Dennis' Mortgage Blog

Question of the week:  As a broker you have access to different lenders, who are they and why do you use several lenders?

Answer:  Second part first, why do we use several different lenders?  Borrowers, properties and transactions are not all the same, neither are mortgage lenders.  Every lender has some area they specialize in or do a little bit better than someone else.  Also on any given day some have better pricing than others for the same mortgage product.  Having different lenders available allows us to balance the peculiarities of client qualifications, property, price and loan amount, mortgage interest rate and cost and the service of the lender and ability to close.  With the contraction in the mortgage market the number of options available has shrunk, so far in 2009 we have funded at least one mortgage through 18 different lenders, in 2008 that number was 29.

As an added advantage to the variety of lenders available to most brokers, with Stratis Financial we also are a direct lender on approximately 50% of the mortgages we fund.  Using the same methods of financing and funding as major lenders we are able to fund mortgages as Stratis Financial.

Here is a partial list of the major banks and lenders used by Stratis Financial; they provide quality service, pricing and sufficient mortgage products for our clients.  Some of the names you will recognize and some you will not, but in mortgage lending name recognition is not as important as service and pricing.

In alphabetical order our major wholesale partners:  Bank of America, Chase Mortgage, Citi Mortgage, Flagstar Bank, ING, Met Life, Sierra Pacific Mortgage, SunTrust Mortgage, Union Bank and Wells Fargo.   These ten lenders fund almost 95% of our business. 

Why then not just go directly to one of the lenders?  Because they may or may not have the right product for you.  If problems arise you are in a position of having to start all over again with another lender.  You are not afforded a range of options on pricing when it is time to lock in your price and rate.  And finally, they are not able to provide the service and experience I have available after over twenty years in the industry.

As a vibrant and growing company we are always looking for other relationships that will assist us in providing better service, pricing and quality to our clients.  In a rapidly changing industry we need to be flexible and have a breadth of sources to ensure our clients are able to purchase homes and refinance and manage existing mortgages and debt. 

Our business is not based on direct mail, cold calls or other mass advertising, but instead through referrals from past clients, real estate professionals, and members of the financial and legal industries.  Referrals for which we are very grateful.  Critical to this are the wholesale lenders with whom we partner to provide the best products, service and pricing to our clients.

Our commitment to our motto Serious About Service™ allows us to have not only survived the current industry crisis but actually grow our operations with the support of our clients, referral sources and lenders.

Have a question for me?  Ask me!

Mortgage Backed Securities (MBS) have had another bouncy week.  With a big spread between resistance and support the market tested both.  Early in the week MBS continued last week’s slide finally stopping at the support floor.  Mid-week they started climbing again until the came up against resistance.  Today market started off strong and then lost steam and going negative again.  As I said last week, rates are very volatile right now.  Those who are able to lock but decide to float their rates are engaging in risky behavior.

Economic news this week gave us inflation data.  We started with Citi and then Wells Fargo announcing repayment of TARP funds, joining Chase and BofA.  While the overall program will cost the taxpayers, current estimate about $140 billion, the costs are less than initially thought and it appears the program worked.  Note the costs would have been less had the automakers not been put into the program.  On Tuesday markets got a jolt with the Producer’s Price Index (PPI) came out much higher than expected. PPI measures wholesale prices and the number was 1.8% for November (0.5% without food and energy—which I never understood why those are taken out).  While the Consumer Price Index on Wednesday was lower, 0.4% (1.8% year over year), that was not unexpected since CPI lags PPI.  Overall inflation percolating but tame enough that the Fed is not making any interest rate moves.

Bonds and mortgage rates got a jolt on Thursday morning with unemployment claims.  Initial claims for the prior week showed 480,000 new filings, much higher than expected, continuing claims are now at 5.19 Americans receiving unemployment.  As you know bad economic news means good mortgage rates so the MBS jumped higher and we saw a dip in rates regaining the losses from the inflation data.  Not to last however, as mentioned above, the MBS market hit some resistance, could not maintain those levels and slipped back down today.

Looking ahead the Fed announced it foresees low rates for quite a while, but also reiterated it will end its mortgage purchase program on March 31, 2010.  April 1^st begins a new mortgage market with no government support or intervention.  As we get nearer to that day we can expect upward pressure on mortgage rates.

Proceed with caution.  Volatile and fluctuating markets require education, communication and preparation.  Make sure you are.

While daily volatility exists week over week we see no change with rates at the same level for three Fridays in a row now.   

Rates for Friday December 18, 2009:

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional 4.75%                              FLAT

30 year conforming-jumbo 5.00%                     FLAT

30 year FHA    4.75%                                      FLAT

30 year FHA jumbo 5.00%                              FLAT

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, and period rate is locked (i.e 45 days instead of 30 days).

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment 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.

An exciting day as it is the last day of school in 2009!  For those in the Long Beach area I believe there may still be some tickets available for the region’s best performance of “The Nutcracker” stage by the Long Beach Ballet Saturday afternoon and evening.  If you go pay particular attention to the incredible performance by the girls in the “Mother Ginger” scene—one of them is Blaire. 

Please note that this will be the last Rate and Market Update until January 8, 2010 with Christmas and then New Year’s following on the next two Fridays.

Thank you to everyone who has supported our business and made 2009 another fun and wild year in the mortgage industry!

And finally, to my wonderful wife and partner, Happy Anniversary of your 39^th Birthday on Monday!  I love you and look forward to many more years of celebrating your 39 years plus anniversaries!

Merry Christmas everyone!

Dennis

Remember this update is posted weekly on My Blog at www.DennisCSmith.com ; feel free to forward the link to family and friends who may be interested in past commentaries.

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