Dennis' Mortgage Blog

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