National Mortgage News - Loan Closings Drag On and On at the Megabanks

More evidence we are moving toward mortgage bank and mortgage broker originations. Unless YSP is truly going away. However, when I checked this AM, we still show YSP on wholesale rate sheets.
Here is a great article about Realtors who are now starting to refer busines away from the MegaBanks. Nice article Mr. Muolo.

National Mortgage News - Loan Closings Drag On and On at the Megabanks

Yield on the 10 Yr could hit 2.5%

According to one of the fathers of mortgage backed securities. Lewis Ranieri, the co-inventor of the mortgage backed security, believes the yield on the 10-year Treasury could fall to as low as 2.5% this year.
That would continue to further lower interest rates which are almost to 4% on a 30 yr fixed rate.

da' bidness

I watched this morning as "The Obama" signed FinReg 2010 today. I still have little understanding on how this is going to be implemented or what the impact really will be, but this guy has some great insights. One thing is for sure mortgage lending will continue to be an industry in the middle of a sea of change as we try to apply these new rules and business practices going forward and interact with a brand new agency to protect the consumer. I'm sure this will be a seamless integration of government entities, not. 

The bad news for consumers is this will no doubt increase the costs of borrowing. Is that bad? Well to me it means less people will qualify for loans, which means less competition for homes, which equals lower home values, which will increase interest rates, which will further slow the pace of borrowing.

Future looks bright!

FINREG - Grapevine Except from National Mortgage News

Found some interesting yet conflicting commentary on the bill. Here you go!

FINREG excerpt, ADIOS MTG BIZ


Feast your eyes on pg 1439:



ix) for which the total points and

fees payable in connection with the loan do

not exceed 2 percent of the total loan

amount, where the term ‘points and fees’

means points and fees as defined by Section 103(aa)(4) of the Truth in Lending

21 Act (15 U.S.C. 1602(aa)(4));



This relates to what is called "qualified mortgage" and is every fixed rate loan now being originated. EVERY FIXED LOAN

by frankenstyle July 14, 2010 8:53 AM





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It also dictates your max rate. Line 12 on pg 1436.

by frankenstyle July 14, 2010 8:56 AM





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Frank, you have a link handy to that?

by BuySide July 14, 2010 10:34 AM





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It's a bit more complicated than that. Frankenstyle, you may be looking at an older version of the measure. Below is a link to the Conference Committee version of the bill. See Title XIV of the bill starting on page 26 of that title, where it defines a "qualified mortgage". This entire bill is a real mess, but especially the mortgage provisions. Anyone voting for it needs to be voted out of office. More can be done to fix financial regulatory problems with much less legislation and gamesmanship by politicians. Call your Senator and compain if they are voting yes on this.



http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/Financial_Regulatory_Reform062410.html





(vii) for which the total points and fees (as defined in subparagraph (C)) payable in connection with the loan do not exceed 3 percent of the total loan amount;



‘‘(C) POINTS AND FEES.—

‘‘(i) IN GENERAL.—For purposes of

subparagraph (A), the term ‘points and

fees’ means points and fees as defined by

section 103(aa)(4) (other than bona fide

third party charges not retained by the

mortgage originator, creditor, or an affil21

iate of the creditor or mortgage origi22

nator).

‘‘(ii) COMPUTATION.—For purposes of

computing the total points and fees under

this subparagraph, the total points and



fees shall exclude either of the amounts described in the following subclauses, but not

both:

‘‘(I) Up to and including 2 bona

fide discount points payable by the

consumer in connection with the mort7

gage, but only if the interest rate

from which the mortgage’s interest

rate will be discounted does not ex10

ceed by more than 1 percentage point

the average prime offer rate.

‘‘(II) Unless 2 bona fide discount

points have been excluded under sub14

clause (I), up to and including 1 bona

fide discount point payable by the

consumer in connection with the mort17

gage, but only if the interest rate

from which the mortgage’s interest

rate will be discounted does not ex20

ceed by more than 2 percentage

points the average prime offer rate.

22 ‘‘(iii) BONA FIDE DISCOUNT POINTS

23 DEFINED.—For purposes of clause (ii), the

24 term ‘bona fide discount points’ means

25 loan discount points which are knowingly

paid by the consumer for the purpose of

2 reducing, and which in fact result in a

3 bona fide reduction of, the interest rate or

4 time-price differential applicable to the

5 mortgage.

6 ‘‘(iv) INTEREST RATE REDUCTION.—

7 Subclauses (I) and (II) of clause (ii) shall

8 not apply to discount points used to pur9

chase an interest rate reduction unless the

10 amount of the interest rate reduction pur11

chased is reasonably consistent with estab12

lished industry norms and practices for

13 secondary mortgage market transactions.



HAD ENOUGH??...

by oldbe July 14, 2010 10:55 AM





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This is the amended version:



http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:s3217as.txt.pdf

by frankenstyle July 14, 2010 11:00 AM





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So, in a nutshell, Barney Frank has succeeded in the disassembly of an industry. Unless I'm misinterpreting something.

by wherewasi July 14, 2010 11:22 AM





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correct, this basically removes any chance of a subprime product from entering back into the market based on a limit of 1.5% above the "prime offer rate"

Wasn't it yesterday that said 25% of citizens are below 599 now? Housing market, meet your doom.

by frankenstyle July 14, 2010 11:34 AM





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I think the opposite. Brokers will be limited on fees. Subprime will be originated through the finance companies that can service the loan. The Beneficials of yesterday should be making a comeback. Self Employed will be getting a cash flow loan that documents their ability to repay through bank statements. Those with big money will rule again. Originators used to today's big splits and making big money on a loan will exit.

by the voice of reason July 14, 2010 12:04 PM

FINREG

So I have eagerly, OK not eagerly, awaited the passing of the FINREG 2010 what is touted to be the biggest increase in government oversight in the financial industry since the great depression. Of course, I am keenly interested in how the bill will impact me, my family, my career, and therefore my future.

So I get on the Internet last night and guess what. No one has published a detailed accounting of what this bill will actually create. I've seem some bullet points, but even those bullet points fail to fully layout or even explain how the bill will change the mortgage market. Some talk has been "Yield Spread is illegal now", is it? I don't see that - wholesale companies are everywhere and last rate sheet I checked had rebate all over it and lots of it.

2300 or twenty-three hundred. It seems like ever more when you write it out. But that is how many pages it takes to protect the consumer from the evils of the banking empire. Funny enough, no one who voted for it has even read it. And even if you did ( and I am not going to) the text would likely cripple your brain into a mush unrecognizable to all but physicians.

Written by attorney's and legally like minded MBA's, the bill is really only a road map and rough draft on how to prevent the train wreck that is the financial crisis.

Even this morning, after the bill has been signed and ready to deliver to the President for signature,Goldman Sachs settled with the SEC and largest earthquake recorded in DC struck. You tell me what that means, but in my world that's an omen.

So what does this mean for consumers since we clearly cannot determine how this bill will really impact lending. They say no more Stated Income loans? Well unless you have 5% capital at risk for those loans (that's not that much) It also exempts FHA and many want fannie mae and freddie mac added to that exemption. So the big banks won't lend then...Well they really aren't right now all that much anyway. So expect it to get harder- not easier to get a new loan.

Fees? Did you say fees. yes these are the things we will all need to get used to seeing more of. Banks will undoubtedly send the costs of ANY new legislation on to the consumer in one way or another. Just wait to see how expensive it will become to have checking account.

Bottom line, no one really knows the true impact of this bill. But one thing is for sure - it's gonna be expensive for all of us.

fannie mae ok's bk's after two years?

some have asked if fannie mae will allow a new purchase with a bk being dismissed over 2 yrs ago. the short answer seems to be only if a dependent or spouse passes away or a bonafide medical issue causing extreme financial distress. yes....it must all be documented. most loan officers are just declining these - so stay informed.

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4.5% at no points - feels good to lock rates this low.

closing times are still consistently 25 days on average.

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The role of the mortgage broker in today’s mortgage market. “GFE” Good for Everything, or a good faith estimate.

With the launch of the 2010 Good Faith Estimate we read articles about the fall of the mortgage broker and that brokers will be unfairly disadvantaged when reporting rates and terms. I am here to call all that poppycock. The simple truth is a borrower can clearly determine how much is being charged or made by the broker and when dealing with a bank or direct lender a borrower does not see all the income being made on their loan. The “TIL” or Truth In Lending Statement still reports the same APR for a broker and lender assuming the same exact terms even if the broker is receiving lender compensation for the loan. Lender compensation or yield spread premium is how brokers offer no points loans and is no different than a bank selling your loan to Freddie Mac except a bank does not disclose this income they receive.

But let’s not forget the role of a mortgage broker. The broker should be presenting him or herself as an authority in the market place, and have multiple investors whereby to deliver their loans. The assumption being that the broker has delivered the best loan product for the client at the most competitive rate and terms to the best individual investor at the time. And every broker should be able to beat a big bank or big bank lender – if they want to. But therein lies the real issue - broker abuse.

Being a mortgage broker became the go to job in the 90’s 00’s for many getting into the industry - and licensing couldn’t have been easier. It just became too easy for mortgage brokers to hijack their clients and charge excessive fees all the while really only being regulated by the wholesale lenders themselves. Of course, those firms had insatiable desires for more paper, so that wasn’t really good oversight, and the states and federal government were apparently asleep for 10 years.

Having originated both as a broker and lender after the new GFE was put into place; I feel I am as capable as anyone to speak to the differences between dealing with a direct lender, bank, or mortgage broker. There aren’t really any differences.

Direct lenders will tell you mortgage brokers cannot be trusted to fund a loan, and mortgage brokers will tell you the banks take 90 days to close. The reality, they are both accurate. There are brokers who can just simply not operate in today’s lending environment and can therefore really train wreck a transaction. But equally frightening is that banks do often take months to close the most simple of refinance or purchase transactions. And often time tell clients late into the process they are not approved or the transaction cannot be completed. Many times due to their own lack of experience mortgage professionals.

Today more than ever it is important to know who you are working with – and be familiar with the actual experience level. Referrals are always great way to determine who to work with. This is not a part-time job. Mortgage professionals need to be licensed and educated in all aspects of residential lending in today’s market. Mortgage brokers generally need even more licensing and education than their bank peers. So your local mortgage broker may be the most knowledgeable mortgage professional available and the cheapest.

So before you go knocking the mortgage broker make sure you are comparing apples to apples and oranges to oranges, and most important, work with someone you trust.





With over twenty years experience in mortgage lending, a Certified Mortgage Banker Designate (CMB) from the Mortgage Bankers Association of America, and billions in funded loan experience, I can assist you and/or your clients with the most important financial decisions related to your residential and commercial real estate. Please call or email me today



Michael A. Foote, CMB
Certified Mortgage Banker

949.584.4600

Rate Update

Clearly, rates have hit all time lows - I have been tracking rates for quite awhile and we are truly at a new low. Today's rates are 4.625 no points for a standard purchase or refinance mortgage. Non-owner or investor pricing is down to 5.00 and almost under 55 for the first time I've seen ever.

If you are in a position to benefit from a lower rate, for heavens sake get your application in today.

Lock your rate --- Look at the chart it's time

Here is a chart of the 10 yr t-bill from 1962 to date..Clearly you can see that you are in a dratiscally low period. It's time to get it done - If you are going to get mortgage financing of any type for any purpose it's time to pull the trigger. Ironically, applications were at a 13 year low last week. 

Last year chart of the 10-Tbill

For those of you "playing the market" and waiting to time the interest rates just right - please review this chart. It's SOOO low for the last year and you can see we've shot up a couple of time already this year. These swings result in mortgage rates for 30 yr products to fluctuate between a 4.6% and 5.550% for a base interest rates.

Shop for a mortgage - Pick your mortgage professional - trust your mortgage professional - and you will end up happy.

You can always apply with me here.

Rate Update and Comparable Sales

Treasury yields continued their upward trend today thereby increasing mortgage rates modestly. For those of you who had not locked you rate - I suggest you take advantage of still historically low rates. Quit trying to time the market and lock the perfect rate. It does not exist.

Comparable sales are becoming a greater and greater drag of refinance and purchase transactions. As sales for existing homes continue to drag, those sales prices are further preventing some homeowners from refinancing since depressed sales, are in fact, sales.

Well those market rates are already on the way out - well there are actually already gone. The 10 yr is at 3.29 as of this post which is a 48% pop from yesterday - If yo didn't lock your loan you are out of luck on the lowest of rates. Still worth locking if you are purchasing a home - but if you are trying to time the lowest time - you missed it. Sorrym but as I always say be prepared - submit your loan NOW and wait to lock the rate when it is at it's lowest, then order an appraisal and bam you are done....DO NOT WAIT TO SUBMIT YOUR LOAN APPLICATION. If you do, you will not be ready to lock when it is time.

USDA Back but not really

Update to my earlier post. Basically the guarantee fees and rules may have changed as big lenders are no longer allowing their correspondents to originate this product - so for the time being you are out of luck if you are looking for this product.

USDA Mortgages? I thought they graded my beef not my credit.

Yes, it is the same USDA that grades and approves our meat and many other components of our agriculture industry. But in fact, USDA also offers mortgages via guarantees made to lenders both large and small. One of the key departments within USDA is Rural Development, whose mission is to bring housing, modern telecommunications, safe drinking water and a bumper crop of benefits to our country’s rural communities.



Although our government and economy have been ravaged from the mortgages originated over the last many years, government agencies are in fact trying to stabilize our housing market by providing support for capital markets, guarantees for lenders, and through government subsidized programs such as these. One of the most popular programs is the USDA Guaranteed Rural Housing Mortgage.



So what is a USDA 502 Guaranteed Rural Housing (GRH) Mortgage like anyway? It happens to be one of the only true 100% No money down purchase products on the market today. The other 100% mortgage product is the VA mortgage. Some basic qualifying guidelines are, the borrower must occupy the property, is a citizen of the country or admitted for permanent residency, does not have non-occupying co-borrowers, and will sell their existing home, if one is owned.



Some program highlights are the property must be located in eligible rural area. These are normally any town with a population of 25,000 or less – and it cannot be adjacent to a large metropolitan area. There are no loan limits and sales price limits…Yep I said it, no limits. There is a one-time USDA Guaranteed fee – and yes, you guessed it that fee can be financed. You can even roll in all closing costs if the appraisal comes in higher than the sales price.



The USDA 502 program does not require monthly mortgage insurance. This is a significant advantage over FHA financing in that respect. This savings can be as much as .55% per year and most likely more if FHA raises their monthly mortgage insurance requirement. These purchase transactions can even include new construction.



USDA even allows refinance of an existing USDA GRH loan provided there is a financial benefit via rate reduction or payment reduction. This program ONLY allows 30 year fixed rate mortgages that are fully amortized. The program allows for condominiums and PUD’s along with the standard Single Family Residence.



If you have credit issues, this program may still be for you. Although 620 credit scores and higher are preferred, 580-619 are considered with compensating such as reserves, job stability and more. Less than 580 credit scores are regarded as a much higher risk and require more due diligence then most lenders are willing to commit to in today’s market.



So is this a great program, in a word yes. Clearly 100% I hard to find and without Mortgage Insurance, makes the USDA Guaranteed Rural Housing program represents the highest amount of leverage available for a primary residence purchase on the market today.



So where do you start? Find a lender that offers USDA financing. Mortgage Lenders, Banks and even mortgage brokers have access to this program. Finding an educated Loan Officer however may pose a challenge. Since the USDA Rural program is fairly small in the mortgage landscape, your typical mortgage call center loan officer is just not going to be familiar with this loan. So make sure to do your research and feel comfortable with the person originating your loan and always check references.