Dennis' Mortgage Blog

Don’t Forget Day Light Savings Time!! Set you clocks ahead before you go to sleep on Saturday (3/7/09) night!

Stratis Financial Corporation is one of just a few mortgage brokers in Southern California that has been approved by an established California bank to offer jumbo mortgages up to $5 million!  Down payments as low as 20% for mortgages up to $2 million available!

Question of the week: What’s in it for me…again? Answer:  We continue on the same WIFM theme this week with President Obama’s Homeowner Affordability and Sustainability Plan (HASP) to assist “responsible homeowners” with refinance assistance going into effect on Wednesday.  The basics as we understand them are that HASP will use several billion dollars to back up mortgage servicers so they can offer lowered mortgage payments provided borrowers are a) current with their payments and b) their loan balances do not exceed 105% of the home value and c) their mortgage is a conventional Fannie Mae or Freddie Mac mortgage and d) they can qualify for the mortgage with full income and credit documentation.  If all the criteria are met and the borrower’s mortgage company has signed up for the program (or received TARP funds) then lender may lower the payment to 38% of the verifiable income and then qualify for lowering payment to 31% of the borrower’s income with the Treasury paying half the difference to the mortgage company.  This lowered payment is to be in effect for five years.  What we do not know: 1) what is in the modified contract between borrower and lender as to what happens to the difference in the new payment and the old payment; i.e. if your payment is lowered from $2000 to $1500 per month, is the $500 per month for 5 years ($30,000) just forgiven? Added to the loan balance?  2) What is reported to the credit bureaus on modified loans that may impact future ability to obtain car loans, credit cards or a mortgage in the future 3) How long the process will take.  Mortgage servicers who are charged with implementing HASP are not staffed to take and process the millions of applications from homeowners that the program is supposed to assist.  The mortgage industry has lost over 40% of its workforce since 2007, it is anyone’s guess how long it will take a company to properly staff itself to efficiently handle the number of inquiries and applications that will flood into their customer service departments.  What’s in it for you?  Once again I have to answer: who knows?  Having seen the lack of efficiency and ability of lenders to handle the sales of foreclosures and short-sales the past year I am not optimistic about their ability to handle HASP.  For borrowers with equity and the ability to save on today’s rates I would suggest not waiting for your lender to assist you—use a mortgage broker, like me!

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

With the stock markets tanking again this week we have seen mortgage rates fall again as investors fled blue chips and bought bonds and mortgage backed securities.  Since election day stocks are down about 35% and since January 1^st the total is approaching 20%--a strong indication that Wall Street investors are not feeling very positive about what has been occurring in Washington D.C. and throughout the economy. 

The mortgage market keeps bumping up against resistance preventing a break through to even lower rates, as you will notice on the graph today we are down to the 4.875%  level that we have broken through just briefly back in December after our intial long run down in rates.  Since the beginning of the year despite the Dow’s precipitous drop, there has not been a corresponding drop in mortgage rates.  A betting man might wager we are near the bottom for mortgage rates having rested on or bounced off this level for seven of the past twelve Fridays.

Great news!  Besides Stratis Financial being approved to offer quality jumbo mortgage products, California home sales doubled in January 2009 from 2008 with over 600,000 units transferring.  While the median prices continue to drop, the number of units sold shows positive activity in the real estate markets throughout the state on the lower end of the price spectrum.  This is where the recovery for the housing market begins, and it has begun before any of your tax dollars have been spent on incentives or foreclosure bailouts. 

On a couple of different industry blogs I have been attacked and disparaged for my positive outlook for the California housing market, I just reply that I am reading the numbers and speaking to families that desire to own their own homes.  The prices have dropped to levels that accompanied by historically low rates have made homeownership affordable for hundreds of thousands of families.  And the 625,000 homes transacted in January 2009 in California were purchased with down payments, with full income disclosure and qualifying and for the most part solid credit histories. In other words the mortgages being funded today are the strongest I have seen in my over twenty years in the industry.  I believe my positive outlook for California housing is warranted and this spring and summer we could see record numbers of units being purchased if we continue to see rates below 6%. 

Rates down across the board as investors shifted their focus from inflation to stock values and poured money into mortgage backed securities and bonds.

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional at 1 point 4.875%                     Down 0.25%

30 year conforming-jumbo at 1 point 5.375%            Down 0.375%

30 year FHA at 1 point 5.00%                                    Down 0.375%

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment 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.

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Have a great weekend,

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.