Dennis' Mortgage Blog

Experience counts.  For the first ten plus years of my twenty year career about half my business was FHA financing.  We are back in an FHA market and almost anyone in the Southern California market who has been in the business for less than ten years probably has no experience with FHA lending.  Don’t gamble with your escrow, choose experience!

CALIFORNIA NO LONGER TAKING 5% HIT ON LOAN TO VALUES FOR DECLINING MARKETS!    Yes we can do conforming-jumbos up to 90%.  Still no condos to 95% using non-FHA financing, but that is not a Fannie Mae/Freddie Mac issue but a mortgage insurance issue.  The underlying good news here is that Fannie and Freddie by lifting the declining market reductions are signifying some confidence that prices may be settling in the near future in California.

Well the good news is that the economy is not falling off the cliff that AP and other news outlets have been building up for the past several months.  It is not exactly robust, but it is still chugging along.  A couple of years ago I used the analogy of a track team for the economy.  Sprinters run real fast, but for a short period of time.  Economies that grow like sprinters race tend to get really winded really quickly and stop suddenly.  Marathoners run a very steady pace for a long period of time and are able to alter their pace throughout the race to re-energize.  Economies that grow like marathoners build a solid foundation and just keep going and going.  The economic expansion we have experienced post-9/11 has been one of, if not the, longest periods of sustained economic growth in modern times.  The economy was very much like the marathon runner, it never sprinted, it just kept growing and growing in moderate and sustainable fashion.  Like any race at some point it must come to an end, and to continue the analogy the economy now is like that same marathon runner who after crossing the finish line walks around to cool off and let the muscles relax. 

This past week economic data has shown almost zero growth in April, but still some growth, and other data on wages and consumer spending indicating a very slow economy.  Of greatest concern is still inflation as fueled by petroleum prices (don’t you love a good pun?) which has caused a strong increase in rates this past week.  As you can see from the chart on my blog we have been in an upward trend in rates for two weeks now, and I predict the trend will continue.  Technically we have broken through key levels of resistance on bond prices creating more room for prices to drop—and rates to increase.  Of importance to the markets is the weak dollar that has kept significant amount of foreign investment out of our markets, creating further pressure on rates to rise.  Looking forward I would not be surprised if our conforming and FHA rates get up to 6.25% before school lets out in a couple of weeks and rates for the summer could be in the range of 6.125 and 6.5%; which is where they were last summer.  Rates this week are up 0.25% across the board from last Friday.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR JUMBO LOANS AND 10% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 720 AND ABOVE (change from last Friday):

30 year conventional at 1 point 6.00%   (up 0.25%)

30 year conforming-jumbo at 1 point 6.125% (up 0.25%)

30 year FHA at 1 point 6.00% (up 0.25%)

30 year jumbo at 1 point 7.25% (up 0.25%)

My thanks to co-worker Dave who pointed out from my comments last week about paying down on Home Equity Lines at the low rates that many borrowers may want to weigh paying down the equity lines versus saving the funds in the bank due to most lenders shutting off access to additional funds on their equity lines.  If you are wondering what is best for you please call me to discuss your situation.

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.

I am available throughout the weekend to assist with scenarios, pre-qualifications and pre-approvals and other questions.

Have a great week,

Dennis