Weekly Rate & Market Update 1-29-16

Question of the week: We had a short sale on a previous home, can we get a new loan?

Answer: Yes, but it is not “if” you can get a new mortgage but “when.”

Provided you otherwise qualify for the mortgage with income, credit and asset verification, a prior short sale does not preclude you from obtaining a new mortgage. However the time frame to obtain a new mortgage has changed.

For conforming loans (Fannie Mae and Freddie Mac) the time from the resolution of your short sale on a prior mortgage to obtaining a new one used to be tiered depending on your down payment or equity. The guidelines have been simplified so that it is a blanket four years since the final disposition of your prior mortgage.

The time frame can be shortened if the cause of the short-sale was “extenuating circumstances,” which is a small hole to thread. Essentially you have to prove job loss prior to the short sale, job transfer to a geographic distant location or other circumstance that was unavoidable and unforeseeable.

If you had a foreclosure the guideline is seven years must have passed before you can obtain a new conventional mortgage.

For jumbo loans (over conforming loan limits, $625,500 for most of Southern California) a prior short sale is a no-go with almost all programs.

For FHA loans the guidelines are a bit looser though tighter than they were in the past. Three years from disposition of the short-sale or a foreclosure is the requirement to obtain a new FHA mortgage. One year is the time frame if there were extenuating circumstances involved.

As with all guidelines have your particular circumstance checked out as regulators are constantly changing guidelines and different properties may have different time limits, for instance second home, investment property, units.

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

Not a lot of economic news this week, but what news we had was pretty important. Wednesday the Fed Open Market Committee meeting announcement was released and to the surprise of no one no change was made to the Fed Funds rate. There is concern of global economic activity and its impact on our economy, and the view of the economy seems to have pulled back a bit from December when it hiked the Fed Funds rate from zero to 0.25%. No impact was had on mortgage rates from the news.

Supporting my comments last week that our economy is being lifted, or supported, by housing markets, new home sales surged with an increase of 10.8% to an annualized rate of 544,000 sales, up almost 55,00 from the prior month. Ordinarily this would be a downer for mortgage rates, meaning higher rates, but the financial markets activity dampened any increase.

A major concern to economic growth has been orders for durable goods. The sector did not end well in 2015 with contraction in November of 0.5% and initial estimates for December showing a fall of 5.1% against an expectation of a gain of 0.2%. America’s manufacturing output has been on a continual decline for several decades, however contraction seems to be occurring at a faster pace in recent years and this sharp drop in orders does not bode well for economic output in 2016. The news is very friendly for mortgage rates.

The big data release for the week was the Gross Domestic Product for the final quarter of 2015. Following a 2% gain in the third quarter GDP rose a scant 0.7% in the 4th quarter. Our economy is very much consumer driven, consisting of 65-70% of economic activity, and consumer spending it slowed as 2015 closed out. Holding back economic growth was business activity, particular domestic companies engaged in foreign trade and markets. Prices were lax, showing the smallest increase for the year. The news is somewhat rate neutral, however taken in context of the international markets and foreign economic issues it becomes a positive for lower rates.

Rates for Friday January 29, 2016: Conforming rates drop to end the week on the GDP news, compounded by slim chance the Fed will raise rates again in March. The 30 year fixed conforming has dropped 0.375% from the beginning of the year and at its lowest since the final Friday in April 2015.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.5% Down 0.125%
30 year high-balance conforming 3.75% 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

We are going whale watching tomorrow with the Rotary Club of Long Beach. I have lived in Long Beach for over 30 years and have never been on a whale watching cruise and looking forward to our adventure.

I asked the question today of what experience/attraction have people not done in their immediate area? Now that whale watching is off my list my next nearby attraction that I have never seen where I would like to take the family is the Grammy Museum. If I cut a demo while I am there I will be sure to share!

Have a great week,

Dennis