Friday, April 25, 2008
Tuesday, April 15, 2008
What’s your rate?
That is the most common question I here today. It is also the one we have the most difficulty answering. With all the changes in the mortgage market over the last 9 months it has been increasingly difficult to quote accurate rates. That is not to say people are not out their doing it anyway, then changing the rate after they find out that their client falls into one of the new adjustment categories.
So what are the adjustment categories? I will make every attempt to answer that here although they seem to change as soon as you make mention of them.
We have always seen adjustments to the rate when taking cash out of your home, however they usually started at 75% loan to value. Now the adjustments start at 60% loan to value and have an added caveat of having a credit score adjustment to go with it. One year ago if you were taking cash out at 80% (a standard move to avoid monthly mortgage insurance) you might see a .750 point hit on your loan. Today with a 660 credit score you are likely to see a hit of 2.00 points. That translates into getting an end rate of 6.125 under the old pricing system and 6.625% under the new pricing system. There are also hits now under no cash out scenarios because of the new tiered credit scoring adjustment system.
So where do these changes leave us when considering the question “What’s your rate?”
It leaves me asking you questions like:
What is your house worth?
What is the value of your home?
Are you taking cash out?
What is your credit score?
Do you have secondary financing?
In essence we can not honestly quote you a rate unless we know the answers to each of these questions. Anyone who is quoting a rate without knowing the answers to these questions is doing you a huge disservice because you can almost bank on the fact that at some point they will change the terms of the loan you have applied for.
Do you have questions about the new rate structure? If so please feel free to submit them here.
So what are the adjustment categories? I will make every attempt to answer that here although they seem to change as soon as you make mention of them.
We have always seen adjustments to the rate when taking cash out of your home, however they usually started at 75% loan to value. Now the adjustments start at 60% loan to value and have an added caveat of having a credit score adjustment to go with it. One year ago if you were taking cash out at 80% (a standard move to avoid monthly mortgage insurance) you might see a .750 point hit on your loan. Today with a 660 credit score you are likely to see a hit of 2.00 points. That translates into getting an end rate of 6.125 under the old pricing system and 6.625% under the new pricing system. There are also hits now under no cash out scenarios because of the new tiered credit scoring adjustment system.
So where do these changes leave us when considering the question “What’s your rate?”
It leaves me asking you questions like:
What is your house worth?
What is the value of your home?
Are you taking cash out?
What is your credit score?
Do you have secondary financing?
In essence we can not honestly quote you a rate unless we know the answers to each of these questions. Anyone who is quoting a rate without knowing the answers to these questions is doing you a huge disservice because you can almost bank on the fact that at some point they will change the terms of the loan you have applied for.
Do you have questions about the new rate structure? If so please feel free to submit them here.
Thursday, April 10, 2008
FHA is at the center of many plans to fix the housing market. A program designed during the “New Deal” Era of the FDR days, whose purpose was to help people with little down payment money or weak credit obtain a home is now expected to once again bailout the mortgage and housing market.
The question is, is the agency up to the task? Currently FHA backs $385 Billion in mortgage loans. Current proposals could see the agency doubling that amount in the not so distant future.
Lets look at what we are asking of an agency who last year made up 7% of the mortgage lending market. With the new and recently passed FHA Secure program we saw an increase in FHA’s funding in the amount of 150,000 borrowers over 6 months. One could logically assume that number to be 300,000 over a full year. This increase is being asked of an agency that annually funds 400,000 borrowers. In essence we have already doubled the size of FHA.
To this point FHA has been a self sustaining agency. What happens if that can no longer be accomplished based on the sheer size the agency will have to grow to? Can you say major tax burden for the tax payers? Who else is going to bail out the FHA? What’s the alternative? Letting home values continue to slide? How much trouble will lending institutions be in then? Does anyone think the FHA, lending institutions or our government would be able to write a check to bail us out of a $385 billion dollar equity loss?
The problem as I see it is that the FHA does not even know if they are up to the task. They have taken on additional risk with FHA Secure and have helped 150,000 borrowers. They will soon be asked to take on a great deal more, as they continue to fill the gaps left by the sub prime market and as a primary source in the purchase money market for many borrowers. How much risk is too much?
The question is, is the agency up to the task? Currently FHA backs $385 Billion in mortgage loans. Current proposals could see the agency doubling that amount in the not so distant future.
Lets look at what we are asking of an agency who last year made up 7% of the mortgage lending market. With the new and recently passed FHA Secure program we saw an increase in FHA’s funding in the amount of 150,000 borrowers over 6 months. One could logically assume that number to be 300,000 over a full year. This increase is being asked of an agency that annually funds 400,000 borrowers. In essence we have already doubled the size of FHA.
To this point FHA has been a self sustaining agency. What happens if that can no longer be accomplished based on the sheer size the agency will have to grow to? Can you say major tax burden for the tax payers? Who else is going to bail out the FHA? What’s the alternative? Letting home values continue to slide? How much trouble will lending institutions be in then? Does anyone think the FHA, lending institutions or our government would be able to write a check to bail us out of a $385 billion dollar equity loss?
The problem as I see it is that the FHA does not even know if they are up to the task. They have taken on additional risk with FHA Secure and have helped 150,000 borrowers. They will soon be asked to take on a great deal more, as they continue to fill the gaps left by the sub prime market and as a primary source in the purchase money market for many borrowers. How much risk is too much?
Wednesday, April 9, 2008
What's Going On In The Mortgage Market?
Hardly a day goes by that you don't hear a story on TV or read a news paper article about interest rates rising, home forclosures increasing, and many people not knowing from one day to the next if their home ownership is in jeopardy. What's going on in the mortgage market and how does it affect you?
If you'd like answers to those questions, have concerns about your home mortage, or just want some honest, up-to-date information, please submit your questions here. As a mortgage planner I am here to take the mystery out of the mortgage market, answer your questions, and "pilot" you through the turbulence of financing or refinancing your home.
If you are receiving mortgage solicitations in the mail or on the phone and need some help understanding them, I'd welcome the opportunity to act as your interperter and give you the facts.
If you'd like answers to those questions, have concerns about your home mortage, or just want some honest, up-to-date information, please submit your questions here. As a mortgage planner I am here to take the mystery out of the mortgage market, answer your questions, and "pilot" you through the turbulence of financing or refinancing your home.
If you are receiving mortgage solicitations in the mail or on the phone and need some help understanding them, I'd welcome the opportunity to act as your interperter and give you the facts.
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