Dennis' Mortgage Blog

This failed to post on Friday 1/28/2011, my apologies.

Question of the week: Why did you ask me several times how I want my name on mortgage application?

Answer:  After waiting for your mortgage application to be processed, appraisal report to be completed, underwriting to review and approve your application, final conditions to be delivered and signed off you do not want to add additional steps before being able to get your loan documents, especially if those steps could have been eliminated during our first conversation.

For the final mortgage package all the details must match.  If the preliminary title report states that the address is 123 S. Main Street, then appraisal must state the address is 123 S. Main Street, so must the loan documents, the Grant Deed and the Trust Deed.

The same is true for your name.  The mortgage application, the credit report, the loan documents, the vesting for how you are taking title and the deeds must all have your name exactly the same.

In taking your information for the application and initial credit report it is important that I input your name exactly as you will be taking title to your new home.  If I run your credit report with you middle initial and you fill out your paperwork with escrow for your vesting, or how you want your name to be on the title to your new home, with your full middle name, we have to re-run your credit report and have new application documents submitted before we can be issued loan documents.

If you have a middle initial, middle name, suffix such as Jr. or Sr., you must decide very early in the process how you want your name to be on your mortgage application paperwork from credit report through closing documents

Frederick Joseph Flintstone is not the same as Fred Flintstone when it comes to legal deeds, credit reports and mortgage packages.  The name Fred uses when he and I first speak and run his credit report will determine if we move quickly from final loan approval to loan documents or closing or have more paperwork to be generated.

It’s your name, choose wisely.

Have a question for me?  Ask me!

A lot of interest rate impacting data this week. But economic data’s impact on today’s rates are negligible compared to social unrest data.  First our data and then why the impact has been practically zero on mortgage rates.

Early in the week we learned that home prices dropped in November according to the S&P Case Schiller indexes of 10 and 20 major metropolitan areas. It is the fourth straight month of price declines as prices dropped 0.8% in the 10 city index and 1.0% in the 20 city index from October 2010 to November.  Year over year the declines were 0.4% and 1.6% respectively.

California comes out ahead in the index as of the four major metropolitan areas that increased year over year, three of the markets were in the Golden State.  Up were Los Angeles (2.1%), San Diego (2.6%), San Francisco (0.4%) who joined Washington D.C. up a whopping 3.5%.

This news has minimal impact on rates but goes to defining the demand for housing, or the supply.  Price drops nationwide reflect either declining demand or increasing inventory as more families, or banks, put homes on the market.  The November price decline cannot be solely attributed to the spike in mortgage rates in November due to the fact the Case-Schiller indexes are three months averages of prices.  Any impact from higher rates will show in the December values due out next month.

Jobs always impact rates.  Regular readers of the Weekly Rate and Market Update know that employment data is a key factor in mortgage rates.  Higher employment will lead to higher interest rates as investors anticipate more robust economic growth and inflation.  Stagnant employment growth, or employment contraction, results in lower rates, or even stable rates at current levels.  Therefore there was no surprise in mortgage rates dipping yesterday when the Labor Department announced that 454,000 initial claims for unemployment insurance were filed the prior week.  The news was a damper on economic expectations as it was 52,000 more claims than the prior week.

Helping rates yesterday, and today, have been the treasury auctions of government debt.  The major participant in the auctions has been the Federal Reserve pursuing its QE2 policy of asset accumulation to maintain lower rates and try to spur the economy.  Thus far QE2 has resulted in higher interest rates and higher stock prices as investors have left the bond markets for the stock markets.  Auctions this week have been more favorable causing downward pressure on rates.

What should have reversed the markets has not.  Today significant economic data was released by the Commerce Department that ordinarily would have sent rates higher, much higher, but instead investors are pouring funds into bonds and out of stocks. 

4^th Quarter GDP numbers grew significantly from prior quarters, up 3.2% for the quarter.  The Gross Domestic Product measures all good and services in the economy and with the 4^th Quarter results total GDP is now at the same level it was prior to the start of the recession in 2007.  A very big number in the report was “final sales” which measures GDP minus the change in business inventories and shows the strength of demand in the economy.  The final sales number was up 7.1% showing very strong demand. 

Consumers make up 70% of the economy and in the 4^th Quarter increased spending by 4.4% from the prior quarter.  The Commerce Department data released today indicates Americans are beginning to buy durable goods, and some luxury items.  Inventories are down as consumption is up.

Ordinarily these numbers would portend inflation and higher rates.  The initial numbers today from Commerce shows inflation at only 0.4% for 2010, far, far below the target rate of 1.7-2.0% inflation desired by the Federal Reserve. 

Our week started with  a brief rally on Monday for Mortgage Backed Securities (MBS), followed by a huge sell off in bonds as investors pushed funds into the stock markets and the Dow reaching the 12,000 point mark.  Mortgage rates took it on the chin hard on Tuesday and we’ve spent the week catching back up.  Late rallies yesterday and today have closed the gap and recouped the lost ground for the week.

In trading this week, especially today, all this data has had zero impact on Mortgage Backed Securities, which determine our mortgage rates, and other markets.  What have had an impact are the riots in Egypt where protestors are demanding Egyptian President Hosni Mubarak step down after thirty years in power.  High commodity prices in Tunisia, which has seen protestors overthrow their government this month, Yemen, which is rioting, and Egypt have created social and political turmoil.  Worried on the domino effect of these riots in other Middle Eastern countries investors are having “flight to quality” and taking money out of stocks and putting them into bonds.

One of the cosmic negatives of mortgage rates is that others misfortunes are a benefit to those seeking lower mortgage rates.  Higher unemployment, recessions, riots and social unrest, wars, all create environments for lower mortgage rates.  What is happening in the Middle East right now is having a very large impact, large enough to cause investors to ignore positive economic news of a growing economy.

After all, it is a small world.

Rates for Friday January 28, 2011 Rates may adjust later today if there is another rally or sell off given the huge swings already today, however I am out this afternoon so here are the rates as of 10:30 Pacific. Rates currently flat from last week, I anticipate a slight adjustment this afternoon.  Given the economic data this week the riots in the Middle East have prevented these numbers from being higher.

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional                             4.75%               Flat

30 year conforming-jumbo                    4.875%             Flat

30 year FHA                                         4.375%             Flat

30 year FHA jumbo                              4.625%             Down 0.125%

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. 

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment with an impound account for taxes and insurance 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.

A mournful day in the Long Beach community as today is the memorial service for Don Westerland.  Don was a role model, mentor, inspiration and leader for our community.  I was fortunate to know Don through various community endeavors and to know Don was to know one of the nicest and caring men you could possibly know.  As I told Leslie one day after having lunch with Don, “being in public with Don is like being with Santa Claus, he knows everyone and they know him.”  He would not just say “hello, how are you?” But would inquire about your wife, children, community activity you may be involved with, etc. 

There are thousands of people in our community who have benefited from the efforts through the decades of Don Westerland, most of whom never knew Don or the positive impact his charitable efforts had on their lives. 

I know my life is better for knowing Don, he taught me many lessons over the years.  I will miss him.

God bless you Don and thank you for all your efforts for others.

Have a great week,

Dennis