Dennis' Mortgage Blog

January 20th, 2017 10:10 AM


Question: What were rates when past Presidents took office?

Answer: This is a question I asked myself this week.

Unfortunately my records for the Weekly Rate & Market Update only go back to 2005 due to a computer melt down in late 2004 that resulted in the loss of a lot of past files at that time.

Fortunately President George W. Bush took office in January of 2005 so we can go back three inaugurations and compare rates. In doing my research I discovered that while the Weekly Rate & Market Update started in 2002, the Question of the Week made its debut on September 26, 2008 with “If I have a loan payment with Washington Mutual what should I do?” This was an inquiry from a few clients that morning since the night before federal regulators pushed/coerced/forced Chase to take over failing WAMU—then and still the biggest bank failure in history. Chase paid the FDIC $1.9 billion for the “right” to acquire WAMUs assets.

Back to rate history.

When George W. Bush, our 43rd President, took the oath of office on January 20, 2005 the 30 year fixed rate was at 5.375% (using same criteria quoted below). In his first year in office the lowest rate was 5.125% in late June and early July, the highest was 6.125% in early November.

When our 44th President, Barrack Obama, placed his hand on the Bible for his first oath on January 20, 2008 the 30 year conforming rate was 4.875%, four years later after his re-election the rate had dropped to near historic lows of 3.375%. During President Obama’s first term the lowest rate was 4.5% in late November 2009 and the high was 5.375% in June. In the first year of his second term the low 3.25%, reached six weeks, and the high was 4.5% in July and September of 2013.

Today when our 45th President Donald Trump swore to preserve, defend and uphold the Constitution the conforming fixed rate is 4.125%.

What will our low and high rates for 2017 be during the first year of Trump’s presidency? If we knew with certainty the answer to that question, and the timing, we would be able to greatly increase our liquid assets.

Regardless of what happens to interest rates the rest of this year, and the next four, it is my sincere hope that the rancor, partisanship and divisiveness shown the past few years is able to be put aside by the overwhelming majority of Americans and their elected representatives. E pluribus unum, out of many, one—always the strength of America, what weakens our nation is when the many choose to remain separate and point out differences instead of joining on commonalities.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Presidents come and go but the economy keeps going in one direction or the other. While the world has been focused on Washington D.C. and politics this week, the economic analysts still put out data reflecting where our economy has been and where it may be going. The Consumer Price Index for December showed a 0.2% increase from November and prices are up 2.1% from December 2015—not overly positive nor overly negative for mortgage rates. Energy price increases were balanced with a decline in food prices and the data gives not a lot of support for another increase in the Fed Funds rate, but does not give a lot of support for the Fed to not raise rates again later in the year.

Rates for Friday January 20, 2017: After three weeks of stable rates we saw a bump this week, mostly for technical trading purposes as some investors sold off to secure some profits. Looking ahead I see us in a range between 4.25% at the top and 3.875% at the bottom for the next several weeks for the conforming fixed rate.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.125% Up 0.125%
30 year high-balance conforming 4.25% Up 0.125%
30 year FHA 3.50% Flat
30 year FHA high-balance 4.00% Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.



Now that everything about the election that started almost two years ago most Americans will quickly pivot their interest to one national event, that while divisive also brings us all together: the NFL playoffs and who will be in the Super Bowl in two weeks. With four excellent teams and quarterbacks going at it this weekend sports fans should have two great games on Sunday to select who will play in Houston on February 5th. I have a rooting interest in the Packers based on a year long pool in which they were my first draft pick, but even without that interest I think the playoff experienced Packers will win in Atlanta. As for the game in New England I am also picking the visiting team to win. Yes Brady and the Patriots have more experience than the Steelers, but their defense hasn’t been that great this year and Brady has been really good but not as good as he has been in the past.

I should comment that I don’t really gamble because I am not right enough to make a living at guessing the outcome of sporting contests—regardless of who you root for know that someone who is diametrically opposed to you politically is also rooting for that team, something to build and repair a relationship that may have been dinged or damaged this past year.

Enjoy the games and have a great week,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .


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Posted by Dennis C. Smith on January 20th, 2017 10:10 AMLeave a Comment

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January 13th, 2017 4:03 PM


Question: How different is your job when helping a client with a refinance versus a purchase?

Answer: This question came up in conversation with some real estate agents who find themselves subject to greatly increased solicitation from lender representatives in the past several weeks looking for referrals.

Why the increase in solicitations? Because interest rates have increased slowing down the volume of mortgage refinance applications causing many lenders who have been answering phones taking refinances having phones that are not ringing. A great source of business for mortgage originators is real estate agents, the foundation for my business as well as many other “old timers,” so with a drop in refinance business….

Back to our question, how different is my job when working with a client refinancing a current home as opposed to working with a client purchasing a home?

Very different. Very, very, very different.

At the basics there is little difference. Collect personal and financial information on client, make sure the guidelines are met, process, submit, approve and fund the mortgage.

Where the differences start to appear however is all the variables that have to be considered, managed and solved for when working with a client purchasing a property.

Before you purchase a home we will want to make sure you can afford it and be able to successfully close the transaction. Are there items on your credit report that will require additional work that may delay an escrow? Are you funds for down payment and closing costs available and in the bank? Did you have large non-work related deposit(s) we need to account for? Is your income verifiable and eligible for consideration, especially if self-employed or have significant overtime or bonuses? Do you own a home now? Does it have to be sold for you to purchase your new home? This is part of what gets us through the pre-approval process.

The pre-approval information and any challenges we will be keeping an eye on must be communicated to your real estate agent so s/he will be aware and we can properly strategize not only price and loan amount but also timing.

When you find a home you wish to buy you will write an offer and naturally want it accepted. This will require a strong pre-approval package and the ability to communicate to the agent representing the seller (the listing agent) confidence in our ability to close your mortgage and therefore a successful close to escrow.

Once your offer is accepted we now have a firm deadline to meet which means managing timing for appraisal, loan processing, submission and approval. Coordinating final conditions and communicating timing to the agents, escrow and title companies to name just a few.

This is all if everything goes well. What if the seller has an issue on the home they are buying and we face a possible delay in closing? The appraiser discovers a problem with the property that will need to be repaired before we close? Could this have been prevented with proper questioning of the agents before we order the appraisal and corrective measures taken? What if there is language in the offer or counter-offer that could trigger more conditions from an underwriter? What if your buyer falls out of escrow delaying your closing? What if a tax lien pops up through title during escrow?

There are hundreds of “what-if” scenarios that can come up during a purchase transaction, many we have not yet seen but most we have seen and successfully handled through the years based on thousands and thousands of purchase transactions.

At the foundation for the differences between a refinance and purchase transaction is the communication. For starters we go from communicating primarily with our client and escrow to adding at a minimum two real estate agents, possibly more if there are other homes up or down stream from our transaction. That may not seem like much, however the communication between ourselves and the agents is critical to a smooth transaction and ability to solve problems that may pop up later in escrow as everyone has built a level of trust and confidence.

On paper it may not seem like there is a lot of difference, but experienced agents will let you know there is a tremendous difference in working with a lender who has experience with purchase mortgage transactions versus one who does not.

Whenever we get a call from a buyer in escrow who is having challenges closing their transaction with their lender it pains me that they have gone through the process and expense and not being able to get to closing. Had they called us before they started they could have avoided the headaches, frustration, stress and potential costs.

Buying a home is not the time to “try him out,” there is too much at stake for you and the seller. Make a call to someone who has experience and proven ability to assist you with your purchase transactions. (By the way, coming up on my 30th anniversary being licensed I have just a bit of that experience!)

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

The big news in residential real estate this week was the reduction of the annual Mortgage Insurance Premium (MIP) for FHA mortgages that close on or after January 27, 2017. The MIP for loans under $625,500 with minimum down has dropped from 0.85 points (0.85% or 85 basis points) to 0.55 points (on $400,000 FHA loan the monthly payment drops from $283 per month to $183 per month, $100 per month or $1200 per year). For loans over $625,500 the MIP drops from 1.05 points to 0.60 points ($500,000 the monthly MIP drops from $438 to $250, a savings of $188 per month, or about $2250 per year). The Upfront Mortgage Insurance Premium remains at 1.75% of the loan amount that is usually financed and added to the loan amount (for $400,000 this amount is $7000, for $500,000 it is $8750).

The final data for Producer Prices in 2016 were released this week and the news is mixed. Prices for wholesalers rose 0.3% from November and were up 1.6% from December 2015. Both numbers fairly benign and below what the Fed would like to see for economic growth. Food and energy were both very volatile in 2015. Food prices increased 0.7% in December but were down 1.1% from the prior year. Energy prices overall were up 2.6% in December, led by a 7.8% spike in gasoline, year over year energy prices climbed 5.9%. With overall prices under 2% growth the data is neutral for mortgage rates and gives little support to inflation in the near future.

How was your holiday shopping season? If you were a national retailer it wasn’t very great. Retail sales in December were a pretty decent 0.6% gain from November’s sales, however…take out auto sales and December holiday sales were only 0.2% above November’s take away autos and gas and there was no increase. This news is somewhat friendly for mortgage rates as it shows a slow-down in expected consumer spending (accounts for approximately 65-70% of economy) for what should be the busiest retails sales month of the year.

Rates for Friday January 13, 2017: Let’s hear it for stability! After a bit of a dip earlier in the week and rebound yesterday rates end the week at the same place they did on the last Friday of 2016. After the run up from the election to mid-December a few weeks of no change is quite welcome. Looking ahead we should stay in a tight range around the current rates for the near term.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.00% Flat
30 year high-balance conforming 4.125% Flat
30 year FHA 3.50% Flat
30 year FHA high-balance 4.00% Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.



An interesting week coming up. On Monday we celebrate Martin Luther King’s birthday and his contributions to our nation, on Friday we celebrate the peaceful transition of power for the 45th time in our nation’s history. After a contentious, ugly, divisive atmosphere in the media, on social media and at many family dinner tables perhaps everyone can take this week to reflect on Dr. King’s message and from where our nation has come from his historic speech on The Mall in Washington D.C. in August 1963.

As I do every year on the Friday Weekly Rate & Market Update before Martin Luther King Day I encourage everyone to take about twenty minutes out of your schedule to watch Dr. King’s most famous speech. Watch as he goes from somewhat hesitant and stilted into a beautiful oratory rhythm that has moved millions since that hot summer day.

Click here for “I Have A Dream” and please share with other.

Have a great week,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .


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Posted by Dennis C. Smith on January 13th, 2017 4:03 PMLeave a Comment

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January 6th, 2017 9:46 AM


Question: No question this week as we are finishing up our vacation week in Scottsdale

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

December’s employment report is mixed. Only 156,000 new jobs (144,000 private sector) were created in December, which is low. However those who are working saw a 0.4% increase in wages with year over year wages up 2.9%, the highest year over year increase since the end of the recession. The news is neither rate friendly or hostile.

Rates for Friday January 6, 2017: Rates start 2017 where they ended 2016. Some large swings inter-week but as we get to Friday we are experience some welcome calm in the rates.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.00% Flat
30 year high-balance conforming 4.125% Flat
30 year FHA 3.50% Flat
30 year FHA high-balance 4.00% Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.



I hope everyone is having a good start to the New Year. We are in Scottsdale for what has become our annual pilgrimage for some R&R. An unexpected guest for the week has been a cold bug hitting Leslie and I, but it has not hindered us—and at least we have our 2017 cold out of the way!

All the best to you in 2017 and beyond,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .


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Posted by Dennis C. Smith on January 6th, 2017 9:46 AMLeave a Comment

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December 30th, 2016 9:26 AM




Question: What were the highs and lows of mortgage rates in 2016?

Answer: As you can see by the chart below we are ending 2016 with interest rates just below the highest rates we saw all year.

The year started with conforming rates starting to fall from near 2015 highs, dropping from 3.875% to 3.75% (using criteria I have used for my chart quotes for over 15 years as described below) in six weeks. After a brief pop up into March rates remained very steady through June before hitting the lows of 2016 in July at 3.25%. From July until election week rates were either 3.25% or 3.375%. Post-election rates quickly climbed to their highs of the year, reached two weeks ago at 4.125%.

We end 2016 with the conforming fixed rate only 0.125% higher than it was on January 1st, but 0.75% higher than our lowest rates of the year. We end 2016 with the 30 year fixed rate at its highest since September 2014.

If I had to use one word to characterize mortgage rates in 2016 I would use “stable.” Absent eight weeks when we saw rates drop steadily (five weeks at start of year) or increase steadily (three weeks in November) rates held steady within a quarter-percent range from February to November.

If I have to use a word to characterize what I think rates will do in 2017 I will use “inconsistent.” With a transition of leadership in Washington that includes not just the President but the heads of every regulatory agency, one party control of the legislative and executive branches, international turmoil through the transition period with tensions increased in the Middle East and with Russia, an economy that appears to be strengthening amidst an international economy that is struggling, I see little that would create an environment for “stable” rates.

Instability in the economy, global relations and politics generally means lower interest rates as investors flee to the safety of fixed return investments like mortgages. However positive economic outlooks lead to higher rates. Rates will be effected by whether investors see more of a threat from external forces than positive economic impacts from policies and regulations.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Rates for Friday December 30, 2016: We close 2016 with rates dropping for the first Friday September 23rd when rates had their last day on the low for the year. Flight to safety is the primary cause for the drop. There was scant economic news to impact rates this week, but plenty of political and international relations issues that did have an impact. With tensions ramped up between the United States and Israel and the United States and Russia investors have been moving from stocks to bonds to end the year. I see no lessening of the tensions for several weeks or more which could lead to lower rates---“could.”

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.00% Down 0.125%
30 year high-balance conforming 4.125% Down 0.125%
30 year FHA 3.50% Flat
30 year FHA high-balance 4.00% Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.



Thank you to everyone who helped make 2016 another great year at Stratis Financial. We are very grateful for the opportunity to help so many families with their mortgage needs. For those who put their own reputation on the line by referring us to family, friends, co-workers, clients, etc we are extremely thankful for your trust and confidence.

We are into our eighteenth year at Stratis Financial and we know we would not be without the support of our wonderful clients and business partners who continue to return for their mortgage needs and refer others we can assist with our expertise and service.

Cheers to a wonderful 2017 to you and your family,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .


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Posted by Dennis C. Smith on December 30th, 2016 9:26 AMLeave a Comment

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December 23rd, 2016 8:22 AM


Question: What should I do if I think someone stole my social security number?

Answer: This question came up this week when my father in-law had someone break into his home and steal financial documents, including tax returns and his passport. What to do?

Thankfully in the age of the internet it is pretty easy to get contact information for various notifications you need to make to ensure, or try to ensure, your protected from further theft using you social security number, bank or credit card information. Below I have a summary of contact information for various agencies you may want to notify.

The first thing you should do is notify your local police department or sheriff’s office and request an officer come out to take a report—you may need this report for insurance claim or some financial institutions.

Second call your bank and let them know what has happened, chances are they will want to close our account and open a new one. This means you will need to notify whomever you receive automatic deposits from, such as your employer or if retired the social security administration or financial institution that may be making transfers from your retirement account to your checking account. As well if you have any automatic payments for your mortgage, auto payment, utility bills, etc you will need to notify those companies if they pull your payments, or you will need to set up new transactions if you push the payments.

Then contact your credit card companies, they too will cancel existing accounts and issue new cards—same as above, if you have any automatic charges to your credit card(s) for services such as the gym, alarm company, insurance, Amazon, etc you will need to change the payment with those providers.

The bank and credit card notifications can be pretty simply, now comes a bit more work.

Contact one of the credit bureaus and they will place a fraud alert on your social security number and alert the other credit bureaus of the alert, here are the numbers for TransUnion and Experian, as well the link to file on-line:

Trans Union: 1-800-680-7289
Experian: 1-888-397-3742

You will want to notify the IRS so they are aware your social security has been taken and be on alert for someone using your number to file taxes and possibly get a refund sent to them at a different address or more likely a direct deposit of the refund into a bank account. You can file on-line with the IRS at this link: IRS Identity Protection or call them at 800- 908-4490.

The social security administration is a bit more challenging, waits on the phone can be very long, up to an hour, or you may visit the local office. The main concern retirees will have with the social security administration is the thief contacting SSA to change where the monthly social security check is sent, or setting up an on-line account. If an on-line account is set up, or changed, SSA will notify you via the mail as to the change. Contact the SSA to let them know about the theft and that you will not be setting up nor changing any on-line account.

If like my father in-law your passport is also stolen you need to file with the information with the State Department with a specific form, this form is available on line to print and send in, or you can complete the form on line and submit electronically at https://pptform.state.gov/ or you may call them at 877-487-2778.

Unfortunately there are those in our communities who have the desire to steal from others rather than earn it themselves, and we must protect ourselves as best we can. Try to keep your financial information in a safe and secure location, do not throw statements in the trash or recycle bins but shred them and keep an eye on your neighbors homes and hope they are doing the same for you.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Now that the Fed rate increase is old news, some traditional and relatively boring economic news was released this week. Existing home sales climbed in November along with interest rates, perhaps the rising rates knocked some who were waiting for lower rates off the fence when rates did climb. There is not a lot of supply so not only have rates going up but so are prices, those who have been waiting to purchase are paying higher monthly payments and prices for their new home. This news is semi-negative for mortgage rates.

Every revision is higher for 3rd Quarter GDP. With the third and final revision the GDP is estimated to have grown 3.5% in the quarter ending September 30th. It is the strongest quarterly growth since the 3rd quarter of 2014. Consumer spending pulled the GDP up also pulling up prices 1.4% over 2015. The news supports the Fed’s decision to increase rates last week and if future quarters retain the growth of over 3% then the chances of future rate hike from the Fed is very high. The news is unfriendly for interest rates.

Rates for Friday December 23, 2016: With a low volume trading week rates have stayed flat from last Friday, a welcome break in the increases we have seen. Will this be our ceiling in the current market? We have two short weeks back to back which can lead to tight trading so we may not see if we have leveled off for another two or three weeks. In the meantime my advice holds to lock in your rate lock as soon as you can to protect against future rate hikes.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.125% Flat
30 year high-balance conforming 4.25% Flat
30 year FHA 3.50% Flat
30 year FHA high-balance 4.00% Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.



I hope Santa is kind to everyone and everyone is kind to each other through not only the holidays but also through 2017. Too much vitriol and empty rhetoric that has caused strains and breaks within families and friendships this past year. Let’s all stay focused on what we can do to be better husbands, wives, children, neighbors and friends.

Have a great week,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .


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Posted by Dennis C. Smith on December 23rd, 2016 8:22 AMLeave a Comment

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