Archive for March, 2008

Bernanke strikes again

March 18, 2008

The Federal Reserve reduced the federal funding rate by 0.75% this afternoon. The last few rate cuts initially caused bonds and stocks to both post solid gains on the day of the cut. That trend stopped today. The Dow shot up 420 points — it’s fourth biggest gain in its history. Sadly for bonds, their value dropped almost 100 points causing interest rates to increase about 0.25% on the day.

Why the change in the trend? Eventually rate cuts produce inflation. Even with the tame inflation numbers from this month, inflation is becomming a much bigger story and may wind up dominating the mortgage backed security bond market in the coming months.

Rates could even get worse over the next coming days. Take a look at the chart below of the bond market the last time the fed rate was cut — Jan 30, 2008.

1-30-2008-rate-cut.jpg

The bond market continued to plummet for weeks after the cut before finally fighting back. This pushed mortgage rates up 0.75% of a point during the first few weeks of February.

What does this all mean for rates now? Well, if history is any indication, rates are more likely to get worse before they get better. Anyone waiting for a good day to lock in a rate for a purchase or a refinance — today is your day!

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.

Advertisements

Can I still get 100% financing?

March 4, 2008

“Tear up page one and run this headline”

j-jonah-jameson.jpg

“100% Financing is Disappearing – Fact or Fiction?”

I recently blogged about a potential change involving 100% financing. As we all know from last year, using 1st and 2nd mortgages for 100% financing has all but disappeared. We could be seeing the end (at least temporarily) of 100% financing for loan programs using mortgage insurance.

Why? Some mortgage insurance companies updated their guidelines for Georgia, and will now only insure mortgages up to 95% loan to value (LTV) – effectively eliminating 100% financing. Lenders will respond tot his decision by discontinuing their 100% financing programs.

In fact, last week some investors have already “unofficially” declared Georgia as a declining value market and have reduced loan guideline LTV’s by 5%. This effectively makes 100% financing, 95% financing. This change has not taken hold with all lenders, but be aware that this is a real possibility.

Given a situation like the one mentioned in this post, this is another advantage to being a broker with access to multiple loan programs and funding sources. Even though one of the lenders we use discontinued their 100% financing loans, we work with several other lenders who still offer 100% financing.

And on that note, anyone currently looking to buy a home using 100% financing does not need to delay as this loan program could be entirely gone sometime in the near future.

More to come as this story develops…

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.

The changes of Spring are coming

March 3, 2008

Even though parts of the country are still being battered by winter storms, the spring season is approaching. Spring time brings a lot of changes… flowers bloom, animals come out of hibernation, rates change, and lender guidelines are modified. (well, OK, so the last two change on a regular basis, but I needed a theme for the post 🙂 … Let’s take a quick look at rates and guidelines.

Believe it or not, the current trend at the end of last week had mortgage rates going down. How long?… How low? Honestly, I have no idea. No one knows exactly what is going to happen, but we can look at the current trends to get an idea of what is likely to occur.

Rates have been nothing but volatile since the last Fed rate cuts from the end of January. Today has been no different as the market has dropped over 30 points and rebounded to be only down 10 points, and by the time I write this post, the market is down 25 points. ALL OF THIS is taking place in the first two hours of trading today (Monday).

Aside from mortgage rates continuing to be volatile, there are a few things to know about changes in lender guidelines along with a couple of other points.

1 — Jumbo loan limits are soon to increase. The economic stimulus package has been passed and will now go to HUD for review and to determine the exact loan amount. The new loan amounts should go in to affect on July 1, 2008. This will likely raise the conforming loan limit to somewhere around $650,000.

2 — 100% financing guidelines continue to become stricter (and may temporarily disappear entirely). Some investors have already “unofficially” declared Georgia as a declining value market and have reduced their max Loan-to-Value by 5%, effectively making 100% financing, 95% financing. If you are working with a client OR personally looking for 100% financing (no matter what their credit score) — if you are under contract, you should lock-in and protect your rate (and loan program) immediately. First it was the 80/20 disappearing; now it is 100% MI. More on this as things develop.

3 — Anyone in an ARM should consider refinancing into a fixed rate mortgage. With rates still near historic lows, this is a great time to get into a fixed rate loan. As inflation continues to become a bigger story in 2008, mortgage rates become more likely to rise.

4 — Speaking of inflation, all of the economic indicators have inflation above the Fed’s target range of 2%. These figures will most likely only get worse as the impact of the Fed rate cuts take hold. Most economists feel it takes about 6 months to see the impact of rate cuts. Currently, we are seeing the results of the first rate cut from the summer of 2007. What is going to happen once the big January cuts have an affect? (see my previous posts here and here for more details)

5 — Which way are rates going? The shorter answer — it appears the new trading range of mortgage rates is going to be 5.5% to 6.5%. Anything in the 5’s would be worth locking-in for anyone looking to refinance OR any buyer under contract to close in 30 days.

As always, check back with the Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile for updates on rate trends, guideline changes, and more in the coming weeks and months!

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.