Are interest rates going to go up or down?

Great question.

Consider this:

For most of this year, the Federal Reserve has been buying mortgage backed securities – en masse. As of last week, they had spent about $792 billion and many people say that the reason that interest rates have stayed so low is because the Fed has provided the demand side of the supply/demand law and thus mortgage rates have remained reasonably low.

The total amount that was authorized by the Fed was $1.25 trillion in mortgage bonds that are guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. This buying is designed to reduce home-finance costs and hopefully turn the housing market around. In addition to the $1.25 trillion in mortgage bonds, the Fed also intends to buy $300 billion of long-term Treasuries and $200 billion of federal agency debt.

But all that buying activity will be coming to an end in the next few months.

And if the main entity that has been providing the demand over the last year “quits” providing demand by buying up mortgage backed securities… what impact will that have?

Not only am I unsure, but some of the smartest people in the world are also unsure about what impact this may have. According to Richmond Fed President Jeffrey Lacker:

Lacker said it’s unclear whether an end to buying the securities will disturb markets. “Whether there is a so-called cliff effect or any disruption due to discontinuous change in our purchases is up in the air.”

Are interest rates going to go up or down?

I don’t know.  But interest rates are bouncing around their recent lows right now and it might be a good time to act.

Arizona Mortgage Rates

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Copyright ©2007-2009 Phoenix Area Real Estate Blog by Steve Belt. This feed is intended for personal, non-commercial use only.

One of the great things about the way the mortgage markets work in the last couple of years is that reality always trails the announcement by anywhere from a couple of weeks to a couple of months.

For example, back in July, it was announced that the Obama Refinance was expanded to allow people who owed up to 125% of their home value to refinance – where previously the limit was 105% under the Making Home Affordable plan.

So, a month and a half or so ago it was announced – and just now today I saw the first lender say “ok, we can now do the 125% Obama Refinance!”

So the good news is that at least it is now available. The bad news is that you had to wait a while after it was announced.

Which is pretty much true about anything you hear being announced by the government… listen to it, then wait a little while before it becomes reality.

But if you have been unable to refinance because you owe more than your home is worth… the time has come.

Lenders are now ready for the Obama 125% refinance.

Well, at least some of them are.

Arizona Mortgage Rates

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Another crazy week in the mortgage business. This week, one of the nations largest wholesale mortgage lenders – Taylor, Bean & Whitaker was effectively shut down by the government and as a result thousands of borrowers are now scrambling to try to find financing.

There is quite a bit of finger pointing as to whether or not the shut-down was done properly (or even should have happened at all) but to all of the people who were about to move into a home and are now back trying to find financing, I am sure that whether or not it should have happened doesn’t really matter too much to them.

Have A Backup Plan

One of the most important things that you can do when getting a loan is to have a backup plan. Backup plan as in a “backup lender” who will be able to do your loan should the lender that you are working with suddenly be unable to fund your loan for whatever reason.

Most loan officers will know how many lenders will be able to do your loan – and it may surprise you how many loans I see getting done where there is only one lender that does that type of loan. For example, if you are financing your home with a jumbo loan, it may be that there is only one lender available who does that type of loan – and if something should happen you may be left without being able to get financing on the same terms – or at all.

So when getting a mortgage in today’s market, be sure that you have a backup plan.

More Information on Taylor Bean & Whitaker:

HUD Press Release

Wall Street Journal Article

Taylor Bean Press Release

Dan Green does a great job of putting together a FAQ list for many questions people have about the Taylor Bean and Whitaker event.

Arizona Mortgage Rates for August 7 2009

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If you are currently shopping for a house, be aware that it is probably about to take a little longer to get your loan done.

The reason it is going to take a little longer is because there is a new law going into effect on July 30th that changes the disclosure requirements and the way that your loan officer sends/discloses to you the Truth in Lending disclosure.

The Truth in Lending disclosure (sometimes called the “TIL” by people who are in the mortgage business) is a very important disclosure because it basically tells the consumer all of the “important” numbers about their mortgage. APR, Loan Amount, Interest Rate, Whether or not the loan is assumable, Late fees for payments and probably about 10 more important things as well.

As a result of the new Truth in Lending Disclosure law, I am expecting it to take longer to get your loan done — possibly about 30-50% longer.  Which means that if your loan officer used to be able to get a loan done in about 20 days, expect it to take maybe 30 now. If it was 30, expect it to take maybe 45.

Why the increased length of time? Because of the number of times the consumer must be sent a disclosure when something changes — even slightly — and then an associated “waiting period”.

Highlights of the new Truth-In-Lending law:

1. No upfront fees can be charged to the customer, except for a credit report charge until they have received the TIL. ( No more up front fees for those lenders who still charged an up front “commitment fee” or anything like it)
2. TIL must be disclosed to the buyer within 3 days of application.
3. Once they receive the TIL, then there is an additional 7 day waiting period before the loan can close.
4. Any changes to the loan that result in a change to the APR, you will need to get a new TIL disclosure and then there is another 7 day waiting period.

Generally speaking, it is not uncommon for various numbers in a transaction to change slightly during the process, and so when this happens starting in August, just be ready for an increased turn time to get your loan done.

Now, it is not every loan that will take longer to get done – but on average, I think it is safe to say that the overall turn times to get a loan done are about to go up.

So my best advice is to write a 45 day close of escrow, starting August 1, not a 30.

Arizona Mortgage Rates July 24, 2009

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Many people have been asking me lately about the “1% down payment program” that is supposedly new and asking me for details.

I have some good news — there is a new program that is available where people can buy a home with an FHA loan and only put 1% down.

No, FHA requirements haven’t changed – but the new program allows this to happen under certain conditions. And wait – there is more! The program is much more than just the 1% down payment program.

Neighborhood Stabilization Program Highlights:

• If you own a residence, you must be leasing your primary residence at least 12 months before applying for the program.
• You must use us a lender from the ADOH participating lender list.
• You must attend and complete an eight‐hour Homebuyer Education Class provided by one of the ADOH participating homebuyer counseling agencies. (A list will be provided by your lender once you begin the process.)
• The property you purchase must be your primary residence.
• You must have a maximum debt‐to‐income ratio of 31/43.
• You must be AUS approved eligible.
• You must have two months PITI reserves.
• You can use any type of financing with the NSP program – including paying cash. That means you can still get up to 22% of the purchase price even if you pay cash for the house.
• You must be approved and have your paperwork completed for the program prior to submitting an offer on a house. (This means you are going to want to contact a loan officer who knows about the program as soon as possible in the process).
  

National Stabilization Program: 1% Down Payment?

A minimum of 3 percent of the property purchase price is required as down payment. One percent must come from the borrower’s own funds. Two percent can come from any other approved source.

National Stabilization Program: How Much Money Can You Get?

1. Up to 22 percent of purchase price
2. All loans are forgivable after a period of time based on the amount of the loan. * 5 years for assistance of $15,000 or less * 10 years for assistance of $15,001‐$40,000 * 15 years for assistance of more than $40,000
3. All loans are zero percent interest with no monthly payment.
4. The balance of the loan is forgiven at the completion of the term.

Neighborhood Stabilization Eligible Property Types:

• Foreclosed properties only. A property is considered “foreclosed upon” at the point that the mortgage or tax foreclosure is complete.
• One‐unit detached single family homes, condos and townhomes.
• The property must be vacant at time of listing.

Neighborhood Stabilization Program Income Limits:

In order to qualify for the Neighborhood Stabilization Program in any county in Arizona, you must have a gross income (the total income before taxes, health care costs, social security, etc.) of no more than 120 percent of the average median income for the county they want to purchase a foreclosed house in. Here are the limits for Maricopa County:

My Opinion On The Neighborhood Stabilization Program

Whether or not this program should exist is not the question in my mind — I have almost quit having an opinion about whether or not something like this should exist.

But what I can say is that the program is very real — meaning this program isn’t one of those programs that the government announces that really doesn’t exist and that there are too many “catches” where it narrows it down to where no one qualifies.

This program is very “real” and is generating a lot of excitement. The real bottom line is basically that if you are buying a foreclosed property and meet the guidelines – AND – plan on living in the home, then this program is easy to take advantage of.

With as much excitement as the 8000 tax credit has generated, I would think this will generate just as much once people get the word that free money is real and available.

Arizona Mortgage Rates July 20, 2009

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Copyright ©2007-2009 Phoenix Area Real Estate Blog by Steve Belt. This feed is intended for personal, non-commercial use only.

Fees.

If you aren’t careful, they will drive you insane.

Fees are something that no one likes to pay and yet, somehow there is a never-ending list of fees that you will be required to pay when buying or refinancing a house. Everyone likes to pick on mortgage guys about fees – but the truth is that crazy-whacked-out-insane-fees come from all different sorts of places.

Even though I realize that there are all kinds of fees and some of them are actually legitimate, I really, really, really enjoy making fun of them – and indirectly of the people who think these crazy things up.

One of my favorite “junk” fees is where occasionally, I will see a title company charge someone an “email delivery” fee of $25.

What I wouldn’t give to be able to charge even 25 cents — heck, even five cents –  for every email I have to send or read.

Twenty five bucks?

For an email?

Oh, and title companies aren’t the only ones with fee-insanity. Just yesterday, I got a note that said Flagstar was going to begin charging a $50 “paper handling fee to help offset some of the costs associated with traditional closings.”

I suppose the price of paper went up recently.  Or, maybe this is their way of launching the “Flagstar Green Initiative” or something.

Who knows.

But my favorite fee story of all time?

The PITA fee. That is where the client was such a PITA that the loan officer actually charged him a PITA fee of $2500. At closing, the escrow agent didn’t even blink an eye — just went through the fees and actually described the PITA fee as “normal”.

What is a PITA?

Pain In The A__.

Make sure you look twice at the fees you are being charged when buying or refinancing a house. And try to keep a sense of humor.

Arizona Mortgage Rates For July 10, 2009

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Lately, I have seen quite a few loans “struggle” to get approved for one reason or another. I have been reminded that many people just aren’t aware of how some of their seemingly unrelated decisions can impact whether or not they get approved for a loan.

And there nothing worse than thinking that you will be approved for a loan only to find out that a lender won’t approve you for __________ reason.

Here are just a few things that I have seen happen recently that helped people get denied for a loan. Some of these, the loan officer was able to “fix” and get the person approved – and some of them just won’t get approved now.

With turn times on loans probably averaging about 30 days right now (as quick as 10 and as long as probably 60 days) there is plenty of time to “make or break” your loan approval right now.

Rule #1: Don’t Quit Your Job

Seems like common sense, but many people think that switching jobs — especially if it is for more money — won’t impact their approval.

Wrong.

If you think you *have* to quit your job, make sure you talk to your loan officer how it will impact your approval.

Rule #2: If It Doesn’t Fit In A Shopping Cart, Don’t Buy It

Don’t buy anything new that is bigger than you can fit in a shopping cart — and no, not the super-size flatbed shopping carts at Costco or Home Depot.

No big screen TVs. No new cars. No boats. No motorcycles.

The “shopping cart” rule of thumb is because the “bigger” the item it is, the more common it is to see people finance the “thing” and financing will impact your credit score and debt to income ratios – usually not for the better.

And no, big screens don’t fit in shopping carts for those of you who were wondering.

Rule #3: Don’t Hide It

Make sure you disclose child support or alimony. If you pay these, make sure your loan officer knows and it is disclosed in your application. I saw it missed recently and the deal is “iffy” now at best.

I know, I know – you are probably thinking that I have been hanging out with Captain Obvious too much by taking the time to write these things down – but you might be surprised to see how many times I have had the conversation with someone about how big screen TV’s don’t fit in shopping carts.

Phoenix Mortgage Rates July 3 2009

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HVCC

HVCC seems to be de-railing quite a few transactions lately. Buyer wants to buy a house. Seller wants to sell a house. Buyer and seller agree to a price. Appraiser says house is worth fifty thousand dollars less than what buyer and seller agree on.

Now what?

Well, either the deal falls apart or buyer has to be able to bring an “extra” 50,000 in cash to closing becasue you can’t finance it.

I have been looking and looking for someone who had something positive to say about the new HVCC rules, but so far I haven’t really found anyone in the business who says “it is working”. However, I have seen quite a few petitions being circulated to get HVCC overturned.

8000 Tax Credit Monetization

I am still searching for a way that first time home buyers can “monetize” the first time home buyer tax credit here in Arizona. Today, I at least found a lender who will allow it to happen:

Wholesale lender Taylor Bean Whitaker, has sent this note out to the clients about the first-time home buyer credit: “HUD recently released Mortgagee Letter 2009-15 regarding the use of the First-Time Home buyer Tax Credit.  The program provides up to $8000 tax credit to qualified first-time home buyers. Although the program allows certain entities covered by Section 528 of the National Housing Act to use their current authority to offer tax credit advances with second liens, TB&W will not provide the second lien.  The Second Lien must be provided by an FHA approved non-profit agency or Federal, State, or Local government agency or instrumentality. Use and approval of the first-time home buyer tax credit is the responsibility of the entity providing the secondary financing.  All documentation must be submitted to the entity providing the secondary financing.  TB&W will only approve the use of the secondary financing being provided by the approved entity. TB&W will begin to accept this type of secondary financing immediately.”

(h/t Rob Chrisman)

I guess finding a lender who will allow this to happen is the first step — now we just need to find an organization who is actually helping people turn their tax credit into funds that can help cover closing costs. Realtors will likely be looking to surety bonds to minimize risk.

Arizona Mortgage Rates

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Copyright ©2007-2009 Phoenix Area Real Estate Blog by Steve Belt. This feed is intended for personal, non-commercial use only.

A report from the front lines: make sure you know what HVCC is and how it may impact your appraisal of your home.

The Phoenix market is active – active to the point where many people are seeing that they are putting multiple bids on a home and they end up “bidding” on multiple homes before an offer gets accepted.

I try hard not to smile when I hear stories where agents are driving 100 miles 3, 4 or even more times before an offer is finally accepted in these bidding wars.

Although the driving 300 or 400 miles for a client seems to agitate agents, that isn’t the thing that they are complaining and worried about when they call me telling me they just got an offer accepted — they are worried about something else.

They are worried about the appraisal on the property.

Since HVCC rules were implemented in May, it seems to be a growing trend that many times a lender-owned appraisal is coming in lower than the contracted sales price and it results in “deal complications”. Read: if you want to buy the house, either the seller is going to have to come down in price or you are going to have to bring more money to close.

I could go on about HVCC and the technical aspects of why the appraisals seem to be “coming in low”, but I won’t bore you with those details because the truth is that many homeowners don’t pay that much attention to industry arguments like that.

But if you are thinking about buying a home, here is what you need to be aware of regarding HVCC.

If you are planning on financing your home with a conventional loan, your loan officer cannot speak with the appraiser and this can result in problems such as a “surprise” low appraisal that comes in 2 weeks late. It doesn’t always happen like that (low and late) but it has happened enough recently for me to write this post about it.

If you are planning on financing your home with a FHA loan, most lenders are allowing those appraisals to be ordered by the loan officer and I see fewer appraisal complications (low and late).

This does not mean that you should finance your home with an FHA loan “just so you don’t have appraisal issues” nor does it mean that you are going to run into “appraisal complications” if you finance your home with a conventional loan…

It is just something to be aware of and ask your Realtor and your loan officer about it.

The most helpful person in working with the appraisers today is your Realtor — there is no rules regarding them speaking with the appraisers and I am finding that the good Realtors are actually having some success when speaking with appraisers about a property.

Phoenix Arizona Mortgage Rates June 19 2009

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Copyright ©2007-2009 Phoenix Area Real Estate Blog by Steve Belt. This feed is intended for personal, non-commercial use only.

By far, one of the most popular questions I have gotten over the past week or so is:

“Is anyone actually doing the 8000 tax credit bridge loan where you can monetize the tax credit and use it for closing costs?”

And although I have searched, called around, asked everyone that I can think of…

I still haven’t found an organization that is doing this in Arizona yet.

Which means if you are in the process of buying a house and your loan officer is telling you something like “I am sorry, but there really isn’t an organization who is monetizing the 8000 tax credit right now…” he is most likely telling the truth.

Now.

One of the nice things about blogs is that many (smart) people read them and I have a hunch that some organization or lender out there is currently helping people monetize the 8000 tax credit and I just don’t know about it.

If you are aware of such an organization or lender, now is your chance to flex your smart muscles and share with the rest of us who that organization is! Just leave a comment — and if you are kind enough to share this with everyone, I will be sure to give you all kinds of credit on all kinds of publications as being on the cutting edge of breaking news of the 8000 tax credit monetization plan.

Until then, I will keep calling everyone I can think of trying to find an organization who is actually doing this for people in Arizona.

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