Weekly Rate & Market Update 11-25-16

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Question: The question of the week is taking the day to recover from tryptophan overdose yesterday.

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

Short week with limited economic data that was positive, supporting rates moving higher. Existing home sales in October were very strong with the most home sales since February 2007 after increasing 2% from August and up 5.9% from last October. The news is rate unfriendly as our economy has been pulled along with home sales this news gives a strong pull to economic growth. Other positive news came in the Durable Goods Orders grew 4.8% in October after declining in September. This news is also mortgage rate unfriendly as stronger orders for durable goods also signifies economic growth.

Rates for Friday November 25, 2016: With the certainty of a Federal Reserve rate increase in a few weeks, strong economic data and growing certainty as to the political future mortgage rates continued their climb this week. Early in the week it appeared the slide in Mortgage Backed Securities prices might have been at an end, but the pause was brief and the slide continues. Rates are up for their third straight week following the election and are now up 0.625% rising another 0.125% this week. Conforming rate hits 4% for the first time since last July.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.00% Up 0.25%
30 year high-balance conforming 4.125% Up 0.125%
30 year FHA 3.25% Flat
30 year FHA high-balance 3.75% 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.

11-25-16

I hope your Thanksgiving was enjoyable as ours.

Have a great week,

Dennis

Weekly Rate & Market Update 11-18-16

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Question: With rates having gone higher what happens if I can’t close before my rate lock expiration date?

Answer: Every lender has their own policies when it comes to rate locks and the options when the lock is set to expire, however most have similar policies. Here is a look at how rate locks work and options when facing expiration before you are ready to close.

While everyone wants to close before a rate lock expires sometimes that is not possible due to many circumstances, from a sale escrow falling out, an issue with an appraisal or property condition, or inability to get required paperwork such as a payoff statement from a lender or an insurance policy. When this happens we need to see what is the best option available to extend the rate lock, and in an up-rate market protect you and your payment.

Let’s say that we locked you in on a $400,000 for a conventional purchase mortgage at 3.25% on October 4th for forty-five days and your rate expires today. The cost of the loan when we locked was 1.25 points ($5000). There was an issue with the closing of your current home which is delaying the closing of your new home for ten to twelve days. Rates are significantly higher, today the same lock would be 3.75%, an increase of 0.500% (one-half of one percent) in interest rate, or $112 per month.

There are two options at this point:

1) Let the rate lock be broken. Wait until we are ready to close and re-lock the loan. If this policy is followed then we get the worse of the original lock or the current rate sheet on the day we re-lock in the loan plus one-quarter point in fee. For example if your rate lock expired last week and you chose to float the rate until ready to close and we re-locked today your rate would be 3.75% but instead of 1.25 points the fee would be 1.5 points ($6000), so by float your rate lock extension you lost 0.500% in rate, or $112 per month, and one-quarter point in cost ($1000). That is the risk on floating a rate lock extension, that the market goes up or stays up during the period. On the other side, if you let the rate expire and rates drop over the next ten days to say 3.5% then you would get 3.5% at a cost of 1.5 points, your payment goes up $55 per month and it costs you $1000 more in fees.
2) On or before the day the rate lock expires pay for an extension of the same rate you currently have. A fifteen day extension costs 0.125 points and a thirty day extension costs 0.25 points. You do not have to pay for the extension at the time you make it, rather it will be added to your final closing costs. For example, we know we will be closing your loan in twelve days, we contact the lender and request a rate lock extension for 15 days. Your rate of 3.25% is extended until December 3rd, but since that is a Saturday the rate lock will be December 5th. The cost for the extension is 0.125 points ($500) which is added to your total loan costs, so the total points are $5500 for the rate of 3.25%.

As you can see Option 2 is significantly better than Option 1, even if the market floats back down to or below your original rate of 3.25%. If the market stays the same as it is today your payment increases $112 per month and your costs increase $1000, versus if you take the risk out of the market your payment stays the same and your cost increase only $500 to retain the rate. By paying for the extension instead of taking a chance on the market your costs of the extension are less than five months of payment increases should you float your extension and end up with the higher rate.

What happens in a stable or down-rate market if you rate is expiring? The policy for letting the rate lock expire and then floating is the same, you get the worst case scenario of the rate you were locked at or the current market plus one-quarter of a point. However if we extend prior to the rate expiring our options may be no cost for an extension of 15 days or possibly a rate reduction if the market has improved considerably.

We are not in a stable or down-rate market so my very strong advice is to know when your interest rate is expiring if you are in escrow and locked on your interest rate. As well know the policies for extending your locked rate should it need to be extended.

It has been some time since we have been in a market that has seen mortgage rates increase as high and as fast as we have seen in the past ten days. In the past we heard from several borrowers, and agents in escrow with borrowers, that they thought their rates were locked but in fact their loan originator had not locked in their rate and was floating the market to try to get better pricing for themselves. The rates went up and the borrowers were told their loans could not close before the expiration and then the lender locked them at the higher rate after the expiration.

If your loan is locked there is most likely, almost assuredly, an extension policy for your rate as a nominal cost—typically 0.125 points for 15 days and 0.25 points for 30 days. If you are told there is no extension policy, or that there is a substantial cost for extension, then demand to see confirmation of your rate lock.

With the new disclosure laws the non-lock rate scenario should be non-existent as when the rate is locked you must receive the Loan Estimate indicating when your rate is locked and for how long. If the lender is unable to close your loan by the rate lock expiration and then indicates the cost for extending is high, send them a copy of the Loan Estimate and demand to see a copy of the rate lock confirmation for the same day. If they are unable to provide then you have some recourse via the Consumer Financial Protection Bureaus—believe me any lender would rather make sure your rate extension and lock are handled properly than have to explain to the CFPB why they generated a Loan Estimate indicating your rate was locked when it was not.

Rate lock extensions are very important, as you can see it can be costly if your loan is not able to be closed within the rate lock period. Because of this it is critical you provide your lender with all documents they require as soon as possible after they are requested.

[email protected]

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

This week saw some positive economic data released this week—all helping to push rates higher. Retail sales in October were up 0.8% from September, led by auto sales. Higher auto sales signify stronger consumer confidence which signifies economic growth which leads to higher rates. While the Producer Price Index was flat for October, and up 1.6% year over year, consumer prices went up 0.4%, 1.6% for the year led by higher energy costs. Higher prices means inflation which also leads to higher rates.

Rates for Friday November 18, 2016: Rates continue their march higher. As you can see from the chart below we have increased one-half of one percent in two weeks for conforming fixed rates. Going through my past charts the last time we saw rates increase this high in a short period was from May 15, 2009 when the conforming rate was 4.625% to 5.25% three weeks later on June 5, 2009. There are many factors to the spike, including herd mentality from investors and technical trading as well. What will be interesting is the Fed decision in a few weeks. The overwhelming consensus is a rate hike, but some began speculating on a half percent increase in rates instead of just a quarter. With the private and public long term rates increasing by as much as a half percent the Fed may see no reason to go with a large increase since the markets seem to be doing their work for them. One result of the increases will be a slow-down in purchase activity, which means if you are a buyer now might be a great time to go out and make a deal on your new home. In the meantime rates match their highs for 2016—right where we starting on January 1st.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.875% Up 0.25%
30 year high-balance conforming 4.00% Up 0.125%
30 year FHA 3.25% Up 0.125%
30 year FHA high-balance 3.75% Up 0.125%

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.

11-18-16

Yeah! Fall appears to have arrived—I can tell because it was about 50 degrees when the dog got his walk this morning and I contemplated some light gloves. I love this time of year with the cooler temperatures, as well the fact that Thanksgiving is upon us.

I hope you enjoy your Thanksgiving wherever it might be.

Have a great week,

Dennis

Weekly Rate & Market Update 11-11-16

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Question: Now what?

Answer: A question a lot of people have been asking this week in many sectors, and one I have had asked several times on Wednesday and Thursday. Now that the election is over and Donald Trump is President-elect, what are the expectations for the mortgage industry?

Three weeks ago I answered the question, “what impact will the election have on interest rates?” The short term of two days of open markets has shown the first part of my answer to be wrong, “no matter who is elected the impact on interest rates will be about the same, that is to say negligible.” On Wednesday the markets opened, ran through the day and closed, then opened on Thursday, ran and closed, exactly opposite of the expectations of myself and many others. The common wisdom that was a Trump victory would insert uncertainty in the markets. Markets do not like uncertainty and what normally happens is money flows from equities (stocks) to “safe harbor” investments—bonds and mortgages.

As the result of the election became apparent on Tuesday evening the futures market was follow the historical pattern of forecasted uncertainty as stock prices plummeted in overnight trading. This garnered well for mortgage rates as the expectation was that money would flow into Mortgage Backed Securities (MBS) raising prices—which lower rates.

When the equity markets opened on Wednesday they were almost flat from Tuesday’s close—surprising many after the overnight trading. And then pow—they started climbing rapidly approaching all-time highs. The ride up continued on Thursday and have been flat.

While the equity markets were jumping up the bond markets were falling down, rapidly and steeply. Looking at the charts the drop in MBS prices on Wednesday were the largest in one day in over several years, the increase in rates from last Friday to this are the largest since last June when rates jumped on expectations for the Fed to raise interest rates—which they did six months later.

Back to our question, now what? While short term my assessment was 100% backwards, long term I still feel confident in my expectations for rates to not move very much. It will take drift back down—many of you have heard me say for years rates go up on a rocket and come down on a balloon—but economic data supports low mortgage rates.

As for economic policy we will need to wait and see what is hammered out between the Trump Administration and the new Congress beginning in January. Expectations are for lower tax rates and unwinding some/many of the regulations put on various industries during the Obama Administration. Whether those will come to pass and their long term effect on the economy will certainly impact mortgage rates, however there is tremendous lag time between initiating policy, getting anything through the legislative process, implementing the policy and then the impact that any policy changes may have on the economy.

While waiting for the slow wheels of government the economy has its own momentum, or lack of momentum as is the case as I see it. As I mentioned in my Weekly Rate & Market Update three weeks ago, I feel we will enter a period of recession late 2nd Quarter or early 3rd Quarter in 2017—well before any impact of policies put into place by the new slew of officials in Washington.

Now what? Even with the bump in rates this week they are still extremely low and a bright spot for home buyers could be a lull in the market presenting some soft targets for sellers who are in a need to sell for whatever reason and suddenly seeing a reduction of buyers in the market. You may pay a bit more in rate than a week ago but possibly could pay a bit less in home price.

[email protected]

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

Any economic data was overshadowed, actually ignored, by the election. One bit of data is new unemployment filings are flat at around 250-270,000 range which indicates pretty steady employment for those who have it. This data supports the increase in rates from the Fed in early December.

Rates for Friday November 11, 2016: We covered rates above. Cautiously optimistic for rates to drift back down in the future, however when and for how long are uncertain.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.625% Up 0.25%
30 year high-balance conforming 3.875% Up 0.375%
30 year FHA 3.125% Up 0.375%
30 year FHA high-balance 3.625% Up 0.375%

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.

11-11-16

For those reading this who are Veteran’s thank you for your service and commitment to our nation and defending our liberties. It is my hope that one of the first acts of our new President and Congress will be legislation to improve veteran’s benefits, particularly for healthcare—both physical and mental.

Have a great week,

Dennis

Weekly Rate & Market Update 11-4-16

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Question: I am going to purchase a condominium unit, what should I be looking at besides the actual unit?

Answer: Condos are a great option for many people. There is not as much upkeep as a home, if you like to travel you can generally shut the door and go, you are in a small community which allows for closer relationship with your condo neighborhood, and if you want to move to a detached single family residence later in life often your condo can become a nice investment option if you convert it to a rental.

There are many issues that can crop up with a condo purchase that you should be aware of before you commit to purchasing. Here some important issues you need to know about:

Is it really a condo? This comes up more often with “townhome” style units where buyers think they are purchasing a home, but the unit is really a condominium, however it happens the other way as well. What’s the difference and why does it matter?

The primary reason it matters is that rates are higher for condominiums than for single family residences if you have less than 25% down payment. The difference between a condo and a “townhome” is not the style of the complex but rather what you own. The simple way to tell the difference is that if you own the land under your unit the property is considered to be a PUD (Planned Urban Development) and priced as a single family residence for your mortgage. If you have an undivided interest in the entire complex, inclusive of land and buildings, then you own a condominium. In a condo you own the cabinets and counters in your kitchen, the Association owns the studs in the wall, the roof and the foundation.

Is there a lawsuit? This should be the first item checked off any list when looking at a condo complex. Not all lawsuits can prevent a new mortgage, but plenty of them can. If the Homeowner’s Association (HOA) is suing an owner for breaking the rules that is not generally an issue. If the HOA is suing the builder for major defects that is an issue and can put the complex on the Do Not Lend list with Fannie Mae, Freddie Mac, FHA and most lenders. With all the new condos put on the market through development and building conversions throughout Southern California in the past decade or so there has been a corresponding increase in lawsuits for building defects. This past week we had a client looking to purchase in one of the newer buildings in downtown Long Beach that has a major lawsuit against the developer for issues with the roofs, balconies, plumbing, electrical and other structural issues. The project is on the “Denied” list with Fannie and Freddie, meaning no loans will be made regardless of down payment using conventional financing.

Why does this matter to you as a buyer? Besides not being able to get a loan the price of the units will begin to drop precipitously since buyers can only buy with all cash or with subprime loans—if even those. The lack of availability of mortgages for the complex severely limits the market for buyers, lack of demand leads to lower prices.

Is the HOA solvent? Part of your purchase contract allows you to review the financial status of the Homeowner’s Association. This is important and many buyers do not undergo this review. Often we are required to review the financial statements of HOAs if prompted to do so by Fannie, Freddie or the lender, but not always.

What do you look for when reviewing the financials? Several items:

What is the delinquency rate of HOA dues? If there is a sizeable amount of unpaid dues that can lead to higher dues in the future for all owners.

Are there sufficient reserves? Does the HOA budget for future capital improvement/replacement projects? How old is the roof and will there be funds available for when will it need to be replaced? Are the funds for future upkeep and maintenance for painting, re-stuccoing, landscape and hardscape? A condo complex is like a giant house, and like a house it needs constant repairs and maintenance. Does the HOA set aside sufficient funds for necessary capital improvement projects?

Is there plan for future increases in HOA dues? Which leads to when was the last increase in dues? If dues are increased on a regular, annual, basis what is the reason? Poor budgeting? Increase in service fees for management, insurances, vendors? This can be the sign of a disengaged board that rubber stamps every suggestion from the company that manages the HOA (it is rare that condo associations manage their association themselves, generally they contract with a professional management company).

What is the owner occupancy rate? Does the complex have a significant number of units that are rentals? This may impact the ability to obtain financing, as well may affect the overall quality of life in the complex and future market values. Higher owner occupied neighborhoods (and a condominium complex is its own neighborhood) are shown to have lower public safety issues, cleaner environments, easier dispute resolution, and longer term residence which leads to stability. If there is a large number of rental units in a complex there is greater risk to units being abandoned if market declines, or landlords selling below market to rid themselves of the investment—thereby setting comparable sale prices for appraisals.

Does one entity own a significant number of units? This goes along with the prior question of owner occupancy. Single entity ownership is relevant in a few ways. First, many lenders will not loan in a complex if one person or company (other than developer when selling units for first time) owns 10% or more of a complex. Second, that one entity can control the market for the complex. If one person owns six of fourteen units and puts them all on the market at the same time it will depress values. As well if the entity is having financial issues and does not pay HOA dues or all its holdings go to foreclosure will have negative impact on the complex.

How many units are for sale? If a significant number of units are for sale at the same time, other than initial offering, this can be a signal that something is not right in the complex. It could be issues with the governing board, the management company, an owner that is constantly causing issues for everyone else, or an environmental issue such as noise. Also if there has been a large turnover in ownership in the recent past that may be a warning sign; have your agent provide you with sales in the complex over the past twelve to eighteen months.

How do the HOA dues compare? For a complex of its size and amenities provided are the HOA dues significantly higher or lower than comparable complexes in the immediate area? Too low can signify either incredible management or perhaps mismanagement not collecting enough which could lead to future assessment increases. Too high can signify lack of reserves and planning in the past that has led to increase in dues to bring the financial health of the Association back to normal.

How onerous are the CC&R’s? Covenants, Conditions and Restrictions are the governing rules of the Homeowner’s Association. Are there some items in the CC&R’s that bother you? If so don’t buy thinking you can change them as it is very difficult to get an Association to vote to change its rules. Are pets allowed but the rule says something like “dogs are permitted but total weight cannot exceed 45 pounds?” A Yorkshire Terrier averages seven pounds, can someone have six Yorkies because combined they do not exceed 45 pounds? Sounds ridiculous but such is the basis of potential lawsuits. Are visitors only allowed to park in guest spaces for two hours, or is there no limit? The former may be good if you have a relative visiting that you can only take for two hours, the latter allows for the guy down the hall to have his partner to become a permanent resident without paying for a parking sticker.

There are many more factors to consider when purchasing a condo than a single family detached residence. Primarily because once you purchase a unit you become a business partner with every other owner in the complex. You are tied to them financially on both a short and long term basis. Before making a condo your home do your due diligence to check out the entire project and your business partners to ensure you enjoy all aspects of your new home not just the spiffy kitchen and great location.

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

Lots and lots of economic data this week. Leading the way was Personal Income, Consumer Spending and Price Index numbers for September were released Monday. Income was up slightly, but not significantly—neutral for rates. Spending was up pretty strong at 0.5% from August, mostly from auto sales—pushes rates higher. The Price Index continues to be stagnant at 1.7% year over year growth—positive for lower rates. Overall the news was shrugged off by investors as it did nothing to increase or decrease future rate predictions.

Fed does nothing. The minutes from the most recent Open Market Committee meeting for the Federal Reserve were released and to the surprise of no one the decision was to not increase the Fed Funds Rate. The language in the release gave no indication of a rate move in December, but the overwhelming consensus (80%) is that there will be a rate hike in December by the Fed. Unknown is how much will the hike be? News was market neutral.

New jobs not inspiring. This morning the Labor Department released employment data for October and the numbers did not inspire confidence of a strong labor market. Only 161,000 total jobs were added in the economy, of which only 142,000 were in the private sector. Considering between deaths and people coming of working age is around 193,000 per month there was a deficit of 32,000 jobs created versus needed. A bright spot was an increase in hourly earnings of 0.4% from September, though the average workweek has been stuck at 34.4 hours for months—keep in mind the definition of full time under the Affordable Care Act that mandates health benefits is 30 hours per week. The headline number is always the unemployment rate which declined from 5.0% to 4.9%, however this is mostly due to contraction of those looking for employment. Also dropping was the labor participation rate to 62.8%. Overall the news is positive for lower mortgage rates.

Rates for Friday November 4, 2016: Rates drift sideways for another week. There is quite a bit of nervousness in the markets this week as investors look to next week. The week is short (Veteran’s Day on Friday) which always leads to choppy trading, add to the short week the elections on Tuesday and there is a lot of unknown. Pouring through different analysis of “what if X wins..or Y wins…” the consensus seems to be the initial market reactions will be more muted if Clinton wins than if Trump wins under the “better the devil you know…” theory on Wall Street. If this is the case then the don’t-hold-me-to-it prediction for Wednesday is that rates will either remain stable or drop since if the “devil you don’t know wins” and spooks investors a lot then money in these situations typically flows out of stocks and into bonds, which leads to lower rates. However this is such a unique election cycle we could see everyone sell everything and go to cash and just sit on it. Volatility means one thing: lock when you can.

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 may have no points and credit towards closing costs, changes daily.

11-4-16

Wednesday night’s Game 7 of the World Series had 40 million viewers, the most for a baseball game since Game 7 of the 1991 Series (perhaps the greatest Series ever with five one run games including the 1-0 extra inning final game). This puts Super Bowl viewing in perspective as Game 7 was the most watched TV show this year since the Super Bowl—which had 112 million viewers.

While Game 7 wasn’t great from a pure baseball standpoint it was outstanding for drama and excitement. Congrats to the Cubs who were able to give their fans a long, long, long awaited Championship. Unfortunately for the Indians they now replace the Cubs as longest suffering team in the four major sports without a championship…

Have a great week,

Dennis

Weekly Rate & Update 10-28-16

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Question: Is it worth it for us to try to increase our credit score?

Answer: Probably.

After the mortgage and housing market meltdowns one of the first adjustments made by Fannie Mae and Freddie Mac was to increase the number of tiers in pricing adjustments for credit scores.

What do I mean by “tiers in pricing adjustments?”

As part of our series on how mortgages work in August/September we covered the teeter-totter relationship between rates and costs and also tiered pricing. Different factors in a loan have different prices for the same rate. Credit score pricing has more tiers than other factors, and the higher your score the lower the price for the same rate.

There are seven tiers for pricing based on the borrower’s credit score from low score of 620 to scores that are 740 or higher. The tiers have a change in price every 20 points and if you can increase your score enough you could move two or more tiers—which depending on other factors could lower your rate up to 0.25%.

So it can definitely benefit you to increase your credit score if it can lower your interest rate. The next question is, how can I increase my score?

There are several factors that go into your credit score and depending on what is impacting your score it may be possible to increase your credit score in a short period of time. For many borrowers paying down and/or closing some credit accounts is the fastest way to increase your score, for others getting creditors reporting delinquent payments to remove those delinquencies from their credit reporting.

Another question you may ask is if the time it may take you to increase your score is worth the risk of losing the home you want to purchase that is on the market now or perhaps interest rates going resulting in the same, or possibly worse, rate you could get today? The answer depends on the potential score increase, the benefit in terms of price and or rate to you and the time it would take to have the changes made to your credit report needed to obtain the score you are shooting for.

Every situation is different and just paying off some cards or closing others may not impact your score or impact it enough to better your cost or rate. When I run a credit report for clients I analyze the report and the scores and provide some guidance on if it is possible to easily increase scores and what it may take for the scores to increase.

When buying or refinancing your home your credit score is a very important element to the rate and cost of your loan, if it makes sense to increase your score we’ll help you.

[email protected]

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

This morning the very important 3rd quarter Gross Domestic Product data was released. The report announced 2.9% annualized growth in the 3rd quarter GDP, more than double the 2nd quarter’s 1.4% growth. It was the biggest 3rd quarter growth in two years. Strength was in personal consumption and exports. The report should be a negative for mortgage rates but so far investors have shrugged off the positive news and Mortgage Backed Securities (MBS, which determine interest rates) are flat following the new.

Rates for Friday October 28, 2016: Some upward pressure on rates this week that flexed rates a bit but at the end of the week all of our rates are the same as last Friday. The speculation amongst the investor set is that when the Fed raises rates in December (notice: when not if) it will be a 0.5% bump instead of the previously anticipated 0.25% increase in the Fed Funds rate. I remind you that increases in the Fed rate do not directly correlate to increases in mortgage rates as those are solely dependent on the activity in the Mortgage Back Securities markets which track closely to the government bond markets. Lock ‘em when you got ‘em.

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 may have no points and credit towards closing costs, changes daily.

10-28-16

Historic times in the upper Midwest with the Cubs and Indians going at it for the World Series. I have no dog in the fight and hope mainly for seven really close games—so far oh for two in that regard. As well that games are decided by fantastic plays by the players and not the result of an error or blown call from the umps. Whoever wins it will be fun to see the winning city release decades, or for Cubbies fans century plus, of pent up excitement about winning the oldest championship in American sports.

Have fun on Monday night passing out your candy to the little super heroes, princesses and pop stars!

Dennis

Weekly Rate & Market Update 10-21-16

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Question: What impact will the election have on interest rates?

Answer: Here I go grabbing the third rail of marketing…never discuss politics nor religion…

Some background, I have a Bachelor of Arts degree in Economics and Political Studies and have been active in continuing my education in both disciplines since receiving my degree in 1984. A bit of a news junkie and not afraid to be labeled an econ nerd, I have always read books, articles, columns, stories on economics and politics through history and modern times. Not trying suggest I am an expert, however I have a pretty good breadth of knowledge of economics and politics and how they interact.

The questionable bona fides established, let’s answer the question I have been asked several times over the current election cycle—which started in 2012 it seems.

When people ask about “the election” invariably they mean the Presidential election, so I will address the question as, “what impact will either a Clinton or Trump victory have on interest rates?”

The short answer is: no matter who is elected the impact on interest rates will be about the same, that is to say negligible. There are many charts available that show one party or the other has bigger impact on stock markets, and like with any statistics it depends on what years are used in the study, including what years are omitted. In looking at the charts with different starting points my opinion is that Congress has a greater impact on interest rates than Presidents. Because of this whoever is sworn in as our 45th President on January 20th will most likely have less impact than those sworn into office on Capitol Hill as members of the 115th Congress, and even more impactful will be those sworn into the House rather than those in the Senate.

Congress controls the purse of America, is responsible for the budget and approving expenditures. How the federal government spends tax revenues, what it decides to tax and at what rates and how much it borrows has significantly more impact on interest rates than appointments of judges, ambassadors and members of cabinet members.

Presidential policy can have an impact on America’s purse as a result of working with or against Congress, i.e. approving spending bills or vetoing them, but per the Constitution the President does not initiate any legislation.

What will have an impact on interest rates during the term of our 45th President is the overall economy, which is already on a course that neither Clinton nor Trump will have any impact on for at minimum six to seven months after one or the other is sworn in—and then only as a result of being able to get Congress to pass whatever spending and/or tax bills they support and have presented by amicable members of the House.

As I look at the economy it is my opinion, shared by some and disagreed with by others, that our next President is inheriting an economy that will likely go into recession by late spring or early summer 2017. Regular readers of the Weekly Rate & Market Update who follow the section on economic data know that our economy has had very anemic growth since the recession ended in June 2009. Although how anemic is hard to gauge since the way the Bureau of Economic Analysis (BEA) calculates GDP has undergone two major revisions in the past few years, once in 2013 and again in 2015. After each revision by the BEA past GDP calculations were revised upward.
As with the pre-recession economy much of the growth and strength has been due to a strong housing market that has seen sales and prices climb for the past several years. If/when the housing market cools, and how cool it gets, will impact economic growth and would aid, abet or help start a recession.

While anemic economic growth and job growth that has not had corresponding increase in wages and salaries as increasing percentage of jobs added to the economy are lower wage and hours, have had economy hovering just above zero growth for some time, those factors are not the only reasons we will see our economy go into a recession. The global economy has been struggling for quite a while. Interest rates for many of our trading partners are hovering around zero, and in the case of some countries rates are below zero—you have to pay the bank to hold your money.

America has never entered into a recession due to outside economic pressures, proud to say our recessions are Made In America. That may/will not be the case with our next recession as the challenges facing Europe and China, yes China which has been reporting suspect economic figures for many years, could start a global recession and drag the United States along.

As you consider a recession remember it is defined as two or more quarters with negative growth, i.e. contraction, in the economy. Because our economy is not flying along my opinion of a pending recession sometime in early 2017 is that it will not be very deep, certainly not like our last recession, and depending on foreign market should not last very long. The impact of the recession on interest rates will be that they do not change very much, meaning there is not a lot of room for them to drop, but also will keep a lid on rate increases through 2017 and into 2018.

So home loan mortgage rate in the near future be decided by Clinton or Trump? Most likely not.

Sidebar: While national elections consume electronic, print and social media, most people are less impacted by elections the further they are from your own community—despite the attention they receive. Local elections for city councils and mayor have a much greater impact on your daily life than who will reside in the White House.

Who fixes the sidewalk in front of your house? Determines cost to park in business and shopping districts? Manages animal control? Provides the police to protect your neighborhood and fire department to protect your home and office? Sets fees for business licenses and zones what type of commerce can happen where? Not the President, member of Congress nor Governor.

As you move up the level of elected officials from city to county to state to federal the impact on your daily life declines proportionally, so while who is our President is important to our nation, who is your local representative is even more important to your daily quality of life. And as a bonus you are much more likely to be able to meet and know your local representatives.

This election has been nasty, and not just the campaigns from those seeking your vote, I have seen too many nasty and hurtful posts and comments on social media—many much worse than either candidate has uttered—that has resulted in broken friendships and mistrust that will linger for years. No matter who wins on November 8th the sun will rise on November 9th and every November 9th for several millennia. Every election since Jefferson and Adams has had ardent supporters bashing opponents—and in many elections far worse than what we have seen in this one—it is the beauty and curse of that First Amendment, and as we continued as the greatest nation on earth despite or because of who has been elected in those prior election so we shall continue after our 45th President is sworn in, and our 46th, 47th, 48th…. End sidebar

As you read and contemplate my thoughts on rates and the economy keep in mind the cliché about economics and economists who are hard to pin down due to the famous, “on the one hand…on the other hand…” There is always the “other hand” and contrary opinion and someone will be right and someone else wrong. I just happen to think my hand is right!

[email protected]

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

You paid a little more for goods and services in September than you did in August. The Consumer Price Index for September increased 0.3% for all goods and services, but only 0.1% when food and energy are stripped out of the index (called the “core” index, which is gauge Fed uses for inflation). Year over year CPI is up 1.5% and the core index has risen 2.2%. Despite the annual price increase of 1.5% the government has established the cost of living adjustment for 2017 for Social Security payments at 0.3%, which means for every $100 someone received in Social Secruity benefits in 2016 they will receive $100.30 (or $1003 for every $1000 received in 2016). The CPI news has neutral impact on mortgage rates, it was within the consensus range so investors were not surprised and validated the common wisdom that the Fed will not increase rates prior to the election at its meetings November 1st and 2nd.

Existing home sales remain strong. Mortgage rates are flat for the week with a bit more pressure for lower rates through the week than higher rates as Mortgage Backed Securities floated a bit higher, but not enough to have impact on lender rate sheets. Rates are fantastic and there is more risk if they break higher than any benefit from them going slightly lower, if you are risk averse (and you should be with your monthly housing payment) lock your rate when you can.

Rates for Friday October 21, 2016:

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 may have no points and credit towards closing costs, changes daily.

Note and adjustment to the chart for FHA, my data entry was corrected to show drop in FHA rate several weeks ago.

10-21-16

I know many readers enjoy this personal section of the Weekly Rate & Market Update and today I was intending to write about my love of fall and October in particular. However last night I learned through social media of the sudden passing of someone who as I reflected on how she entered my life what a tremendous impact she had on my life, the biggest impact in fact—and never knew it.

On Wednesday night Kathy Soule who has been an escrow officer in the local area for several decades passed away unexpected. She leaves behind her husband Ed and two daughters, Niki and Dani. I met Kathy through her husband who I worked with for a few years. Through Ed I was introduced not only to Kathy but also her the escrow company where she worked. The owner of that company, which today is Cardinal Escrow, Nancy Glass. Nancy was very active in the Greater Long Beach Association of Realtors and had bugged me to come help with a fundraiser. I went by her office after work one night to talk about the upcoming festival, she had convinced me to put on a Batman costume and entertain the kids, and pick up my costume. When I got there several people were making signs, and getting ready for the event. On the floor was a cute girl drawing a sign for hot dog sales. This boy said, “hey, nice hot dog!”

Those were the first words I spoke to Leslie McCormick, now Leslie Smith. Nancy introduced us and there began a rather lengthy attempt at courtship by yours truly and ultimately was successful as evidenced by our 22 plus years of marriage and our two beautiful daughters.

Fate, kismet, destiny, Providence, luck, happenstance, whatever the word, put the people in my path, and Leslie’s, so that we would meet and marry. Kathy was a critical part of that path for me.

Were it not for Kathy’s tremendous laugh, beautiful smile, at times mischievous look and especially her warm and welcoming personality I may not have been as likely to wanted to do business with her and missed the opportunity for Nancy to get me involved in a Batman costume and ultimately the pretty, smart and witty girl drawing a hot dog poster.

Prayers for Ed, Niki, Dani and all Kathy’s family and friends, a wonderfully fun and life-loving woman was tragically taken from them.

Have a great week,

Dennis

Weekly Rate & Market Update 10-14-16

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Question: I just received my tax bill and the amount is higher than last year. Why is it higher, I thought because of Proposition 13 my property taxes would always stay the same?

Answer: This is not an uncommon question this time of year because of confusion, or lack of knowledge, about Prop 13 and property taxes. Hopefully this will make it clear up any misunderstandings.

Proposition 13 was passed by California voters in 1978 to limit property tax increases. The impetus for the measure was rapidly increasing property tax bills that were forcing many California homeowners on fixed or stable incomes to sell their homes as they could not afford the every higher assessments every year. It set a base tax rate of 1% of the 1975 property value for all properties in 1978 and moving forward the rate would be 1% of the purchase or transfer price of all property.

One of the provisions of Prop 13 is that while your base assessment is determined by the purchase price of your home, there are some instances in which your annual tax may increase; most notably if you have remodeled your home and added square footage or major improvements.

If you did not undergo major improvements then your property taxes increased because Prop 13 included a provision that the base tax can increase every year by the lesser of the increase in the cost of living index for California or 2%, whichever is less.

In December last year the State Board of Equalization released the 2016-17 California Consumer Price Index to county assessors indicating that CCPI increased 1.525%. Since this is less than 2% your base tax bill shows a 1.525% increase from last year’s bill. (In numerical terms for every $1000 in property taxes you pay the increase is $12.50).

Almost no California property owners pay only 1% of assessed value because there are additional assessments and indebtedness voted in by the electorate or mandated by state and/or local legislatures, so your tax bill is probably more than 1.525% higher as that just applies to the base tax per state law. For instance in Long Beach our home has an additional 20% in assessments added to our tax bill from the base tax bill for such items as a bonds for the community college and K-12 school districts for building new structures and retrofitting older ones, water district assessments, parks, flood control and trauma services.

In the 1980’s voters passed Proposition 60 which enables homeowners over the age of 55 to transfer their current tax base to another home of equal or lesser value; this was in response to older Californians who were retiring and downsizing. Perhaps selling their home they bought for $50,000 in Huntington Beach and were able to sell for $400,000 and transfer their equity to purchase a home in a Leisure World retirement community for $200,000. Many seniors were balking at such a transition because their property tax would go up considerably at a time when they were transitioning to a fixed income. Since the passage of Prop 60 many counties have passed other measures that allow transfer of taxes between counties, thus enabling the explosion of retirement communities in the Inland Empire where builders could sell seniors on relocating to smaller, newer homes while retaining their lower tax bases.

California also allows parents to transfer the tax base on their primary residence to their children provided they will also retain it as their primary residence. If Mom and Dad have an annual tax bill of $2000 on the family homestead in Ventura and decide to sell the home to their son and daughter in-law for $600,000 gifting them equity for down payment, the kids can move in and retain the $2000 annual tax base instead of paying the higher base of $6000 per year.

There are many who complain that Prop 13 is unfair to those who do not own property, or to those who have purchased property in recent years compared to those who purchase decades ago and enjoy lower tax rates than their newer neighbors who enjoy the same benefits of those taxes. The alternative is to return to the time of ever higher property taxes and once again seeing older Californians or those on fixed incomes not be able to retain their properties due to being unable to afford their ever higher tax bills. There are many states that still have annual reassessments of property values and therefore higher taxes, however most if not all of these states have a very low or no income tax and sales taxes off-setting the increase in property taxes.

Understanding the political challenges of getting property owners to vote for ever increasing property taxes that could/would outpace their income in later years, those in favor of modifying Prop 13 to allow for higher property taxes when values increase are starting to focus on commercial property owners. This approach seems appealing because older California homeowners would not be impacted, however the hundreds of thousands of small and medium size businesses, most family owned, would be dramatically impacted as most commercial leases are “triple net” where the business tenant pays the property taxes. There are some loopholes in the tax that could be closed to increase some of the taxes being paid on commercial properties, particularly extremely high value buildings whose owners can transfer using some of the loopholes to considerably undervalue property taxes and reassessment. However a blanket change for all commercial property would have a deleterious impact on the state economy.

With the highest income tax, sales tax and gas tax California should be more than able to afford the stability Prop 13 brings homeowners, the problem is not lack of revenue but lack of spending control the past several decades in Sacramento. Elimination of the provisions of Proposition 13 will harm property values, harm elderly and fixed income homeowners and ultimately reduce long term revenue to the state.

[email protected]

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

Fed fight! Well, not really a fight but some feistiness apparently at the Fed’s September meeting of the Open Market Committee—the folks who decide to raise the Fed Funds rate or not. The “hawks” (in favor of moving the rate up) argued that waiting to increase the rate will only mean that in the future there will have to be more and quicker hikes. The “doves” (low rates) argued that inflation is still too low. Not in the minutes was waiting until after the election to not appear to be trying to influence voters. The Fed minutes pretty much re-affirmed for everyone that one year after its hike in December 2015 the Fed will most likely/very probably hike again this December. The minutes caused a lot of huffing and puffing in the rate markets and created upward pressure on rates.

Some positive economic news today, in the release of data for the Producer Price Index and Retail Sales for September—both bounced up nicely from August. Wholesale prices, as measured by PPI, rose 0.3% for the month and are up 0.7% year over year providing a little bit of inflation for businesses that pleases the Fed. Retail sales after being negative in both July and August jumped 0.6% in September. Driving the increase was auto sales which climbed 1.1%. Both of the economic release support higher interest rates.

Rates for Friday October 14, 2016: Mortgage Backed Securities (MBS) came off the three day holiday lower than market close last Friday (lower prices = higher rates) and there was no data or news to push MBS prices higher (lower rates). With conforming fixed rate under pressure at the end of last week the drop to start the week was enough to push the rate higher after a stable three weeks. At this point the high-balance conforming rate is maintaining the same rate it has had since July 22nd. With Fed rate hikes imminent the market will get squirrely (technical term) and now is not the time to try to beat the market—lock your rate when you can.

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

10-14-16

The Update is a bit later this Friday as I spent part of the day at a wonderful award luncheon put on my our local Rotary district. Clubs from our district (parts of LA and Orange Counties) nominated individuals, companies and organizations who have made significant contributions to their local communities. With all of the negative comments, posts, memes, editorials, etc, etc we have been subject to it was refreshing to be reminded that what happens in Washington is far less important to our lives and our communities than the everyday efforts of “normal” citizens and companies that just want to help make things better.

I know a lot of you on this email list participate in many ways to better your/our communities, not for gratitude or accolades, but just because you want to help. That was what we celebrated today. While some got certificates and applause, my fellow Rotarians and I were really celebrating everyone who actively participates to make our little part of the city, state, country, world a better place. Thank you for all you do!

Have a great week,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .

Weekly Rate & Market Update 10-7-16

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Question: Where do you get your business?

Answer: It is interesting how often I will be asked the same question over a short period of time from different people, telling me the question has to be a question of the week.

This question, inquiring where my clients come from, has been asked three or four times over the past few weeks, including two inquiries after last week’s Weekly Rate and Market Update (even though I partially covered the answer). This is a quesiton I love to answer.

Where do I get new clients and my business?

From you.

Our business is 100% referral business. There are no Stratis Financial ads on the radio, inserts in your local paper, no sophisticated search engine optimization to drive traffic to our website or call centers calling you at dinner. The only marketing I do is the Weekly Rate and Market Update that will go to 614 people today.

Your repeat business is very important to us and we are very grateful you continue to trust us with your mortgage needs. Also greatly appreciated is the further demonstration of that trust when you are willing to pass our contact information along to a relative, friend, neighbor, co-worker or other trusted advisor—personally vouching for our service and integrity.

I was in a meeting last week with other professionals from different businesses and it was interesting because we had all been in our industries for over ten years and all of us were dependent completely on past clients and referrals for our business. Another commonality we had was that all of us routinely had clients call us for advice on matters outside our respective fields, primarily looking to us to refer professionals we trust that we could refer.

The next day I had lunch with a young professional who requested the meeting on the advice of his mentor. He asked where my business came from. I explained that my business is reliant on referrals and this weekly email is my marketing. “Don’t you want to grow your business? Why aren’t you using the internet to generate leads?”

“Because our business model is built on trust that begins with a referral and continues as we work with our clients to understand their needs and abilities. We provide outstanding service backed with experience and results. We found many years ago that leads from the internet or other services generally do not care about what we deliver and we tended to spend a lot of time and resources for clients who typically went elsewhere.”

What is the source of my business? The trust you show in us when you tell someone who needs mortgage advice, “Call Dennis, he’s my mortgage guy and he’ll help you out.”

Thank you for that trust and being our primary, and sole, marketing agent(s)!

[email protected]

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

First Friday, everyone knows what that means! Well maybe everyone….the first Friday of the month brings us the very important employment data for the prior month. Today’s Labor Department report showed that the economy added 156,000 jobs in September. Not a great number, not a horrible number. Average earnings were up 0.2% for the month and he workweek increased 0.1 hours to 34.4 per worker (that is an increase of 6 minutes per worker by the way). The manufacturing sector continues to shed jobs, after dropping 16,000 workers in August an additional 13,000 losses occurred in September. Retail sales and temporary employment both showed strength—perhaps an indication that stores and businesses are expecting a robust Christmas shopping season. Overall the news bailed out the Fed from having to consider a pre-election rate hike. The news does not increase or decrease the likelihood of a Fed increase in December. The employment data today is neutral for interest rates to slightly friendly.

Rates for Friday October 7, 2016: Since reaching a short term high last Tuesday September 27th, Mortgage Backed Securities (MBS) have been declining (lower MBS prices mean higher rates). The slide halted today and depending on how markets open on Monday the brakes put on today could signify the bottom of the range—if so our rates will remain stable into the future. Despite the slide in MBS prices rates hang on this Friday for no change from last week.

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

10-7-16

Boomer!

Waiting for the reply of Sooner!

Born in Oklahoma and raised by an Okie dedicated to Oklahoma Sooner football I have followed in my dad’s path as a lifelong Sooner fan. This week is the Red River Rivalry where the universally beloved Sooners will play on the road at the “neutral” field in Dallas against the not universally beloved Longhorns of Texas. The cows lead the Sooners all time in the series 61-44-5 and won last year’s game. Tomorrow morning will find me settled into the couch watching the game and hopefully my Sooners destroying Texas and enabling me to enjoy some barbecued beef for dinner. What college football rivalry do you enjoy most? Does it have you cheering, yelling and mumbling even when watching by yourself?

Have a great week, Boomer,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .

Weekly Rate & Market Update 9-30-16

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Question: Why would someone use an app for something as important as a mortgage?

Answer: Great question from a 9th grader sitting on the couch when an ad came on the television. It was prefaced with, “when I first saw this ad I thought, ‘this company could put dad out of business. Then I thought, ‘why would someone use an app for something as important as mortgage?’”

There is most likely some environmental bias having spent her 14 years listening to Dad talk about mortgages, but it is still a great question, why would someone entrust something as important as their most expensive financial obligation to a computer program and some unknown person or people perhaps in some foreign company?

The personal computer revolution has commoditized many segments of the economy and combined with the advent of big box stores has brought to the forefront for most consumers the instinct to get something for less. But what have we sacrificed in doing so? Quality? Service? Accountability?

Airline tickets, groceries, books, ratchet sets, cabinet fixtures, beds and more can be purchased and delivered to you without ever speaking to anyone or actually seeing or touching the product—in the case of books without ever touching the book. Even medical and legal advice can be had with the click of a mouse. And of course mortgages are also available in the click-click economy.

But is diagnosing a skin rash that could be skin cancer, setting up a trust for your estate or financing your home on a similar level of importance as getting a flight to and a hotel in Nashville or a set of high ball glasses for your brother’s birthday?

When someone uses an on-line app or large call center for their mortgage this is what they miss:

Personal service: When we speak with clients about their mortgage, whether purchasing a first home, investment property, refinancing or whatever their need is, we engage in a conversation that is more than how much do you owe, how much do you make. What is the purpose of the mortgage? What are your long term plans? Would it make sense to pay bit more and get a lower rate or increase your payment a little and save on costs? Are there special considerations regarding your income, employment, credit, source of funds to close, property with unpermitted rooms? In essence much like a doctor reviews your medical history during an examination before completing a diagnosis and suggesting treatment a good mortgage professional will also engage in a thorough examination before presenting mortgage options. My Samsung Galaxy cannot do that.

Accountability: You can touch us, come into our office and shake hands, have a cup of coffee or other beverage and talk about what you need, or what problems may or have cropped up. Should something go wrong or need immediate attention you have our phone numbers that are direct dial and not through a myriad of push 1 push 5 push 3 then hold. There is only one point person for your mortgage and it is the same person you initially spoke to when discussing ability to qualify and mortgage options through the application and collection of supporting items through ordering and signing loan documents through closing and for any questions you may have for as long as you need after your loan is funded—be it five days or five years. Every step of the way we are accountable to you for ensuring you are informed on what is happening and why, when the current step in the process will be completed and when the next is expected to start and be completed. Because our business is solely referral based we go the extra step to make sure everything occurs as planned with you, we know if it doesn’t then we not only failed you but also failed to possibly secure future business.

Knowledge: Yesterday was the 17th anniversary of Stratis Financial, next year will mark 30 years since I received my license from the Department of Real Estate and began in the mortgage industry (sidebar real estate licenses are chronological, mine is 00966315, today licenses being issued are above 01999980—that means over one million licenses have been issued since I received mine). Our company has hundreds of years of experience in the industry between our originators and staff. We have funded thousands of loans at Stratis Financial and tens of thousands of loans if counting the totality of our careers. There are very few circumstances we have not encountered before, and if we do come across an issue or problem we personally have not seen the depth of experience we can draw upon for solutions is as deep as any mortgage company in the region, much state or country.

Value: I tell clients you can get on the phone or internet and always find someone marketing a “cheaper” loan. But there is a big gap between marketing and closing, and between closing when and how intended and just getting it done when it gets done. Do some companies have lower rates, fees, costs? Most likely. Are we competitive with the market? Absolutely. And when you add in the support, service, ability to minimize the amount of time and resources you need to expend to get your loan closed then we are perhaps the best value in the market. Not saying we are comparable in regards to the big picture of life, but your shelter and biggest financial commitment is a pretty big deal, that said would your shop the cost of doctors and hospitals if you or someone in your family needed an very delicate operation? Most likely not. The advantage we provide is our ability is akin to the top surgeons in any field but the rates and costs we provide are closer to your family doctor than the best surgeon. (That’s probably a poor analogy but I hope you get my meaning.)

Relationship: As mentioned above, once we fund your loan you are not a file number, you are a client for as long as you choose to be one. We have clients that we first met decades ago, worked together on several home purchase and refinances and now working with their children on their mortgages. This is because we care, if we did not care all of our transactions would be one and done and looking for the next one—in which case we would be spending significant money on media advertising, on-line presence and marketing to capture that one phone call or on-line application for another client we will never speak to again. That is not us. You will not hear our ads on the radio or television. You will not see pop up ads when you go on-line. You will not receive telemarketing calls. Because the business we want, the business we get and the business we do very, very well is referred to us from clients and business partners. And they refer us because we are very good at what we do, we provide tremendous service and personalize that service and we succeed at funding the mortgages you need.

Why use an app? I use one to get Dodger tickets, but when it comes to my home and biggest check I write every month I’d rather have someone I trust to speak with and work with through the process.

[email protected]

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

A bit of positive news for the economy this week as the second revision for 2nd quarter Gross Domestic Product up GDP growth to 1.4% from its prior estimate of 1.1% and the estimate for 3rd quarter growth is 2.5-3%. The news is slightly mortgage rate unfriendly, especially if the estimates for 3rd quarter growth are accurate.

Not as positive was data released today for personal income and spending. Since consumer spending is 65-70% of our economy future economic growth is very dependent on people buying goods and services, and to do that they need to earn money. Personal income in August just 0.2% in August and spending for the month was flat, as in 0.0% growth. Prices inched up 0.2%, negating income comes and year over year prices are up 1.0%, though the core price index (strip out food and energy) rose to 1.7% annualized approaching the Fed’s 2.0% inflation target. The news is mostly mortgage rate friendly.

Rates for Friday September 30, 2016: Rates remain unchanged from last week and we remain in our tight little band where rates have been for several months. Technical factors are pointing to a possible drop in Mortgage Backed Security prices in the near future which could lead to higher rates. My advice remains to lock in your mortgage rate when you can through the end of your escrow period.

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

9-30-16

Tomorrow kicks off the best month of the year for sports fans as all four major sports are underway. Baseball playoffs and World Series, professional and college football seasons enter there midpoints, the NHL and NBA start their seasons. Before cable my friends and I would spend many a weekend with two or three televisions stacked up in a dorm room or someone’s apartment constantly changing which game was on the color t.v. and moving antennas to get clearer pictures. I still wonder why our grades tended to dip a bit in October….

Summer is still clinging to us this weekend, I am ready for it to let go and give us the cool, crisp mornings and afternoons.

Have a great week,

Dennis

Missed a Weekly Rate & Market Update? You can catch up as all the updates are posted on my website at http://www.denniscsmith.com/MyBlog .

Weekly Rate & Market Update 9-23-16

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Question: Why shouldn’t I get 20% discount from retailer to apply for a credit card?

Answer: This question came up in a backdoor sort of manner with a client who has a blemish on his credit report from a credit card company that mismanaged his account. The reason he had the account was he received a discount from a retailer when he applied for the card as he was paying for his purchase.

Stores are starting to put up Christmas decorations (remember when they waited for Thanksgiving, and then they at least waited until after Halloween?) and that means many of us will be wandering the malls looking for that perfect reindeer and Santa sweater for Aunt Nellie and the moose slippers for Uncle Burt. Once we reach the register the dutifully trained sales associates will inquire if we want 10% off our purchase by applying for a credit card, with possible additional incentives of higher discounts for first five purchases, etc.

Instincts tell most people to say “sure!” because who doesn’t want to save 10% off?

My advice has always been, and will continue to be, say no to the new card. This is for several reasons.

First, most of the sales associates you see in stores at the holidays are temporary hires. While many of them are outstanding people, some are not as upstanding and it is easy for them to take your personal information you are giving them for the credit card application to use on their own in the future—social security number, address, driver’s license number, etc. It happens and you do not want to be a victim of identity theft.

Second, if you charge your items on your new card at point of purchase the bill will come in several weeks with a nice option to make the minimum payment due, or make no payment until after the holidays.

When the bill come you think, “Hey, it’s the holidays, I’ll make the minimum payment now and catch up and payoff the remainder of the balance in January.” Next thing you know you carried the balance until you receive you tax refunds in April, while paying 21% interest on the items you saved 10% on at the register.

Third, the inquiries that have the biggest impact on your credit score are inquiries for credit cards and department store cards—auto loan and mortgage inquiries have no to minimal impact. That 10% savings on some sweaters, scented candles and slippers may knock down your credit score below a threshold that kicks in a higher interest rate on your new mortgage or auto loan. That higher interest rate over time can cost you more over time than the 10% savings on your purchase.

Finally, 10% sounds like a lot but if you break it down the savings is often not that great. I have stood behind people at the register getting their 10% off of a total bill of $80, saving $8.00. How much are you really saving?

Faithful readers of the Weekly Rate & Market Update know that retail sales have been a bit sluggish this year, up only about 1.5% in 2016 and about the same form August 2015 to August of this year. Since Christmas is approximately 20% of most retailers sales for the years they need to move inventory between now and the end of the year. With retail sales having been somewhat flat it stands to reason that there could be some significant discounts this holiday season. Take advantage of the discounts being offered on the shelves and do not apply for that point of purchase credit card to save a few dollars more.

And didn’t you get Uncle Burt moose slippers last year, maybe a Rams sweatshirt this year?

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

Weeks were we get any Fed news any other economic news is usually ignored until the Fed speaks. This week was no exception. There was a data release however that is important to the mortgage and real estate industries and that was the existing home sale figures for August released by the National Association of Realtors. For the second month in a row sales of existing home sales dropped nationally. The slowdown is primarily caused by higher prices and limited inventory. Existing, or previously owned, home sales are about 90% of the market nationally and earlier this year reached the highest since 2007. Sales are up 0.8% from last August and the median price is 5.1% higher nationally. In the Los Angeles Metropolitan Area sales are up 3.8% from July and 6.2% from August 2015 with the median price on a single family residence up to $473,950—6.1% higher than last August. Overall the news is mortgage rate neutral. Home sales have driven the economy the last few years and a slowdown could have far reaching impact on the economy but since the slowdown appears to be price and inventory driven investors ignored the data.

Not ignored by investors is any word from the Federal Reserve. On Wednesday the Federal Reserve Open Market Committee announced it was leaving its Fed Funds Rate unchanged for now. The vote for no change has narrowed however with the vote this week being 7-3 as opposed to prior meetings when the vote was 9-1. The statement in the release was somewhat mixed with most of the economic assessment the same as July. The statement gives no real reason for the Fed to increase rates in December but the consensus is growing that there will be a rate hike at that time. The immediate reaction was a bump in Mortgage Backed Security (MBS) prices causing a bit of a dip in rates, but not much as MBS trading has maintained its tight range we have seen for the past few months.

Rates for Friday September 23, 2016: Conforming rate slipped back down after spending the last two weeks above its seven week bottom on the Fed speak, while high balance has remained flat for ten consecutive Fridays. I continue my advice of locking through your escrow period to protect these incredibly low rates from any sudden increases.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.25% Down 0.25%
30 year high-balance conforming 3.50% Flat
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.

9-23-16

My favorite season is upon us. I love autumn with the cooler days and nights but still plenty of sunny days. Having grown up in different regions that experienced all four seasons, unlike Southern California where we have summer and not summer, I have always enjoyed Fall and all that comes with it, from the leaves and weather turning to the start of football season and the baseball playoffs. I am hoping this autumn we have many crisp days and nights!

Have a great week,

Dennis