There have been a lot of changes in our industry the past couple of years and a few more very big changes are on the way. Every mortgage application taken for a residential property that is primary residence or second/vacation home (investment properties exempt), conventional or FHA, conforming or jumbo, fixed or ARM, bank or broker--All mortgages will be impacted by the Mortgage Disclosure Improvement Act (MDIA), also known as the Truth-In-Lending Act (TILA).
The Act has some quirky features and interpretation varies form lender to lender. In a nutshell it boils down to when, how and from whom borrowers receive their initial Truth-In-Lending statement (TIL), a waiting period of seven days from the initial TIL being received, when fees for appraisals can be collected, and when, how and if a final TIL must be given to the borrower which starts another three day clock during which the borrower may not sign loan documents--generally a three day period from when loan docs are ordered and a new TIL is released.
As I said interpretations vary from lender to lender as to how the MDIA will be implemented and how the dates will be calculated and when loan docs will be able to be signed. Critical to the process is the APR (Annual Percentage Rate) and any variance between the initial TIL and the final TIL. Many factors affect the APR, including third party fees like escrow and title (for list visit this
Your Question!
What can I do as a real estate agent to make compliance easier with the new MDIA? As soon as you have accepted offer/counter-offer get a fee schedule from the escrow and title companies and provide them to me for my final application with the client. This will allow me to input accurate information on the Good Faith Estimate and reduce the chances for a delay caused by the need for a final TIL being sent and acknowledged by the borrower.
Escrow and title companies must be made aware of this new regulation and I encourage you to encourage them to have pre-printed fee schedules and to follow them closely so as not to negatively impact fees that could trigger additional TILs late in the escrow.
As always I am available for your questions. Please visit, and send your co-workers and escrow and title officers, to my
This regulation is effective with all applications taken July 30, 2009 forward.
Again please contact me with any questions.
Dennis C. SmithStratis FinancialDirect (562) 472-1118
Mobile (562) 243-6912
Fax (562) 684-4316
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Note: Mortgage Disclosure Improvement Act now in effect, make sure procedures followed to avoid unnecessary delays in closings!
Question of the week: There is a lot of controversy over appraisals right now, what goes into an appraisal?
Answer: The Home Value Code of Conduct has certainly disrupted our industry. While a lot of people unfamiliar the situation think it is a good idea, those individuals subject to the measure since it went into effect in May have seen some really, really bad appraisals that have cost homeowners and buyers a lot of money in lost equity, fees and restructured transactions.
How can appraisal be bad? Well there are many factors to an appraisal and depending on how they are placed in a report a value is supported or unsubstantiated. I will quickly go through the major elements of an appraisal to give you an idea of the many different factors.
One major factor that must be understood is that appraising a property is part scientific, part mathematics, part experience and part subjective. From all the factors, and more, listed below it is up to the appraiser to select which comprise the best match for the subject property and arrive at a value. Note that three ordinary appraisers can appraise the same property and arrive at three different values, three excellent appraisers with knowledge of a local area may arrive at three different values but the differences would be very slight.
The main part of an appraisal is obviously the subject property. The appraiser inspects the property, measuring the gross living area and creates a sketch of any structures. He notes the location, any adverse elements that may impact value such as flight paths, busy roads or abutting commercial developments.
Next the appraiser researches other properties within the same neighborhood that are most like the subject property that have closed escrow recently. While standard appraisal practice allows for using comparables that have sold as far back as six months, emphasis is always placed on those sales that have closed most recently and closest physically to the subject property. In analyzing the closed sales the appraiser makes adjustments for size of property, bedroom and bathroom counts, amenities such as fireplaces, pools, patios, lot size, location, and condition if known (aside: this has been one of the biggest issues with many recent appraisals through HVCC as appraisers are misstating condition of either the subject property or comparables).
Along with researching closed comparable properties the appraiser also lists and compares any properties that have entered escrow but have not yet closed escrow, called “pending sales”, and also active listings on the market that would be the alternative properties a buyer would have looked at prior to making an offer to purchase the subject property. These properties, pending sales and active listings, are adjusted in the same manner as the closed sales with three differences. First the listed, or asking, price is used instead of a closed sales price. Second, the number of days on the market is noted on the appraisal. Third the average percentage of closed sales price to listed price for closed sales is calculated and used to adjust the values for the pending and active listed properties. Why not just use the price the property sold for on pending sales? Good question, agents do not give out the final price on pending sales until they close escrow so as not to compromise the seller should the property fall out of escrow.
After the comparable closed sales, pending sales and active listings are obtained and analyzed the appraiser selects three to five closed sales, up to two pending sales if available and up to two active listings if they are available. He then makes his final adjustments based on market analysis. The appraiser must research the last twelve months of market history for the neighborhood and note the amount of inventory on the market for periods through the past year, the average percentage of closed price to listing price, the number of days homes were on the market, if the predominance of sales were distress (foreclosure or short-sales) or “traditional” (one family selling to another with no bank approvals needed for seller). If asking prices and closed prices are increasing, flat or declining for 12 months, 6 months and 3 months. From this data the appraiser states whether the property is in a stable market, increasing value market or declining value market and by how much. Once this is determined all the comparable sales are then given “time value adjustments.”
The time value adjustment is critical in our Southern California market as the number used can be somewhat subjective and has a great impact on the appraised value. What the actual figure is for the neighborhood’s declining value and how it is applied to comparables is one of the key factors that separates quality appraisers from inexperienced and sloppy appraisers. Is the factor being applied evenly, is the factor used from the neighborhood or a much broader region, is the factor adjusted for recent sales activity?
The purpose of an appraisal is not to determine the exact value of the property, but rather to inform the bank if the asset, the property, supports the liability, the mortgage, that is being applied for by the borrower. In choosing comparables appraisers can find the best possible comparables supporting a sales price that has been agreed upon by the buyer and seller, or he can choose comparables that show the lowest possible value of the home. In some neighborhoods we see comparables from top to bottom that vary by over 30%, which end of the comparables an appraiser chooses has a huge impact on the market and future sales.
This is pretty quick, though a little lengthy, explanation of the basic factors in an appraisal, I hope it provides some understanding for you as to the multitude of factors considered in determining appraised value.
I will keep this link on my “Question of the Week” section to assist new homeowners:
IRS Form 5405 for First Time Buyer Tax Credit for those eligible for the up to $8000 credit. Note credit only for those who close escrow before November 30, 2009 under current legislation.
Have a question for me? Ask me!
Our bond charts this week looked like a green staircase. Those who follow CNBC or other markets shows know that green means up. Today is mortgage backed securities are surging even higher and from Monday’s open are up over 120 basis points as I write this. Pop quiz: is it good or bad when bond prices go up? Answer: good if you want lower rates, higher prices mean lower rates.
The increase in prices and drop in yields, or rates, is a bit of a head scratcher as the Treasury dropped over $250 billion in notes on the market which should have depressed prices. Initial jobless claims dropped a bit lower yet again. Housing prices appear to be stabilizing. Second quarter GDP dropped only 1%. All this news would typically depress bond prices and have investors running for stocks. Well that did not happen, they did run to stocks this week, but money also flowed into bonds and specifically mortgage backed securities
Helping the mortgage rates has been the continuing purchase of Fannie Mae and Freddie Mac securities by the Fed. The Fed purchase program has kept rates low, artificially so in my humble opinion, which has helped the housing recovery. What we need to watch out for is the market reaction when the Fed stops the program and natural market supply and demand influence the market.
Back to the GDP figure real quick. The slowing of the decline of the Gross Domestic Product is good news for the economy. You have to shrink slower before you can grow and that is what the numbers show. While one quarter an economic analysis should not make, it does add some credence to my predictions early in 2009 that I have reasserted from time to time that the current cycle should bottom out sometime in the Fall of 2009—remember the last day of Fall is December 19th so I have the rest of the year!
Which leads me to my long term cautionary tale once again. Most of the money coming out of Washington, most notably the stimulus funds, will not hit the economy until next year. When we should be heading out of the recession and in a flat or growing, albeit slowly, economy. When we will be very susceptible to inflation. Which is not good for interest rates.
Rates had a big week dropping the most in one week for conforming since mid-January. Caution as the market may be over-bought leading to sell offs next week and rates rising. My advice is to look to lock today or early Monday morning if market starts in the red:
FIXED RATE MORTGAGES AT COST OF 1 POINT*
30 year conventional 4.875% Down 0.375%
30 year conforming-jumbo 5.375% Down 0.25%
30 year FHA 5.00% Down 0.375%
30 year FHA jumbo 5.625% Down 0.25%
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, and period rate is locked (i.e 45 days instead of 30 days).
Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected. Numbers provided are for comparative purposes only.
I have been informed by two very interested parties that “summer is almost over and school will be starting too soon.” By my calendar math summer is now half over, or you still have half of summer left! Make the most of it!
I’m around all weekend to help you, your clients, your friends and family with any mortgage needs and products. You can always apply on-line at my website.
Have a great weekend,
Dennis
Remember this update is posted weekly on My Blog at www.DennisCSmith.com ; feel free to forward the link to family and friends who may be interested in past commentaries.
Follow me on Twitter for market updates throughout the day.
Note: New Federal Legislation Effective 7/31/09 That Will Delay Closings For All Transactions, TIL Must Be Signed 3 Days Prior To Fundings. All Real Estate Professionals need to know about this—make sure escrow officers know about this new regulation! Mortgage Disclosure Improvement Act
Question of the week: Why are you so concerned about where my money is coming from for down payment and closing?
Answer: A few months ago I covered this question but I want to cover it again because it has come up several times in the past few weeks and might be the number issue delaying approvals and closings. Lending guidelines need to ensure all debts are accounted for to determine an applicant’s debt-to-income ratio (total monthly payments divided by gross monthly income).
Acceptable sources of borrower’s funds:
· Seasoned and sourced as borrower’s own—generally at least 2 months in account verified as borrowers. Any large/unusual deposits need to be sourced.
· Gift from parents or relatives (see below regarding gift funds policies)
· Bonus from employer (see below)
· Borrowed funds
GIFTS FannieMae/FreddieMac (Conforming) and FHA treat gift funds differently. FHA allows all of a borrower’s down payment and closing costs to be gift funds from a relative. Conforming guidelines require the borrower to present to closing at least 5% of the purchase price in their own funds unless the amount of the gift is 20% or more of the purchase price. All gift funds must be sourced with name, address, phone number and relationship of the donor(s), a gift letter from the donor, proof the donor has the funds to gift, proof the funds have been deposited into the borrower’s bank account or escrow account. Sourcing and paper trails are important and more than a few escrows have been delayed because of improper trails.
BONUS Bonus from employers must be documented on a “normal” paycheck, and needs to be “normal” for the employment and the history of employment. If borrower works for a small company for 5 years with never receiving a bonus and then receives a $5,000 bonus with a handwritten check we will probably have an issue with underwriting and funds may be disallowed.
Borrowed Funds If money is borrowed for down payment or closing the underwriter needs to know to either disallow the funds if not borrowed from acceptable source (401k, other property, secured debt) or if allowed to count the monthly payment. A paper trail is needed to show the source, the deposit of funds into borrower’s account and the terms of re-payment.
Note that retirement accounts are considered borrower’s own funds and can be drawn upon for the transaction. As with all funds a paper trail is needed to show they funds are the borrower’s (statement) and the withdrawal of the funds (copy of check) and proof deposited into account.
Do Not Deposit Funds from any source other than employment or other accounts you hold in your name without checking in with me first to make sure we have a proper trail for the underwriter.
Finally, CASH ON HAND is one of the major stumbling blocks for asset verification as it is extremely difficult, typically, to verify the funds as the borrower’s own funds. FHA will only allow cash at home, or cash on hand, if “borrowers do not have bank accounts” the funds are allowed on a case-by-case basis and extremely difficult to get an approval. Conventional guidelines state that cash on hand is not an acceptable source of funds.
So before buying a home have your cash in a bank account, track all deposits and do not make any unusual or large deposits without fully tracking the source and transfer; call me for guidance.
IRS Form 5405 for First Time Buyer Tax Credit for those eligible for the up to $8000 credit.
Another wild week for bonds, with little major economic news this week stocks and bonds (which includes Mortgage Backed Securities—MBS) traded funds and both swung up and down. MBS went crashing through resistance levels of 25/50/200 day moving averages on Wednesday after positive trading on Tuesday. With the technicals of the market and the jobs report out on Thursday I put out an advice to lock on my Twitter feed Wednesday morning and it was prudent. Mid-morning on Wednesday MBS market started to deteriorate and in the afternoon saw a lot of money flow into stocks creating a big drop in bonds before closing—remember drop in bond prices means hike in rates. Yesterday the drop continued and MBS prices quickly dropped back through the supposed resistance of the moving averages. Up, down for bonds and the opposite, down, up, for stocks as the Dow closed over 9,000 for the first time since January.
Today everyone is gasping on the sidelines, very little movement in any investment markets through mid-day Pacific time. Stocks are flat and bonds are flat. As they catch their breaths, investors are waiting for the next round of economic news to decide if they should buy or sell, stocks or bonds. We do know that the Treasury is dumping about $114 billion of bonds on the market next week which will create an over-supply in the market and probably push mortgage rates up. Looking ahead if you purchase a home this weekend it will probably be a good idea to lock on Monday—but let’s talk and see how the market is doing.
Looking ahead, Fed Chairman Bernanke told Congress this week that he sees unemployment continuing to rise through the end of the year and inflation remaining moderate into 2010. Last year around this time Bernanke told Congress he thought unemployment would rise to 4.6-4.9%. Use the latter as a modifier for the former. I stand by my statements for the past six, seven months: economy should start to bottom out in the fall, inflation will start to take hold in our economy in late 2009, early 2010.
If you have been waiting for “the bottom” to purchase a home you may find yourself there.
Rate flat from last Friday with all the up and down this week:
30 year conventional 5.25% FLAT
30 year conforming-jumbo 5.625% FLAT
30 year FHA 5.375% FLAT
30 year FHA jumbo 5.875% FLAT
Remember all owner occupied and second home applications taken next Thursday on are subject to the new MDIA regulations—there will be impact on many escrows so stay informed.
Please see the attachment below, sent to me by the National Association of Mortgage Brokers. It urges you to contact your Congressional Representative to co-sponsor H.R. 3044 which would put an 18 month moratorium on the Home Value Code of Conduct that has had such an adverse impact on the housing market recovery.
Please check out the document and contact your Congressional Representative today.
H.R. 3044 Letter from NAMB:HVCC alert.pdf
How to contact your Representative: Click Here you will need your Zip + 4, if you do not know your +4 there is a link on the site.
Please urge your Representative to co-sponsor this bill!
Note: New Federal Legislation Effective 7/31/09 That Will Delay Closings For All Transactions, TIL Must Be Signed 3 Days Prior To Fundings. More to come!
Question of the week: Can you explain the Truth-In-Lending Disclosure Statement (TIL)?
Answer: Great question and great timing since starting July 31st the mortgage industry will be under new regulations regarding the Truth-In-Lending (TIL) and when it is delivered and signed by clients before fundings and closings can occur.
The TIL is a very complicated document, it generates more questions than every other form and document combines. Its purpose is to allow mortgage applicants to compare loan programs and loan quotes from different lenders, however it is frequently misused and misread thereby undermining the purpose.
To save space on this update and also bytes on the email transmission to everyone I have constructed a page on my website going through the TIL and how APR is calculated, to learn how the TIL is compiled: Truth-In-Lending Explained.
Please note that APR is easy to “fudge” or to come up with a low figure to make one loan product or loan originator’s quote look better than it may actually be. For the TIL to be effective the same fees, charges and line items from the Good Faith Estimate must be included in the calculation. Because of this do not accept a TIL without the Good Faith Estimate used to compile the numbers and calculations. Is pro-rated interest from closing to the end of the month included? Is the escrow fee being quoted accurate to market price? Is mortgage insurance, if necessary, on the estimate? Is there a large number on the “Document Preparation” line—this fee is not used for APR calculations but is essentially the same as processing, underwriting or other lender/originator fees.
It is easy for someone providing a quote to leave some information off the Good Faith, and therefore create a lower APR on the Truth-In-Lending, so always when using a TIL to compare quotes make sure the Good Faith Estimates are available and compare those as well.
Also on the page on my website (here it is again) are two lists, one contains fees that must be included in the APR calculation and the other contains fees that are not included in the APR.
Major Change! Real estate agents, lenders and escrow officers need to be very aware of the new regulations that will delay closings because the borrowers must now sign Truth In Lending disclosures 3 days before funding can occur—which means delays between loan docs and fundings on purchases similar to 3 day right of rescission we have in California on refinances. Any changes for any fees after the loan docs are drawn re-starts the clock so everyone needs to be aware of the rules and how they apply. I am taking two trainings this week to get my arms around the regulations and will be posting the information on my blog on my website (www.denniscsmith.com/myblog) so stay in touch with it.
Not a good week for mortgage backed securities (MBS), and that means not a good week for mortgage rates. Keeping in mind drops in MBS prices mean increases in mortgage rates here is how our week went: Monday big drop, Tuesday medium drop, Wednesday huge drop, Thursday good gain up, Friday medium drop so far.
In our industry we always have mixed emotions, that is because bad economic news leads to great mortgage rates and good economic news leads to higher mortgage rates. This week we had several pieces of positive economic news, from fewer jobless claims than expected, to higher than expected inflation numbers, higher than expected retail sales, strong earnings—or stronger than expected—reports from several corporations, and different experts looking at the recession bottoming out by the end of the year (ah-hem..who was writing this in January? J ) combined for a somewhat rosy economic week which boosted stocks and hurt bonds.
So while we are glad that the economy appears to being somewhat better than expected or anticipated, or at least in a choppy period that usually indicates transition from moving in one direction to another, the news has led to a hike in mortgage rates for the week. Even the Fed weighing in with another hefty buy of Fannie and Freddie securities (now over $650 billion in purchases) was not able to stem the climb. This week we see the largest Friday to Friday climb since January.
Our rate market is volatile to the upside, combined with the new TIL regulations coming in a few weeks that will lead to some delays and the HVCC appraisal process that we have seen lead to delays, I strongly recommend borrowers lock at least through their escrow periods and perhaps a bit beyond. We have many challenges from outside the traditional participants in the transaction, challenges beyond our control that create obstacles to the efficient and timely transactions were are all accustomed to the past several years. Lock your rates to accommodate those challenges and potential obstacles, have patience, ensure information, forms, signatures, etc are executed and communicated in a timely fashion. And have patience.
A very wise and experienced agent once told me, “Escrows are like pregnancies, there is a due date….” Patience, communication, diligence and professionalism lead to good closings as soon as possible.
By providing this honest assessment I hope there is no one out there thinking myself and Stratis Financial cannot perform in a timely fashion, we can and do with every file—there are factors out there however that we do not control, neither does escrow, or title, or any other service chosen by the clients and agents. Choose local professionals for your services with quality communication and you will stay on top of your escrow and closing time frames.
Happy Anniversary it was one year ago this week that the chairman of the House Financial Services committee, Barney Frank, said, “Freddie Mac and Fannie Mae are fundamentally sound. I think they are in good shape going forward.” Congressman Frank has said many things over his tenure in the House of Representatives that have been somewhat suspect, this may come close to the top of the list. His involvement in pressuring Fannie and Freddie to loosen their lending guidelines to the extent that Fannie/Freddie loans were approved to 100% of the purchase price of a home for borrowers with FICO scores below the national median with no verification of income and debt to income ratios over 60% was almost criminal—but there will be no investigations of Mr. Frank, his committee nor the relationship between those members and Fannie and Freddie executives and their donations. Off my soapbox.
As mentioned above rates jumped this week:
30 year conventional 5.25% UP 0.375%
30 year conforming-jumbo 5.625% UP 0.25%
30 year FHA 5.375% UP 0.375%
30 year FHA jumbo 5.875% UP 0.25%
My prayers to Leslie, her mother and family as Leslie’s step-father Norm passed away this week after a prolonged battle with cancer. Grandpa Norm to my kids, always had a laugh a smile and was eager to tell or hear a good story. I have met a lot of nice men in my life but none nicer. Be at peace Norm, we love you and are thankful to have had you as part of our lives.
Hug your family, reach out to friends you have not reached out to in a while and thoroughly enjoy yourself each day on this little pebble we share as it rockets around the Universe.
Follow me on Twitter (www.twitter.com/dcslb) for daily updates on the mortgage market and other industry news.
I sent the following to my contacts in the real estate community and think it should be more widely spread:
Note: New Federal Legislation Effective 7/31/09 That Will Delay Closings For All Transactions, TIL Must Be Signed 3 Days Prior To Fundings.
Question of the week: We are half way through the year, how about a recap of the markets?
Answer: The official business start to 2009 was January 2nd, a Friday so while the markets were open they only ones staffing them were those low on the totem pole or in trouble with their boss. Speaking of bosses, when 2009 started we were weeks away from a new President and Administration taking office. On that Friday the Dow Jones Industrial Average was at 9035 points and the Fannie Mae 30 year fixed mortgage backed securities were trading at 101.156; the conventional 30 year fixed under the terms I quote each week (purchase transaction with 20% down for borrower with 740 FICO at 1 point cost) was at 4.875% and the “hi-balance” or jumbo conforming (over $417,000 mortgage) was at 5.00%.
After the Inauguration we experienced some choppy markets as Wall Street and investors tried to read the tea leaves of the White House and how the markets would be regulated and what steps the Treasury Department and Federal Reserve would be taking to keep more banks and investment companies from going under and bringing some confidence back to markets. On that first Friday in January I wrote that we should expect to see continued low rates and continued activity from first time buyers slowly leading stability to local housing markets from the bottom up. Both have been somewhat accurate.
Rates peaked for YTD 2009 in February after the Stimulus package was announced and investors reacted to more money being thrown into an economy already loaded with government spending and borrowing. The Fed announced they would buy significant amounts of conventional mortgages however and we saw rates begin to drop. As the first quarter economic data came out showing none of the policies from Washington were impacting unemployment and consumer spending rates dropped even further.
During this cycle we also saw a disconnect between the Fannie/Freddie “normal” conventional mortgages, those up to the $417,000 limit, and the “hi-balance” conventional rates. For the past several years the spread was between 0.125% and 0.375% in rate, mostly about 0.125% however. During starting in February when the Fed announced their new purchasing program for conventional mortgages we saw the spread jump to almost 1% in rate and typically stay close to 0.5% (one half of one percent). This is the result of the Fed creating a somewhat artificial demand for conventional mortgage backed securities and the open market having more of true reaction to economic data and sentiment.
With rates dropping through March and maintaining lows through April the mortgage industry saw tremendous volume of applications as homeowners with equity and first time buyers rushed to take advantage of the lower rates. After touching bottom once again in mid-May mortgage rates saw five straight weeks of increases before a turning down in the cycle we are currently in.
Today we see the markets struggling to find a new range of equilibrium, with a convergence of the 25, 50, 100 and 200 day moving averages on mortgage backed securities that period of relative stable rates for a period of weeks may be approaching. The technical aspects of the stock and bond markets are on the precipice of a fall either into declining stocks and rates or rising stocks and rates and investors are furiously reading their data and tarot cards to determine which way they should invest.
Looking ahead to the second half of the year I stand by my statement earlier in the year that the economy should see the bottom sometime in the fall, it may be late fall which gives me until December 19th but I feel fall is the season we see economic data begin to show slower contractions and/or flat data. September is when the cash from the almost $800 billion stimulus package passed in February is due to hit the economy, the timing could coincide with whatever health care plan and Cap and Trade bills come out of Congress, all of which are inherently inflationary. So as the employment numbers, payroll numbers and production numbers begin to right themselves we should see inflation numbers start to rise and nervous investors fleeing bonds creating higher rates.
While housing prices in some markets begin to flatten those looking for the bottom may not want to look much longer; especially if they miss the bottom of the price portion of the market and the bottom portion of the interest rate market.
On the other hand I could be completely wrong and we could see rates drop through December….we’ll check the crystal ball in a few months and see how my opinions are holding up.
IRS Form 5405 for First Time Buyer Tax Credit for those eligible
A strong couple of days in the mortgage backed security market saw a big sell off yesterday spiking rates for the day, only to see Chevron’s earnings report, consumer confidence numbers and trade numbers pull more money into the qualify bond investments. As I mentioned above technically trading is a bit on the edge with reasons for bond prices (and therefore rates) to break either way. Anyone in escrow and not locked will want to be in constant contact with the market and be ready to lock at a moment’s notice.
Rates take big drop this week mostly as a result of very favorable Treasury auctions and drops in the stock markets. A correction yesterday that may have been a one day profit taking session. We are resting below the 100 day moving average which depending if broken or not will determine rates for the near future. FHA has seen correction to bring closer to conventional markets. Cautiously float if you are not locked. Follow me on Twitter (dcslb is my Tweet) if you want through the day mortgage market updates.
30 year conventional 4.875% DOWN 0.25%
30 year conforming-jumbo 5.375% DOWN 0.25%
30 year FHA 5.00% DOWN 0.50%
30 year FHA jumbo 5.625% DOWN 0.375%
For those in the Long Beach area tomorrow is the Annual Dragster Expo and Car Show that will have some neat Funny Cars, boss Dragsters and way keen classic autos; plus vendors and booths. Including a both by the very bright and attractive owner of Blankie Keeper, a great product for those of you with kids, grandkids, nieces, nephews, of any age who are still attached to their blankies.
Happy Birthday Jack, I know you are having a piece of apple pie with a slice of cheddar!
Question of the week: In light of Independence Day tomorrow, what are the restrictions or legal barriers to homeownership?
Answer: Thankfully there are not many. While there are still some deeds out there that have the racial restrictions as the property has not been exchanged since before 1968, title VIII of the Civil Rights Act of 1968 made covenants on deeds that restricted ownership based on race, sex, religion, illegal. The Fair Housing Act removed the remaining legal barriers to homeownership for all Americans. Today the only legal form of limiting homeownership are age restrictions for senior housing or communities—such as Leisure World.
If a buyer does not need a loan to purchase a property, is legally able to enter a contract and can come to an agreement on price with a seller then he/she may purchase property.
Should a borrower require a loan to purchase property there are more restrictions, obviously due to the ability to qualify for the mortgage; however the restrictions are imposed not by the government but rather by the lending requirements. The Equal Credit Opportunity Act bans lenders from discriminating against applicants based on race, sex, religion, so any qualified applicant can obtain a mortgage and purchase property.
Our Founding Fathers were land and property owners, as were those who wrote and adopted our Constitution, recognizing the benefits of such ownership succeeding generations of America’s leaders have removed all barriers to homeownership; to the extent that the American Dream is alive and well—and still a sought after dream, owning our own home.
Happy Independence Day!
The past week had negative news for the U.S. economy with Consumer Confidence and employment numbers coming in worse than expected. While negative economic news generally helps bonds and mortgage rates, the news this week came out during a slow trading week-as a result little benefit accrued to mortgages.
Some technical comments on the mortgage backed securities (MBS) market. Last week MBS broke above the 25 and 200 day moving averages, which had merged for a day. This is usually good news as it can establish a new range of trading above the previous range, keeping in mind higher prices for MBS means lower rates. This week MBS dived on Tuesday and on Wednesday it appeared they would push through the 200 day moving average going down, which is not good news for rates. Instead of breaking through however MBS bounced off the 200 day floor and headed back up. Yesterday MBS tested the 50 day moving average moving up and before reaching it prices retracted. Next week we may see MBS bouncing around the 50 day average as the ceiling for rates, any significantly negative news could push MBS through this critical barrier and we lead to rates dropping a bit. My feeling is that rates will continue to trade between the two averages (200 and 50 day) with mortgage rates being within the range of last week and this—barring some unexpected outside event.
Rates up this week slightly this week except conforming—Tuesdays drop in prices was too much to overcome on a short week. Too early to tell if these rates will continue, market is volatile so plan accordingly. Follow me on Twitter (dcslb is my Tweet) if you want through the day mortgage market updates.
30 year conventional 5.125% FLAT
30 year conforming-jumbo 5.625% UP .125%
30 year FHA 5.5% UP .125%
30 year FHA jumbo 6.00% UP .125%
This weekend we celebrate the Declaration of Independence from Great Britain by the Continental Congress in 1776. Here is a great link for the history of the Declaration and that fateful week in Philadelphia.
Happy Birthday Bud, have a beer with Sis and Mom.
Happy Independence Day everyone, remember Our Creator has endowed you with these inalienable rights, life, liberty and the pursuit of happiness.
Pursue!
Since Congress passed legislation increasing FHA loan limits our industry has seen a significant portion of FHA financing for purchase transactions. With the pull back of private mortgage insurance in California, particularly condominium financing, the real estate industry has become more dependent on FHA financing for first time buyer transactions--which make up the highest percentage of home buyers in recent memory.
Part of the process for FHA financing on condominiums has been the ability to obtain "spot approval" for transactions on individual units in complexes that are not on the FHA "Approved" "Withdrawn" or "Denied" lists. As part of the process during our processing of the mortgage application we have collected data from the Homeowners' Association, title company and appraiser showing the complex meets FHA standards and lenders have issued the spot approval on the individual units when applicable.
Recently HUD released a Mortgagee Letter that announced changes in the condominium approval process. As part of the process HUD is eliminating the individual unit "spot approval" option later this year, currently October. At this time many lenders are already pulling back on their participating in the spot approval process for FHA mortgages, as October nears we can expect more lenders to no longer provide the individual unit spot approvals.
Moving forward HUD is allowing lenders that are Direct Endorsed and have the necessary "knowledge and expertise" to approve condominium projects, our reading on this clause thus far however is that lenders will still pass the approval process onto HUD to limit their liability.
My advice on borrowers who need to use FHA financing to purchase condominiums is to try to concentrate searches on units that are FHA approved, or be prepared to submit documentation and apply for complete approval of the complex.
My advice on listings that are in non-FHA approved complexes is to work with the HOA board and management company to get the complex its HUD approval--and while going through that process parallel a process for VA approval . This will ensure a broader market of buyers for all the units in the complex in the near and long term.
To see if a condominium complex is approved, go to this link: HUD Condo Approval, enter the appropriate field office, the state and the Condo ID note the ID is the tract number, leave the Status field blank so you can see the status as no status, Approved, Withdrawn or Denied.
If you have any questions please do not hesitate to contact me.
Dennis C. Smith
Stratis Financial Corporation
Dennis@StratisFinancial.com
Direct: 562-472-1118
Mobile: 562-243-6912
Fax: 562-684-4316
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Dennis C. Smith, California Dept. of Real Estate Broker #00966315 Stratis Financial Corporation, California Dept. of Real Estate Broker #01269597
Dennis C. Smith, California Dept. of Real Estate Broker #00966315
Stratis Financial Corporation, California Dept. of Real Estate Broker #01269597
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