Dennis' Mortgage Blog

Question of the week:  I have unemployment insurance income in 2009 when I was between jobs, will I not qualify because I was unemployed for part of the year?

Answer:  No, you will not not qualify because you filed for unemployment insurance last year, or the year before.  We are getting fairly used to seeing income streams in which our clients may have been unemployed for part of the previous two years.  While we cannot use the unemployment income (**asterisk alert** keep reading for when we can use this income) your receiving it does not disqualify you from qualifying.  We will need to show a two year history of employment so if you were unemployed for three months we will need to show employment going back at least 27 months.

If you receive unemployment insurance on a regular basis as part of seasonal employment then we can count the income provided you can prove you have received it for the past two years, just as we would any type of income.  Certain industries are closed or not operating during certain parts of the year and employees in those industries file for and collect unemployment insurance payments, in these cases we can, and have, use the income for qualifying.

Note that federal laws make it illegal to discriminate in lending because someone receives any type of public assistance.  You may not qualify because you do not receive enough but you are not disqualified because you do receive it.

Have a question for me?  Ask me!

You know those 0% credit card offers you get in the mail if you transfer your balance from another creditor?  We were joking in the office today that could be the mortgage market if things keep going the way they are going.  Currently the Fed discount rate is pretty much zero, which allows banks to borrow money at zero percent interest and use the funds to purchase short term securities or over-night rate swaps.  With the economy suddenly flagging what will our rate floor be?

This week the main economic news was not any better than reports earlier in the month or in June.  After a precipitous drop in June, the consumer confidence index dropped again in July to 50.4; for economic growth most agree this number needs to be at or above 90.  Gross Domestic Product in the second quarter grew at only a 2.4% annual rate (or 0.8% for the quarter).  The trend for GDP is not positive have grown at 5.0% in the last quarter of 2009 and 3.7% in the first quarter of this year. 

Prior to the GDP release the Fed Beige Book was released.  The Beige Book is a compendium of anecdotal economic activity in all the Fed Districts and is used to provide a general direction of the economy.  The report was not favorable and combined with the consumer confidence numbers and a drop in durable goods had one economist asking at what point does this bump in economic recovery become labeled a cliff?

During the week our friend, in a euphemistic sense, Fed Head Ben Bernanke indicated the Fed was willing to take further action to spur the economy if it does not show renewed signs of economic growth.  What more can the Fed do?  Its rates are near or at zero, it has already gobbled up $1.25 in mortgages that it still holds and has not control over fiscal policy in Washington.  Bernanke has gone on the record as saying letting the 2001 and 2003 tax cuts expire effective January 1, 2011 (just 155 days away) will harm economic growth, but he does not have a vote in either the Senate or House of Representatives.

In the meantime investors are buying bonds.  Prices are climbing which is causing yields (interest rates) to continue to fall.  Each week as I write this update I cannot see how rates can go down further and each week data is released on the economy that convinces me that they can.  Freddie Mac posted its Weekly Mortgage Market Survey yesterday showing the average rate for a 30 year fixed rate loan in the country the past week was 4.54% at a cost of 0.70 points, the twelfth week in a row it has been below 5%.

Consumers aren’t buying, millions are out of work, and Washington spends time and energy debating bills that ultimately do nothing to increase private sector hiring, boost consumers’ confidence in their economic future, and creates approval ratings well below confidence levels.  Expect more of the same and make plans for continued low interest rates until something fundamentally shifts or the debt pressure cracks the Treasury.

Rates for Friday July 30, 2010:  Each morning the Mortgage Backed Security markets opened higher than the prior day’s closing this week as morning data releases put a premium on the security of bonds.  Today MBS hit the highest price point of my career, possibly life.  As discussed last week FHA rates are at absolute bottom so call for special pricing.  From 52 weeks ago rates are down 1 to 1.5% in rate.

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional 4.00%                              Down 0.125%

30 year conforming-jumbo 4.375%                   Up 0.125%

30 year FHA    4.25%                                      FLAT*

30 year FHA jumbo 4.25%                              FLAT*

* See comments above

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. 

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment with an impound account for taxes and insurance and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

Some day you will tell your children and grandchildrend, “I remember in the summer of 2010 when mortgage rates were at 4.00%” and they will look at you with disbelief, just as I am looking at them today with similar sentiment.

Seven months down in the first year of the second decade of the third millennium, are you ready for the next five?  Enjoy your weekend.

Have a great week,

Dennis