.  With rates holding steady at resistance levels set in the past year, and the decline in values many families are find now is a great time to buy a home; and they are right.  This strength at the entry level of the market is providing a good foundation for the industry that can hold as the move-up markets slowly begin to come together as well.

Economic news this week showed more inflationary pressure from reports for activity last month; however the significant drop in petroleum prices provides a glimmer of light that the economy may be stabilizing with lower oil costs.  Should this be the case it will ease the Fed’s concern about inflation and decrease the chances of them raising rates at their next meeting, or the one after that.  Bonds reversed themselves this week from the trend they have been following the past several weeks; this week they climbed early in the week and fell late in the week closing on a positive note. 

We are still in a very skittish interest rate environment with big swings; as always my advice:  LOCK!

***ALERT*** Jumbo 30 year fixed rate pricing is not available; the most reasonable quote we have currently from our lenders is 8.5% at cost of 3.5 points.  5/1 and 7/1 ARM pricing is available on loans over $719,000---call for quotes.

NOTE:   We have received heads up that Fannie/Freddie will be adjusting their risk based pricing as early as next week.  Currently many lenders have pricing add-ons for FICOs below 720; we are being told that next week or shortly thereafter this number may move up to 740.  As a result I am changing matrix below to be rates for borrowers with FICOs greater than 740—as always every borrower is different and the numbers quoted in this updates are generic.  All borrowers need to call for interview to receive accurate quote.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 740 AND ABOVE (change from last Friday):

30 year conventional at 1 point 6.25%              ó  FLAT

30 year conforming-jumbo at 1 point 6.375%            ó  FLAT

30 year FHA at 1 point 6.25%                                    ó  FLAT

30 year jumbo at         NO PRICE CALL FOR INFORMATION              

A word of caution:  buyers/borrowers make sure when you are getting quotes that you are being quoted everything including mortgage insurance premiums if your loan to value exceeds 80% on conventional deals and on all FHA deals.  There are many guideline changes that we have seen affecting condos with low down payments, renting out existing homes and buying new homes, source of funds, debt-to-income ratios, etc; make sure experience is helping you with your loan, not just someone with a low rate quote.

Let me know how my 20+ years of experience can be of assistance to you, your family, friends or co-workers.  It is a great time to buy a new home!

Have a great weekend!

Dennis

An abbreviated update this week as I am on vacation (Golf vacation with my Dad in Colorado Springs—wow what a beautiful place); but even in the wild lands of Colorado we have internet and cell phone service so it has been a semi-working week as I keep in touch with the markets and clients.  Back in the office on Tuesday and staring down the home stretch to the start of the school year already!

The bond markets this week reacted favorably to more jobs being added to the economy in July—next month those 9,000 jobs gained will probably be revised out.  As the stock market took big losses the bonds did well in the middle of the week—giving back some today. 

Looking ahead we will still advise locking as soon as possible on all transactions to take the uncertainty and sudden jumps out of clients’ mortgage payments. 

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 720 AND ABOVE (change from last Friday):

30 year conventional at 1 point 6.25%              ê 0.125%

30 year conforming-jumbo at 1 point 6.375%            ê  0. 25%

30 year FHA at 1 point 6.25%                                    ê  0.25%

30 year jumbo at 1 point 7.75%                                  ê    0.25%

Let me know how I can be of assistance to you, your family, friends or co-workers.  It is a great time to buy a new home!

Have a great weekend!

Dennis