The Industry Report

The Fannie & Freddie Government Takeover...

...is official! And you've read some of the headlines...

I was going to go on and explain what this meant for your mortgage interest rate as a homeowner and prospective homeowner but Dan Green, author of The Mortgage Reports, offers such an excellent explanation in as little as 265 words!

[Video] On Down-Payment Assistance

How do you feel about the elimination of Down-Payment Assistance? Ha! Should I really have to ask you that?

Here's an interesting video...

Mortgage Rates Are Working Their Way Up!

California mortgage rates closed at approximately 6.125% to 6.25% yesterday; as you can see, we're up quite a few basis points. In fact, just last week we were looking at 5.875% on a 30-year fixed rate mortgage. How's that for a deterioration in pricing...

Freddie Mac Vice President and Chief Economist Frank Nothaft says:

"Mortgage rates drifted up this week over market concerns that the Federal Reserve Board may raise short-term rates later this year." [Source: Freddie Mac Press Release]

In fact, odds are 88% that the Fed will raise rates back to 2.25% by October.

So what should you do to hedge against this rise in mortgage interest rates?

First and foremost, lock-in your mortgage interest rate at application!

Secondly, this is where speaking with your mortgage professional and weighing your options on different loan products comes in handy.

If you're purchasing and the seller is offering concessions, have you considered buying down the mortgage interest rate?

Have you considered a 5- or 7-year Adjustable Rate Mortgage?

5-Year Adjustable Rate Mortgage
5.5% (5.624% APR)

7-Year Adjustable Rate Mortgage
5.75% (5.875% APR)

When you consider the fact that the average Californian homeowner refinances every 3-4 years, an adjustable rate mortgage doesn't sound all that bad.

Just look at the differences in payment:

30-Year Fixed Rate Mortgage | $400,000 Loan Amount | 6.25% Mortgage Interest Rate

Payment = $2,462.87

5-Year Adjustable Rate Mortgage | $400,000 Loan Amount | 5.5% Mortgage Interest Rate

Payment = $2,271.16

Estimated Monthly Savings = $191.71

That's $2,300.52 per year!

If you have any questions on differing loan programs and want me to calculate payments for you, contact me here or call me directly at 323.810.2175.
 

Mortgage Rates Are Volatile & Can Expire Within Hours

Certified Mortgage Planning Specialist Dan Green, author of The Mortgage Reports, wrote an excellent post titled: Proof: Mortgage Rates Are "Expiring" Within Hours

This is one of the "truths" of our existing mortgage market right now. In fact, it's one of the main reasons why I most often favor locking your mortgage rate at application and why I ask that you contact me to verify pricing when I publish our daily mortgage update.

To quote Dan:

"No longer can rate quotes at 9:00 A.M. be compared to rate quotes at noon and there are two ways to help navigate the storm:

1. Do your rate shopping in a compressed timeframe.  Think minutes, not hours.
2. Ask your loan officer: 'Was there a recent reprice, or do you expect one soon?'" -- Dan Green

Dan gives us excellent advice in these days where navigating the mortgage environment is difficult. If you want to lock-in a rate be sure to 1.) submit a complete loan application and follow up with your mortgage professional on submitting any necessary paperwork, 2.) be sure to obtain a written lock-in agreement versus a verbal agreement (a mere verbal agreement should be a red flag), and 3.) when comparing rates, be sure to ask about any reprices for the day as Dan suggests.

And as I said once before, ask questions and if you're not getting any answers, you're probably working with the wrong professional.
_______________

Articles of Interest:
Definition of Mortgage Rate-Locks
The Economics of Interest Rates & How They Work

Fannie Mae Lowers Down Payment Standard: great news for Los Angeles County Real Estate?

For many, every little percent makes the world of difference in getting approved for a mortgage. In California, with Los Angeles County being considered a declining market, many borrowers were hit with a declining market down payment standard that said "if the maximum allowable financing is 95%, we're automatically reducing that allowable limit by 5% (making it 90%) due to a declining market." This was devastating for many prospective homeowners who had already saved up a set amount of money in hopes of getting approved on a new home loan.

But as of June 1, 2008, Fannie Mae is making an effort at a solution for them...

"Fannie Mae, backing down from pressure from homeowner and real estate groups, will allow buyers in markets with falling home prices to purchase houses with 3 percent down payments, potentially increasing the company's risk...

Fannie Mae and Freddie Mac, created by Congress to increase mortgage financing and provide market stability, fulfill their mission by buying mortgages from lenders so banks have more cash to make new loans. The companies, adjusting to a rise in mortgage defaults, tightened loan standards to limit losses, introducing new fees to buy riskier loans and raising required credit scores...

The stricter down payment policy, adopted in December, will end June 1, Washington-based Fannie Mae said in a statement. Potential homeowners approved by the company's computer program will be able to borrow up to 97 percent of the value of the property, the company said. Other loans will be accepted with loan-to-value ratios of up to 95 percent. Previously, borrowers in areas such as parts of California, Nevada and Florida were required to put down 5 percent more equity than elsewhere." [Source: Bloomberg]

Are you thinking of buying a home in Los Angeles County and wondering how this might affect or help you if at all?

The prospect of a lower down payment requirement is enticing but the threat of costly PMI requirements is still present and raises the issue of affordability. Putting less down means you might have to incur mortgage insurance. Often times lenders would advise a 1st and 2nd combo and poof, problem solved. But in today's retracting secondary mortgage market this solution has become difficult to obtain.

So what should you do? Sit down with your Real Estate Agent and Mortgage Professional and go through the paperwork while asking questions. Sounds tedious and burdensome but the time spent doing so will yield you the best results.

Contact me here or call me directly at (323) 810-2175 should you have any questions. And be sure to check for Daily Mortage Updates here on the blog.

Fed Funds Rate Cut: April 30, 2008

Today's FOMC Announcement brought another Fed Funds Rate cut for the fourth time this year. Down another 25 basis points, the current Fed Funds Rate sits at a nice 2%. From the Press Release:

"The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."

The Fed is expected to leave rates steady on upcoming FOMC Meetings to allow recent rate cuts to work their way through the economy since continuing inflationary concerns remain present.

In the meantime, Stocks lost traction in light of the news of the recent rate cut which is great news for mortgage interest rates (remember, when money moves from Stocks into Bonds, we see lower interest rates); we'll have a Daily Mortgage Update for you early tomorrow morning.

____________

Remember, a cut to the Fed Funds Rate helps your pricing on second mortgages and second mortgages only. Changes to your 30-Year Fixed Rate Mortgage on the other hand are tied to changes in the Mortgage-Backed Securities Market. It's the emotional reaction to the news of a rate cut rather than the rate cut itself that forces investors to react and affect the movement of money from Stocks to Bonds thus causing changes in the MBS market.

For now, pricing on a:

Home Equity Line of Credit = Prime - .45

Fixed Home Equity Loan starting at 7.35%

No More Countrywide?

Don't worry, don't worry...neither Countrywide wholesale or retail is shutting down!

And yes the big purchase transaction between Bank of America and Countrywide is still in the works.

BUT, Bank of America does plan on dropping the Countrywide name. Thoughts anyone?
 

If you're looking for a 2nd mortgage, you have a very limited selection!

Jenny's a great gal. She's always been a frugal spender. Never racked up too much debt and always paid what she had on credit, on time! Never a late payment...not even once. A real A+ in the credit department.

Jenny has a Countrywide 1st Mortgage and a Flagstar 2nd Mortgage; both at a great interest rate. What she'd really like to do is refinance and take some cash-out but, she doesn't want to consolidate both mortgages (I won't argue with her).

What would really make her happy is to take out a new Home Equity Loan with Flagstar Bank...according to her they've been a stand-up lender; great customer service and all (and I certainly agree as I've had a similar experience in my dealings with Flagstar). My Account Executive at Flagstar is one of the best in the industry!

There is however one little problem. You see, as much as Jenny would like to refinance her home equity loan with Flagstar, the secondary mortgage market is a very restricted market so it's not really her place to decide what lender to finance with. Here's what Underwriting Support at Flagstar Bank had to say on the matter:

"The second mortgage market is very volitile at this point and we had eliminated second mortgages altogether for a good 6 months or so.

Since the reinstation of the program we decided that we would only offer the second mortgage product to current customers as a benefit to them, but since the market is weak for second mortgages we have not opened the option back up to all borrowers only current customers.

Thank you

Flagstar Bank
Underwriting Support Desk
underwritingsupport@flagstar.com

[My note: current customers are classified as current Flagstar 1st mortgage lien holders.]

Flagstar Bank isn't the only institution following this policy, Wells Fargo is too.

This doesn't mean that if you're looking for a Home Equity Line of Credit or a Home Equity Loan you won't get it, it simply means 2nd mortgages are in short supply and there's less room for being picky; you'll have to take what you can get!

_______________

If you have any questions on your Home Equity Line of Credit, please contact me here.

Plan to let bankruptcy judges modify mortgages derailed

There's been some recent talk on whether changes to the bankruptcy law could help fend off foreclosures.

From L.A. Land:

"The L.A. Times reports: that Senate Democrats are pushing for changes in federal bankruptcy laws that would allow homeowners to renegotiate their mortages in hopes of keeping their houses: 'The proposal, part of the Foreclosure Prevention Act embraced by leading Democratic lawmakers, would allow judges to ease the terms of mortgage loans during bankruptcy proceedings.'"

Proponents and hopefuls alike lose out today as the plan to let bankruptcy judges modify mortgages is derailed.

Fair Housing Education In America Day!

HUD celebrated their first ever "Fair Housing in America Day" on Wednesday, April 16th. Talk about it's never too early to start learning something new, this national education outreach program was designed to teach 4th through 6th grade students (including their teachers and parents) about the Fair Housing Act.

______________________________________

Now the more I think about this, I'm not so sure how I feel about it. On the one hand it's a pretty neat concept (the teachers and parents will be learning something too). On the other hand, I feel like we're spamming our 4th, 5th and 6th graders at too early an age.

What do you think? 

______________________________________

From the press release:

'"The goal of ‘Fair Housing Education in America Day’ is to start the conversation about fair housing opportunities at a young age,' said Kim Kendrick, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity. 'It’s critically important to teach future generations of renters and home buyers about their rights under the law.'"

And if this isn't education at an early-enough age, REALTOR® Sarah Bandy introduces us to the newest, hot young talent to hit Keller Williams!