Weekly Rate & Market Update 5-20-16

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Question of the week: Can my mom payoff my car so I qualify for a mortgage?

Answer: Yes. But…..

It is not uncommon for us to have a client pay down or off a debt in order to qualify for the loan to purchase their new home. For installment loans, like auto loans, the entire debt does not always need to be paid off in full. For most loan programs if the debt is paid down to less than ten remaining payments the payment is not counted for qualifying. I.e. if you owe $10,000 on your car and the payment is $500 per month if you pay the loan down to $5000 then we will not count the $500 per month when qualifying.

Can you mom pay down this obligation for you?

Yes she can. If she does there are several steps that will have to be followed in order to ensure we get loan approval and the transaction does not go sideways.

When mom either pays your auto lender or gives you the funds to pay down/off the loan we will consider that a gift and the underwriting policies for gift funds will have to be followed.

Steps for gift funds are as follows:

• Prove mom has the money to make the gift with a copy of her statement from the account she will use to make the gift.

• Prove the money has left mom’s account, either with copy of cancelled check or transaction statement from bank.

• Prove the money was deposited in your account, or if she makes check directly to auto lender that the balance has decreased the same amount as verified leaving her account.

That takes care of the gift, now we need to verify the balance on the auto loan is below the ten month payment threshold. To do this we will have our credit company contact the lender to verify the balance and the credit company will issue us a supplemental report showing the reduced balance.

If this is possible scenario for you my suggestion is the old-fashioned KISS process (Keep It Simple Simon):

• You get gift from your mother while we are processing the loan and we use steps above to have gift verified before we submit the loan.

• You do not send the funds to the auto lender to pay down/off the account.

• We submit the loan without the auto loan being paid down/off and indicate we will do so in escrow.

• Your closing costs for your new home purchase will include the funds needed to pay down/off the loan, so you send those funds to escrow along with the balance of funds needed to close for down payment and closing costs.
Once we run your credit report and have it in the file then we cannot omit a payment due to an account being paid down/off unless we verify the source of the funds for the balance reduction. So if mom wants to be helpful make sure she knows not only how grateful you are but also that there are guidelines we have to follow so the loan approval process does not get fouled up due to her generosity.

If this is a possibility please have mom call me and I will happily go through the process and the reasons for the process to ensure her gift goes as intended: to help you buy your new home.

[email protected]

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

Consumer prices climbed in April with CPI posting a 0.4% gain from March, but strip out a 10% bump in gasoline prices and food costs and consumers spent only 0.2% more in the month. The “core” inflation number is up only 2.1% from April 2015, pretty much at the Fed’s target line of 2% price increases. The news is somewhat mortgage rate friendly and should cool off the Fed rate hawks a little bit.

Yakety-yak. I couldn’t help but think of the old Coasters song when I read the Fed minutes from their April meeting. While sounding mostly biased towards hiking rates in June at their April meeting, the voting members of the Federal Open Market Committee don’t seem to have a lot of economic data domestically or globally to support a rate hike next month. Despite the data the refrain of yakety-yak from the board members gave a sharp bump to rates when the minutes were released on Wednesday.

Rates for Friday May 20, 2016: With the big move on the Fed news we saw rates bounce off the lows of last week. There is some upward pressure on rates as investors maneuver ahead of a possible hike next month from the Fed. We may see rates climb another 0.125% over the next few weeks. Or not if the Fed and investors look at the economic data. It is always a good idea to lock through your escrow period, those who took that advice last Friday are a bit better off than those who take it this Friday.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.50% Up 0.125%
30 year high-balance conforming 3.625% Up 0.125%
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

5-20-16

It used to be a technological problem was when your fax machine was out of that thermal paper that turned yellow after a month in a file, now we get issues like I have been battling where you computer turns on but won’t do anything….arghhh! That was how yesterday started and thankfully I use a desktop and laptop so have been able to continue to work, but how frustrating to learn from the IT Brainiac that whatever is messing the computer up can only be cured by wiping the disk drive and reloading everything. Another arghhh! Thankfully I have a great back up system for my files and most of our programs are cloud based so little interruption to my work flow. But still, arghhh!

Here’s hoping you have a technologically glitch free weekend, week, month, year, decade…

Have a great week,

Dennis

Weekly Rate & Market Update 5-13-16

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Question of the week: What is escrow?

Answer: Last week we answered why you need title insurance which helped a lot of families looking to purchase their first home. This week’s question is the follow up from a first time buyer who is uncertain as to the purpose of the escrow company.

Dictionary.com defines escrow as “a contract, deed, bond, or other written agreement deposited with a third person, by whom it is to be delivered to the grantee or promisee on the fulfillment of some condition.”

By this definition escrow is a third person with whom a contract is deposited. For a contract to be valid it needs two parties, so part of the contract is that both parties agree who will be the escrow, the holder of their contract.

In real estate, escrow is a third party that buyer and seller, or in the case of a refinance the borrower and the lender, use to transact funds from one party to the next; escrow is also referred to as the settlement agent. Given instructions agreed to by both parties, the escrow holder agrees to accept funds from the buyer, and the buyer’s lender if necessary, and then after paying costs for other services involved in the transaction, deliver the funds to the seller once all promises are fulfilled in exchange for a grant deed from the seller that is delivered to the buyer.

Escrow is neutral and has no agency contract with the buyer or seller, its agency is with the transaction. A simpler way to look at this is that the Smiths are selling their home to the Joneses. The Smiths are represented by Mary as their real estate agent and the Joneses are represented by Joe as their real estate agent. Once an agreement to price and terms is made an escrow account is opened with Sally at the escrow company, at that point Sally is the agent of the transaction representing the agreement the Smiths and the Joneses made.

If the Joneses wish to make a change to the agreement, say have $3000 credited to them to off-set some repair costs discovered during their home inspection, they notify Sally at the escrow company. Sally cannot just change the terms of the transaction, she first must get consent from the Smiths for the credit. Once both parties agree to any changes then Sally can amend the transaction.

Escrow plays a vital role in real estate transactions. Large sums of money flow through escrow companies on a daily basis for purchase and refinance transactions. Escrow is not only charged with making sure the initial instructions are followed but also that neither party is able to change the transaction without the consent of the other. At closing, escrow is responsible for disbursing funds to all the parties and services involved in the transaction, refunding overages to buyers or borrowers, pay fees to termite, title, home warranty, lender and themselves, payoff any liens currently on the property such as the seller’s mortgage or tax obligation and transmit the net proceeds to the seller. After the closing escrow provides a very detailed accounting of all funds received and disbursed to all parties.

Escrow companies and officers in California can be independent of any other affiliation or may be part of a title company or owned and operated by a real estate brokerage. If the escrow company for a purchase transaction is owned by the real estate broker representing the buyer or seller this must be disclosed to all parties.

Agents and lenders cannot require that a particular escrow company be used on any transaction; buyers and sellers have the opportunity to request a specific company if they choose, though customary in our marketplace the seller, or the seller’s agent, is given the choice of this service.
A good escrow officer and company is like a good umpire in a baseball game, you don’t always know how good they are until you get a bad one; thankfully the latter are very few and far between these days.

[email protected]

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

Slow week for economic data until today when retail sales and producer prices for April were released. Consumers were in a buying mood in April across all sectors as sales jumped 1.3% from March. The news is not positive for lower rates, but any pressure for higher rates on the monthly number is tempered somewhat by year over year sales are only up 3% from last April. The data gives a little support to a June rate hike from the Fed, but just a little.

Producer Prices remain slack, after going negative in prior month prices for wholesalers gained only 0.2% in April and are flat year over year. This is slightly positive for mortgage rates and tempers possibility for a Fed rate hike in June.

Rates for Friday May 13, 2016: Last week I mentioned that rates were soft and lenders were hanging on to some of the gains, this week they have let a little of the gains onto the rate sheet and conforming rate dips to its lowest level in four weeks, matching our twelve month low. High-balance conforming rates dip to lowest level in three years—yes three years to Friday May 3, 2013. Lock ‘em!

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Down 0.125%
30 year high-balance conforming 3.50% Down 0.125%
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

5-13-16

I spent my morning assisting Poly High School by proctoring one of the twenty something AP exams that Poly students have taken this year. Seeing the kids pouring through their testing packets gave me the shivers remembering my years of testing in high school and college. Very proud of our daughter’s school and all of the Long Beach Unified School District which has a very high percentage of students across all the high schools taking and passing the Advance Placement exams in a myriad of subjects. The cumulative savings in college costs for all the students with AP scores is very significant. As well, this year LBUSD has paid for the costs for every student who wishes to take the SAT so there is no financial barrier to taking this needed exam for college admittance.

When looking for a home remember the school district and the opportunities available for your children!

Have a great week,

Dennis

Weekly Rate & Market Update 5-6-16

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Question of the week: Why do I need title insurance?

Answer: This is a common question I have been asked my whole career and it has come up in a few conversations lately as more new home owners enter the market. Every buyer and seller in a real estate transaction sees charges for a title insurance policy, but few know what the purpose of the policy is, other that something gets insured. Is it necessary? Like all insurance, only if you need it and if you need it you will be very glad to have it; like auto or homeowner’s insurance.

Simply put title policies insure that things are what they seem. If you buy a home the title policy is insuring that you are the rightful owner, that no one can come along later and claim ownership of your property. If you are a lender making a loan secured by real property the title policy insures that your lien has a certain priority on title and that the only liens against title are documented and disclosed. Title insurance covers any title issues that occur up to the date deeds are recorded when the policy goes into effect, it does not cover any issues that occur after your transaction, those are covered by the next policy when you sell or refinance.

Throughout the years I have heard many complaints about the need for title insurance and the cost relative to what is being provided. A common complaint is that most title policies insure the work that title companies have performed before, so why charge so much. Another complaint is that title policy claims are so rare that the fee, or premium, should be lower. Like the excellent driver who has no tickets or accidents on his record, most homeowners, particularly in areas where the housing stock is older and has transferred several times over the years with each transaction requiring a new title policy, the purchaser of title insurance wonders why the expense for insurance that likely will never be used. Then the excellent driver with the perfect record gets in a bad accident caused by an uninsured driver; how glad is he that he has quality auto insurance and has kept up the premiums? Similarly the homeowner that suddenly faces a title challenge is glad to have paid the title premium at closing.

When title insurance companies do pay claims they are usually very hefty, think tens or hundreds of thousands of dollars. Because of this most of the revenue title insurance companies collect do not go to paying claims, in fact the industry average is that only about 5% of premium revenue goes to claims compared with approximately 70% for auto insurance. Title insurance companies spend the bulk of their premium revenue on loss prevention, i.e. research.

What if the owner of your current home purchased the property eight years ago from a seller who had a lien against the property that was recorded improperly in the county records and that lender stepped forward to collect on your home and possibly force the sale? What if you purchased your home from a seller with an IRS tax lien that was unpaid? How about an estate that sold a property that was later challenged by an heir as being improper and a judge agrees? Each of these could be a very legitimate claim against a title policy that could lead to a very large payout for the title company.

Even more challenging for title companies today are bank foreclosures and short-sales. Lenders that hold seconds are finding out that some properties are transferring without their consent to pay off and are coming back to the enforce their liens as unsatisfied. In such instances the title company that insured the sale and that all liens are satisfied would have to make restitution to the lien holder.

Title policy claims are rare because of the loss prevention that is performed by the title company during the escrow or settlement period to investigate the property, seller, liens against title and other factors that may lead to a claim down the road. Unfortunately you will not know if the title company, in particular the title officer, did a good job investigating the title until you find someone making a claim against your title. This is why it is critical to have a title officer who is experienced and knowledgeable. Over the years I have had perhaps three or four clients with a title claim. Easements for shared driveways, a piece of vacant land included in a sale that maybe wasn’t, power lines, even fences, have been issues that have cropped up.

Far more prevalent in recent years, especially when most sales were controlled by banks as sale was either foreclosure or short sale, are title issues that are discovered and corrected during escrow. Divorce settlement with a recalcitrant spouse, estate issues, private party second from a prior seller are other issues that pop up during escrow that require the title company to sort through the various filings and legal issues to determine if clear title can be conveyed or not. Your title policy premium pays for all the work done by the title company prior to closing so they can insure you are getting what you think you are getting, clear title. And if you don’t it is their obligation to pay to correct any claims that may arise later.

Are you absolutely certain there are no forgeries on deeds, unpaid liens, easements improperly recorded or illegal confiscations of title on your property?

Aren’t you glad you have title insurance?

[email protected]

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

It’s the first Friday of the month, which means not only is it the monthly First Friday’s event on Atlantic Avenue in the Bixby Knolls section of Long Beach, but more importantly for the rest of the nation the day when employment data is released. Following up on the disappointing GDP numbers from last week the Labor Department’s April jobs’ report did not meet expectations for job growth. Adding only 160,000 jobs nationwide combined with the lackluster growth in the 1st quarter, the economy could be defined as between moribund and sluggish. The jobs report was rate friendly.

Rates for Friday May 6, 2016: Rates are soft but not moving down as expected. We are in one of those markets where lenders are holding onto some of the market gains to hedge against a sudden change in the market. If the soft environment continues into next week we may see rates dip a bit more, “may” being key word. Market is also poised to see a bump in rates with investors taking profits and moving back into stocks when those markets rise again. Be cautious, lock when you can through the end of your escrow period.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.500% Flat
30 year high-balance conforming 3.625% 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

5-6-16

Milestone week in the Smith household as we managed to be alerted to a very good value on a used car that we purchased. Subsequently the new to the family vehicle was driven to school by our daughter, opening a new window of anxiousness for Dad as he watched her drive away. Our most important job as parents is to ensure our kids are able to become independent and support themselves and their families and contribute to their communities—driving and the independence it brings is pretty important in that process. Thankfully she is rule-follower and cautious in her time behind the wheel.

For those so inclined enjoy your mint juleps tomorrow!

Have a great week,

Dennis

Weekly Rate & Market Update 4-29-16

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Question of the week: If you run a credit report will it mess up my score?

Answer: This is a very common question for us to hear from clients during conversations for preapproving and determining options for refinances. Because there is so much misinformation regarding credit scores some people are over cautious for any credit report being pulled. As a result they are resistant to our obtaining all the necessary information we need to provide accurate and complete information.

My standard response is that I don’t have to pull a credit report if you do not want me to but I cannot provide a pre-approval letter for your offer until I do.

This can often lead to, “well I just got a free credit report on line, can you use that?”

No.

When we pull a credit report it is through a company that is approved with Fannie Mae, Freddie Mac and HUD. As a result the reports are accepted as accurate for showing the applicant’s credit history and outstanding obligations. The report we receive is a “tri-merge” report, meaning it combines reports from TransUnion, Equifax and Experian and provides the credit scores from all three bureaus.

When preapproving a loan, either for a purchase or refinance, we upload this credit report along with the other information from the application package to the Automated Underwriting System (AUS) for either Fannie Mae (Desktop Underwriter) or Freddie Mac (Loan Prospector). The report that is part of our file is then read by the AUS and used for determining if the loan can be approved as long as all the evidence for income, assets and property match the information we uploaded.

Without having our credit report in our system to upload into the AUS for Fannie or Freddie a loan cannot be preapproved, therefore I need to pull my own credit report for your file.

Regarding the impact on your credit scores, our inquiry has zero to minimal impact depending on your history. The models used to determine credit scores have built in a tolerance for multiple inquiries for different lenders in the mortgage and auto loan industries. This is because it is not unusual for someone looking to buy a car or home to speak with more than one lender and each will want to obtain their own credit report. As a result if you have spoken to two other lenders within the past week or two and then call me and rightly decide you want me to work with you on your new mortgage application, when I pull my credit report your credit score should be the same as the score with the first lender you spoke with a week or so before.

Inquiries that will have a negative impact on your credit scores are for consumer, or revolving debt for credit cards and department store cards. If you have multiple inquiries from different credit card companies and/or department stores it appears you are seeking credit from anywhere. This type of behavior is seen as a negative and will impact your score.

When you call or come in to get prequalified or preapproved to purchase your new home or to refinance your existing mortgage be prepared to have me ask you for social security numbers and dates of birth, I will need a credit report and this is the information I will need.

[email protected]

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

Last week while I was away was a fairly light week for economic data. This week, however, had a fair amount of big news. The overall news shows a dormant economy with consumers leading the dormancy as indicated by consumer oriented data. Consumer confidence slipped in April from March with lower expectations for the future component dragging the report down. This is good news for lower rates.

The first assessment of first quarter Gross Domestic Product shows a slowdown from the last quarter of 2015 with economic growth at only 0.5%. What growth there was occurred due to consumer spending, however that spending dropped from the end of 2015, with the decline due to reduced purchase of durable goods. Prices also slowed from 4th quarter 2015. The GDP report is also good news for lower rates.

Tripling down on consumer driven data was the personal income and outlays report for March. On the income side the news was positive with wages increasing 0.4% for the month following increases in January and February. The other shoe in the report though is the slowdown in consumer spending, up only 0.1% from February. With consumers earning more but not spending as much indicates they are saving their increased earnings, or using it to pay down debt, but not buying goods and services. This is positive for lower rates as well.

With the data presented this week indicating a reluctant consumer it is not surprising that the minutes released on the recent Federal Reserve meeting in which no increase in the Fed Funds interest rate was made. In the minutes the Fed states that our economy “appears to have slowed.” With consumer spending making up 65-70% of our economy slower increases in personal consumption of goods and services results in slower economic growth. The data points to a reduced chance of a Fed increase at its next meeting in June.

Rates for Friday April 29, 2016: While I did not put out the Weekly Rate & Market update last Friday I did record rates for the chart and they were up 0.125% from the prior week—mostly due to profit taking. This week’s news has softened rates, with high-balance rate dropping to prior week’s rate but conforming hanging onto to last week’s pop up though weakening. Looking forward rates will continue to move in tight range based mostly on technical trading. While we may see some drift down any such move will not be significant nor worth the risk of trying to catch such a drift. Lock while you can at these low rates.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.625% 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

4-29-16

The Weekly Rate & Market Update was on hiatus last week as I was in Tulsa for services for a family member I considered to be an uncle, Glenn Wright. The best story teller I will ever know, going places in Tulsa was like travelling with Santa Claus—he knew everyone and their story. When you met Glenn he was truly interested in you, where you are from, your family, what your family is doing. You can know someone for many years, then introduce them to Glenn and learn more about this person in ten minutes of him getting to know this person than you had known.

The saying goes that the value of our lives is measured by the friends we have in our lives—Glenn was a very high value man and will be missed.

This week meet someone new, or meet someone you already know in more depth, this will enrich your life and their’s.

Have a great week,

Dennis

Weekly Rate & Market Update 4-8-16

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Reminder property taxes must be received by Monday! If you need more info see email I sent this morning or contact me!

Question of the week: How does a bond measure impact me as a homeowner?

Answer: It is that time of year in California, property taxes are due this week and in coming weeks/month many voters may see on their ballots propositions to assess property owners for municipal bonds to be issued for capital improvement projects.

At this time almost all California property tax bills have a section “VOTED INDEBTEDNESS” which lists the voter approved bond measures that are paid by you and other property owners. Each of the bonds passed by voters is listed with the assessment rate, then the dollar amount of the assessment for your parcel.

For instance currently in my area of Long Beach the tax bill has three Voted Indebtedness listings:

Metro Water District 0.003500
Community College 0.045945
Unified Schools 0.087635

For total assessments of 0.13708 percent of my assessed value, in dollar terms my neighbors and I are being assessed $137.08 per thousand dollars of assessed value. These assessments continue until the bonds pay off, which is usually provided as part of the measure on the ballot; i.e. this bond will be used to build new buildings and repair existing buildings for the school district, each parcel will be assessed at 0.025% of value for a period of 20 years.

When there is a bond measure on your ballot the description will tell you not only what the purpose of the bond and what it will fund, but also the cost to property owners.

As an addendum beyond the bond measures approved by voters, most property bills also have another section of charges that are “DIRECT ASSESSMENTS” that are imposed without direct voter consent but through public agencies or by elected officials. This taxes are not a percentage of assessed value but are flat dollar amounts due annually.

Most people when they receive their tax bill put it aside until they are ready to pay it and then just look at the coupon and send in the amount due. Take some time to review your bill to see just what you are paying for, what special assessments are being charged to you.

If you need help deciphering your tax bill or have any questions please do not hesitate to contact me.

If you are not receiving a tax bill because you are not yet a homeowner and would like to receive a tax bill next year for your own home call me!

[email protected]

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

Rates for Friday April 8, 2016: Not a lot of economic news this week. Last week while I was on vacation the Labor Department released employment data for March, and it was nice but not shattering. Rates were softening all last week and continue to move in that direction. We are back to our lowest point seen a few weeks ago. If your rate is near 4% or greater give me a call as we might be able to save you some money on your monthly payment.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Down 0.125%
30 year high-balance conforming 3.625% Down 0.125%
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

4-8-16

Back from our trip to Orlando and visiting the Universal Studios and Disney theme parks. Quite a bit of fun but can now say, “been there, done that…” What we found most interesting is the disparity between the Disney parks in Anaheim and Orlando, not for the attractions but for the friendliness and cleanliness. It is interesting how such a well-known brand built on customer service can such noticeable differences for their two main sites.

Glad to be home and looking forward to hearing from you for how I might be of service.

Have a great week,

Dennis

Weekly Rate & Market Update 4-15-16

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Question of the week: We had a short sale several years ago, can we get a loan to buy a home?

Answer: Regular readers of the Weekly Rate & Market Update know the immediate answer this question: Yes. No. Maybe.

Fannie Mae and Freddie Mac have had a revision on their guidelines for how long after a short sale someone is eligible for a new mortgage. Prior to the revision there was a sliding scale, the more money you put down on your purchase, or equity you had in a refinance, the shorter period of time you needed to wait. Those guidelines have changed and the waiting period is the same for everyone regardless of the loan-to-value (LTV) of the applied for mortgage.

Here are the waiting time periods for different loan programs (see important notes below):

Fannie Mae & Freddie Mac (aka ‘conventional’): 4 years plus one day from date of sale of short sale.

FHA: 3 years plus one day from date of sale of short sale.

VA: 12 months plus one day from date of sale of short sale.

Jumbo*: Treated same as foreclosure, if it shows on your credit report then ineligible for new loan, typically short sales and foreclosures remain on report for 7 years from final reporting date to credit bureaus by lender impacted by short sale.
*We have one lender with one program that will all 3 day waiting period if, IF, there is a very compelling reason that can be provided as to why the short sale occurred—we will not start file until lender has signed off on the explanation.

It is very important to note that the waiting period impacts you on not only when you can be approved for a new mortgage but also when you can purchase a home. The purchase contract for your purchase must be dated either 3 or 4 years plus one day from the short sale close date, our loan application cannot be dated prior to the waiting period plus one day as well.

For example, you had a short sale on your previous home and we have a recorded deed that shows it closed on June 1, 2012. You wish to purchase a new home for $500,000 with 10% payment located at 1234 Main Street, Somewhere, CA.

You write an offer on June 1, 2016 and it is accepted—lender will reject.

You write an offer on June 2, 2016 and it is accepted—lender will accept.

Keep in mind that all other qualifying guidelines for credit, income, assets, etc for the loan program for which you are applying must also be met.

If you have had a short sale in your past before going out and writing an offer on a new home call me so we can make sure you are eligible for a new loan as well that you are qualified to purchase the property.

[email protected]

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

Data crunchers were busy this week as there were plenty of significant economic reports released that impact mortgage rates. Wednesday brought us retail sales for March, which dropped 0.3%, pulled down some by slow auto sales, but pushed up by higher gas prices. The number was disappointing and is mortgage rate friendly.

Of more importance to overall economy was the Producer Price Index for March. PPI fell 0.1% for the month. Expectations were for an increase of 0.3% following a 0.2% drop in February. The dropping PPI is reflecting global deflation/economic slowdown which is slowly bleeding into our economy. This is not great news for economic growth, as a result is good news for lower mortgage rates.

Consumer Prices are also showing weakness appearing in the economy. Following two months of 0.3% gains the CPI increased only 0.1% in March. Year over year prices grew 0.9%, which is down from 1.0% growth from February 2015 to 2016, this decrease in growth is worrisome. The news supports Fed Chair Yellen’s uncertainty on whether inflation will continue to increase through the year; and this puts into question future rate hikes by the Fed. The news is mortgage rate friendly.

Capping off our week of market moving data today’s industrial production report showed contraction for the second month in a row and a drop in capacity utilization. Declining industrial production has long term impacts on prices and employment. This number is mortgage market friendly.

Rates for Friday April 15, 2016: Despite all the rate friendly data we barely held onto last Friday’s rates as investors were moving out of Mortgage Backed Securities through the week to take profits. Rates did not fall mostly due to technical trading. If we can hold onto to current levels through early next week we may (may) see a dip by next Friday.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.625% 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

4-15-16

Vrroooom! Long Beach will be filled with sounds of race cars this weekend for all the races and events as part of the Toyota Grand Prix. In 1999 Leslie and I were in Amsterdam and got back to our hotel room pretty late and I turned on the television to see what was on and there was shot from the blimp of Long Beach in brilliant sunlight with the race in progress. We can forget how beautiful our city, region, state can be and how it is seen by outsiders.

If you are going bring your earplugs!

Have a great week,

Dennis

Weekly Rate & Market Update 3-18-16

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Question of the week: Should I co-sign for my son/daughter’s mortgage?

Answer: Yes. No. Maybe.

Like most questions involving mortgages, real estate and finances in general, the answer is very situational.

It is not unusual for parents to want to help their children purchase their first home, especially in areas such as Southern California where the prices are high. However there are some factors to consider before offering the assistance.

First, you cannot co-sign bad credit. If your child has credit that precludes them from qualifying for a mortgage then adding you with your credit to their application does not change their credit, nor the lender’s recommendation. Often in these instances we look at the opportunity for the parents to purchase the home as investment property, renting the home to the kids at the rate of the mortgage, putting them on title and after they rehabilitate their credit seeing if it is possible to refinance mom and dad off the loan and title.

It is possible to co-sign for income. Some, not all, programs will use “blended ratios” for qualifying, meaning that the income to debt ratios for qualifying includes all the applicants’ income and all the applicants’ debt obligations. This is the most common type of parents co-signing for their children that we see. There are limitations regarding program types and loan amounts.

The upsides to co-signing on your child’s mortgage are obvious: they are able to purchase a home being the primary benefit, a secondary benefit is that you have leverage when it comes to spoiling any grandchildren….

There are downsides as well that need to be considered before obligating yourself to the mortgage debt. When working with a client who co-signed for a family member in the past we often hear, “that’s not mine, I just co-signed,” as if they have no obligation for the debt. Wrong. If you co-sign for any loan your as equally responsible for the repayment as everyone else on the loan. If payment is not made your credit is impacted, if the loan defaults the lender may come after you for satisfaction of the debt.

Before co-signing one of the factors I have you consider are how likely is it that your son or daughter will not be able to make payment in the future? Do they have spotty work history? Have you bailed them out not infrequently in the past, especially the near past? At times after taking an honest, and difficult, look at the situation I have seen parents decide to not co-sign until there is more financial stability in their child’s life.

Are you considering purchasing a home or financing a major purchase in the near future? For most practical purposes the full housing obligation for your child’s home, principal and interest on the loan, taxes, homeowners insurance, HOA dues if applicable, are counted against you for qualifying. There is a guideline for most mortgage programs that if you can show you did not make the payments for the prior twelve months and the mortgage payments are made on time the payment will not be counted against you. For example, you co-signed for your son and daughter in-law in 2012. You are looking to purchase a second home in Fallbrook that you intend to become your retirement home in 2020, but need a mortgage for the purchase. As part of our application package for your Fallbrook mortgage we collect proof that your son has made all the mortgage, and tax, payments on their home for the past twelve months. If you made even one payment, or paid the taxes, during this period then we count the entire housing obligation against you for qualifying; in this instance you would need to qualify using three housing payments: your own home, your son’s home and the home you are looking to buy in Fallbrook.

Should you co-sign for your son or daughter? Perhaps, but before you offer let’s have a discussion about the situation, your involvement and the impact on you for the short and long term.
[email protected]

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

Plenty of news this week impacting mortgage rates, all of which became irrelevant due to Fed speak on Wednesday. Starting the cavalcade of data was the Producer Price Index for February, which showed flat to declining prices for the month and for the past twelve months. This data is positive for lower rates. Also providing good news for rates was a decline in retail sales in February, and a strong revision downward of January sales.

Contrary to the PPI data, the Consumer Price Index came in a bit hotter when food and energy prices are stripped from the model (“core prices”) showing a 1% increase in prices from January to February and 2.3% growth year over year. This is not friendly news for mortgage rates.

The markets moved little on the price news. Not the same story after the minutes and forecast from the Federal Reserve Open Market Committee were released on Wednesday. The Fed did not increase its discount rate, as anticipated, and announced it would increase the rate two times in 2016. The news sent stocks and bonds higher—lower rates. The Fed’s forecast through 2018 is for a slow growing economy, from 2.0-2.3% in 2016 and 2017 slowing to 2.1% in 2018. The news was pretty rate friendly as it suggests that while the Fed will be raising rates a bit this year but not a whole lot in 2017 or 2018.

Rates for Friday March 18, 2016: Rates retreated following increases for the past two weeks, and the momentum is down for the short term. It appears we tested the high for 2016 thus far and bounced off. My advice is still to lock through your escrow period when you can as to no lose the opportunity with the current rates.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.50% Down 0.125%
30 year high-balance conforming 3.75% Down 0.125%
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

3-18-16

The Weekly Rate & Market Update will most likely be a bit short the next two weeks as we head out Orlando for a week of rides and roller coasters. Spring Break will be upon us which means one thing, as soon as we get back the kids will be counting the days until school is out for the year.

Have a great week,

Dennis

Weekly Rate & Market Update 3-11-16

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Question of the week: Should I get earthquake insurance?

Answer: In the fall our question of the week was if you should consider flood insurance with El Nino in effect (so far the insurance companies are winning on Southern California policies). Since California is on Eastern edge of the “Ring of Fire” there of course exists the possibility (probability?) that we will experience a massive trembler in the future. California’s vulnerability and possibilities to major earthquake(s) have many homeowners are wondering about protecting their primary asset, their home, should a large earthquake hit the region and cause damage to their home.

Whether you should or should not have earthquake insurance is a conversation you should have with your insurance agent who provides your homeowners’ coverage. In California individual companies no long write earthquake policies, rather they provide policies under the California Earthquake Authority (www.earthquakeauthority.com). The CEA provides the coverage, determines the premiums for coverage and deductible options available to you.

When considering earthquake coverage three questions to consider are:

1. What are you protecting
2. What is your deductible
3. What is your cost

1) What are you protecting? How much equity do you have in your home? Are you upside down? Do you have ten or fifteen percent equity in your home?

2) What is your deductible? CEA has two deductible options, 10% or 20% of the coverage. If your dwelling is insured to rebuild for $200,000 then your deductible is either $20,000 or $30,000. Does this exceed your equity in your home? If so do you feel it worth the cost to pay not only premiums but also a deductible to rebuild your home given the current value? If you home is valued at $450,000, you owe $415,000 and your deductible is $20,000 do you feel it makes for your to get earthquake insurance? A difficult question to answer. Finally, if there is partial destruction of your property, but not complete, the cost to repair may be just beyond your deductible, say $30,000 to repair some damage as the house was not a complete loss to the earthquake.

3) What is your cost? Premiums, as you can see by going to the CEA site, depend on a myriad of factors, as most insurance premiums do. Type of home, zip code, deductible, etc all factor into your premium. The analysis of premium comes down to how much it is worth to you per year to insure how much equity against how much of a deductible? It is a risk-benefit analysis that only you can answer, with the assistance of your insurance professional providing the costs and deductibles. If your premium is around $500 per year and you have significant equity you may decide there is a good value in obtaining a policy. If you premium is over $1000 per year, you have little equity and a large deductible you may feel the value of the policy is not worth the premium and should your home undergo significant destruction in an earthquake you are comfortable walking away from the home and the mortgage(s).

In California it is important to note that with a few exceptions earthquake insurance is not required by lenders. (The primary exception is that Freddie Mac requires earthquake insurance on condominiums, Fannie Mae and FHA do not.) Because the insurance is not a requirement of obtaining your mortgage the lender does not need to be listed as a loss-payee for any earthquake insurance policy you may purchase. This means that if you do have cause to submit a claim on your earthquake policy your lender need not be named and therefore a co-payee on any checks or claims paid. In short if you chose not to add your lender as an additional insured they do not have a claim to any funds to pay down/off the mortgage or control who gets the funds for rebuilding etc.

There is no set “yes” or “no” answer to “should I get earthquake insurance?” Every situation is different and every family’s comfort level of risk and benefit is different. Answering the question however is a valuable exercise and one every homeowner should engage in annually when reviewing their insurance coverages.

[email protected]

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

Not a lot of news this week moving mortgage rates. Europe has initiated a new round of stimulus through the European Central Bank, however trading in American mortgages was mostly based on technical triggers.

Rates for Friday March 11, 2016: Mortgage Backed Securities (MBS) traded mostly down this week (higher rates) as investors moved to a climbing stock market and took some profits from gains made in the past few months. As you can see from the chart rates for conventional mortgages have climbed two weeks in a row for the first time since late October/early November. Looking ahead we are in an up market and the advice is to lock through your escrow period as soon as you can. (FHA says “flat” as the rate is on the floor and adjustments are to price and credits you get for closing costs).

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.625% Up 0.125%
30 year high-balance conforming 3.875% Up 0.125%
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

3-11-16

I get a bit curmudgeonly about this time every year due to our switching the clocks ahead for daylight savings time—which means I am back to spending the morning in the dark when I am up and walking the dog. Being a morning person the morning light is more meaningful to me than a longer afternoon. How about you, morning person who will miss the early morning light for the next several weeks or month, or glad to have the daylight later in the day?

Don’t forget to set your clocks before bed on Saturday—and that is ahead not behind (made that mistake once!).

Dennis

Weekly Rate & Market Update 3-4-16

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Question of the week: When should I refinance my adjustable rate mortgage?

Answer: This is always a challenging question to answer, and like most questions the answer is very situational from person to person.

Those who have been in adjustable rate mortgages for the past several years have seen extremely low rates as the indices upon which their ARMs are based have been near, or below, 1% for a long time. Now looking forward homeowners with ARMs hear about rates going up and are wondering how soon, how fast and for how long the rate on their mortgage will increase. Risk management dictates fixing the rate while long term mortgage rates are still low.

However by fixing the rate and payment for the long term chances are most ARM mortgages will convert to a higher payment. So the dilemma of when to increase your mortgage payment to avoid future rate and payment increases versus stretching out as long as possible the lower rate and payment on your current mortgage.

Here’s a bunch of math:

Example, you bought your home in 2008 with a 5/1 ARM at a rate of 5.5% on a loan of $450,000. For several years you paid interest only and over the past several years have started paying principal on the loan balance and now owe about $415,000.

The loan went from fixed to adjustable in 2013 and the rate is based on the 1 Month LIBOR plus 2.25%, the lifetime cap on the rate is 10.5%. Your rate can adjust only once a year on the anniversary of when you first funded the loan, and the adjustment cannot be greater than 2% higher than the rate the year before.

Your loan rate is currently last year’s LIBOR, 0.17%, plus your margin of 2.25% for a rate of 2.42%. You received notice from your lender that your rate is scheduled to adjust with your April 1st payment and since LIBOR has increased to 0.44% your rate for the next year will be 2.69%.

Knowing the maximum rate increase of 2% this means that from April 2016 to April 2018 the highest your rate can be is 4.69%.

Your current payment, fully amortized for the remaining 22 years at your new rate of 2.42% will be $1681 per month effective April 1st.

Should you refinance to fix the rate? If you were to refinance today at no points/fees you are looking at a rate of around 3.875%.

If you refinanced your $415,000 balance at 3.875% in a new 30 year fixed rate mortgage your monthly payment would be $1952 per month, an increase of $271 per month and an additional eight years on the loan balance.

If you want to fix the rate and do not want to increase the term of the mortgage and amortize your payments for 22 years your payment will be $2338 per month, an increase of over $650 per month.

As you can see the decision to fix your mortgage rate at today’s low rates is not as easy as it may seem since to do so will most likely raise your month payment several thousand dollars per year over your current rate. To analyze the decision you should approach the conversion from adjustable to fixed rate as you would with insurance. How much more in premium are you will to pay for how much more coverage should you need the insurance? There is a cost benefit analysis that has a very big unknown, in this case when, how fast and for how long will rates move up forcing you into increasing payments on your home?

Wading through the math may or may not make your decision easier, in the end it comes down with your comfort level of unknown future payments and what your tolerance is for higher payments.

Keep in mind that short term rates will always be chasing long term rates. So while your adjustable rate may be below 3% today and the fixed rate is just below 4%, in the future when your adjustable rate is near 4% the fixed rate will be near or above 5%.

If you would like to do the math on your adjustable rate mortgage, or have a friend or family member who may benefit from an analysis of their mortgage, please contact me.

Have a question? [email protected]

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

First Friday means jobs. The monthly employment report was released by the Labor Department today and the news was good. The economy added 242,000 jobs in February and 30,000 jobs were added to the January and December reports. All the data points in the report were positive which boosts the chances of the Fed raising rates again in a few weeks. The news is mortgage rate unfriendly.

Rates for Friday March 4, 2016: As stock prices have climbed this week Mortgage Backed Securities (MBS) prices have dropped (higher rates). After dropping or staying flat for the past 10 weeks of the year rates bump up this week. Looking at the chart this is the first Friday since Christmas where rates are higher than the week before. I’m not looking at a trend upward just yet, but we might have bounced off a near term low last week.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.50% Up 0.125%
30 year high-balance conforming 3.75% Up 0.125%
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

3-4-16

I had a very unique experience yesterday thanks to my friend Mark. Thermal, California is not a destination spot for many people—it is about halfway between Coachella and the north shore of the Salton Sea. But it was the destination for a group I was fortunate to be part of as we played at the BMW Performance Track. Never a big car guy I sure enjoyed putting various performance BMWs through different exercises and cranking up the speed on the track to then stand on the brakes into a hairpin turn.

One lesson that applies not just to driving a car, performance or family van, but to many aspects of life is not to focus on the object in front of you but look as far down your path as you can to see what is ahead. Looking at what is right in front of you can cause you to bump into something else, looking ahead allows you to determine where you will go that is to your benefit.

Keep your eyes up this week,

Dennis

Weekly Rate & Market Update 2-26-16

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Question of the week: When should I throw away financial and tax documents?

Answer: NEVER!

Never throw away any document that has any financial or personal identification information such as your social security number, ALWAYS SHRED THEM.

Okay, perhaps that was a bit over the top, but before I get to how long you should retain records I want to strongly emphasize never tossing any bank statements, tax documents, paystubs, etc into your trash. Always shred these documents to prevent identity or financial theft. One of the primary sources of identity theft is your garbage bin outside your home, many thieves posing as recycle bin divers are more interested in what financial documents they can find in your trash can than the soda cans and wine bottles (which is why in our neighborhood whenever I see anyone rummaging around in the recycle bins I run them off and if they do not leave call the police—over the years of walking the dog every morning I have found may paystubs, W2s, bank statements etc. in the streets and alleys, either dropped by individuals or thieves.).

Buy a home shredder, Office Depot and other office supply stores have many low cost, small shredders that you can use to shred any documents and protect your identity and assets. If you do not have one, buy one, a $50 or $60 investment that may save you thousans.

Now onto the intent of the question, how long should you retain financial and tax records?

Over the years I have been asked this question by many clients and the standard answer from most tax professionals is for federal tax documents retain your records for three years and for state taxes retain your documentation for four years. Conventional wisdom to retain the records for seven years. The IRS can audit you for the prior three years, however in auditing one year they can discover something that causes them to look for the prior year, and then the year prior. From the IRS website, “Generally, the IRS can include returns filed within the last three years in an audit. Additional years can be added if a substantial error is identified. Generally, if a substantial error is identified, the IRS will not go back more than the last six years.”

There is a very important qualifier to retaining your records: records relating to the purchase of your home and mortgage documents should be kept permanently. Even if you are in your home for fifty years, when the time comes for the property to be sold or transferred as part of your estate there may be, probably will be, the need to establish the cost basis and other factors that weigh into any potential capital gains calculations.

So there you have it, on the short side three years for federal tax documents and four years for state documents, but to be safe save records for seven years for most records like bank statements and income records, but save records on your home purchase until you no longer own the home.

[email protected]

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

Mixed news on home sales in January. Existing home sales kept the gains from Decembers jump and year over year are up 11%. New home sales however saw a sharp decline in January from December, down over 9%. The news is mixed for mortgage rates, the increase in existing home sales is not good for lower rates, the decline in new home sales is good for lower rates.

More good news from the manufacturing sector as durable goods orders jumped in January after the large drop in December. When there is such a strong reversal in data caution is advised to see if an upward trend is starting, or if the increase is a one month anomaly, we shall see in the coming months. Increases in manufacturing sector number typically push rates up.

All the news early in the week was fluff, the big numbers came out this morning as we got the second estimate for Gross Domestic Product for the 4th Quarter of 2015 and Personal Income and Outlays for January. Both data sets were negative for mortgage rates as they showed positive economic activity.

Consumers made more and spent more in January than in December, and paid more for what they were buying. In December income outpaced spending, in January both personal income and spending increased 0.5%. Year over year consumers are paying 1.3% more on all goods and services, and 1.7% more when food and energy are stripped out of the index (the “core” price index). The Fed uses the core number for its inflations gauge and at 1.7% it is approaching the Fed’s 2.0% target. The January price index may not change the consensus that the Fed will not raise its Fed Funds rate in March, but increases the chances of a move in June. Rates climbed on this news.

As for the economy, the Bureau of Economic Analysis released its second estimate of the Gross Domestic Product for the 4th quarter of 2015 and revised the initial estimate of 0.7% growth to 1.0% growth. The upward revision had little impact on markets as digging into the report shows most of the adjustment was in inventory growth and not more output.

Rates for Friday February 26, 2016: Mortgage rates are barely hanging onto last Friday’s levels with todays’ economic news—and I would not be shocked if rates close higher at the end of the day with midday price revisions from lenders as Mortgage Backed Securities are losing ground this morning. After a few weeks resting on the bottom of the rate chart it appears rates are ready to move up a bit in the coming week or so.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.625% 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

2-26-16

The Academy Awards are on Sunday and I have only seen two of the best picture nominees at this point (The Revenant and The Big Short), which are also the only best actor pictures I have seen as well. Looking through the winners of best film through the years not a lot of them jump out to me as outstanding movies—I love going to the movies but it appears my tastes are not always, usually, aligned with those who make the nominations and do the voting.

Enjoy the show, and have a great week,

Dennis