Dennis' Mortgage Blog

Question of the week:  We are offering on a bank owned property and they say we have to pay a per diem if the escrow closes late, do we?  Answer:  We have seen a lot of per diems in the past several months on bank owned properties and are yet to see any per diems actually paid.  The per diem is an attempt by the bank to put a penalty on the buyer if the transaction closes later than the scheduled closing date.  Every single transaction we have had involving either a short-sale or foreclosure/bank owned property that has closed late it has been because of the bank or the services selected by the bank for title and/or escrow.  My advice is to strike through the per diem clause and refuse to sign it.  There are too many properties on the market and any bank dumb enough to not sell one of its REOs in this market to a willing and able buyer is going to be difficult to work with once you open escrow.  Remember, this is a buyers’ market so act like it!

If you have a question you would like me to answer send it to me!

As you are no doubt aware the Fed dropped the Fed Funds and Discount rates by 0.500% on Wednesday—sorry for not getting an update out to you but I was having technical difficulties on Wednesday, technically I was not near my lap top!  For the past, well let’s say decade, for the past decade almost every time the Fed has dropped rates we have seen mortgage rates jump that day and for the days following.  This week, prior to the stock market opening and the Fed announcement, rates were doing really well and dipped from Tuesday when rates came out Wednesday morning.  Ever since then we have not faired so well and rates are up from last Friday.  So true to form the Fed drops rates and mortgage rates increase.

We saw some gains early today when some key economic data was released.  Most interesting to me was that in September personal income rose and personal spending dropped—meaning Americans made more and spent less therefore savings were up.  The message from the American consumer in September was, “let’s wait and see before we buy that Wii, or television, or new shoes.”  Key inflation numbers showed a bit of a dip which is always good news for interest rates, not good enough however for a Friday climb in the market and as a result rates are worse from last Friday by a little bit.

We are now clear on our lenders that loans over the baselines for FHA ($362,000) and Fannie/Freddie ($417,000) and below the new “agency-jumbo” limits of $729,750, most are only funding these loans until December 10, 2008; thus taking some pressure off Thanksgiving week.  It appears more and more like the new limits for FHA and conforming loans will be $625,000 as that is what some mortgage insurance companies are starting to post as benchmarks beginning December 1, 2008.

The last two months of 2008 will be two of the craziest in my career with the loan limit changes, Presidential election, lame-duck session of Congress that may result in hundreds of billions more of our tax dollars being dumped into the economy to what effect, and who knows what else may happen.  My advice?  Consult with an experienced and knowledgeable mortgage broker to advise you on mortgage options, possibilities and to assist you in your new home purchase.  I can recommend one whose contact information is at the bottom of this message.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 740 AND ABOVE (change from last Friday):

30 year conventional at 1 point 6.25%              é 0.125%

30 year conforming-jumbo at 1 point 6.375%            é 0.125%

30 year FHA at 1 point 6.375%                                  é 0.375%

30 year jumbo at         NO PRICE CALL FOR INFORMATION  

Note that FHA has climbed considerably, giving back the lower position it had been in the past few weeks vis-à-vis conforming rates.

I hope everyone has a safe and enjoyable Halloween.

Do not forget to vote on Tuesday.  No matter what the result or for whom you cast your ballot take pride in the ability you have as an American to vote for your government.  Take greater pride in the role model we present to the rest of the world, and have for over two centuries, on the peaceful transfer of power through our electoral process.

Dennis

Remember this update is posted weekly on My Blog at www.DennisCSmith.com , feel free to forward the link to family and friends who may be interested in past commentaries.