Your rate is floating?!?!??!? Now what do you do?

Rates have really risen quickly catching many of us, including me, left holding a wet bag of floating loan applications. When the loan officer told you to hurry up and get those items to him so he could lock your loan now sounds not so much like a sales pitch, but a true call for urgency on your part.

But don't freak out. Rates are expected to fall back a bit soon. But we may have left the lowest of mortgage rates in the history books. However, no one really knows, including yours dearly.

Here is my recommedation if your loan is floating.

If your loan is for a purchase, you are most likely going to need to lock something -so take the new higher no points rate, and know that historically speaking its a really good rate. If you qualify for a higher rate or adjustable mortgage take it and run.

If you are tight on your debt to income ratio get used to a term called discount points. You'll need to pay some of these to buy your rate down, in other words, get it lower to qualify.

If you are a refinance loan. Hang back, you most likely haven't ordered an appraisal yet and hopefully didn't pay a nonrefundable application fee - so you can wait. Check in daily with your loan consultant and check to see what your rate is for that day. Have a number in mind and when it hits, take it.

Don't be greedy. Yeah I said it. You know who you are. If your rate gets back to 4.5% don't try to hold out for that extra .125% in rate. Take the benefit and feel good. No one times the bottom of a market.

OK, that's all kids.

Ouch 10 yr hits 3.51% @ 92.64 For those of you regular folks..that's bad

We experienced our first 4 rate change day today. Rate are over 300 bps higher than a month or two ago. Refinances are slowing and the pace of decline in values is picking.

What's the bright side you say? Well prices will continue to fall and those with resources and good credit can pick up property with what appears to be a new low in values since the implosion of the Real Estate bubble.

$9 Trillion in home equity lost since 2006

It's a huge number. We all lost about $1.7 trillion in home equity this year alone. This could be good or bad depending on how you look at it. Massive drops in values create investment opportunities. Properties can now be acquired and debt service with average market rents. So you can buy an asset that will eventually increase in value again and the investment will pay for itself while appreciation takes place.

Now if you are a homeowner one way to limit your exposure to your currently underwater or zero equity properties is to buy at today's prices. If you are fortunate enough to be able to afford the qualification buy another home as a rental and use that valuation to offset some of your loses on your current properties. When home values increase you will have achieved appreciation on two properties at an overall low.er cost basis.

Go Rental, Go Investment!, 2011 will be a great year to acquire real estate.

Rate Check Check Check Microphone Check

Wow, what a rate roller coaster these days. Rate are mostly stable this week although higher that the previous 30 days on average. The general concesus it rates will chop around these levels for the near term with a tendncy to rise over the first two quarters next year...which is RIGHT around the corner.

Prudent lending advice is to apply with your lender or broker of choice and float the rate while processing and underwriting take place. All the while you should be working with your lending professional to lock on a dip.

Of course, you can just lock today too...I mena 4.5% at no points for 30 year fixed base rates is still pretty darn good.

Just when you thought it couldn't get tougher to get your loan approved....

Today I read the news that we will get new rules from FANNIE related to underwriting guidelines. Rob Chrisman wrote, "The new DO/DU version will enforce underwriting changes that will allow buyers to use gifts and grants from nonprofit groups for their minimum 5% down payment. Currently, borrowers had to contribute a minimum 5% down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20% down: all that money could come as a gift. But with overlays, many lenders now require a down payment of 10% or more, the new rules mean that borrowers will still have to come up with extra funds - either their own or gifts. But with Version 8.2 comes tougher DTI ratios: the maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines. Buyers who have missed a payment will have 5% of the total balance added to their ratios. And borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, up from four."

Wow, sure is going to see who will be able to buy these foreclosures. My bet the rich will get richer.

Good stuff!

QE2 Explained....

Rates..Always good to take stock of where we've been and where we are today.

I always track rates. I live for rates.  Daily morning rates, mid-day price improvement, late market deterioration. It's as close as I will get to being a wall street trader ala my favorite hotel thrasher Charlie Sheen, which is just fine with this California boy.

When someone asks me what the rates are and I tell them. I will many times get back, "That's too high,  and so and so is offering -0.009% with no fees at all. In fact, the lender said I would get a vacation to Hawaii, and a new car!!" Obviously the later is a shot at levity. But the point being is that many people say many things, and sometimes they are actually speaking the truth or at least comparing apples to apples. Sadly I'd say the majority of mortgage quotes given on websites are half truths at best and many times just plain wrong.

Go to bankrate.com and see the average lowest possible rates - then call the person you know or trust, whether they are a broker, lender, DRE, DOC, CRLMA, NMLS, NORML (the later again a shot at levity), and complete the loan process with them.

Until you complete the application process, and I mean ALL the loan application fields filled out, all income doc, all assets information. Yes, I want all the pages of the bank statements. No, I don't care you get massages at Madam Wong's in the city. Tell your mortgage professional what you want. If we can get it, we'll give it to you. Then and ONLY then, will you know what your loan terms will end up looking like.

But look at this chart - and marvel at your timing...Money is as close to free than it's ever been; whether you believe that is a good thing or not rates are dirt cheap.

Top Ten Mistakes Realtors Make in Today's Mortgage Market

Top Ten Mistakes Realtors Make in Today’s Market



Today more than ever Realtors play an even more critical role in determining financing options for their clients. Even though many Realtors are not familiar with the intricacies of today’s lending environment. Sure, they know it’s tougher, but do they know how to help? Here is a top ten list that Realtors can use to aid in the mortgage process for your clients.

#10 – Don’t even look at one property prior to receiving a pre-approval from a competent lender or mortgage broker. There once was a time when pre-approvals were silly because EVERYONE got approved. But now you need to review every piece of borrower income and asset documentation with a fine tooth comb to make sure there are no landmines within those documents and others that could potentially kill your transaction.

#9 – Condo’s are tough. Before you show a client a condo, make sure it is an FHA approved condo or has the ability to be financed for FHA. If your client is not an FHA buyer, then you should certainly make sure the condo project is lendable. Is there any litigation currently pending? Is there enough reserves? Is there a special monthly assessment that could affect borrower qualification and debt to income ratios?

#8 – Ask the borrower to immediately start gathering their financial documents. As noted in #10, borrowers need to complete this process prior to looking for a home. As a Realtor you should make sure you aren’t wasting time showing buyers properties that cannot afford.

#7 – Participate in the pre-approval process. Sure many of you just want to see the baby and you don’t want to hear about the labor pains. But seriously, the more involved you are in the financing side, the easier it will be for you on the real estate side. Plus you relay to your clients your expertise in finance as well as real estate.

#6 – Determine the long term goals for your client with this property. The sooner they start thinking about investments, exit plans, or how long they plan to hold and sell, or turn a primary residence into a rental property, the easier our job will be to find a suitable mortgage that fits the borrowers plans.

#5 – Get a pre-approval letter that can be easily modified. If your lender has prequalified a buyer to $500,000 but you are making an offer at 450,000. You certainly don’t want to tell the listing side you have more room. Get a WORD document and change the purchase price lower. This is a great tool when you are working up an offer at midnight and your loan officer has decided to finally get some rest.

#4 – Understanding closing times is critical for Realtors when determining how to present an offer. If you are making an offer for an REO property and the REO property manager wants a 15 day escrow and you have an FHA buyer then you need to know that won’t happen. Financed buyers are up against cash buyers all day, and for some sellers, a cash deal at a lower offer price is more desirable.

#3 – Work with your lender. Calling your lender and screaming at them to, “Close this deal now!!” This does nothing to help close the deal. The Loan Officer much like you has to close loans to get paid just like you. So next time, when you approach the lender, ask first is there anything I can do to help, and then if you get no response, yell and scream.

#1 – Work with Michael A. Foote, CMB. With over twenty years of finance experience you need a professional is today’s fast paced and ever changing market.

We've been here before...

There was a great article today from Rob Chrisman that referenced a small article about the HOLC. A very old acronym from the Great Depression. HOLC the old/new mortgage bail out model . The article makes interesting comparisons to today's mortgage market and the tools that were used to save home during the the Great Depression. You will find the comparison encouraging.

FHA News Release from Caliber Funding

Important FHA MIP Changes


Effective 10/4/10 – Applies to all FHA Loans with a Case Number date on or after 10/4/2010

Upfront MIP will go down to 1% for all FHA loans with Case Number date on or after 10/4. This will impact the amount

disclosed in Block 3 of the GFE.

Monthly MI will go up significantly for all loans with Case Number date on or after 10/4. This amount is

disclosed in all places where the monthly amount owed appears on the GFE (several places). The premium

will depend on the Amortization Term and LTV:

LTV Annual Premium for Loans > 15 Years

= or < 95 percent 0.85

> 95 percent 0.90

LTV Annual Premium for Loans > 15 Years

= or <90 percent -None-

> 90 percent 0.25

Under-disclosure of the monthly amount owed on the GFE may result in a RESPA tolerance violation. There

is no cure for the tolerance violation.

FNMA Loan Quality Initiative

Policy Effective 10/4/10

Caliber Funding has established policies and procedures in compliance with Fannie Mae SEL-2010-01

Selling Guide for the Loan Quality Initiative (LQI).

1. Effective October 1, 2010 Caliber requires documentation in the submission package that all parties

to the loan transaction are to be verified against the LDP/GSA list for all files, including but not limited

to, Government and Conventional products.

2. As a reminder, all FHA files require the FHA Case Number Assignment and CAIVRS report.

Un-disclosed Liabilities and Re-underwriting Requirements

Caliber Funding requires that all loans, regardless of channel, be underwritten using a tri-merge credit

report from an accredited agency.

In order to assure that a borrower has not incurred any new debts between the date of their application

and the loan closing, Caliber Funding will obtain a “Gap” report from 1st American / Credco on every

transaction within 5 days of closing.

The responsible underwriter on the transaction must review and clear the gap report. In reviewing the

report attention should be paid to any debts, inquiries or balance increases which have occurred since

the original credit was pulled and the file was initially approved.

Social Security Number Validation

Caliber Funding requires that the Social Security Number associated with each borrower in the

transaction be validated outside of the documentation provided by the borrower / broker.

Excluded Party Lists

Caliber Funding requires that all parties to the transaction, regardless of product, including but not

limited to the borrower(s), broker, originator, processor, appraiser, and realtor(s) be checked against the

standard HUD Limited Denial of Participation (LDP) and GSA lists.

Borrower Occupancy Verification

Caliber Funding recognizes and shares concerns in the industry regarding occupancy misrepresentation

and has implemented several steps in underwriting to help insure the borrower’s occupancy is as stated

on the loan application.

Caliber

Today and Tomorrows FHA Borrower: New changes to FHA lending guidelines and their effects on borrower qualification.

Well the summer is almost over and as we head into another fun filled school year in my home, FHA has some new rules for me to follow at the office. The job to qualify people for a home loan has never been tougher. As many recent mortgage borrowers can attest, the application process can be daunting, haunting, and overall intrusive to no end. Many borrowers feel the headache is not worth the reward.

Now we have word from HUD that FHA rules and guidelines will be changing yet again. Most notably and directly related to borrower qualification are the new MI requirements. These requirements were signed into law by President Obama on August 12, 2010 and gave the HUD secretary more authority and flexibility to change and modify the FHA program as needed to ensure continued liquidity in the mortgage market place.

Effective for originations in the beginning of October 2010, Upfront Mortgage Insurance goes from 2.25% to 1.0% for loans greater than 15 years in duration and over 95% loan to value. This is basically all low money down FHA purchase 30 year fixed loans. But wait, that’s good news. You thought this article would be glum didn’t you. Yes, that is good news, but HUD also changed the monthly mortgage insurance from the current .55% to 1.55% for the same type of transaction.

But what does this really mean to the average FHA borrower? Let’s take a simple hypothetical purchase transaction. The borrower is buying a home for $275,000 and is going to put down the 3.5% and will finance his upfront mortgage insurance premium. Here is how this deal looks today versus post October 2010 changes.

                                                Old                          New

Borrowers pmt. @ 4.500%     $1374.90                 $1358.06

MMI Monthly MI Pmt            $121.63                   $346.00

Totals                                      $1496.53                 $1704.26

FHA has essentially raised the borrowers Principal, Interest and Mortgage Insurance Payments by $60 a month. This is an increase of 12+%.

While this increase seems timely considering the government’s spending of late and talk of expiring tax credits and new taxes too. This increase will get FHA much needed capital, more quickly, by requiring borrowers to pay more monthly versus financing a large amount of the overall insurance over the life of the loan.

With rates still hovering slightly above the all-time lows, this modest increase should not impact the purchase market a great deal. There maybe a few borrowers who are squeezed out of financing a higher priced home, but maybe that is the strange side-effect, some borrowers will not be able to buy as expensive of a home as they would like. And that is OK.

FHA Changes

FHA is changing it's terms, yet again. FHA will increase it's MMI or monthly mortgage insurance premium to as high as .90% from the current .55% and it's UFMIP or upfront mortgage insurance premium to 1% from the current 2.25% for purchase transactions. The result, plenty of technology updates and confused Loan Officers. The question is how will the streamline refinances be affected by this?

4% 30 year fixed...

It's official - we've hit 4% 30 yr fixed. I would offer a high balance client 4% 30 yr fixed today...4% has a small rebate, so smaller loan balances probably won't get that offer...yet.

Should you go with a Big Bank or smaller local mortage company

Posted on my blog a few days back was a link to an article regarding Realtors sending prospective buyers to direct lenders versus the big banks. The reason? Time.



I wanted to expand on that previous article and talk about the advantages of using a small or mid-size company versus the drawbacks of not using a big bank.



The simple truth is your loan will most likely end up with a big bank or at least their servicing group. Bank of America currently services several trillion dollars in mortgages. That’s “T” for trillion. But this doesn’t mean going direct to a big bank will provide a quick and painless refinance or purchase money loan. In fact, in many cases, big bank customers will pay a higher rate and fee combination.



Almost all big banks give access to their vast financial resources through intermediaries called correspondent lenders. These are direct lender that fund their own loans and then sell them to a bigger bank. This structure is common and has been in practice for decades.



So it would seem that going to a correspondent lender would increase prices. But it doesn’t, and here is how. The big banks have overhead and huge operations that eat into other division’s profits or losses. Another way to say it is the banks aren’t just in the business of making home loans. Mortgage Bankers and other direct lenders are solely interested in originating loans. The difference is the direct lender is focused on making loans and structures their company to provide the most efficient platforms in which to originate. As a result, turn times, pricing and overall customer service are generally far superior to the bigger bank.



This isn’t to say big banks are always slower or always higher priced. Ultimately your loan officer or mortgage consultant is the best indicator of how well your loan application process will go. But you can’t tell how good or how bad they are until you are deep in the process.



The best way to find a mortgage company is through due diligence and referrals. You can’t beat a trusted family member or friend who has something nice to say about the person or company that completed their transaction. And make sure that person works for a direct lender or small community bank and your service times should be reasonable.



So the top five reasons to NOT use a big bank are:



#1 You’ll be lost in the shuffle when applying. The big bank application volume is amazing since many think the big bank should have lower rates.



#2 Big banks take advantage of their brand and will provide rates that are above the national average



#3 You may not necessarily receive the personal touch with a big bank. Smaller companies are more nimble and better able to adapt to the changing needs of specific client needs. Turn times at some major banks are upwards of 90 days.



#4 Big bank closing times can take 60-90 days. Most purchase contracts are being written under 30-45 day close scenarios. If you can’t close within that time you may suffer per diem penalties for not closing on time. These fees can be anywhere from $75 a day to over $300 per day.



#5 The Big bank don’t care about you. Bank of America now holds a financial relationship with 1out of every 2 people in the country. Do you think they will miss or appreciate your business?

10 Yr Hits 2.80%

In another sign of continuing pressure to keep rates lower and that mortgage production is not keeping with demand the 10 yr hit 2.80 @ 105.0+ !!

You can get a 4.25% 30 yr at no points and probably no fees if the deal is uber-clean and low LTV.