If you’ve been following me on Twitter, you’d know that rates have increased as much as 1/2% since Monday. If you haven’t been following me on Twitter, today – you might consider starting. The bus of low mortgage rates has left the station and it’ll be a while before it returns.
To understand why rates have been climbing this week, you first have to understand what mortgage rates are based on. Mortgage rates directly correlate with value of mortgage backed securities (MBS). Rates are NOT based on the 10 Year T-Note, stock market, or the fed funds rate (FFR). These common misconceptions are due to the lack of visibility of MBS. In order to receive live bond quotes, you have to pay to subscribe to a service (and it’s not cheap).
Ok, now for the specifics on WHY rates have increased (so much) this week. When you buy a bond (like a mortgage backed security), you buy it and it will have a pre-determined amount paid over time. If inflation is creeping up, that pre-determined payout is going worth less to the owner of that bond in the future. Make sense? When investors see inflation as a concern, they sell off their mortgage bonds and put their money elsewhere.
The higher the value of a mortgage backed security, the lower an interest rate will be on a mortgage. If the value falls, rates increase. As I had mentioned, some individuals in my industry give advice to follow the 10-Year T-Note the same way I follow mortgage bonds. I’m not one to laugh at other’s expense (actually, I sort of do), but take a look at what happened today (especially if you were watching the 10-Year T-Note):
A loss of 103 basis points for MBS is a big one. Rates worsened between 1/4% and 1/2% just Thursday. If you or your loan originator were following the 10-Year T-Note, you missed the bus… and you will be spending thousands of dollars more over the life of your loan because of some bad advice.
Are you and your loan officer watching the right indicators? Do you know when the best time to lock is? Is someone managing your mortgage? Are you receiving top notch advice? Does your lender have access to live, real time, mortgage bond quotes?
If you answer no to any of these questions, we should chat. I love this stuff, seriously. I look like a kid at a candy store when I’m watching bond quotes… It’s sick, it’s sad and you should take advantage of it.
Categories: General Fiscal Literacy · In The News · Mortgage Management · Mortgage Market & Rate Prediction · Mortgage Rates
If you missed it, Mr. Ben Bernanke made some interesting comments at the Independent Community Bankers Conference. While addressing the current foreclosure crisis, Bernanke suggested banks make principal reductions on problem loans. Here are a couple excepts from his speech (I found the quotes at Alex Stenbeck’s blog):
"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure. "
"…a reduction in principal may increase the expected payoff by reducing the risk of default and foreclosure. "
"A write down that is sufficient to make borrowers eligible for a new loan would remove the downside risk to investors of additional write downs or a re-default."
This is meant for banks to manage their risk and make homes affordable for owners that would end up in foreclosure otherwise. Instead of taking a huge loss in a foreclosure situation, the bank keeps the home in the homeowners hands and continues recieving some form of re-payment instead of none. Once again, proving – bank’s ARE NOT in the property management business.
The only ‘problem’ I see with this solution, is that folks will inevitably be trying to take advantage of the write downs when they really shouldn’t really be eligible. It’s a sick sad world we live in sometimes.. but we have to acknowledge there will be potential freeloaders. No offense intended, sort of.
Here’s a link to more info about the speech.
Thanks on the photo to invisibleman.com
Categories: In The News · Mortgage Market & Rate Prediction
Numbers are always extremely important to consider when buying, selling and financing a home. Each week, I receive a weekly market watch update providing the breakdown of the activity from last week. The report is provided by Heather Barglof at Peoples Company. As I continue to get them, I will continue to post them (with her permission of course). Here is her brief market commentary this week:
"Our solds this past week were up significantly compared to the week prior to that, but are still down from a year ago at this time. We are seeing that days on market is slowing declining as is total active listings but we still are averaging only 1 sale pending for every 2 new listings put on the market."
(Click Picture to HUGIFY)
I hope you continue to enjoy these updates as much as I do!
Categories: Weekly Market Watch
Announced earlier last week, ‘Iowa Mortgage Help Hotline’ will assist Iowan homeowners that are currently struggling with their house payments. Recently funded by an additional $1.5 million dollar grant, the capacity will be increased on the foreclosure hotline.
"We want Iowans to call the mortgage help hotline if they are currently struggling or as soon as they think they may be headed toward financial difficulty. Our counselors have more resources available to help people who are in the early stages of mortgage delinquency. Ideally, we’d like to talk with Iowans before they miss a mortgage payment." Bret Mills, IFA Executive Director
The goal of Iowa Mortgage Help Hotline is to help 7,000 Iowans before the end of 2008. This program has been heavily promoted by Bret Mills of Iowa Finance Authority and Iowa Attorney General, Tom Miller.
Statistically speaking, nearly 50% of people who are unable to pay their mortgage never contact their lender or seek assistance from a trained counselor. Since it was established in September of 2007, the helpline has received about 8,000 calls and is presently handling about 700 cases.
If you personally would like to get help, please contact the Iowa Mortgage Help Hotline at:
1-877-622-4866 or online at www.IowaMortgageHelp.com.
Categories: In The News · Mortgage Market & Rate Prediction · Personal Development Tips
First off, sorry for the short ‘vacation’. I’ve been out and sick with the flu for the past week, still recovering as we speak.
Back to tax rebates – as you’ve probably heard, many American’s will be getting a check in the coming months. Here are the details:
- Married couples will get as much as $1,200.
- Singles will get $600.
- Filers with children under 17 get $300 per child extra.
- Married couples must make at least $17,500, but no more than $150,000 to qualify for the rebates.
- Singles must make at least $87,500, but no more than $75,000.
- Seniors and disabled veterans also qualify using their social security benefits and disability income.
- You must file a 2007 tax return to qualify for the refund check.
- You must have a valid social security number to qualify.
If you’d like to figure out how much you should expect for your rebate, check out Kiplinger’s free calculator.
If you need a copy of the tax form to file (even if it’s simply for the purpose of getting the refund) here it is.
Tax season is here. Keep in mind that your tax refund checks are sent after your taxes are filed. As always, if you need more about filing taxes – I can recommend a CPA to assist you.
Categories: General Fiscal Literacy · Personal Development Tips
When you’re financing over 80% of a purchase price or appraised value, you’re at the mercy of two things:
- Lender Guidelines – Defined by GSE’s (like Fannie and Freddie) or banks/investors (such as Countrywide or Citi Mortgage)
- Mortgage Insurance Guidelines – Companies that carry some of the risk on money loaned over the 80%.
Last week, I received more guideline revisions (a common thing to get these days). I review them closely each time – but this particular update has some pretty big changes. Notably, the lender has decided to put into place minimum score requirements, requirements that Fannie & Freddie haven’t even put into place yet. I think it’s extremely interesting to see lenders tighten up credit requirements before the actual markets tighten them.
Here’s the details on the revisions directly from Countrywide Wholesale (keep in mind, all lenders haven’t put these rules into effect):
Guideline Changes for LTVs > 80%
- All transactions:
- Min credit score increased to 620*
- Cash-out:
- Owner Occupied: Min credit score increased to 680*
- 2nd Home & NOO: No longer allowed
- 3-4 Units:
- LTVs 95.01 – 97%:
- Min credit score increased to 620*
- Fixed Rate products only (Interest Only not allowed)
- ARM Terms > 5-Years only (Short term & 3/1 ARMs not allowed)
- SFR & PUD only
Like I mentioned, this isn’t a blanket policy.. but it’s a sign of things to come! Tomorrow, I’ll touch on the big changes that have happened with PMI and the different companies that provide the coverage.
Categories: In The News · Mortgage Market & Rate Prediction
According to MarketWatch, this morning Fannie Mae (FNM) and Freddie Mac (FRE) have been downgraded from ‘neutral’ to ’sell’ by Merrill Lynch. Apparently they are pretty bearish on the GSE’s. Fannie and Freddie are supposed to be reporting numbers next week.
Here are a couple brief quotes from the Merrill Lynch report:
"Weakening macro-economic, financial market and credit trends continue to point to more financial stress than we think the market is discounting.."
"..we do not think the stocks fully reflect the severity or duration of the financial headwinds facing the companies."
I’m not extremely surprised of the downgrade, especially considering the spike in defaults and late payments. One thing continues to be sure (in my opinion), things will get worse before they get better. It’s been my re-occurring theme and I’m not sure when I’ll really switch sides of the fence (I really don’t think it will be soon). For now, continue to be prepared for constant re-assessment of risk and guideline changes. If I were you, I’d be prepared (whatever that means) for rough news next week when Fannie and Freddie release their data.
Too much focus has been placed on ‘alt-a’ and ’subprime’ loans. Prime saw a lot of loosening in their credit guidelines for a pretty large window of time as well. I think we’ve just seen the tip of the iceberg. Strap in, this could get messy.
Categories: In The News · Mortgage Market & Rate Prediction
Together we’re smarter. Sometimes, instead of plagiarizing great posts… I’d rather just direct you to them. Here is this week’s finds:
If you found something incredible.. quit hording it and share it already you punk. Post them in the comments.
Categories: Blog Watch · General Fiscal Literacy · In The News · Personal Development Tips
Numbers are always extremely important to consider when buying, selling and financing a home. Each week, I receive a weekly market watch update providing the breakdown of the activity from last week. The report is provided by Heather Barglof at Peoples Company. As I continue to get them, I will continue to post them (with her permission of course). Here is her brief market commentary this week:
"Below is a snapshot of the Des Moines residential market watch. We had an increase in pendings and solds for the week but as you can see both pendings and solds for the month are down when compared to the numbers from last year at this same time. As you can also see the average price per square foot is also down about $8/ft in comparison to last year. What does this mean? On average in Feb of 2007 a home sold for $113/ft, if you took an average size of 1500 sq ft times $113 ft you would get a sale price of $169,500. If you take that same 1500 sq ft house in Feb of 2008 times the average price per foot today of $105 you would have a selling price of $157,500. Keep in mind these numbers are an average of all price ranges and all locations in the metro areas."
(Click Picture to HUGIFY)
I hope you continue to enjoy these updates as much as I do!
Categories: Weekly Market Watch
I’m often asked about what makes Four Legacies Mortgage and myself any different from our countless competitors. The truth of the matter is, I don’t like the answer ‘our advice is better or more timely or that we are more professional than the rest’. These things should be required to even be in consideration (even though they often aren’t really there).
I would say the BIG thing that makes Four Legacies Mortgage different than anyone in our market, is that we will help you actively manage your mortgage EVEN after it is closed. We do not generate transactions in our practice, we create long term relationships with our clients. In the interest of not sounding too cheesy and sleazy, I want to be totally upfront – I’m still a regular guy.. I just happen to take my clients financial situation extremely seriously, much more than others in my profession.
So, if you’ve ever received a mortgage.. I’ve got a few questions for you:
- Do you know the terms of your mortgage? (EXACT rate, length, fixed or adjustable, balance)
- Do you know your credit score? … and most importantly, Do you have a gameplan to improve it?
- Do you know what your home is currently valued at?
- When was the last time you heard from the mortgage lender that financed your home?
- Who do you call with questions in regards to your current mortgage? Do you talk to someone you personally know?
I could keep going with questions, but I think my point is obvious here. I don’t baby sit my car insurance policy. I also don’t sit on e-trade all day making stock trades. I trust my team of carefully selected professionals to tell me if I need to change coverage or when to buy or sell stock. Why is it that everyone thinks a mortgage is a do-it-yourself project? I think it’s because most people don’t think they have a choice. If they knew, why would they choose to watch mortgage backed securities (MBS) instead of enjoying their freetime?
Truth of the matter is, I spend a lot of my time studying the market and determining which direction it’s moving. I lock ahead of rate increases and know when to recommend floating to take advantage of gains. I hint at the direction via Twitter, but I don’t give away the farm either. Yea, it’s easy to say that we’ve done a good job – but check out our track record. I really am enveloped in the mortgage business, I love what I do and I love helping my clients save money over time by implementing a mortgage plan that works.
If you or someone you know has a loan that has been abandoned, please let me know. I’d be happy to step in and help manage it. At Four Legacies Mortgage we believe mortgage management should be the standard to which other lenders are held, and we’re willing to work to show you why. No, we don’t charge anything extra for our management services. I’d love to help you and your family implement a mortgage plan that gets you where you want to be the fastest.
Just a few weeks ago, we had a dip in interest rates of about .5%. Did you get a call? My clients under active management that could benefit from the rate reduction did. If you’re located in Iowa, and have a mortgage on your home, don’t wait until you miss the next big chance. Let me get you under management today!
Categories: Mortgage Management
A loss of 103 basis points for MBS is a big one. Rates worsened between 1/4% and 1/2% just Thursday. If you or your loan originator were following the 10-Year T-Note, you missed the bus… and you will be spending thousands of dollars more over the life of your loan because of some bad advice.
