The Loan Ranger

July 28th Market Review

2008-07-28T12:13:00.000-07:00

There was good economic news on Friday as New Home Sales for June and Orders for Durable Goods were far better than expected. And good economic news about the economy is bad news for Bonds, which caused money to flow right back out of Bonds into Stocks, keeping Bonds and home loan rates from bouncing up any higher. So after a week that saw the 30 year fixed rate get as high as 6.625%, we have today's bond price declining by 80 basis points and allowing the same 30 year fixed rate to drop to 6.25%.

Details are still coming out about the housing reform bill passed over the weekend and we will update you as to the particulars as they become clearer. Needless to say it will be another interesting week for housing and financials.

My emails are a steady stream of lenders upset with what they see as negative media sensationalism. We are not in that camp. From politics to economics we accept they will report… inaccurately. For example, the state of California has as many pending foreclosures as 32 states… combined. 1 in 500 homes is currently 90 days or more delinquent. That isn’t a positive… but it isn’t a crises either.

What IS good news is the fact that we are seeing an increase in purchase activity AND higher interest rates.. BOTH are typical in a rebounding market

July 21st Market Review

2008-07-22T10:02:00.000-07:00

The good news is you can call your broker and thank them for not moving all of your investment liquidity into cash last month. Stocks roared back with vigor last week (and opened up higher again 45 minutes ago). The bad news is that the rally in stocks was fueled by cash taken out of the bond market and as a result mortgage rates moved up nearly .50 a point in 4 days of trading.

While we open this week with the year-to-date high-water mark for rates we have seen a significant increase in activity - in particular purchase transactions. This most likely means we are defining a bottom as clients are now moving on contracts that they let set dormant for most of 2008. So we look to be returning to healthy market... which most likely means higher rates. If you have a client who has been on the sideline waiting... it may be a good time to lock a rate.

June Market Tidbits

2008-06-18T12:50:00.000-07:00

Mortgage rates continued to rise last week as crude oil nears $140 a barrel. It appears this may be a trend for the summer of '08. 30 year fixed rates averaged 6.33% last week which is the highest level since November. At this same time last year rates averaged 6.32%. For all of the daily volatility we track every week - the market has been relatively stable over the last year.

Last Monday the Federal Reserve Chairman stated that “the central bank will strongly resist rising long term inflation.” This is welcomed by the bond market - ever wary of inflation. Bernanke has faced challenges in his tenure and so far he has been up to the task. A stronger dollar will lower crude oil prices and restore confidence in bonds - giving us a stable market.

And here some FYI for you guys who are or real estate investors or currently service them. I pulled this off a blog:
Real estate investors throughout the country including California, the San Francisco Bay Area and Contra Costa County now have an additional challenge when there is a need to refinance their real estate investment properties held in an LLC for liability protection...
Changes in Freddie Mac lending policy: Freddie Mac will not refinance a property that has been held in an LLC at any time in the previous 6 months. Fannie Mae is expected to follow suit. And of course, this may require your lender to do the same.
To read the whole blog, go to: http://activerain.com/blogsview/519308/Fannie-Mae-and-Freddie

Market Tidbits

2008-05-18T12:46:00.000-07:00

M & T Bank (formerly known as Union Planters) announced last week that they are eliminating their wholesale mortgage team. Countrywide has eliminated their wholesale division as well. This is a sign of our times. In 2007 we saw 400 + lenders in Tennessee close. The Department of Financial Institutions estimates we will lose at least that many in 2008.

As more lenders close and home prices fall it is a good sign that we may be reaching a low point in the downturn. Wall Street has rumblings of such as we are seeing new signs of strength in financial sector stocks (with the exception of builders). If money is beginning to flow back into stocks then you have to take that as a positive sign.

Clients seem convinced that mortgage rates are moving lower based on media reports but we continue to see rates hold their ground as mortgage backed securities remain unchanged. It will be interesting to see who is right - consumers or the bond traders.

Thorns In The Roses, II

2008-05-05T12:29:00.000-07:00

clip...clip, yikes!! More THORNS!!!

No Closing Costs Mortgages: While a mortgage company may be willing to waive their customary charges, does anyone really believe that third parties such as appraisers, title companies and the government are actually willing to waive their fees also? You will most likely receive a higher interest rate to more than cover these fees. Every mortgage company has the option of structuring your loan in such a way. Request all your options and compare Good Faith Estimates.

Speaking of…Good Faith Estimates: You must demand them. Although it is the law, if you do not ask for one, you may not receive it. You cannot effectively shop for the mortgage that best suits your financial situation if you do not have Good Faith Estimates to compare. When you do have them, be sure and compare apples and apples regarding down payment, payment, rate, closing cost, etc. If you are having trouble doing so, ask questions.

Money Merge Accounts: The newest rave in the mortgage industry is the MMA. This multi-level marketing “movement” promotes the MMA as a mortgage acceleration program. Although the complexities are too many to fully cover, the MMA encourages individuals to pay their mortgage from a home equity line-of credit instead of from their traditional checking account. As you make extra payments towards the principal of your mortgage, you will pay it off earlier and save thousands of dollars in interest. The software and the “revolutionary” knowledge can be purchased for the average price of $3500. Save your money. Extra payments to your mortgage principal reduce interest with or without the fancy software.

I encourage you to take the time to stop and smell the roses. Go ahead and clip a few. Display their beauty in a vase. Just watch out for those thorns.

Thorns In The Roses

2008-04-19T13:23:00.000-07:00

Two of my favorite things emerge in the spring…roses and home buyers. After this winter’s longer than usual dormancy period, the housing market is blooming thanks in part to renewed consumer confidence. But be wary…every rose has a thorn.

Here’s a short list of thorns to look out for as you undertake the process of buying or refinancing a home.

Unrealistic Closing Dates: Mortgage activity has increased, but attempts to make up for 1st quarter losses and uncertainties in the industry keep banks and mortgage companies from staffing for such. When coupled with extreme underwriting diligence, it is now taking more time than usual to complete a mortgage transaction. Be realistic when initially proposing a closing date and prepare to make contingencies should delays occur.

On-Line Rate Shopping: Go to any Yahoo, CNN or Google page and you will undoubtedly find an “Average Mortgage Rates” banner ad. THIS IS AN AD! Take the time to read the fine print regarding how much of a “discount” (aka – “points”) you will be charged for this “low, low” interest rate. If you want to know what mortgages are actually closing at, find the average rates published by Fannie Mae. They can be found in the business section of most local newspapers.

Ouch. Those pesky thorns make it tough for even the toughest of rangers to type! Don't touch that dial - - - "Thorns" will continue.

Rate Shopping Truths

2008-04-09T07:19:00.000-07:00

STOP - If you have not read the 3/21/08 blog, How To Shop For A Mortgage Company, read that one first!!

Most people shop for a mortgage by simply calling and asking – “what is your best interest rate?” Such an open-ended question will invariably leave you frustrated and expose you to “salesmanship.” If this is all you ask for, it is all you will get!

NEWS FLASH - all mortgage companies have the same interest rates!! For example, if three different companies all offer FHA products, then each mortgage company CAN get you the same rate. But will they?

Because one loan officer may quote you 4.99% and another quote you 6.25%, it does not mean that one mortgage company has significantly better rates than the other. It means you are being “sold” different products.

Perhaps the loan officer quoting the 4.99% is pitching you an adjustable rate. Maybe they are offering a 2-for-1 buy down product, which is 4.99% the first year, 5.99% the second year and 6.99% for the remaining 28 years of the mortgage. Or do they have higher closing costs to offset the lower rate? Before passing these actions off as unethical, remember – all you asked for was “the best rate?”

Even if you ask for the best fixed rate program, have you relayed your credit score, income situation or available down payment to the lender? Did you mention you ONLY qualify for FHA financing? Most potential borrowers do not begin to comprehend all the factors that ultimately determine one’s interest rate…especially considering the current state of the industry.

Consider this – up until 2008, Fannie Mae offered a borrower with a score of 620 the exact same rate as the borrower who had a 760 score. Now, in their infinite wisdom, Fannie Mae has implemented tier-based pricing so that the 760 borrower receives a rate that is at least .75% better than his 620 counterpart. When you ask for the “best rate”, do you think the loan officer will assume your score to be 760 or 620?

Without the full picture, your lender cannot accurately quote you an interest rate. All they can quote you is what you asked for – the best interest rate.

March Madness

2008-03-28T19:08:00.000-07:00

Yes, even The Loan Ranger takes a break from righting injustices to participate in the national phenomena of March Madness.

This year I participated in the Peoples Mortgage Madness, commissioned by a fellow mortgage broker known simply as Deuce. This guy can ride in my posse any day.

Apparently part of the Peoples Madness' storied history includes Deuce's statistical analysis, consistent scoring updates and "insightful" commentary. Today, on the dawn of the Vols loss to Louisville, Deuce posed the following question: "Would you rather get flat-out spanked or lose a last-second, heart breaker?"

In the humble opinion of this masked man, I prefer to know that my team put it all on the line, played their best game and, despite it all, fell short of victory. If this means a last second heart breaker - so be it! Last night will haunt me for awhile. I would have slept better knowing that Louisville beat us when we were at our best. This was not the case last night.

Still...what an amazing season. The Big Orange Nation should be proud. We will miss seniors Chris Lofton, JaJuan Smith and & Jordan Howell. But the fact of the matter is...UT basketball is on the map!

It's great - to be - a TENNESSEE VOL.

How To Shop For A Mortgage Company

2008-03-21T14:02:00.000-07:00

Notice –this is NOT “How To Shop For An Interest Rate.” Calling five mortgage companies and asking “what is your best interest rate” is like asking a doctor to diagnose you over the phone – it is misleading and potentially hazardous. And quite frankly, it puts you in a position to be taken advantage of. You should compare mortgage companies based on the financing options they can provide, their level of service and knowledge, as well as the interest rate and closing costs associated with the mortgage.

I suggest calling 2 or 3 mortgage companies based on personal referrals. Be sure that one is an FHA approved mortgage broker as they have access to the rates and programs for a multitude of national and local lenders. Applying with a mortgage company that is not FHA approved automatically excludes you from the mortgage industry’s hottest program.

Speak with a loan officer from each company and set an appointment to visit with them at their office. From your phone conversations, decide on the loan officer you initially feel most comfortable with and allow them to pull your credit. Be sure that they agree to pull a report that discloses all three credit scores from the differing repositories and that they will provide you a copy.

Prior to your appointments, provide a copy of this credit to your other potential lenders to avoid additional credit inquiries. Insist each loan officer provide you with several loan options and accompanying Good Faith Estimates (GFE) that disclose rate and cost.

At the appointment, the loan officer should advise you as to the different mortgage products available to you immediately and to those that would be offered if your credit or financial situation were improved. They should assist you in determining your target monthly house payment and advise you to how your payments would change based on differing loan programs, home prices and down payment. At that point, it will probably be obvious as to which loan officer seems most competent and trustworthy in addition to possessing a mortgage program to fit your needs.

Now it’s time to nail down a rate. Armed with multiple Good Faith Estimates you should now possess, meet with your preferred loan officer and ask them for assistance in comparing his figures with those of the competing lenders. Should your chosen loan officer be higher on interest rate or closing costs, they should be willing to adjust their initial estimates in order to secure your business.

Did you notice the interest rate bit came last? Stay Tuned for ANOTHER exciting episode of.....THE LOAN RANGER!!!!!!!!!!!!!!!!!

Tonto Speaks: Gov't Regulation

2008-03-17T08:47:00.000-07:00

The biggest threat to the credit market is …

… the GOVERNMENT.

Last Thursday Treasury Secretary Paulson detailed the bureaucratic intention to further regulate the mortgage industry. Not surprisingly, most of his "innovative" concepts are regulations that are already in place. For more information, see http://www.wjla.com/news/stories/0308/503729.html.

The existing regulations just need to be enforced. The brokers they want to “regulate” - closed in 2007.

If given the chance - A FREE MARKET WORKS!!

Should I refinance my Tepee?

2008-03-11T13:10:00.000-07:00

An often quoted rule of thumb on when to refinance is “if your new interest rate is 1% less than your current one.” However, an accurate cost-benefit analysis of a potential mortgage refinance involves much more. Other factors to specifically consider are the proposed monthly payment and closing costs, as well as, the amount of time you estimate that you will continue to reside at the property.

For example, your current mortgage balance is $180,000 and the monthly principal and interest payment calculated at 6.875% is $1,182. Your friendly, neighborhood mortgage broker offers you a rate of 5.875%...exactly 1% less than what you now have.

The average borrower may be satisfied to hear that he can save $88/month with a new monthly payment of $1,094. But the knowledgeable borrower would require additional information and thus discover that the closing costs associated with the loan equal $5,000. Fair enough?

Now the question becomes: “Should I pay $5,000 to save $88/month?” Dividing the cost ($5000) by the monthly savings ($88) reveals that it will take 56.81 months (roughly 4 years, 9 months) of saving $88 BEFORE recouping the $5,000 it cost to refinance.

Therefore, your cost-benefit break point is 57 months. If the borrower is confident that they will reside at their home for over 57 months, this refinance is beneficial. If they intend to upgrade to a new home in 2 to 4 years, they should be satisfied with their current mortgage as they will never recoup their $5,000 in cost.

The fact is, you cannot apply the “1% rule” or a mathematical formula to every individual’s unique situation. A different analysis is needed if you are consolidating debt, pulling out cash/equity for home improvements and/or reducing your term. But that sounds like good fodder for another spine-tingling episode of...The Loan Ranger!

Some Good News...FINALLY

2008-03-07T13:43:00.000-08:00

It is official. As of yesterday, HUD has temporarily raised the FHA loan limits. In Knox county (and the surrounding area), that loan limit is now $271,050. The limit increases effect mortgage programs 203(b) (Standard FHA 1-4 unit), 203(k) (for disaster victims), 203(k) (rehabilitation mortgage) and 234(c) (condominium units). THIS WILL OPEN MANY DOORS FOR OUR CUSTOMERS AND YOUR BUYERS!!!

WARNING FROM SCOUT:: This is a temporary increase (just in case you missed that part.) We have at least until the end of the year.

If you need to know the maximum loan amount for YOUR area, email me at loanranger.knoxville@gmail.com.

Saddled Up...Again

2008-03-05T12:44:00.000-08:00

I want to thank the many of you who have encouraged me to "go public" with my thoughts, meanderings and opinions as they pertain to the mortgage industry as we now know it. In my attempts to catch up with technology, I am replacing the old, faxed newsletter with this blog. I ask that you bear with me as my trusty companion, Tonto, and I attempt to get a grip on the reigns of this new beast. I hope to gradually post all of my old stuff, adding relevant revisions and updates where needed. In addition, count on getting your weekly Market Updates, Industry News and the regular nitty-gritty you've grown to know and love...right here...from The Loan Ranger.

So - to borrow an old phrase: "Return with us now to those thrilling days of yesteryear.... The Loan Ranger Rides Again!"