Mortgage News that Matters

What was looking like a ho-hum week has turned into a block buster. While our markets took Monday off to celebrate Martin Luther King Jr's birthday, the European and Asian markets tanked in fear of a US/Worldwide recession. In reaction to that, our Fed cut the Prime rate by .75% in fear of a major Wall Street sell off. Well, we still saw a major sell off, in part because of what happened overseas, and probably in part due to the unexpected move by the Fed. Wall Street doesn't like surprises.

Today started out with more of tea same, but stocks are starting to bounce back.

So, what does this have to do with mortgage rates? Two things.

1) While a Bear market is bad for stocks, it is great for bonds. Long term mortgage rates are essentially bonds and when investors pulled money out of stocks they had to put it somewhere, and one of the places was long term mortgage backed securities. We are at or below 5% now on a 30 year fixed rate loan!! This is good for those who can qualify.

2) The Fed reducing tea Prime Rate lowers the interest rate on most Home Equity Loans. SO watch your next statement, you should see a nice reduction in the rate tat you are paying. THis is money in your pocket.

My Advice: If you are paying more then 6% you should really be looking at refinancing, especially if you have an ARM over 5%.

Call me at 1+888-660-2842 or email me at larry.morris@equipoint.com to discuss your situation.

Wow, what can happen in a day, or few hours for that matter. Yesterday, shortly after my post the stock market rallied and we lost about .75 basis points on the mortgage backed securities, and so far today another .31 basispoints. This means that while we were looking at a 5% rate on a 30 year fixed rate loan yesterday, today that same loan will is at 5.5%. Those who locked in yesterday, good job!!

On another note, part of the new economic stimulus bill being worked on in Washington DC includes a temporary provision to allow the conforming loan amount to be lifted. The amount will vary based on the average home price in an area. Of course, California will see the largest increase. For those of you with loans above $417,000 and below $500,000, this could present a great opportunity to refinance, or purchase at a very attractive rate. As an example, a Jumbo 30 year fixed loan with one of my lenders comes in at 6.75% today. So, that could result in more then a 1% rate reduction. On a $450,000 loan, this is a monthly savings of around $300!!

Call me if you, your friends or clients have any questions.

The markets are closed today in celebration of MLK Jr's Birthday. Mortgages rates improved last week due to weak economic news and the uncertainty of the future. This week we see 3 economic reports with a moderate impact on mortgage rates: Initial Jobless Claims, Existing Home Sales and Crude Inventories. These are all on Thursday, so watch for potential rate changes due to investors reactions on Wednesday and Thursday.

Par today on a 30 year fixed rate loan is 5.375% and 4.875% on a 5/1 ARM for the best borrowers.

These are interesting times. Mortgage rates are back to historic lows, but underwriting guidelines have tightened enough to where many will not be able to enjoy these rates. However, that said, there are some incredible programs available that can help many borrowers to refinance or get into a new home. These include FHA, USDA Guaranteed Rural Home loans and the PITI Abatement program.

As the Fed, Congress and our President work to providing an economic recovery plan, it will be interesting to see how this effects rates. Remember, a booming economy is usually bad for mortgage rates as is inflation. Time will also tell if much of tea bad news is from lenders and investors writing off all of the bad debt now, rather then stretching it out over time.

A lot has happened lately, and more is on the horizon. Some good and some bad. On the good side, long term mortgage rates are once again at historic lows due to uncertainty in the economy and investors rush to the safety of bonds and securities. 30 year fixed rate loans at around 5.5%. 15 year fixed around 5%. Equity lines are also decreasing as the Fed continues to lower the Prime rate. On the bad side, more lenders have shut their doors or down sized. Underwriting guidelines have continued to tighten and many programs have disappeared. While rates are better on many programs, it's harder for borrowers to qualify.

One of the most potentially devastating events on the horizon could be the desire for the State of Oregon to abolish Stated Income loans. The Fed is looking at it also. While these loans have been abused by some, most self employed borrowers will find it difficult to get a loan if this passes. As tax payers, we are encouraged to write off as much income as is legal. Yet when it comes time to qualify for a loan, a self-employed borrower must show their tax forms. Many will find that even though they can afford a home, they do not qualify for it. The intent of the Stated Income loan was for those with good credit and hard to verify income to still be able to qualify for a loan at a comparable rate as someone else with their credit score and ability to pay.

While I agree that Stated Income loans should not be used for sub prime borrowers, it appears that we will be discriminating against many self employed borrowers if this passes. The only way for many to qualify will be to show more income on their taxes, which may inhibit their ability to grow or even stay in business. Of course, by increasing their income, they will pay more taxes, which could ultimately be what Salem and Washington wants to see happen.

But the main thing that I want to stress is that the industry and the market place is correcting itself and is still alive. We are in a period of change, similar to what we have seen several times in the last 30 years.

• If you have a good fixed rate loan hold tight.
• If you are in an ARM that adjusts in a few years I would look seriously at converting it to a 30 year or 15 year fixed rate loan.
• If you need to state your income and are looking at doing something in the next year, I'd jump fast. I have very few lenders who offer high LTV Stated Income loans and would not be surprised to see them disappear for a season.

Have a great new year!