Dennis' Mortgage Blog

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% (1^st 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. Smith
Stratis Financial
Direct (562) 472-1118

Mobile (562) 243-6912

Fax (562) 684-4316