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

Our sincerest gratitude to the Veterans and families of Veterans and fallen heroes who have ensured our national freedom and safety.  Have a safe Memorial Day Weekend as we celebrate our Veterans and remember those who sacrificed their lives in defense of our liberties.

Historically the start of the summer buying season, Memorial Day Weekend is upon us.  As we enter the early throws of summer our markets continue to rise and fall with big movements on a daily basis as investors warily eye the price of oil once again in a rapid ascension and worry about inflation.  The Fed this week released statements indicating that the drop in rates they have participated in since the Martin Luther King holiday is probably over; meaning they have two options:  let rates stay or raise rates.  My advice to those with equity lines is make larger payments when possible to pay down the balances while the rates are low as they will be rising again in the not too distant future.

This week we have seen more news reports indicating that the much talked about recession is either over, or never started, or if there is one we are already headed out of it.  Jobs and other data indicate the cooling off of the economy over the past seven to eight months may never have actually reached the contraction stage but rested instead just above zero growth.  As always we do not know what economy we are in until it is history and the data can be analyzed.

Rates took a pounding yesterday on inflation fears and stock surges; today a bit of a rebound in rates as stocks take the beating heading into the long weekend.  As a result conforming rates up a bit from last Friday, FHA rates flat and one of our jumbo lenders has evidently found secondary markets receptive to products as jumbo rates dropped significantly with them. 

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 5.75%   (up 0.125%)

30 year conforming-jumbo at 1 point 5.875% (up 0.125%)

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

30 year jumbo at 1 point 7.00% (down 0.500%)

We continue to receive calls from first time buyers looking to take advantage of the affordability of the market, a positive sign for the summer and beyond.

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, remember our Veterans and have a safe Memorial Day Weekend.

Dennis

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

Mobile (562) 243-6912

Fax (562) 684-4316

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

Special Mother’s Day Edition! Buy Mom a new home this year instead of flowers and a card! J

PROGRAM NOTES—DOWN PAYMENT GUIDELINES:

 ** No Condos with 5% down for Fannie Mae and Freddie Mac

 ** FHA 3% Down okay but condos need to be on approved list

 ** Minimum down (except FHA) for all loans over $417,000 is 15%

            This includes new conforming-jumbo product

 ** FHA loans over $417,000 with minimum down require 2 appraisals

Major news to lead off the weekly update:  the rate/price hits for the Conforming-Jumbo loans have been severely reduced so they are now just 0.125% above the Conforming-Conforming rates.  There are still several restrictions, however this is almost a half-percent drop in the rate.

Another very volatile week in the markets has passed with a net result close to zero from last Friday.  While the posted rates are a touch down from last Friday we saw major rate revisions upward today to get to that number.

Why? Oil prices are fueling increased inflation fears.  With some positive economic news came some negative this week, but the overall balance was sending stock prices down and bond prices up (rates down); until today when afternoon trading moved money out of bonds.

Looking ahead there are some global events that could create a positive market for bonds—as those who have read my commentary for many years know, bad news in global politics/affairs is generally good news for bonds.  Lebanon is on the razor thin edge of, if not already embroiled in, a major civil war as Hezbollah and Al-Qaeda are now fighting for control of the country.  Since the 2006 Israeli invasion of Lebanon attacking Hezbollah terrorists and the subsequent cease fire reports are that the terrorist group has amassed in excess of 25,000 rockets, many with capability of hitting Tel Aviv.  Add in the Iranian nuclear situation and their support of Hezbollah and the chances of all out war breaking out in a triangular fashion between Israel, Hezbollah and Al-Qaeda forces in Lebanon are becoming very real.  Should this happen we may see a tremendous drop in rates as investors throughout the world pull out of commodities and equities and invest in the U.S. bond market.

Today the House passed the latest housing stimulus package—one that if it goes through the Senate without modification may be vetoed by President Bush.  There are many bells and whistles to it but the basic plan would be for FHA to change their guidelines to allow mortgages to borrowers who owe more than their homes are worth—provided their existing lenders agree to discount the principal balances of their loans.  On the face of it this seems like a good idea to keep people in their homes, in analyzing the program it will discourage people from continuing to make payments on good loans just because the value of the property has depreciated.  Imagine if a similar plan was offered on auto loans, where every car is worth less than the loan/lease almost the minute it is driven off the lot. 

I am not sure where the balance is, or if there is one, to have the government involved in rescuing homeowners from foreclosure.  Experience tells me though that anytime there is government intervention for helping people the results tend to be poor in the long run.  But that is my jaded opinion.

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%   (down 0.125%)

30 year conforming-jumbo at 1 point 5.75% (down 0.5%)  !!!

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

30 year jumbo at 1 point 7.375% (down 0.125%)

Check out that drop in the red Conforming Jumbo line!

I will try to post later this weekend a great opinion piece from the Wall Street Journal this week in which the author argues that the bottom of the market is near due to market fundamentals.  While the author is a hedge fund manager with much to gain no doubt from her assessment being true, much of what she is discussing is what we are experiencing in our local market.  Affordability is the best it has been in a long time causing many buyers to enter the market—particularly first time buyers looking for condominiums and “starter” single family detached residences.  With the conforming-jumbo rates dropping we are now looking at the biggest hurdle of cash for down payment and closing costs; except for FHA loans the down payments have gone up dramatically. 

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

Have a great weekend.   Happy Mother’s Day!!

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

PROGRAM NOTES—DOWN PAYMENT GUIDELINES:

 ** No Condos with 5% down for Fannie Mae and Freddie Mac

 ** FHA 3% Down okay but condos need to be on approved list

 ** Minimum down (except FHA) for all loans over $417,000 is 15%

            This includes new conforming-jumbo product

 ** FHA loans over $417,000 with minimum down require 2 appraisals

The past seven Fed rate cuts I let you know that rates would probably increase after the rate cuts—and that is what happened.  This week we had a brief surprise when after the rate cut on Wednesday bonds took off on the news and we opened Thursday morning continuing the decline in rates.  Thankfully for some of my clients I invest in multiple market alert programs and was following the market yesterday morning as rates took a dramatic turn for the worse about 10:30—I was able to protect my clients but I bet several “floaters” who were told to ride out the forward momentum from the rate cuts lost out on the turn around.  Do not gamble with your mortgage payment! More importantly do not let someone else gamble with it!

Rates headed back up yesterday and today from the dip on Wednesday but after some big surges they leveled off to modest bumps leaving us better off this Friday from last.  The economic news continues to show job losses and higher prices, a bad combination.  The job losses being reported for the previous month are also grossly under-reported; just like a year or two ago when 300,000 plus jobs were being added to the economy the numbers were too big and moving too fast for the statisticians at the labor department.  As a result each month when the job numbers were released for the prior month they would have upward revisions for the months prior to that.  We are seeing the same trend in reverse today; with each job release we are seeing the labor department add more lost jobs to prior reports. 

The job loss and economic growth slowing to 0.60% call for rates to be lower than they are; the inflation of food, energy and consumer goods calls for rates to be higher than they are.  With each piece of economic news the speculators and investors will react pushing our rates in one direction one day, and the other direction the next day—or later in the same day.

How should those looking for a mortgage react?  First, be informed; knowledge takes away a lot of surprises.  Second, be ready to act; hemming and hawing can push your payment past your comfort level or if refinancing the “makes sense” level.  Third, do not try to beat the market; lock in your loan and do not worry if you could have gained an extra one-eighth of one percent—usually the dollar figure attached to a incremental rate change is small.  Fourth, concentrate on payments not on rates; on a $400,000 mortgage a change in rate of 0.125% (one eighth) is just over $30 per month—a dollar a day, less than your cup of coffee on the way to work.  Fifth and finally, remember that rates go up like a rocket and down on a parachute. 

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 5.75%   (down 0.125%)

30 year conforming-jumbo at 1 point 6.25% (down 01.25%)

30 year FHA at 1 point 5.75% (down 01.25%)

30 year jumbo at 1 point 7.5% (down 01.25%)

What is in the pipe this week?  First time buyers using FHA financing for entry level homes and condos are very popular at the moment.  We are also working on FHA based refinances for some new clients that were in sub-prime loans—unfortunately many are caught in valuation issues preclude assistance.  Reverse mortgage applications are on the rise and we are seeing more clients inquiring about this financial instrument to assist their parents so they can maintain their homes while facing rising medical and care costs.

Have a great weekend.

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