Dennis' Mortgage Blog

August 24th, 2007 12:19 PM
So how was your week?  I have spent much of mine communicating the positives that do exist in the mortgage industry (we are still helping families purchase homes) and disputing/discounting much of the negatives swirling through our live (we are still helping families purchase homes). 
 
An agent asked me this week how the closings of the various mortgage companies has affected Stratis Financial.  My response was minimally. Of the 26 lenders we have funded loans through thus far in 2007 3 are either closed or temporarily not accepting applications, they represent 4% of our loan volume.  Of the 39 lenders we funded loans through in 2006 5 are either closed or temporarily not accepting applications. 
 
Our top ten lenders for funding volume are all strong national banks and account for over 80% of our volume.  So we feel our sources are very secure.
 
What is a bit insecure are the programs that are available--particularly once we get away from Fannie Mae and Freddie Mac products; i.e. non-conforming.  The 80-20 piggybacks funding 100% loan to value purchases are scarce, mainly because of the lack of 2nds.  Fannie Mae is still funding their one loan 100% with mortgage insurance product, but I am not holding my breath that this will be an option much longer. 
 
Rates for non-conforming are such that we are seeing better value in borrowers looking for Jumbo financing to use what I am calling "conforming based piggy-backs."  As I explained on my blog, the math often works out better with a low LTV first at the conforming loan limit and a larger second.  For stated income/stated asset loans we are seeing lenders move this product back to where it was when it first came out about 15 years ago: for self-employed borrowers only (including salary + significant commission), seeing the loan to value on the product drop, and seeing premium pricing.
 
As we move to some sort of conclusion of this current market environment--and at some point it will conclude that is the nature of free markets--we will see more "tiered" pricing within small bands of FICO scores, debt-to-income ratios, reserves, etc.  The "prime" or "A-paper" market will probably price products in similar fashion to how the sub-prime market has historically priced mortgages.  Instead of lumping everyone with good to excellent credit together, lenders and programs will differentiate based on incremental risk the pricing for "good" and "very good" and "excellent" risks. This will benefit the A++ borrowers and relatively cost the B+ or A- borrowers.  Some of our lenders are moving to that already on conforming product.
 
What to do?  If you are a well qualified borrower looking to purchase a home for your family, buy the home.  If waiting for rates to drop, or housing prices, we do not know if/when that will occur until after it has happened.  Make your deal and buy your home.  If you are a not as well qualified borrower looking to purchase a home, get in contact and stay in contact with your mortgage broker (me!) to improve your credit, manage debt to increase savings for future down payment, and explore the options available to you today.  Be ready to act when the window of opportunity for home ownership opens.
 
Stay tuned....
 
This week conforming has ticked down a tad and jumbo has gone up--the separation being the greatest in my career between the two:
 
30 Yr. Fixed Conforming with 10% or more down: 6.125% at 1.00 point
30 Yr. Fixed Jumbo with 10% or more down: 7.375% at 1.00 point  **
 
Note these are for 30 day locks, purchase transactions with 10% or more down and strong FICO's. 
 
***PLEASE NOTE*** "Jumbo" for this rate graph is for mortgages identical to those mortgages that fit Fannie Mae and/or Freddie Mac guidelines with the exception of loan amount greater than $417,000.  "Non-conforming" mortgages may be below the $417,000 loan amount and are so designated depending on may factors, including but not limited to FICO scores, income and/or asset verification, etc.
 
**Of the several lenders I review each day/week for fixed rates, the spread on Jumbo fixed rates from our lowest provider (7.375%) to our highest is about 1% --yes some lenders are over 8% for Jumbo rates.  This is why using a reliable mortgage broker and not a direct lender is critical.
 
Be sure all clients are in constant communication with the lender (me!) before writing your offers to make sure they are not impacted by the now daily changes and dropping of programs.  Caution rues the day and leads to smoother transactions.
 
Have a great weekend.
 
 
Dennis
 
Posted by Dennis C. Smith on August 24th, 2007 12:19 PMPost a Comment (0)
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