WE HAVE PRICING ON THE NEW “CONFORMING-JUMBO” PRODUCTS!
Note that with FHA back in the market many brokers will be soliciting your FHA business--most have never done FHA financing before. I started my career as and FHA lender and until local real estate prices jumped significantly ahead of FHA limits about 7 to 8 years ago approximately 30% of my business was FHA/VA financing. Do not let someone learn on your loan, call me!
Rates are updated to include Conforming-Jumbo and FHA as both have loan limits to $729,750 in most areas of California.
As you are aware the Fed unexpectedly cut the Fed Funds rate last weekend, and engineered a buyout/salvation of Bear Stearns by Chase. Then on Tuesday cut the rates another 0.75% on Tuesday, as mentioned in last weeks update. The immediate effect was rates climbed the ladder on Tuesday, then slowly drifted down the rest of the week.
What is happening? As those who have been reading my comments on the market for some time know I have been against this current round of Fed rate cuts as I feel they started them too soon and cut too deep so soon. While it is going to be apparent in the next month or so that our economy hit the critical data numbers needed to label the economy in a recession probably around the beginning of December, we still have had some very inflationary economic information. Food costs are rising, primarily because of the fundamental crops of wheat and corn increasing—a combination of poor crops in other parts of the world, higher fuel costs and the increased demand for corn for ethanol to slake the global warming reaction to petroleum. It appears the is no policy being put forth on any level to try to bring down costs for wheat, and therefore flour costs, and also corn used for human consumption so we will probably see these costs continue to climb. Further the high petroleum costs have finally risen to a level that has broken above the “normal” level relative to GDP and the effect is being seen in manufacturing costs being passed down the line. This is inflationary data. Lower rates feed inflation, therefore I have argued against lowering the Fed rates, and therefore Prime and other consumer and corporate borrowing rates, on economic principles.
With the teetering of Bear Stearns, and as rumors have it Lehman Brothers may be similarly reaching a tipping point, the Fed and Treasury are rightly concerned about what our economic and investment markets will look like if one of the biggest investment houses in the world were to collapse. Remember “It’s A Wonderful Life?” Multiply that by hundreds. Because of this the Fed and Treasury have concentrated their efforts to make sure our financial markets get back on somewhat solid ground. Our nation’s retirement accounts, college savings, life savings and investments lie in these institutions and they are critical to our economy. They need to be healthy if our economy, and housing markets, are to have any chance for rebounding and to have a chance for the recession we are probably in to be short and shallow.
Because of this, my take on the Fed actions is that the Fed Governors feel they can let inflation into the market and let it build for two or three—possibly four—quarters and then fight inflation at that time. But to do this they must have in the fight the major banks and investment houses. So it appears to me that the trade off is inflation for a period versus having financial markets Americans and global investors and foreign economies can trust. This makes sense to me and if this is their plan then I retract my earlier aversion to the rate cuts and hope they work quickly to inject the necessary confidence into Wall Street.
Rates dropped this week from last as seen below. Note I have added the Conforming Jumbo and FHA pricing as well.
NOTE PRICING BELOW IS BASED ON 15% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, FULL DOC, AND FICOS OF 720 AND ABOVE:
30 year conventional at 1 point 5.55% (drop of 0.375% from last Friday)
30 year conforming-jumbo at 1 point 6.375% (1st time quoted)
30 year FHA at 1 point 5.5% (3 % down plus mortgage insurance premiums)
30 year jumbo at 1 point 7.50% (no change from last Friday)
Today is Good Friday and Easter weekend and at the risk of offending anyone please note my intention is not to offend but to demonstrate; as Jesus is said to have risen after 3 days, so will our housing and real estate markets after a period as well. Have faith and confidence, every market has cycles the questions are not whether there will be ups and downs but how up, how down and for how long in between.
I would appreciate it if you could pass my name on to someone who needs mortgage information this week, or send me their name and contact information and I am happy to see how I can be of service. Thank you!
Please feel free to forward this email to your co-workers and clients--or send them to my Mortgage Blog where it is posted weekly.
Have a great weekend,
Dennis
Friday, March 21, 2008
Dennis C. SmithStratis FinancialDirect (562) 472-1118
Mobile (562) 243-6912
Fax (562) 684-4316
Inexperience will cause headaches—especially in this market. Call me for your mortgage needs, experience and honesty result in smooth transactions---I have both.
More major swings up and down in the bond markets this week, a lot of the activity swirling around the secondary markets and how (whether?) investors will react to the new jumbo-conforming and jumbo-FHA mortgages. Current results is some favorable activity on the jumbo rates, while the week resulted in a net negative for conforming.
It is important to note on the new loan amounts that there are restrictions for the guidelines, do not assume that you are eligible, or that you are not. Please contact me with the scenario so we can discuss your options.
NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, FULL DOC, AND FICOS OF 720 AND ABOVE:
30 year conventional at 1 point 5.625% (up .125% from last Friday)
30 year conforming-jumbo at 1 point 6.375% (flat)
30 year jumbo at 1 point 7.250% (drop of 0.250% from last Friday)
Thank you to those of you who referred me this week, I appreciate your trust and confidence in knowing I will provide your friends, family and co-workers the same excellent service I provided you!
www.DennisCSmith.com : apply on-line, check rates, check loan status and much more
Be prepared to see Fed cut rates next week 0.75%--when it happens we may see a jump up in mortgage rates as it is expected and being priced into the market ahead of the move.
Please keep in mind layered risk pricing for all loan products for credit score and loan to value mixes. Call for quotes.
As I posted on my blog on my DennisCSmith.com website, while we have the increased loan amounts available, no lenders are providing us with pricing yet. Mainly we have no rates yet because no investors have stepped forward to say what they are willing to pay for the now-named “jumbo-conforming” mortgages in the secondary markets. Go to the blog and see my posting on it (“Pacing…waiting…” on 3/12/08).
While the stock markets have been dropping with more news of losses due to the credit crisis we have seen a benefit in bonds and mortgage rates as investors are putting their funds into the quality government backed bonds and also the Fannie Mae and Freddie Mac Mortgage Backed Securities. We have not recovered from the losses experienced starting about four weeks ago, but we are below 6% on conforming and gaining some downward momentum.
At this point the credit markets are pricing in a rate cut by the Federal Reserve of 0.75% so when the news of the actual cut hits do not be surprised to see an immediate increase in rates.
We are in the most turbulent market I have experienced in my career. To use a boat at sea analogy, when the waters get very rough and the boat is rocking smart sailors move with caution and balance to stay on board. For those needing mortgages I urge education, awareness and communication—just what I provide.
30 year conventional at 1 point 5.875% (drop of 0.25% from last Friday)
30 year jumbo at 1 point 7.50% (slight increase from last Friday)
Growing up watching television in the late 60's and into the 70's we saw Darren Stevens and Robbie Douglas and other soon to be Dads pacing in a hospital waiting room as their wives were delivering babies. They would be pacing, knowing that soon they would be a father but not knowing whether they would have sons or daughters--and in Robbie's case triplets! After much suspense for Darren or Robbie (and us at home!) a nurse or doctor would come in, "Congratulations Mr. Stevens, your a Dad!" Then we would have the ubiquitous scene of the nurse holding the precious little witch up to the glass of the nursery as Darren smiled and made coo-coo faces from the other side.
Well the whole mortgage industry is pacing in the waiting room, we know we have new loan limits for FHA and conforming but we do not know yet what they look like. We can see the limits through the glass but the markets and lenders have not let us take them home yet because they have not figured out how they will be priced. And there's the rub, what will be charged for mortgages fitting the new limits?
Quick review/lesson on the mortgage market: Lenders fund mortgages under certain guidelines and then bundle the individual mortgages together into big "pools" and sell those pools on what is known as the secondary market, at which point they become Mortgage Backed Securities (MBS). The securities trade as bonds trade as other bonds issued by government and private entities are their competition for investment dollars. When in high demand the prices of the MBS rise, causing their yields--or interest rates--to fall. The demand for MBS and other bonds rises and falls with many different factors, primarily the expectation for inflation--high expectation for inflation equals lower demand and higher rates.
With the new "jumbo-conforming" and "jumbo-FHA" loan limits the markets are puzzled as to how to handle these new MBS. At one point there was some thought that mortgages that fall into these new categories would be pooled with "regular-conforming" and FHA mortgages for selling on the secondary market. It appears now however that the new jumbo-conforming/FHA mortgages that will be funded between whenever they start funding them and December 31, 2008 when the limits expire will have their own MBS markets or pools and they will not be packaged with the traditional conforming and FHA mortgages.
......silence.....crickets chirping....sound of mortgage originators quiet steps pacing empty waiting rooms...There appears to be little to no interest by investors to purchase the new MBS for the jumbo-conforming/FHA products. No secondary market investment means no funds for lending by the lenders means no pricing for originators to quote clients calling asking, "can we refinance our $650,000 adjustable rate mortgage on our $1,000,000 home using the new loan limits yet?"
So we wait for the investment side of the market--which was hugely responsible for the credit crisis we have been in since last summer--to determine what price they are willing to put on the risk they feel they will be taking with the new MBS. Once they do lenders will be able to price the loans and we will be able to give competent quotes to clients that we will be able to close.
Stay tuned.
Now a word from our advetisor: Dennis C. Smith of Stratis Financial. I see from my website statistics that I have been fortunate to have a lot of traffic on the website and people reading this mortgage blog. That is great, I hope my thoughts and opinions are able to educate you on the industry and provide you with needed and valuable information to make sound decisions regarding your mortgage and debt decisions. It is my hope as well that when you are in position to obtain a mortgage that you click on my email address or pick up the phone and contact me. That is if you want to work with an honest and experienced mortgage broker.
Back to our program.
Rates started improving dramatically yesterday (Tues 3/10/08) and continue to improve significantly today reversing the big losses from last week. The cause was the Feds move yesterday to increase liquidity (and confidence) by allowing banks to borrow against the MBS portfolios. More Friday on my weekly rate and market update.
Wednesday, March 12, 2008
Don’t forget to set your clock ahead tomorrow (Saturday 3-8-08) before you go to bed or you will be late for church on Sunday (or your tee time!)—or is it early? I never remember J
C R A Z Y ! ! That is the market this week as economic news and loan limits and lack of buyers for mortgages pushed and pulled the rates on the wildest week I can remember in my two decades in the industry. Suffice it to say we are in a volatile market and everyone needs to proceed with prudence and caution on all transactions. Communicate often, make sure lock dates can and will be hit, quickly provide any information requested.
After jumping 0.375% yesterday in one day, that is in rate not in fee; almost one-half of one percent in one day; today we gained most of that back as the market zoomed the other way. That balanced us out for Thursday but the market still had big losses on Tuesday and Wednesday.
***LOAN LIMIT UPDATE***
We have the new limits for Fannie Mae and Freddie Mac and FHA. What we do not have is pricing. Investors have not yet determined what they will pay for the new loan amounts in the secondary market so we do not know what price add-ons will occur. I am skeptical of anyone who says they can price one of these loans right now and so should you be.
What we do know about the new Fannie limits:
This is just a summary of the nine page letter we received from Fannie, we assume Freddie Mac has identical guidelines.
Will this help our industry? Yes as there are many borrowers who will benefit from the lower rates available, even with the add-ons. Will you benefit? Call me and find out.
30 year conventional at 1 point 6.125%
30 year jumbo at 1 point 7.375%
Do not forget to set you clocks back.
Do not forget to contact me for up to date and accurate mortgage and market information.
Do not forget to pass my name and number along to someone this weekend!
I comment on the industry frequently on Mortgage Blog so check in, this week I commented on the pressure being put on the Senate by the National Home Builders Association to give a $10,000 tax credit to buyers of new construction homes.
Friday, March 07, 2008
Just saw a news release that the National Association of Home Builders is asking the Senate to "quickly pass" a $10,000 tax credit for homebuyers. They want this to reduce their inventory and to stimulate the housing market. Why don't they just lower their asking prices? Tax payers are being asked to subsidize people purchasing new homes so the builders can maintain their profit margins? That is chutzpah!
The argument by the NAHB of helping "to stimulate the housing sector and prevent the economy from spiralling into recession" is just laughable. The only concern the NAHB has is for the profits of their members, which is understandable, to use tax payer money to support and generate those profits however is wrong. The builders have excess inventory because they built too many homes for the market. Because of their inability to properly guage the market they should be bailed out? Again, if you have excess inventory lower your price or hold the inventory, do not ask the government to create a false market using our tax dollars.
What about people purchasing existing homes? Why should they not get a tax credit for $10,000? At least that would help two families: the family purchasing the home and the family selling the home. Homeowners already get a very good tax credit, the mortgage interest deduction. While that deduction may get repealed for California homeowners if Sacramento Democrats have their way, it still exists on the Federal level.
I will repeat what I have been saying for years, but more frequently for the past several months: the government position on the “bailouts” for the housing industry should be limited to a) raising the loan limits—which has been passed and should be effective in the next few weeks and b) create a national lending license that every individual in the country who takes applications for home loans and mortgages must hold—every mortgage broker, every S&L loan officer, every credit union employee, every direct lender, every website customer service mortgage advisor; all of us must go through a difficult process and exam to get a National Mortgage Lending License. No more credits, bailouts, payments, judicial renegotiation of notes, let the markets do their job.
By the way, I saw that one of the golf stores is having a sale to "blow out" excess inventory--how about a $500 credit so I can get some new wedges and we can also stimulate the golf industry?
Wednesday, March 05, 2008
This also posted on the Long Beach Post at www.lbpost.com My Front Porch
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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