Dennis' Mortgage Blog

Do you need this?  Most of my clients do but have not taken the time; please do so!   I have spots available for those who wish to meet Debra Caldin, an Estate Planning Attorney in my office Wednesday May 15^th in my office.  Free 45 minute consultation to speak with you regarding your estate, trust, planning, etc.  Call or email me for a meeting time.  If you do not have a trust or estate plan you need this meeting.

VERY IMPORTANT:  If a buyer wants to purchase a condominium with 5% down he/she must use FHA financing—there are no more mortgage insurance companies insuring the transactions on Fannie Mae/Freddie Mac loans.  If showing condominium to buyers with little down payment make sure the complex is FHA approved, otherwise clients need minimum of 10% down (15% for jumbo non-conforming).

Interest rates and equities (the stock market) have been in a pitched battle all week with tremendous swings in both every day.  As the stock prices drop we see rates drop, as they rise we see rates rise.  Why?  The flood of economic data this week is putting a lot of pressure on the Federal Reserve to not only leave rates alone next week but possibly raise them.  With raw crude oil prices surging in global markets, food prices rising globally and shortages in many countries of basic staples such as rice, there is a lot of inflationary pressure; which prompts the Fed to raise rates.

A month ago when I was questioning the Federal Reserve in their significant lowering of rates starting in mid-January during the Martin Luther King, Jr. holiday I hypothesized that the Fed was trading inflation later in the year to make sure the credit markets and major lenders and investment houses were secure—at which point they would raise rates and begin to fight inflation.  With the recent spate of economic news, combined with earnings reports showing most of the major banks and Wall Street investors, while taking it on the chin, will survive this market, the Fed is in a position to aggressively fight inflation—higher rates.  One of my co-workers hypothesized that the Fed may look to push the economy over the brink and into recession so they can then go about slowly re-building the economy over the next year.  With the fear in some of the economic numbers of stagflation this approach, while painful, makes sense.  As an aside, stagflation is a term coined in the 1970’s under President Carter, the term describes an economy suffering from inflation and rising prices, while at the same time suffering stagnant business activity and rising unemployment.  To combat this Carter tried massive tax hikes and government spending—neither of which worked yet both of which we hear on the campaign trail this year.  End of aside.

What to expect in our industry?  Continued daily fluctuations in the rate markets and mortgages through the spring and probably into summer.   Depending on the price of raw crude oil and the action of the Fed we could see conforming rates top 6.25% heading into Memorial Day weekend; about the same as last spring.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, FULL DOC, AND FICOS OF 720 AND ABOVE (change from last Friday):

30 year conventional at 1 point 5.875%   (down 0.125%)

30 year conforming-jumbo at 1 point 6.375% (down 0.25%)

30 year FHA at 1 point 5.875% (flat)

30 year jumbo at 1 point 7.625% (flat)

I am hearing of multiple showings and offers on properties in different markets in different price ranges, particularly condominiums in entry level prices.

I appreciate your referrals and look forward to working with you this week!

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

Dennis C. Smith
Stratis Financial
Direct (562) 472-1118

Mobile (562) 243-6912

Fax (562) 684-4316
 

www.DennisCSmith.com : apply on-line, check rates, check loan status and much more