Dennis' Mortgage Blog

July 22nd, 2016 7:07 PM


Question of the week: Do you have a method to pay off debt without using our home’s equity?

Answer: Continuing our series on refinances and whether to take any cash out, as I mentioned last week this week I will go through process that I have used with many clients over the years to pay off their consumer debt.

First and foremost to pay off debt is to quit growing debt or maintaining the same spending habits. If you are serious about being consumer debt free modify your spending otherwise you will be hamster in a wheel except with your income and debt relationship---always paying debt but never paying it off.

Then you have to have a budget as to how much you are paying out every month on credit cards, auto loans, student loans, etc. Let’s say your budget for this is $1200 per month and the total of the minimum payments on all the debt is $900 per month. In the past you have been “shot-gunning” the payments to add a little extra to each credit card while paying the required minimum on auto and/or student loan (let’s say auto and/or student loan total $350 per month).

You have four credit cards with balances and minimum payments of $12,000 at $240/mo, $9500 at $190/mo, $4,000 at $80/mo and $2500 at $50/mo for total minimum payments of $560 per month plus the auto and student loan for total minimum payments of $560 per month so your total minimum payments are $560+$350=$910 leaving you an additional $290 per month to pay down on principal balances.

Your instinct is to pay down the highest interest rate card first. Ignore your instinct and instead follow this plan and if you stick to it you will find yourself paying off all your debt faster.

I call it the Roll-Up plan. Concentrate your extra payments every month on your lowest balance, then roll that payment and the extra you have been paying on the next lowest debt, then roll that payment plus the first debt paid off and the extra into what is now the lowest debt, keep doing this until all our payments are being used to pay off your highest debt.

Example: In all these examples the auto and student loans will only have the minimum paid on them. So you will have $1200 - $350 = $850 for paying on credit cards.

To start pay the minimum on the $12k, $9.5k and $4k credit cards, total amount of $510. This leaves $340 in your credit card budget, pay all of it on your $2500 card. Keep doing this until that card is paid off, which will happen in about 8-9 months.

Success, one card paid off and out of the way. Now make minimum payments on the $12k and $9.5k cards totaling $430 and pay the balance of your credit card budget on the $4000 card for a total payment of $850 monthly budget less $430 minimum payments leaving $420 on the $4000 card. Now this card will be paid off in 10-11 months. In less than two years you have paid off two credit cards and wiped out $6500 in consumer debt.

You can see how this is going, now we have just two cards left and pay the minimum of $240 on your biggest balance and focus $610 on what was your $9,500 card (after two years probably down to around $9000) and this card should be paid off in 15 months.

You are now down to one credit card with a balance of around $11,000 and you are paying $850 per month on the balance, paying off the card in approximately one year.

From not making any in-roads to paying off your $28,000 to having it all paid off in less than four years. Seems like a long time, and it is, but consider your auto loan is probably five years, student loan more than ten and your mortgage is thirty years—and all of those carry lower interest rates than you credit cards.

As you go through this process the minimum payments on all the cards will drop incrementally, by staying with the minimum payments on all cards that are not the focus of the pay-off you will accelerate the time frames to pay off the cards you are targeting for pay-off. We have put together this plan for clients and were looking at about four to five years to be paid off on all consumer debt and most get it down in almost half the time. Once you get started you begin to alter your spending habits and become focused on paying off that one card….and then the next one…and then the next one.

Like a diet, exercise regimen or earning a degree paying off debt requires two things: consistency and commitment to the objective.

If I can be of assistance to you in planning your become debt free please contact me, I’m happy to show you where to start.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Party like its Two Zero Zero Seven. Existing home sales nationwide built on May’s increases and rose 1.1% in June—the highest monthly gain since February 2007. Year over year sales are up 3.1% with condos up 3.2% in sales. Prices were not shrinking in a market with strong sales, nationally the median price increased 3.7% and are up 4.7% year over year. This news is somewhat mortgage rate unfriendly as it not only puts demand on mortgages but also shows strength in this very big piece of our economy.

In Southern California the data is eye-popping. Per the California Association of Realtors, Los Angeles County’s median price is $502,190, up 6.1% from June 2015; Orange County median is $759,490 up 6.0%, Riverside up 6.1% to $357,810, San Bernardino plus 6.0% to a median of $245,220 and San Diego sees 4.4% year over year rise in the median price to $594,430. For those who live in LA and Orange County your home is worth more, but if you have been considering pre-buying your retirement home in the desert or mountains that home has gone up as well (if you are interested in pre-buying for retirement call me to discuss options and strategy). When prices go up with this rate it is not unusual for appraisals to lag the market so be prepared when purchasing or refinancing for some potential soft valuations that may need to be appealed with more recent sales data.

Rates for Friday July 22, 2016: A tick down in rates from last Friday. With the slow economic week trading has drifted within the range we have established over the past several weeks. Next week some big economic data, most notably 2nd Quarter GDP, which could prove to be rate movers. Now is not the time to float your rate and try to beat the market.


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.25% Down 0.125%
30 year high-balance conforming 3.50% Down 0.125%
30 year FHA 3.00% *** Flat
30 year FHA high-balance 3.25% *** Flat

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. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have may have no points and credit towards closing costs, changes daily.



The Weekly Rate & Market Update is coming to you from beautiful Benbow, California (for those up on their California geography it is just south of Garberbille). Leslie and I are on our traditional summer road trip while the girls are at camp in Minnesota. We have driving up Pacific Coast Highway with stops so far in San Luis Opispo, Monterey, San Francisco, Ukiah and now Benbow. It is a fantastic journey with so many different vistas, geology, topography, flora and fauna. We head into Oregon today before turning south and meandering back to Long Beach. This is a trip everyone should make at least once, and perhaps more than once!

Have a great week,


Dennis

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Posted by Dennis C. Smith on July 22nd, 2016 7:07 PMLeave a Comment

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July 15th, 2016 12:51 PM


Question of the week: Does it make sense to pull money out of my home to pay off other debt?

Answer: This question is now the third in a series of Questions of the Week on refinancing. First the question was whether to pull out cash from home now for use later, last week was simply should we refinance, now whether to refinance and pull out equity to pay off other debt.

This is a common question and the most frequent target for the “other debt” being paid off is a HELOC, or Home Equity Line of Credit, that is a lien against the home and has an adjustable rate.

Other debt that some consider paying off with cash out of their home is consumer debt, i.e. credit cards, student loans, auto loans.

When answering this question with clients the questions we need answered are:

• What is current value of the home?

• What is your current mortgage balance and rate?

• What is the total amount and nature of the debt?

• What is your current interest rate?

• What is the total of payments that go along with the debt being paid off?


Some mortgage basics. Typically when analyzing the cash out scenario we are looking at conforming mortgages, either a Fannie Mae or Freddie Mac product, although there have been times when using a FHA or VA product is suitable. As you are probably aware for most of Southern California the conforming loan limits are $417,000 for the basic conforming mortgage and $625,500 for “high-balance” mortgages.

The $417,000 limit is important as when a cash out mortgage goes over that limit and into the high-balance range then the maximum loan to value is lower and the costs for pulling cash out are significantly higher.

Once we have they type of mortgage determined then we consider the nature of the debt we are paying off and start doing math.

If you have a HELOC on your property and wish to pay it off the transaction is considered to be cash out unless the HELOC was used to purchase the property and you have not accessed the credit line in the last 12 months the refinance is considered a rate and term refinance, which is generally lower cost/rate than cash out.

This math can be pretty easy. You have $375,000 mortgage with rate of 4.25% and a HELOC with balance of $40,000 at Prime + 1% (3.5% + 1% = 4.5%) with combined payments of $2120 per month, you have opportunity to refinance at 3.75% a $415,000 balance with a payment of $1920 per month you refinance and save $200 per month plus lock in the rate of your equity line.

What if the debt you want to pay off is credit cards?

This changes the conversation. While the math may make sense to consolidate your debt and reduce your monthly debt payments, the bigger question is whether it is a good idea to use your home to finance consumer spending. This scenario is one that came back and hurt many homeowners after the bubble who on more than one occasion found themselves with very high consumer debt and since rates were low and their home value had increased significantly refinanced and pulled cash out to pay off their consumer spending.

If you are going to refinance and use equity in your home to pay off consumer debt, and have that debt be paid off over 30 years as a result, it is important that your plan of action moving forward include two key components: First, reduce your spending and do not use credit, or nearly as much, in the future. If you do not then you will find yourself in a similar position not too far in the future where your credit card debt is hard to manage and you are looking for a way to make it manageable. Second, use the savings from the refinance to build up your savings/reserves and/or pay down your new mortgage until the balance is down to your original loan balance when you refinanced, then either keep paying down or put the money into savings/ reserves (at that point you will already have accelerated the paydown and your mortgage term will have decreased from the 30 year term).

Example: You have mortgage with balance of $375,000 with a payment of $2000 per month and credit cards of $40,000 with a minimum payment of $800 per month for total payments of $2800 per month—and you are just paying the minimum on the credit cards.

Your refinance for $415,000 at 3.75% for a payment of $1920 per month you are reduce your total debt payments by $880 per month.

If you make the same total payment per month as you were before with your mortgage and credit cards of $2800 per month on your new mortgage in two years you will have paid off the credit card debt, your mortgage balance will be approximately $375,000 per month. If you continue on that payment schedule your mortgage will be paid off in about seventeen years. Or as mentioned, you can then reduce your mortgage payment to the required amount of $1920 per month and put the additional $880 into your savings/reserves.

While it may be a great time to refinance and obtain some equity to pay off debt, whether it is a good thing to do or not depends on your actions and habits moving forward. Make sure you have a plan and follow that plan.

If you are interested in paying down debt but not using your home to do so I have a method that has worked for many clients over the years I will share with you next week.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

It has been awhile, but we have a week with all positive economic news. Prices for wholesalers (the Producer’s Price Index) and consumers (the Consumer’s Price Index) both showed nice gains in June, as did Retail Sales. Rising 0.5% in June, wholesale prices pushed the year over year price gains into positive territory and pressures consumer prices to rise in the future. On the consumer side CPI increases in June matched those in May, growing 0.2%.While still tame and below the Fed target, consumer inflation is steady and ready to accept price increases from down the chain as wholesalers increase costs to retailers. This combined news pushes rates higher.

Speaking of retailers, out of school sales must have been busy as consumer spending on retail items increased 0.6% in June. A small downer in the report was a revision downward for May sales, but the revised number was still growth in sales from April. Most consumer spending is good for the economy since it consists of 65-70% of our economy, and since it is good for the economy it means it creates upward pressure on mortgage rates.

Rates for Friday July 15, 2016: After Mortgage Backed Securities have been riding at the high end of the trading range for some time it is not a surprise that positive economic news pushes the prices down, and therefore rates up. Whether this is long term correction that leads to trending higher rates, or if it is short term profit taking, won’t be known for a week or so. In the meantime I continue my advice of locking through your escrow period as soon as you are able. After hanging onto the bottom of the rates graph for a few weeks rates tick up this Friday.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Up 0.125%
30 year high-balance conforming 3.625% Up 0.125%
30 year FHA 3.00% *** Flat
30 year FHA high-balance 3.25% *** Flat
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. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have may have no points and credit towards closing costs, changes daily.



With our girls safely packed off to camp for several weeks, Leslie and I are going to meander around California starting up the coast and Highway 1. We have spent tens of thousands of miles driving the highways and by-ways of the United States but have never had a prolonged drive just within our beautiful state. Looking forward to the small towns, diners and stores and meeting the great people who are part of them all.

Have a great week,


Dennis

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Posted by Dennis C. Smith on July 15th, 2016 12:51 PMLeave a Comment

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July 8th, 2016 11:34 AM



Question of the week: Should we refinance?

Answer: A semi-follow up to the Question of the Week from last Friday (if now is a good time to pull cash out from home for use later), and our most popular question for the last several weeks. And those who are regular readers of the Weekly Rate & Market Update know the one word answer, read, all together now: Depends.

When this question is raised I naturally have several questions I need answered before I can provide an answer. What is your current balance? Rate? Payment? Then we try to determine an approximate value of the property to determine what our loan to value will be if we do refinance.

Then there is some math that is done so we can determine first if you can refinance then if you should.

What do you mean if you “can?”? If the rate is lower I should, shouldn’t I?

Earlier in this century it was not uncommon for some (many?) loan originators and lenders to “churn” clients with refinances with every tick down in rate without concern as to how much clients were saving nor total costs. Since then guidelines have been put in place to prevent such practices. The guidelines are pretty simple, if you are going from a like to a like loan, i.e. 30 year fixed to 30 year fixed, with a rate and term refinance (not pulling out any cash) then your payment must be reduced by at least 4% and the time frame to recoup the costs of the refinance with your savings must be 48 months or less (I try to use a stricter standard of 5% savings and 24 months or less).

Because of these guidelines and how low rates have been a lot of homeowners are discovering that guidelines will not allow them to lower their rate from 3.875% to 3.75%, or in some cases even 3.625%, because their rate and payment is already so low that shaving an eighth or a quarter off their rate will not save them very much on a monthly payment---in that case instead of being upset that you cannot take advantage of the lower rate be happy your rate has been so low as long as you have had it!

For others adding the additional term to their loan for the savings ends up costing them more in the long run and is also not worth the refinance. Take David, a past client who has a 15 year mortgage with 12 years left. We worked out the numbers and while he would save money over the next 12 years with a refinance the additional three years on the new mortgage would wipe out the savings and more. Since he wants the home paid off when he retires adding the additional cost made no sense.

Next week: does it make sense to pull money out of my home to pay off other debt?

Give me a call to assess your situation and needs and find the program that matches best for you.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Interesting juxtaposition of economic news this week. Working backwards, the U.S. economy had a surge in job growth from May’s anemic 11,000 hires (revised down from initial report of 38,000 gained) adding 287,000 jobs. That is well above estimates and gains were made across many industries—including manufacturing for a change. Some tempering in the news as hourly earnings gained only 0.1% and are up just 2.6% year over year, but many more people are earning that hourly wage which is good news. The question on everyone’s mind is was last month’s job report or this month’s job report an anomaly? I think perhaps neither. The employment data today should be bad for rates especially since…

…the minutes from the Fed’s meeting were released on Wednesday. The minutes showed that the May job report was the primary cause for the voters on the rate committee to not raise the Federal Reserve’s discount rate. So if the May report was the reason not to raise does the June employment data support an increase at their next meeting?

Rates for Friday July 8, 2016: The short holiday week has seen a slightly wave in mortgage rates and pricing through the week. The conforming rate is the same as last week while lenders have edged up the high-balance rate from last week’s low. Market is in what we call a “caution” zone, meaning floating is a bit risky as a slight move to lower prices for mortgage bonds (higher interest rates) could trigger a pop up in rates. If you are able to lock through your escrow period I advise you do so, the slight gain you may get from lower rate/price is less than loss you will experience if/when rates turn.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.25% Flat
30 year high-balance conforming 3.5% Up 0.125%
30 year FHA 3.00% *** Flat
30 year FHA high-balance 3.25% *** Flat

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. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have may have no points and credit towards closing costs, changes daily.




Thank you to everyone who turned out for our Annual Flag Collection and Retirement Ceremony last week, it is always good to see old friends!

Have a great week,


Dennis

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Posted by Dennis C. Smith on July 8th, 2016 11:34 AMLeave a Comment

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July 1st, 2016 12:41 PM


It’s that time of year, our 6TH Annual Flag Collection and Retirement will take place TONIGHT!!


Question of the week: With rates so low we should we take out some cash with a new mortgage now for use later?

Answer: This has been a popular question lately and as with many Questions of the Week there are multiple answers depending on your situation. As well the question is best answered using more follow up questions.

When will you need the money? Is there a definite timing for using the money? One client is considering accessing equity today for future college costs, which will start in 2-3 years. Another is planning on extensive remodel for their home beginning at the end of the summer. Yet another is looking for JIC money---Just In Case—and may never need the money to cover a potential emergency or major expense such as a new roof or plumbing work.

What is your current mortgage? Is the rate on your current mortgage as low or lower than the current rate you can obtain with a cash-out refinance? Will taking the cash-out push your mortgage balance over one of the tiers that increase rates/pricing (either $417,000 or $625,500)? Do you have a primary mortgage and a second or equity line?

What is your home’s value? After the refinance and increasing your loan balance what will your loan-to-value be? The primary factors in the rate/price of your refinance are what will the loan-to-value be, what is the loan balance, if the loan is just reducing the rate or cash-out, and your credit score.

If someone has a delayed need for the funds from a cash-out refinance my typical advice for them is to wait until they have more immediate use for the funds, see what long term mortgage rates are at that time and if it makes sense to do a cash-out refinance at that time otherwise an equity line of credit (HELOC) may be a better solution for them. Depending on your current rate, refinance now to lower your primary mortgage payment and save money until that time comes. If you pull funds out now that you will probably not use in two or more years, or ever, then consider the additional interest costs during that period for funds you have sitting in the bank. Funds you may be tempted to use for other purposes in the meantime.

Over the past few years we have funded many refinances for families consolidating and outstanding HELOC and their mortgage into a new loan that lowers their total payment and fixes the rate on their HELOC. Some people are uncomfortable not knowing what their borrowing costs may be in the future and since rates are so low would rather take advantage of historic low rates to obtain the funds they will need at a future date, pay the interest on the unused money to avoid future rate risk. The math may show they end up paying more for the funds in the long run even with higher interest rates in the future, but that is what they are comfortable doing.

Everyone’s situation is slightly different, and everyone has their own comfort level with current stability versus future risk. Depending on your situation, when and for what you need the additional funds and your comfort level for future rate risk a cash-out refinance today may be a good move, otherwise perhaps just lower your rate and payment today and tackle the cash-out issue in the future when the funds are needed.

Give me a call to assess your situation and needs and find the program that matches best for you.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

It’s not all Brexit…Some important economic data for the United States was released this week. Early in the week the third and final revision to 1st Quarter Gross Domestic Product was released and the growth figure was revised slightly upward to 1.1% growth. The upward revision was mostly due to export data being updated, of concern was a downward revision to personal consumption. Also revised downward was the price index showing just 0.4% growth. Overall the news supports low interest rates.

Consumer confidence spiked in May to its highest level since last October. While confidence was running high in May plans to buy really big ticket items, cars and homes, declined in the report. Overall the report is slightly negative for interest rates.

Converse to the confidence shown by consumers in May was their income and spending. Personal income growth slowed in May, growing just 0.2% and spending grew 0.4%. Neither number supports robust economic growth. Nor does 0.9% increase in prices year over year. This data combined with the GDP data support rates remaining low for an extended period.

Rates for Friday July 1, 2016: As expected markets have settled down following the Brexit vote last week—the Dow and the S&P indexes are ticks below where they were at close last Thursday. Bond markets continued to see rising prices, but as with the sudden spike last week, while softening rates not a lot of movement down as lenders are reluctant to lower their rates much further. But a tick lower rates are this Friday to their lowest since May 2013.


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.25% Down 0.125%
30 year high-balance conforming 3.125% Down 0.125%
30 year FHA 3.00% *** Flat
30 year FHA high-balance 3.25% *** Flat

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. RATES ARE BASED ON 20% DOWN (3.5% FOR FHA) WITH 740 FICO SCORE FOR PURCHASE MORTGAGES. ***FHA RATES HAVE MAY HAVE NO POINTS AND CREDIT TOWARDS CLOSING COSTS, CHANGES DAILY.



As I do the Friday before almost every Independence Day here is a link to the Declaration of Independence that I encourage everyone to read once a year. An amazing document as it put forth ideals never before written by and committed to by leaders of any nation.

May your pursuit of happiness this weekend be met with fulfillment many times over this weekend.

Have a great week,


Dennis

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Posted by Dennis C. Smith on July 1st, 2016 12:41 PMLeave a Comment

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June 24th, 2016 11:12 AM


It’s that time of year, our 5th Annual Flag Collection and Retirement will take place on Friday July1st!


Question of the week: What impact does the Brexit vote have on mortgages?

Answer: Kicking myself a bit as I should have had this question ready to go with a reply and save some time this Friday morning, however I was lazy and didn’t want to pre-write an answer assuming the outcome would be what it was on the Brexit vote.

First, for those not following the international news that closely, what is “Brexit?” Following the modern tradition of mash-ups of couples names, think Brangelina, Bennifer, etc (thought to self, will Leslie go along with Denslie or Lesnis….), Brexit is a mash-up of British Exit.

Exit what? The European Union, which consists of 28 countries, soon to be 27, who operate as a single market allowing free movement of goods, services and people between member nations. Britain joined the pre-cursor to the EU, the European Community, in 1967. In 1991 a new treaty was signed creating the European Union which created the Euro currency—the Prime Minister of Great Britain was able to get an opt out clause for Britain. The new European Union went on-line so to speak in 1993 and the Euro introduced in January 2002.

Yesterday a referendum was held in Great Britain (England, Wales, Scotland and North Ireland) for the people to vote to remain in or exit from the European Union. The final tally was 52% in favor of leaving and 48% for remaining (for numbers folks, differential was 1.3 million for roughly 33.5 million votes cast). Prior to the vote polls were going back and forth as to which side was leading, creating a surprise in the final tally and the substantial win for those punching “Leave” on their ballot.

Britain leaving the EU will obviously impact their economy and that of nations remaining in the association, but will it impact the United States economically and to the question above our mortgage rates—and therefore housing markets?

Yes there will be an impact and it is already occurring. On news of the Leave victory investors began reacting quickly and in large ways selling off European investments, currencies, bonds, stocks. Spilling other markets around the globe we saw equity (stock) markets down around the world, with American stock exchanges currently down from 2-3% (as of 1:00 pm Eastern), having opened down and holding steady on initial losses.

Where does the money go? As I have discussed before in the Weekly Rate & Market Update, when there is turmoil, danger or disaster investors engage in what is known as “flight to quality.” This means they sell volatile investments, like stocks, and purchase safe investments, such as bonds and mortgages for their fixed, and if U.S. Treasury bills and bonds and mortgages practically guaranteed, returns.

This morning our Mortgage Backed Securities (MBS) markets opened with the biggest gap up from the prior day close that I can remember. (Sidebar for those not familiar with MBS. When prices go up, rates go down; prices go down, rates go up. When we open with a large gap up or down then rates will be lower or higher correspondingly.) Why? Money flowing in overnight from the sale of other assets into the safety of the U.S. fixed income markets.

Interestingly is the reaction of lenders to the sudden drop in rates is a hold back on much of the drop for two reasons: first, caution that there is not a reversal when the initial panic of “what now” subsides and calm and rational analysis of the timing of the British exit and impact on markets is better understood. Second, lenders need to control their volume of applications they can realistically process and close within the periods of the rate locks they are accepting. Let’s say you make bicycles and your company can fill an order in 30 days, guaranteed, and your capacity for filling bicycles on the 30 day guarantee is to take in 10 orders per day. You want to have a sale and lower your prices to increase business. How low can you lower your prices to guarantee the 30 day delivery even if everyone works 2-3 hours overtime every day and weekends? Can you handle 15 orders per day, an increase of 50%, 12 orders, 17?

That is the reality of our market the next few days while everything sorts out, a balance between rates and ability to handle the volume of rate locks that will come in as homeowners who were on the cusp of refinancing last week are now seeing it makes more sense.

The initial reaction is usually an over-reaction to any significant event, remember when Golden State blew out Cleveland in the first two games of the NBA and the consensus was the Warriors would coast to another championship? Over-reaction to immediate events.

Moving forward what impact will Brexit have on our industry? It will provide more support for lower rates further into the future. There may be economic ramifications on an already ailing European economy that could exacerbate a recession. Our economy has not exactly been running at high speed growing 1-2% since the end of the recession in June 2009, so any further drop in Europe could pull us down further.

Lower rates should support the housing recovery that has been on-going for many years (median prices in Southern California near the all-time 2007 highs), which has been a major factor in our positive economic growth. With housing inventory currently very low and prices rising lower rates make those higher prices more affordable to more people.

As we watch the unfolding of the aftermath of Brexit the same fundamentals will apply in regards to mortgage rates: when rates are at or near all-time lows do not try to beat the current market and see if you can gain a little bit more. The savings will be incrementally smaller and the risk of a bounce up will show a larger rise in rates than any potential drop. In other words: Lock when you can.

If you want your current mortgage situation analyzed please give me a call and we can run your numbers. When you do so please have ready your current mortgage balance, interest rate and payment (if you have mortgage insurance, taxes and/or insurance included in your payment have that broken down). Or just email me your mortgage statement and I will punch the calculator.

I have many opinions on why the referendum in Great Britain to leave the European Union passed, will not bore those who do not care in this communication, but if you would like to discuss feel free to contact me—I always enjoy engaging with others and their opinions on economic and political issues!

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Rates for Friday June 24, 2016: There was not a lot of other economic news this week impacting mortgage rates—and if there were it would not have the impact of Brexit. Today’s move in MBS markets mitigated drop yesterday as investors hedged against a “Remain” vote, however momentum is for lower rates. For now we are flat from last Friday, and for the third week in a row.


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.50% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat

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. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits



I have the annual reminder banner across the top of this communication but know many people read this section of the Weekly Rate & Market Update so want to repeat. Next Friday will be our 7th Annual Flag Collection and Retirement Ceremony. We will be located in the parking lot of Georgie’s Place on the southeast corner of Atlantic and Roosevelt in the Bixby Knolls section of Long Beach. We will be set up and ready to accept you old flag that needs to be retired around 5:30 (if you have a cloth flag that has meaning to you and needs retiring let me know and we may use it in our ceremony). Around 7:30 the scouts from Boy Scout Troop 29 will conduct a flag retirement ceremony, if you have never observed one it is pretty neat to observe—if you have kids this is a great show for them to see how the flag is respected and treated. The ceremony lasts about 15-20 minutes.

Have a great week,


Dennis

Posted in:General
Posted by Dennis C. Smith on June 24th, 2016 11:12 AMLeave a Comment

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