Massive Rate Jump, New Foreclosure Guidelines

On the weekend of December 11,2010, Fannie Mae will release Desktop Underwriter Version 8.2. All conventional loans are ran through Fannie Mae's automated underwriting system to receive a preliminary loan approval. The new version going into effect this weekend will have some updated guideline changes. The most important one to take note of concerns previous foreclosures. If you have had a foreclosure on your record you will now have to wait 7 years before buying a new home in your own name, regardless of credit score. Pre foreclosure sales (i am assuming short sales and potentially deed in lieu's)are now two years.

The rate train has been steadily moving higher and higher, with yesterday being an absolutely brutal day in the bond market. If you were quoted a rate on Monday, by Tuesday afternoon that same rate would have cost you an extra 100 basis points (1% of the loan amount) to keep it. If you kept the same fee structure as you were quoted on Monday, your rate would be .25-.375% higher over a 24 hour span.

The generally accepted culprit of yesterday's rout is twofold, beginning with an Irish budget cut and intensifying with a Congressional compromise on extending both the Bush era tax cuts and unemployment benefits. Tax cut extensions lifted the stock market right out of the gate (and hurt bonds) while news that Ireland was close to confirming austerity measures was an early motivator of interest rate weakness in U.S. benchmarks (stole demand from Treasuries).

Today's advice is the same as yesterday. Volatility and uncertainty remain ways of life. We are NOT in a position yet to say we've reached some important support levels that should allow mortgage rates to recover. Things can get worse before they get better, and judging by what we've seen in recent weeks, will probably do a little bit of both in rapid succession. For those who must pull the trigger in December, get safe and get out with a livable payment. All others are at the whim of a market that makes no promises as to when or if it will see improved loan pricing (rates).

Current market rates for well qualified buyers are hovering around 4.75%. Please call to inquire about the definition of a well qualified buyer in today's market.

Crystal Clear Mortgage
888-634-6911

Wild Ride over Thanksgiving!

WOW...Thank goodness for half days on the day before Thanksgiving. Otherwise I would have been in my office watching my hair fall out from the horrific performance of the bond markets. Rates increased a full quarter point (some lenders more) on Wednesday. We picked up some of those losses on Friday but not all of them. It will be interesting to see how this week plays out with regard to mortgage rates. I had chalked up the Wednesday ride to the usual near holiday trading day on Wall Street, but now I am not so sure. For those not familiar with the near holiday trading day, here you go:

Any day near a holiday is notorious among traders. First of all, lots of experienced Mortgage Backed Securities (MBS's) and stock traders take the day off. In general, December is year-end and many annual bonuses have been earned so there is little motivation to take risks or make moves. At the same time mortgage loan shoppers should know that there can be large desperation trades to recover losses or adjust balance sheets prior to year-end reporting. This can make for large and quick movements in rates. For the five weeks traders and investors tend to go along with the herd. Preservation of existing gains takes precedence.

I will post more later in the week regarding the movement of interest rates. As you can imagine the email inbox is quite full after a four day weekend!

Current rates are hovering around 4.25%-4.5% for the best qualified customers on 30 year notes.

Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on agency conforming loan amounts to borrowers who are have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recording + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest)".

Happy Thanksgiving!

Well...that time of the year is officially upon us. Thanksgiving is tomorrow and that means Christmas is right around the corner. We have much to be thankful for here at Crystal Clear Mortgage. It has been a banner year for us and we owe it all to our customers and realtor partners. We give thanks to you this weekend, and our team of great associates that make it all possible. We are thankful for the troops that protect our freedom, and pray for their safe return from far away lands. We hope you and yours have a wonderful Thanksgiving and a safe one as well.

As far as mortgages go...Rates have been holding steady after a few days of rate increases. We are still seeing 30 year mortgage rates in the low 4's to mid 4's for the best qualified candidates. Historically speaking, still fantastic. Make sure to get pre approved before you start shopping for that home of your dreams. There have been a lot of changes to FHA loans and PMI guidelines. Please call us if you have any questions!

Adam Simmons
Crystal Clear Mortgage
888-634-6911

4th day in a row of rising rates

Interest rates have risen for the fourth consecutive day. QEII has come and gone and with almost no fanfare as predicted. The reason rates have not moved lower since the FED announcement is simply because the mortgage bond market had one trillion dollars already priced into it. When the FED announced 600 Billion in asset purchases it actually ended up being a disappointment to the markets and they are correcting their long term positions now. Here is some insight from Sigma Research:

Interest rates continue to increase; so far the fourth day in a row interest rates have climbed. The last three days the 10 yr note yield has increased 17 bp and mortgage rates up about the same; add in the decline so far this morning, the 10 off 23 bp and mortgage rates down 18 to 20 basis points. The bond and mortgage markets were expecting the QE move would drive rates down and the markets were heavily long, now we know QE 2 isn't going to push rates lower as widely expected and all those long positions are being closed out driving rates up quickly. Every technical indicator we apply to bond and mortgage markets are now bearish. The bond and mortgages markets opened weaker this morning but by 10:00 have re-gained the early losses

The QE decision by the Fed is being criticized heavily around the world as unnecessary and an attempt to drive the dollar lower to increase US exports. Many finance ministers are worrying over a currency war with nations moving to lower their currencies to accomplish the same thing the Fed is doing. Haven't heard this much strong criticism of a Fed decision in years.

I personally think that QEII was not needed and only served to further weaken our dollar as well as raise our debt levels. With rates already testing all time lows before the announcement, why was there a need to try and drive them lower? Do people really think 3.0% on 30 year fixed rate money is going to happen. I will be shocked if it does. However I do think we are seeing an over correction right now and a mortgage rate rally will probably happen in the next few days. This rally will not get us back to historic lows, but rates are still amazing!!

Please let us know if we can help in anyway!

Crystal Clear Mortgage
936-447-5626

Tomorrow Is the Day We have all been waiting for...

From our friends at Mortgage News Daily (they saay it a lot better than I can!):

Tomorrow is the day we've all been waiting for....

At 2:15pm, the Federal Open Market Committee (FOMC) will release their policy statement. At 2:15pm we find out if Quantitative Easing becomes a reality. At 2:15pm we find out if mortgage rates are destined to retest record lows.

Let's recap the "What If's" one more time...

If you're still a passenger on the float boat, it's because you made a decision to pass on rates below 4.25% in favor of a chance to lock in a rate below 4.00%. It's because you decided to PLAY THE RANGE UNTIL BERNANKE PLAYED YOU

On November 3, 2010 I anticipate the Federal Reserve will announce another Quantitative Easing program. This event is expected to lead consumer borrowing costs back down to record lows, which means we should see mortgage rates dip below 4.00% with much more attractive float down structures (in terms of how long it will take to recover points paid at closing).

FYI: This process might not be instantaneous, we might have to give lenders a few days to ease into rates below 4.00% again.

Do I think mortgage rates will go lower than 3.75% if the Fed announces QEII?
No I do not. Why don't I see rates moving below 3.75? Because I don't see 3.0 MBS trading in enough liquidity to allow lenders to offer rates below 3.75%. This is a bold prediction considering we don't know exactly what the Fed is plotting. If 3.0s do trade in size, lenders will be able to go as low as 3.25%

How long do I think QEII will keep mortgage rates at the record lows??
Long enough to lock your loan at record low rates!!! :-D

Unfortunately I can't provide an acceptable answer to that question yet, we just don't know enough details about the QEII program. We do however know that the Fed is looking to spark a little "Demand Pull Inflation" via "Cost Pull Inflation", and we also know inflation is the enemy of mortgage rates. While demand pull inflation won't ignite immediately, if the Fed's QEII plan is as successful as previous alternative policy strategies (which were intended to stabilize the economy, and they did), mortgage rates will eventually rise, and it will happen on the slightest hint of consumer led inflationary pressure or sustained job creation. I'm not even going to venture a guess on when that might happen though. Traders, economists, and analysts alike are still operating in a very reactive manner. Outlooks are constantly changing as the economic and political environments evolve. Let's see what the Fed says on November 3rd and go from there....

What if QEII is not what the market was expecting???
"Disappoints" is hard to quantify but I think there would be an initial period of selling that pushed the best par 30 year fixed mortgage rates at least back up to 4.375%. "At least" would imply the Fed announces QEII but it fails to inspire aggressive bond buying. In that case I still think we'd see mortgage rates touch record lows again sometime in months ahead, but I also think that would be a factor of the market losing faith in the Fed which would lead to a sense of panic and extra protectionism. This would be good for no one!

What if the Fed paints a much rosier picture of the economy and they say "no QEII for you"????

When the bond market gets overcrowded, which it still is, an event that shocks the herd would greatly increase the potential for snowball selling. The Fed deciding to delay QEII would be an event that "shocked the herd". If this scenario played out, the best par 30 year fixed mortgage rate would move at least up to 4.75%. This would reflect a lack of liquidity in the 4.0 MBS market.

We don't want that, we really don't want that. I don't think the Fed would let that happen either. They've over-telegraphed QEII. In none of my studies was I able to uncover a logical reason why the Fed would be planning a trick when we clearly expect a treat.

Waves of asset purchases are coming. And the size should be limitless (trillions = limitless) if the Fed really wants to spook wage earners into requesting a hike in their wage rate(bc of cost-push inflation). These asset purchases should also accompany a more accommodative tone in the FOMC statement. For example "rates will be low for longer than an extended period" (not how Ben would communicate but you get the point). This is an imperative part of the easing/debt monetization process. The Fed must send the markets a clear message that they fully intend to reflate the monetary base with inflationary policy. On a side note, I still believe the Fed will eventually encourage the designation of a resolution authority to mop up the overabundance of non-performing assets in the market. It's like Cancer, we gotta cut it out.

If QEII is not announced fence sitters are gonna be o.g "ticked off" and many loan officers are gonna be pointing their fingers directly at me! I'm cool with taking the blame though. I usually don't offer such direct lock/float advice, so when I do, and I do it consistently like I've done all week, you know I believe in it.

Patience is counting down without blasting off....

2:15pm.

The End of Record Low Interest Rates

There is a lot of chatter these last few days about interest rates and where they may be heading. I have been saying for months...how can they get any better? If they do, you may see a .125% drop but nothing substantial. There is just no room for a large downward adjustment. That being said we have now had a few days in a row of rate (price) increases. This means that to keep the same rate quoted to you on Friday, it will now cost you more in closing costs.

Here is some great commentary from Sigma Research (they think the record low rates are going away for good):

Interest rates continue to increase, the 6th day in succession that the rate markets have experienced selling. The bellwether 10 yr note is now back to the level it was trading when the FOMC statement called for another QE move. The mortgage market and treasury market rallied sending rates down as much as 40 basis points on the 10 yr and 20 basis points on mortgages. Now there is apparently a concern in the markets that whatever the Fed may do next Tuesday won't be enough shock-and-awe to drive rates lower. The Wall Street Journal reported this morning that the Fed is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, in contrast to the central bank's purchases of nearly $1.5 trillion worth of bonds during the financial crisis. The report said officials want to avoid the "shock-and-awe" approach used during the crisis in favor of an approach that allows them to adjust policy over time as the recovery unfolds.

As the calendar ticks off closer to the easing move, designed to push long term rate lower, there is increasing skepticism that the amount of the easing move may not be what the original beliefs thought when the FOMC made that statement. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Monday that more expansive monetary policy was a "bargain with the devil." While there is a serious debate within the Fed about another easing move, it is still likely to occur but as we noted in past comments, traders are withdrawing their bets that the amount of the Treasury buying will be less than originally believed. While speculators are covering their bullish bets that rates will decline substantially, the Fed will ease and at worse will keep rates from increasing. The issue now is by how much and on what time frame? How the bond market will trade on the easing next Wednesday is uncertain, but we believe the market is coming close to the end of its bull market that has taken interest rates to historic lows.

Bottom line...if you are closing in the next 30 days I would take your medicine and lock. If you don't you may be in for a rough ride especially with the election surely to be a market mover.

Call me with any questions!

Adam Simmons
Crystal Clear Mortgage
www.CrystalClearMortgage.com
936-447-5626

Best Rates ever...and have been for a while

The news has finally hit the mainstream media. Rates are at the lowest levels in history when it comes to mortgage financing. 30 year and 15 year notes are in the 3% range if you are willing to pay for it in the form of points.

***My personal recommendation*** With rates this good take a slightly higher rate and have your lender waive all of your lender fees to lower your loan amount or lower your cash needed at closing. It is not worth it to pay points in our current environment. If you or someone you know is getting a quote with discount/origination points please send them to us and we will give them the deal they should be getting. The breakeven points on buying down your rate are far too long right now.

Of course these low rates are reserved for the top tier of credit borrowers with the lowest risk profile. Risk profile includes debt to income ratio, loan to appraised property value, credit score, etc. If you do not fall into the best credit/lowest risk sceario you will be subject to Loan Level Price Adjustments (LLPA's). Ask your lender if there are any LLPA's in your loan so you can understand the rate being offered to you.

Do you lock the rate or not lock the rate?? If you are being quoted a base rate below 4.125%, I think you're Gary Busey crazy not to lock it up. If your base rate is above 4.125%, there is room for you to float without seeing a big change in your borrowing costs, regardless of market data. Ugh. That means you should be locking every rate Crystal Clear Mortgage is quoting right now!

Adam Simmons
Crystal Clear Mortgage
936-447-LOAN

Rapid Refinance Program and Check on rates...

As many as 30 million U.S. homeowners would be able to refinance their mortgage at record low interest rates regardless of their income, credit history or loan-to-value ratio under a plan to be unveiled on Tuesday by a Democratic lawmaker.

The legislation would allow for blanket 30-year, fixed-rate mortgages at the prevailing market rate, now around 4.3 percent, for anyone seeking to refinance a government-backed loan, Representative Dennis Cardoza told Reuters on Tuesday.

The plan would help a wide swath of borrowers and is much more comprehensive than the narrowly targeted efforts President Barack Obama has tried to date.

While this is purely seen in the mortgage market as political posturing (the representative that proposed the bill is up for re election and has been strongly against Obama's current foreclosure prevention efforts)it has been talked about in various forms or fashion for months now. Any action taken on this will come with extreme advance notice (think several months) as the ramifications to the secondary mortgage market would be severe, and in my opinion would likely foretell a complete dismantling of Fannie Mae and Freddie Mac which may be difficult to sell. Does the American tax payer really understand what happens if Fannie Mae or Freddie Mac are shut down? I doubt it.

Is the rapid refinance program a cure all? Will people start making their payments at a lower rate even if they are upside down on their mortgage note. President Obama's current refi program says no as only 30% of all enrolled are making timely payments. Until the issue of negative equity is dealt with, there will be no cure for what they are trying to fix.

...In other news mortgage interest rates continue to hold steady. On loans amounts above 150K you should be able to obtain a very low 4% 30 year rate with no points or origination fees. 15 year notes are ringing in around 3.75%. These rates are based on 9/28 and may have changed by the time you read this. Bottom line, there is still money to be borrowed and at great terms. Hope to hear from you soon!

Adam Simmons
936-447-LOAN
Crystal Clear Mortgage

Where to from here? Disappointing data...

So the dog days of summer are officially over even if it does not say so on the calendar or on the temperature gauge. Kids have gone back to school and fall is right around the corner.

This can typically be a slow time for those of us that make a living in the real estate business. What is unusual for this year is that the summer purchase season was very slow. The data is out today that existing home sales in July were down way more than expected, to the tune of 27.2% over this time last year. Here is the article: http://www.mortgagenewsdaily.com/mortgage_rates/blog/168738.aspx.

Where are the buyers? With historical interest rate lows (think upper 3% on 15 year and low 4% on 30 year) there has never been a better time to finance the purchase of a home. Home prices have come back to earth as well. That being said it is obvious that the general public is not buying into the fact that the economy is rebounding. In talking with real estate professionals and potential buyers there is a general edginess to the normally exciting prospect of buying a house. Buyers are extremely cautious right now and are worrying more about their future job prospects, worried about overbuying (which is a good thing), and the feeling that they want to hold on to what ever cash they have instead of sinking it into real estate. Hopefully things will turn around soon because this slow down in purchases will have a tremendous effect on the economy. If people are not buying houses that means people cannot sell their homes. If they cannot sell their homes they cannot buy new houses, they may be forced to foreclose if they cannot afford the payment any longer, may not be able to take a new job out of the area, etc. Let's all hope this turns around soon.

As far as home refinancing, the time has NEVER BEEN BETTER. If you have an interest rate above 5.5% on 30 year money or above 4.75% on 15 year money it is at least worth it to look into your options. Depending on your loan amount, there could be substantial savings for you In our current market. Feel free to call us with any questions you may have about refinancing!

Keep an eye on the Headlines!!

Wow, what a crazy mortgage environment we are lending in. A lot of potential news on the horizon that could have a HUGE impact on the economy, and more importantly homeowners.

First off...RECORD LOW MORTGAGE RATES FACE TOUGH TEST ON FRIDAY. From our friends at Mortgage News Daily:

"The official Employment Situation report is slated to be released this Friday at 8:30am eastern. This event holds the most potential to move mortgage rates in the day's ahead. At the moment, conditions in the secondary market are not supportive of mortgage rates moving any lower. This implies anyone floating their loan on a short timeline, as in less than 20 days to closing, should strongly consider locking in as their is much more to lose than to gain. Anyone closing on a 30 day timeline is less sensitive to this data but should still consider the idea of locking as loan pricing is generally as aggressive as it's ever been in my lifetime"

Secondly...Look for a big push from the government to force Fannie Mae and Freddie Mac into doing one of two things, or both. Either a massive write down on principal balances owed on millions of mortgages to help borrowers that are underwater. (this is the only thing that will stop foreclosures, no one wants to get a loan mod on a house they owe 100K more than it's worth), or a loosening of guidelines to help people with bruised credit, late pays, etc. do refinances to lower their payments.

I would look for a combination of both. Most people cant refinance today because their home won't appraise. Question is...how loose are the guidelines going to get if at all? As long as we remain at full doc loans I think we will be fine. Verifying capacity (the ability to repay) should always be paramount in loan underwriting. Ignoring payment history would help, but it all boils down to how much a borrower owes vs how much the house is worth.

Here is a link to somoe Wall Street rumors regarding FNMA: http://blogs.reuters.com/james-pethokoukis/2010/08/05/an-august-surprise-from-obama/

Loan Quality Initiative

Fannie Mae has begun to require specific data and processes on all new loan undewrites as part of a Loan Quality Initiative (LQI). This LQI includes various changes that will be implemented at different times in the coming months.

For those that are not aware, Fannie Mae is the backer on roughly 80% of all residential mortgage loans in today's market. When you hear the word "conventional" loan, it means that there is an 80% chance that the loan will be underwritten to Fannie Mae's standards no matter what lender you are using.

The first hurdle in the LQI is labeled as "undisclosed credit and liabilities". In order for a loan to close the underwriters and lender will have to represent and warrant the fact that the loan was underwritten with all of the borrower's credit and liabilities taken into account.

This means all loans will be closely analyzed for credit inquiries that could have resulted in new deb that has not found it's way onto a credit report and the time of applicaiton. A written statement fomr the borrower may be required, itemizing out the inquiries and the reason for the inquiries. If the borrower states they have obtained new debt, the loan will need to be underwritten based off of the new debt load as well as the new credit score.

BOTTOM LINE: WHEN YOU APPLY FOR A MORTGAGE LOAN AND GET AN APPROVAL, DO NOT GO BUY ANYTHING ON CREDIT, USE YOUR CREDIT CARDS, OR APPLY FOR NEW CREDIT. IF YOUR SCORE DROPS YOU COULD BE IN BIG TROUBLE OR AT LEAST IT WILL COST ADDITIONAL TIME AND CONDITIONS.

Please call me if you have any questions!

Rates rise, then come back...but for how long?

Consumer borrowing costs moved higher yesterday morning but were able to recover from weakness later in the day after stocks experienced a late session sell-off that pushed investor funds back into the bond market. A decline in bond yields led mortgage-backed securities prices higher and allowed lenders to reprice for the better.

A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which generally forces lenders to push mortgage rates higher.

Rates are still at the lowest points in history. What does that mean? It means that based on 60 years of historical data rates only have one way to go, and that is up. But when?

We are in a period of very little economic activity on the calanders. When this happens the prices of bonds and mortgage backed securities take their cue from the stock market. Bad day in stocks, expect small to no gains on interest rates. Good day in the stock market, expect an increase in borrowing costs to keep rates the same (i.e. points). please remember that rates move up a lot faster than they move down.

Please call me with any questions! I hope you have locked in your rate becasue it may be a wild ridde!

Mortgage rates Sink to Record Low's

Against all odds, mortgage rates have continued to fall. We are now at the lowest interest rate levels in history. Don't believe me? Read this article; http://www.msnbc.msn.com/id/37896585/ns/business-real_estate/.

If you have been sitting on the fence wondering about refinancing or purchasing a home, it is time to get off of that fence.

How long will rates stay this low? Great question, and a hard one to answer. All of the "experts" and "analysts" never thought we would be this low in the first place. SO it is important to understand why the rates have fallen to the current levels.

From our friends at Mortgage News Daily:

We can look at price action in one of two ways today...

1.A Product of Excess Uncertainty: continued choppy behavior (stocks, bonds, mortgage backed securities)within a well-defined but wide range OR

2.Double Dipper: We are experiencing the beginnings shift in global economic sentiment...sparked by a downturn in housing, weak June employment numbers, and earnings disappointments.

If you are a supporter of the range bound perspective (#1), you might view today's interest rate rally as a "buy the rumor, sell the news" pre-FOMC flight to safety. This would assume you felt Treasuries were overbought and unlikely to break long term 3.17% resistance. You might also feel that stocks were "selling the rumor" so they could "buy the news" tomorrow. The rumor being a significant FOMC downgrade of housing or the labor market. Supporting this theory: stocks are still trading in low volume and the 10yr note didn't breakout of the recent range

If you're a "DOUBLE DIPPER" (#2), today's worse than expected Existing Home Sales print was another nail in the coffin of the global economy. You've probably been patiently waiting for the short covering led stock market glass rally to shatter. This camp speculates that the Fed will downgrade the housing market tomorrow by referencing "SHADOW INVENTORY" in the FOMC statement.

While option #2 seems like the most logical outcome, especially to frustrated housing professionals (even I am frustrated), I find it hard to believe the Federal Reserve will "cut off their nose to spite their face" and spook the markets with some bearish verbiage. More or less, given the government's recent rhetoric on housing and the NAR's "glass half full" spin on data, the Fed will probably sidestep the issue while finding a way to remind us all that the road to recovery is going to be LOOONG and ROCKY.

If this LONG and ROCKY sentiment holds tru, we may see rates at these low levels (sub 5%) for quite some time.

Adam

The Loan Process, in Summation

It has come to my attention over the last year or so that most people actually have no idea what takes place from womb to tomb (application to funding) in a mortgage transaction. Most real estate agents have a general idea, but still think we hold all the keys to the puzzle when things don't go as planned regarding time lines. Therefore I shall give a brief rundown off the entire process for some clarity to those in the business, or those thinking of purchasing/refinancing property in the near future. Here goes:

1. Application (or Pre Qualification Stage): At this time a loan officer will collect information from an applicant in order to pre qualify them for a home loan. This is an initial glance, or birds eye view, of someones ability to get financed. Usually credit is pulled and reviewed, and income and asset information is reviewed verbally. This allows us to get a look at an estimate of the buyer/refinancer's debt to income ratio's. Credit and debt ratio (DTI) are the two most important pieces to loan approvals these days. If the credit and verbal debt ratio all check out, a pre qualification can be issued. WARNING: IF YOU WANT A PRE APPROVAL, YOU BETTER HAVE YOUR W2'S AND PAYCHECK STUBS FOR VERIFICATION.

2. Preliminary Good Faith Estimate/Fee Worksheet: At this point we can issue a prelim Fee Worksheet that will show borrowers the current market interest rates, and fees that they would incur if the transaction were closing, or being locked, on that day. These are subject to change based on the market, so buyers don't start railing your loan officers at this point because it will do you no good. If you are not in a position to lock, it is not a time to discuss interest rates. If doing a refinance, you will get a legally binding GFE and it IS the time to discuss.

3. Home shopping (for purchasers): Have fun! When you think you have a home in mind, call your loan officer to get an estimate of the payment for the home, closing costs, etc. Get a list of documents you will need to gather for the loan processing so you can start collecting them.

4. Home under contract: THE DAY you get a home under contract call your loan officer to lock in the interest rate. They may require that you send in all of your application verifications prior to (W2's, paychecks, bank statements, etc.) so get those ready.

5. Once the contract is received by the loan officer it is thoroughly reviewed. Any nuances (seller concessions, non realty addendum's, survey costs) are added to the loan application to get it true and correct. The loan officer will then analyze your paycheck stubs (looking for average monthly income based on year to date earnings, whether you are commission, etc.) analyze bank statements for unusual deposits, verifying you have the needed cash to close, etc. Once everything checks out the loan is ready for processing. That is where the fun begins!

6. Processing: This is when the appraisal gets ordered (provided the home has passed inspection), survey gets ordered, and title gets opened. It typically takes about 7 business days to get all of these items back. In the meantime the loan is submitted to the underwriting department for review against the investor (bank) guidelines. Turn around times are always changing so this can take a day, or a week. As we move into June it will take longer thanks to the influx of tax credit contracts trying to close.

7. Underwriting: Once the file is received in underwriting it goes in line. It will not be looked at until the files in front of it have been reviewed. Get with you loan officer to confirm turn times. The underwriter will review your file and either clear the file to close (if they have appraisal and title) or issue an approval with conditions. The conditions on the approval can be small items, or very large, deal killing items. I will get into this in a separate post.

8. Processing: At this point the processing team will gather all of the conditions on the approval and resubmit to underwriting. However long it takes you to gather the conditions will effect how soon we can close your loan. Once we have them, it's back up to underwriting, waiting on the updated turn times to come and go.

9. Clear to close: The underwriters have cleared the loan for closing. Documents still have to be ordered, prepared, reviewed, sent to title, HUD's balanced, etc.

That is a VERY quick summary. Depending on turn times and how handy you as a borrower have all of your documents, can directly impact how long it takes for a file to get to closing. You may have got your loan officer everything they needed 4 days ago, but if turn times are 5 days in underwriting, you will be waiting one more day. I know this was a very long blog post, and they typically will not be that long. I will take the next couple of weeks to breakdown the entire process step by step. Please call me with any questions!

Are You Kidding Me??

WOW! Get ready for this one...effective June 1st, Fannie Mae will now require that a second credit report be pulled prior to closing on all home transactions (refinances and purchases).

I understand that Fannie Mae had a lot, and I mean a lot, of losses over the past couple of years. However, the ramifications of this are going to send shock waves through the industry for several reasons:

1. Credit is always a moving target. You can have zero transactions on credit in a 30 day period and pull different scores. Loans must be underwritten off of exact credit scores. This means that if you started your loan with a 740 and end up with a 739 (yes one point), your loan has to go back to underwriting and closing will be delayed.

2. Borderline Deals: If you have a 680 credit score, which is the lowest you can have to obtain PMI, and at the end of the transaction you are a 679 you can say good bye to your loan, your earnest money, and the house.

It remains to be seen exactly how this will be handled in underwriting, but for now, DO NOT have any activity on ANY lines of credit once you apply for a loan application. More information to follow...

Legislative Alert!

So those of you that have read this blog are aware of the trials and tribulations that have occured since the onset of the Home Valuation Code of Conduct (HVCC). Some of the Realtors that I work with read this blog and know first hand some of the issues that we have had to deal with, and the work it takes to overcome these issues. Well...good news may be on the horizon! The National Association of Mortgage Brokers has successfully lobbied congress to get an amendment offerred to immediately "sunset" the HVCC. This means that lenders would again be able to order appraisals from their trusted associates, appraisers would get paid their fair wages, and the overall quality of work on appraisals would increase. This is potentially great news for Buyers, sellers, loan officers, Realtors, title companies, appraisers...basically everyone connected to a home transaction. I will continue to keep you updated. here is some of the info: (by the way...rates are still unbelievable!!!)

After months of hard work and meetings with Congress, NAMB is pleased to announce it was successful in working with Congress to have an amendment offered to S. 3217, the "Restoring American Financial Stability Act of 2010," that would create new appraisal independence standards and SUNSET the HVCC. Senate Amendment 4015, introduced by Senator Casey (D-PA), would, upon enactment of S. 3217, immediately sunset the highly controversial Home Valuation Code of Conduct (HVCC). The amendment would also bring greater appraisal quality and accountability to the housing market by requiring licensing standards for appraisers pursuant to the SAFE Act, and require minimum standards for AMC's, among other provisions.

NAMB applauds Senator Casey and staff for their hard work on this amendment. The amendment will be officially public tomorrow, continue to monitor your email and NAMB's website (www.namb.org) for updates on this amendment's progress.

For a copy of the amendment, go to this link: https://www.namb.org/images/namb/GovernmentAffairs/casey%20amdt%204007.pdf

Thanks for stopping by! Call me or our great team with any questions!

Wow! Did you see the DOW yesterday...What it means for Rates

Absolute chaos and pure panic on Wall Street yesterday as the DOW suffered it's largest single day fall in History, almost 1000 points. Stocks ended up down about 360 for the day, gains coming as word spread that most of those mass sell offs were triggered by computer programs, and someone had fat fingered their keyboard selling billions of stock instead of millions.

However, not all of the anxiety was due to an error. The issues with Greece are becoming more paramount by the day. The concern is that other countries, who are heavily invested in Greek debt, such as France and Germany will follow them into a financial black hole should the Greeks default on their promissory notes. France and Germany are widely considered to be the healthiest of the European Union (at least financially!). If Greece were to default on the loans France and Germany made, it would hurt their economies tremendously. Spain, Italy, Portugal, and Great Britain are widely invested in Greece as well, and are already paying the price. The Portuguese government is issuing 10 year bonds paying 11.5%!!!! That means they pay twice as much to borrow money as France does. Holy Cow!!

What does this mean for mortgages, i.e. why am i talking about it?? It is the flight to quality that results when stocks are in a wide sell off. Investors pull out of the stock market and invest in government debt (treasuries). The prices of the bonds go up, which causes the yield to fall. Mortgage backed security bonds are closely tied to these types of securities. That means...RATES FELL YESTERDAY! Bad economic news for most people is good news for those buying and refinancing. Rates are now at the lowest levels of 2010. Not quite as low as the tail end of 2009, but close. If you were sitting on the fence, you better jump off ASAP as rates move up much faster than they move down.

Call me with any questions. 936-447-LOAN!

Common Pitfalls during Home Financing

Realtors....ever have a great deal, one that looks like a slam dunk, only to have it fall apart once the file hits an underwriters desk? Absolutely you have, because it is unavoidable in some cases. A good loan officer should do their best to ask the right questions at the initial loan application, but you never know what can rear its ugly head during processing. Here are some common issues we see and hear about:

1. TAX RETURNS, TAX RETURNS, TAX RETURNS: everyone wants to pay Uncle Sam as little as possible. I get that. What I don't get is why you think you should be able to qualify with more than you tell Uncle Sam you made. For example: if you take unreimbursed business expense deductions (the worst is mileage and car expense, especially for W2'd sales reps), the amount you deduct will be taken out of your W2 income for qualifying purposes. The underwriters will look at two years of your tax returns and average the deducting. That is the amount they will "hit" against your income. It does not matter if you "aren't going to do it again this year (wink,wink)", the underwriters will assume you will until they have proof. This has killed many of deals in the past, and will continue to do so in the future so be careful.

2. SELF EMPLOYED BORROWERS: same issues as above. If you write down all of your income to help you on the tax side of things, get ready for a difficult underwrite. The only line item you can add back to your bottom line for qualifying is depreciation. So, if you take a huge write off, better hope it's depreciation if you want to buy a house. Also, you need two years self employment history in 95% of cases. If your company W2'd you, and then switched to 1099 recently, you will have difficulties.

3. Have a debt that someone else pays? Better have 12 months of cancelled checks to prove it. If you co signed on a car for someone, and they pay you, and then you pay Ford Motor....fuggitaboutit. That debt will be factored into your dent to income ratio.

These are just a few issues that can pop up from time ti time. We are only as good as the information the borrower gives us. So if they think they can not be honest with us on the forefront, it will be figured out, and usually not at the best time (i.e. well on down the road).

If you have a unique situation, call us and we can guide you through the process!

Having Appraisal Issues? Here's why...

HVCC, a.k.a. Home Valuation Code of Conduct. This may be one of the most absurd, pieced together, least thought out rules to ever materialize in the mortgage/real estate business. The funny thing is...IT IS NOT EVEN A LAW!!!

HVCC was a settlement to a lawsuit filed by the Attorney General of New York, Andrew Coumo, against Fannie Mae and Freddie Mac. The idea behind HVCC was to help ensure appraiser independence and to protect the integrity of the appraisal valuation process. HVCC was a settlement. Instead of the NY Attorney General suing Fannie Mae, Freddie Mac, WaMu and First American’s e-Appraise-it appraisal management company, we ended up with HVCC. Sounds like a decent idea on the surface.

However...here is the issue. Appraisals used to cost about $380 for a standard lot/block appraisal. The cost has not changed. What has changed is the amount the appraiser actually receives out of that $380. Now, because of HVCC, all appraisals must be ordered through an appraisal management company, or AMC. The AMC contracts out the appraisal job to the lowest bidder and pockets the rest. Therefore you have appraisers viewing property for pennies on the dollar for what they are used to, and have no incentive to spend the time and put in a quality report. They have to see twice, maybe even three times the number of properties to make the same amount of money. You cannot see properties when you are analyzing comparables at a computer. Thus enters LOW APPRAISAL VALUES, HORRIFIC COMPS, and the exit of customer service.

While not all appraisal reports are coming back low, a lot of them are. What do you do in this case? What recourse do you have? HVCC forces appraisers to respond to comments and additional comp suggestions regarding the appraisal report in question. If you have a low appraisal on your deal here are the steps you and your lender/real estate agent should take:

1. Get the agents together and come up with three new comps for the home under contract. Make sure these homes truly are comps (i.e. less than 5 miles away, sold in the last 6 months, similar square footage and amenities). If additional comps are outside of these listed areas, your not going to like your results.

2. Have your lender submit the comps to the appraisal management company for review and comment. Usually the AMC will give the appraiser 24-48 hours to make any changes. CROSS YOUR FINGERS. Appraisers do not like to be told how to do there job.

3. If the appraiser does not adjust the value, have your lender take the appraisal to the appraisal review board inside of the lenders offices. Sometimes they will override an AMC appraisal but you need strong compensating factors (large down payment, typically 20%, great credit, cash reserves). Lenders want that type of paper and don't want to lose it to a bad appraisal.

If that does not work...get ready to renegotiate the contract. There are a lot of movements underway to repeal this aberration and hopefully it will be repealed soon.

I will keep you updated with more information as it comes along. Thanks!

What is Good Credit anyway?

The definition of good credit has changed rapidly over the last 2 years. Ever since the "Mortgage Meltdown" (I hate that term), there has been a fast and furious tightening of underwriting guidelines. One of the major components of loan underwriting is a potential borrowers credit score, and what the credit report says about their past borrowing history.

Let's time travel back about 24 months, or 10 years in the mortgage years, when loans could be had by stating your income, or basically proving that you could fog a mirror. Back then Fannie Mae/Freddie Mac had allowances for credit scores down to a 580. Yes 580! You still had to receive an Approve/Eligible response form Fannie Mae/Freddie Mac, which was unlikely on that credit score. However 620 scores and up usually received the approval. That means a 620 score received the same rate as someone with an 800 credit score. NOT ANYMORE!

Fannie Mae/Freddie Mac have implemented loan level pricing adjustments (called LLPA's). These are nothing short of bumps to your interest rate depending on what your credit score is. In today's world, you need a 740 or above if you are looking at conventional loans to not get an LLPA attached to your loan. If you have a 700-739, the hit to your rate is not that bad, but some days may be as much as .125% on a 30 year note. Credit scores below a 700 get hit much harder. Expect about .25% higher of an interest rate than current market if your score is a 680-699, and as much as .375 if your score is 660-679. If you have score that low, you better have 20% down or you must go with an FHA loan. I'll talk more about that at a later time.

Just because you have a credit score in the range I just discussed, does not mean you can get approved. It is also important to look at what is on your report (i.e debt ratios, late pays, etc.).

If you are thinking about buying or selling and are not sure what your credit reports says, or are unsure about the credit score, call a mortgage professional today. Do not go the free credit report websites as they are not always the same as what a mortgage company will pull. Lenders eventually need their own credit report anyway, so you don't want to base a loan approval off of a credit report the lender did not obtain.

It is official!

The dreaded day has come and gone. The FED has officially exited the mortgage secondary market and (for the time being) ceased propping up an entire industry. What does this mean for you as a realtor or as a buyer/seller?

First things first. Rates WILL go higher. This is understood. What is not understood at this point is how much higher they will go and how quickly. We at Crystal Clear Mortgage, along with other market participants, expect rates to move upward but not at alarming levels. I expect the best interest rates to be around 5.5% within the next 30 days on 30 year notes. This will scare some buyers but it is our new reality. You snooze you lose.

There will be a tremendous amount of volatility in the near future regarding mortgage rates. Price worsening will be harder to predict. The reason for this is Private investors are now entering the market for the first time in a long time without the security of the FED. They will be in a "feeling out" mode to try and even out supply and demand and the price points that create this equilibrium. It is quite possible that a quote on one day can be .25% better or worse than the day before. Prepare your buyers for this. IF YOU HAVE A HOME UNDER CONTRACT, LOCK IN YOUR RATE TODAY AND FORGET ABOUT IT. BY THE TIME YOU CLOSE YOU WILL HAVE A BELOW MARKET INTEREST RATE. THE TIME TO BEAT UP YOUR LENDERS ON RATE, OR WAIT FOR RATES TO GET BETTER HAS DISAPPEARED.

I am also recommending longer term rate locks for the first time ever. Usually the best rates are had on 30 day locks, with rate adjustments the longer out you lock. If you have a buyer or are a buyer but have a closing 45-60 days away, LOCK. Once again, by the time you close, odds are you will have a below market rate even after taking a slight hit for the piece of mind.

When Should you lock in an interest rate?

I hear this question from my clients all of the time. My answer to them is that they should lock in as soon as they get a fully executed sales contract. That being said, your best rates will come on a 30 day lock, and some contracts these days are pushing closings out for 45 and even 60 days. What do you do then?

You need to bite the bullet and take a slightly higher rate for the added security of the longer rate lock. The reason I suggest this is two fold:

1. You can always float down, or renegotiate, your interest rate before you close. Make sure your lender offers a float down option on your rate locks. There may be a small fee for doing this, but locking in your rate protects you by giving you a worst case scenario. Keep in mind you will only be able to float down if rates have remained stable or have moved lower. This is getting increasingly doubtful in our current market.

2. We are no doubt about to enter a rising rate environment. If you have a 45 or 60 day escrow and hold off locking until you get within 30 or even 15 days of close you are risking a higher rate then if you had done an extended lock. The markets can adjust fast, and by the time your loan officer gets in touch with you to let you know rates are going up, you could end up very disappointed. If you have high debt to income ratios, a higher rate can blow your loan, and at a minimum the loan will need to be processed through underwriting again at the higher rate, adding more time to the process.

I hope this information helps. Check back soon!

Mortgage Rates go from 2010 Lows to 2010 highs in one day!

It is more than a little ironic that I cautioned yesterday about interest rates moving upward and doing so quickly, because it happened yesterday. Across the board (by that I mean conventional, FHA, VA, etc.) rate sheets took a hit of about .375%! That is a HUGE jump in one day. That means if we were quoting 4.875% in the morning, by the afternoon we were quoting 5.25%. I would like to think that this is just a knee jerk reaction to a horrific bond offering yesterday, but I know it is more than likely going to continue. Why did this happen yesterday??

There are several factors. However the likely culprit is a lackluster 5 year bond offering. At 1PM eastern, the Treasury Department auctioned 42 Billion dollars worth of 5 year notes. When our government lacks the cash needed for spending, they must find it from investors (China!). They do this by selling debt such as bonds and t-bills. The success of any auction is always gauged by demand....and there wasn't any! This had investors jumping out of the bond market (which drives mortgage interest rates as Mortgage backed Securities are tied closely to bonds) which drove the prices for Mortgage Backed Securities in the toilet. The less the bonds are worth, the higher rates go to attract buyers. Bad Situation.

IF YOU HAVE BORROWERS WHO HAVE NOT LOCKED, YOU NEED TO ADVISE THEM TO DO SO. With FED support of the mortgage markets ending on 3/31, it is doubtful rates will rebound.

Feel free to comment!

Welcome to My Mortgage Blog!

Thanks for stopping by my new blog. I will update this blog at least every week with information regarding home mortgage rates, new guideline requirements, appraisal issues, unique scenarios, etc. My goal is to educate the real estate community and potential buyers and sellers in all aspects of mortgage financing. It is always important to have a fundamental knowledge of the mortgage markets before entering a real estate transaction. And for all the Realtors out there...we know that every loan you have is unfortunately not as smooth and perfect as the ones we do (wink, wink) and in those cases hopefully you can find some answers here. Once again, thanks for stopping by and I look forward seeing you on the blog. Fill out the poll question to the right and I will use the answers to help fill content!

For now, my first post will be directed towards all of the FENCE SITTERS and agents with FENCE SITTERS in your Rolodex (do people still use Rolodex's?). There are a lot of reason why potential home buyers hesitate in making a decision. Each one of the reasons is very real to the people that are feeling it, and those reasons need to be understood so we can find out if the reason for hesitation is valid. We are in a unique spot right now in that those that hesitate may just price themselves out of the market all together, and here is why:

The main reason has to do with mortgage interest rates. The FED is ending their presence in the mortgage secondary market. This secondary market is where mortgage backed securities (Large bundles of mortgage loans) are sold. This market used to be filled with Pension Funds, Hedge Funds, private investors, etc. Once the market collapsed, everyone left the mortgage secondary due to increased risk. That is when the government stepped in last year and dedicated 1.25 TRILLION dollars towards the future purchase of mortgages. The prices these mortgage fetch on the secondary is what drives current mortgage rates. Because the FED has been paying above market prices for these securities,rates have been artificially low over the last 12 months. The 1.25 Trillion is expected to run out at the end of March, and according to the FHA commissioner, a "healthy" increase in rates overnight will be half to three quarters of a percentage. Any more than that, and you may see the FED re enter, but for now they are out. Make no mistake, we will be entering a rising rate environment. TAKE ADVANTAGE OF RATES YOU WILL NEVER HAVE TO REFINANCE. Once the FED exits the secondary will be filled with private investors who demand much more return for their money, which means higher rates.

Also, the tax credit is set to expire. If you are not under contract by April 30Th you miss out on $8,000 from the federal government. This is not an 8K tax deduction, this is a credit. It is a free 8K back to you! This can replenish most borrowers down payments in our current market. This program WILL NOT be extended.

Check back soon!