Dennis' Mortgage Blog

Some good news to start the weekend, it looks like Freddie Mac is loosening their 5% reduction to Loan To Values (LTV) in the Southern California market.  This is good news as most conforming borrowers that qualify for Fannie Mae also qualify for Freddie Mac and vice-versa which means in many instances our equity requirements should be less.  The next challenge however is mortgage insurance on the high LTV loans.  As stated previously there is no mortgage insurance on non-government financing for condos with less than 10% down, and the state has two or three MI companies insuring loans to 95% for single family detached properties, so options are limited.  While the Freddie move on LTV requirements is good news, until Fannie follows suit and the MI industry opens up some more we will proceed with caution—as always.

Another week of big ups and big downs resulting in a lot of commissions to equity and bond trades and little change in rates from last Friday—in fact no change with the exception of a small bump in Jumbo rates.  The economic news showed consumers were buying in April, except for new automobiles, and that the economy grew at a very, very moderate pace.  This put some inflation concerns back in the market, the effect of which was dampened by the Fed dumping more cash into the economy.  While the media is filled with doom and gloom predictions for the economy; the data indicates a weak economy but not anemic and susceptible to growth if factors start to line up properly.  Since consumers drive about 70% of the economy the perception they receive over the mainstream media has a significant impact on their behavior.  I am sure if the media began a series of reports about how well various segments of the economy are doing then a rebound would follow shortly thereafter.  I will spare you my thoughts on when and under what conditions we will see positive reporting on the economy, among other issues.

While the low prime rate has been good for those with Home Equity Lines of Credit (HELOCs) most borrowers with HELOCs in the region have received bad news from their lenders indicating that the loans have been capped at existing balances, or the amount available on the HELOC has been reduced.  Every lender is doing the restrictions at this point, and while most of the decisions do have a process for appeal I have not yet heard of a successful appeal.  As well we are finding more holders of 2^nd Trust Deeds and HELOCs unwilling to subordinate those loans to new 1^st Trust Deeds for those refinancing.

In the past few weeks I have spoken with several different people whose scenarios vary widely but have had one thing in common:  bad advice and direction.  Clichés are clichés for a reason, there is some historical truth to the statements; this holds very true in our current market for the saying, “if it looks or sounds too good to be true it is.”  While I have had several clients with difficult scenarios that I have been able to bring some light and reality to, I have also had contact with many people looking to refinance to whom I have said, “you have a great loan, do not do anything.  Any transaction you do today would benefit me and be of no value to you.”  Sometimes the best deals are the ones you never do.

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 5.625%   (no change)

30 year conforming-jumbo at 1 point 5.75% (no change)

30 year FHA at 1 point 5.75% (no change)

30 year jumbo at 1 point 7.5% (up 0.125%)

This week we continue to see first time buyers entering the market, a definite increase in FHA qualifications and purchases and personally I have counseled several people on reverse mortgages.  With the upper end softening there are some whispers and soft conversations for upper-upper end properties and mortgages as well.    

Call me to discuss the down payment options for your scenario.

It is school carnival weekend throughout most of our Long Beach Unified School District, our school included so I will be unavailable most of this afternoon (Friday) as I grill about 55 pounds of tri-tip and brew two gallons of homemade barbecue sauce for sandwiches.  I appreciate your patience for any return emails are phone calls coming later in the weekend as I clear the smoke from my eyes!

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