My Thoughts for the Week of July 5th, 2016

Mike Thomas

Mike Thomas

  Hope everyone enjoyed their extended 4th of July weekend, a chance to gather with friends and family. Most know that only 2 founding fathers actually signed the Declaration of Independence on July 4, 1776, with most signing on Aug 2, 1776. But what most don’t know is that a Docusigned copy did go out to the founding fathers but a private email server issue is actually what caused the 1 month delay. Seriously tho, e-signature services like Docusign have been around for about 12 years but adoption has been slow by the mortgage industry. Much progress has been made and we are happy to say almost all initial loan disclosures can now be e-signed to help save some paper and speed up the loan application and submission process. Final loan docs of course still need to be wet signed with a notary.

Mortgage rates have been improving so far in 2016, somewhat to the surprise of the bond markets post QE. Fear and concerns over a slowing global economy has helped to keep rates low. And now with the UK voting to leave the European Union (aka Brexit), more uncertainty with how it will affect global markets has caused another push lower for Treasury bond yields and mortgage rates. It will take some time for this to play out, including chatter that there could be a “do over” on the referendum vote, but as uncertainty wanes rates could increase. Domestically we have our monthly employment report coming this Friday. Strong employment growth is typically negative for interest rates, but the focus continues to be overseas so not too much attention on that statistic right now. Best to keep an eye on the Brexit story and demand for government bonds like the 10yr US Treasury. Right now could be an excellent opportunity to lock in among the lowest interest rates we have seen.

2016-07-05_1205

Posted in Mortgage News | Tagged , , , , , , | Leave a comment

Fannie Mae New Program to Assist First-Time Buyers With Closing Costs on HomePath Properties

Mike Thomas

Mike Thomas

Fannie Mae has announced the launch of the HomePath Ready Buyer program, through which qualifying first time homebuyers can receive up to 3 percent of the home’s purchase price in closing cost assistance toward the purchase of a Fannie Mae HomePath property.

This calculates to up to $9,000 in savings for a buyer on a $300,000 home. Qualifying homeowners will receive the assistance upon completion of an online homebuying education course, and Fannie Mae will reimburse the homeowner at the time of closing for the $75 cost of the homebuyer education course. This course must be completed before the offer is made on the HomePath property.

“Purchasing your first home can be an overwhelming process,” said Jay Ryan, VP of REO Sales at Fannie Mae. “We developed the HomePath Ready Buyer program to provide first-time homebuyers with the knowledge to make informed decisions as they navigate the complexities of the home buying process. Closing cost assistance provides a cushion many first-time buyers need to more confidently face the financial responsibilities of homeownership.”

The homebuyer education course covers by the complexities of the homebuying process and the responsibilities of owning a home in nine 30-minute sessions, all online. Fannie Mae has teamed with Framework, a nonprofit created by the Housing Partnership Network and the Minnesota Homeownership Center, to offer the course.

In order to be eligible for the closing cost assistance and the reimbursement of the cost of the education course, buyers must complete the full online training course and receive a certificate of completion; must be a first-time homebuyer or have not owned a property in the last three years; must plan to use the property as a primary residence; and must submit the request for closing cost assistance at the time of the initial offer on or after April 14, 2015. The online course must be completed before the buyer submits an offer in order to qualify for the closing cost assistance.

Posted in Mortgage News | Tagged , , , , , , | Leave a comment

Great News for new FHA Loans – Reduced MI Coming

Mike Thomas

Mike Thomas

With the improved quality of FHA loans currently being underwritten many have been calling for FHA to lower their MI premiums and it looks like our voices have been heard. We just found out U.S. President Barack Obama is set to announce a 50 basis point reduction of Federal Housing Administration mortgage insurance premiums to 0.85% in a speech to be delivered Thursday in suburban Phoenix, according to Bloomberg.

Since the housing crisis, FHA fees have skyrocketed. The annual insurance premium paid by most FHA borrowers has risen to 1.35%, up from 0.55%  in 2010 — or more than $300 a month on a $300,000 mortgage. The higher premiums helped beef up the agency’s cash cushion when its finances took a hit after the housing bust.  

Posted in Mortgage News | Tagged , , , , , | Leave a comment

My Thoughts for the Week of Nov 24, 2014

Mike Thomas

Mike Thomas

Happy Thanksgiving, typically a strange week for the bond and stock markets in that there is not a lot of activity or excitement. This year though November as a whole has been pretty quiet. The bond markets and interest rates have been trading in a tight channel for 20 sessions now, holding firm after rates dropped in October. This has been welcomed by the Real Estate industry as we’ve all been bracing for interest rates to end the year higher. This just hasn’t happened yet. The number of analysts that were sure interest rates would be 50 basis points higher by now have been exiting the building.

The 10 Yr Treasury is not likely to increase much between now and the end of the year. For all of the talk and discussion, the bond market is not buying into the idea the US economy will grow quickly enough to increase inflation concerns. If inflation stays low, the Fed should keep their rates low. Another factor that’s not being talked about but possibly oneTurkey 10 of the key forces keeping rates low is hedging against the increasing potential of a decline in the stock markets. Large investors and hedge funds should be moving into treasuries; there is very little risk in doing so and there is an increasing risk the stock market may be close to a big correction. Stocks have been pushing higher for almost 5 years now, outpacing earnings growth. The cowboys will run out of ammo at some point.
2014-11-24_0823

Posted in Weekly Update | Tagged , , , , | Leave a comment

My Thoughts for the Week of Sept 15, 2014

Mike Thomas

Mike Thomas

It’s been a busy summer for my office in both purchases and refinances as rates improved to 12 month lows. The industry has been expecting rates to move higher as the Fed eased their bond purchasing program, but International conflicts overseas have kept rates low as worried investors purchased up Treasury bonds in turn keeping rates low and demand high. We may be seeing an end to this as rates have been steadily ticking up since the end of August, with the 10 yr Treasury yield moving from a 12 month low of 2.34% on Aug 29th to 2.61% last Friday. Mortgage rates have increased along with this but not much. 30 yr fixed rates are still in the low 4’s and considerably better than they were at the start of the year.

This week the FOMC meets again to discuss our economy and short-term interest rates. Verbiage from their Wed press conference will be closely scrutinized and the market will be listening for clues as to when the Federal Funds rate will start to be increased. Employment figures heavily tie into this decision for the Fed and the August number were not so good with far fewer new jobs than the market was expecting. Investors largely ignored the numbers on Sept 5th and Treasuries have been on the rise ever since. If the Sept jobs report shows similar poor job growth and the Aug report is not revised then we shouldn’t expect the Fed to raise the FF rate any time soon. On the other hand, if Aug is revised upwards and we continue to see strong job growth thru the end of the year than expect rates to continue to climb up. Once again we are at the mercy of the monthly employment reports. Stay glued. 2014-09-15_0931

Posted in Weekly Update | Tagged , , , , | Leave a comment

Americans are Going Big with VA Loans

flag homeIn 2013, U.S. homebuyers using loans backed by the U.S. Department of Veterans Administration (VA) bought the biggest new single-family homes by square feet out of all common loan types for the first time dating back to 1978, according to U.S. Census Bureau data.

That milestone coincided with tremendous growth of the program. The VA guaranteed a decade-high 629,293 purchase and refinance loans in 2013, and the average loan size reached a decade high of $241,190, up from $148,810 in 2003, according to the VA.

With many borrowers finding conventional mortgages tough to get and the Federal Housing Administration (FHA) program potentially about to become more expensive due to proposed mortgage insurance increases — and the FHA perceived by big banks like JPMorgan Chase & Co. as too risky — VA-backed loans may be a viable and safe alternative for some originators.

“Overall volume [from first-quarter 2007 to 2013] is up 375 percent,” lender Veterans United Home Loans Director of VA Loan Education Chris Birk told Scotsman Guide News. “It’s really driven in no small way by the tightening in lending requirements and historical low interest rates.”

Big homes, jumbo loans

U.S. Census Bureau data show that VA borrowers in 2013 bought new homes with a median size of 2,635 square feet, and an average size of 2,764 square feet. By comparison, borrowers using conventional mortgages, who for years bought the biggest homes, purchased new homes with a median size of 2,497 square feet and a median size of 2,724 feet.

VA administrators declined to speculate why VA borrowers are buying bigger new homes, but the difference in lending standards for VA loans compared to other types may play a role.

The conforming limit for a typical mortgage is $417,000. The conforming VA limit, however, can change by geography. Near San Francisco, the limit is $725,000. Most borrowers may not have to provide a downpayment if the mortgage is below the conforming limit in a given area.

VA borrowers can buy large homes in some areas for well below $417,000. Based on a recent search on Zillow, there were many homes for sale in the Houston area — a high VA loan-volume area — below $400,000 and in excess of 3,000 square feet.

When a loan exceeds the conforming limit, downpayment requirements are much smaller than typical loans. Birk used the Arlington, Virginia, area as an example, where the limit is $693,500. Borrowers purchasing an $800,000 home in Arlington would be responsible for paying only 25 percent of the difference, or approximately $26,000, 3.25 percent of the price. Birk said that about 85 percent of veterans buy with no downpayment.

“VA borrowers can — all things held constant — purchase more home because VA is a no-downpayment, no-[mortgage insurance premium] program,” VA spokesperson Terry Jemison told Scotsman Guide News.

Not for everyone

The federal government created the VA loan program during World War II. Generally, it is open to anyone who has served in the military, during either war or peace, for more than 90 days, plus reservists and certain spouses of deceased veterans.

One drawback is that VA borrowers must pay a funding fee, which helps fund the program. For a first-time, no-downpayment buyer, the fee is 2.15 percent of the total price. Disabled veterans are exempt from the fee.

Because of the fee, a VA loan may end up being more expensive for well-qualified buyers.

“If you’re a service member or veteran with excellent credit and liquidity and assets, you would want to compare rates and costs,” Birk said.

Jemison said that VA guarantees the most loans in states with high military populations. In 2013, the top states were Texas, California, Virginia, Florida and North Carolina, he said.

Posted in Mortgage News | Tagged , , , , , | Leave a comment

Good News for FHA Borrowers

Mike Thomas

Mike Thomas

WASHINGTON – Aug. 27, 2014 – Last week the Federal Housing Administration (FHA) announced that borrowers who prepay their FHA-insured mortgages will not have to make interest payments beyond the date their mortgage is paid in full. It’s about time they amended the policy.

Currently, anyone with an FHA loan would be on the hook for a full final month of interest no matter what day of the month the loan was paid off on. Only FHA loans are allowed to do this and it is more or less a penalty imposed on the borrower. This is great news for FHA borrowers who are looking to refinance out of their current FHA loan and into a Conventional loan. If the home has appreciated enough to give them 20%+ equity then the new Conventional loan will not have any mortgage insurance, another negative feature FHA loans do not allow for.

FHA’s rule, Handling Prepayments: Eliminating Post-Payment Interest Charges, applies for FHA-insured mortgages closed on or after Jan. 21, 2015. This rule explicitly prohibits lenders from charging borrowers post settlement interest, which is broadly defined as a “prepayment penalty” by the Consumer Financial Protection Bureau (CFPB), for all FHA Single Family mortgage products and programs.

Posted in Mortgage News | Tagged , , , , , , | Leave a comment

My Thoughts for the Week of July 21, 2014

Mike Thomas

Mike Thomas

With growing tension between Putin and the US over the downed Malaysian airliner, increased fighting between Israeli troops and Palestinians, and ongoing instability in Iraq, geopolitical news is controlling the markets right now. There has been a fair share of positive domestic economic reports recently, enough to cause interest rates to move higher. But with all that is going on overseas, it is causing panic and assets are being parked in Treasury bonds keeping interest rates down. These are the sort of events that can’t be predicted and no way of guessing when they will be resolved. But for now interest rates are continuing near their 1 year lows and presenting renewed opportunities for purchase and refinance loans. Check out the improved Govt rates below. VA IRRRL and FHA Streamline refinances are fast and easy and may save you some money. Give me a buzz and i’ll take a look at your scenario and let you know if it’s worth pursuing.

2014-07-21_1021

Follow our mid week Market Updates on Facebook

Posted in Weekly Update | Tagged , , , , | Leave a comment

My Thoughts for the Week of July 7, 2014

Mike Thomas

Mike Thomas

Welcome back after the holiday weekend and the start of the second half of the year. Last week left us with the June employment report that was better than expected, again making initial headlines. Businesses added 288k jobs in June, the 3rd month in a row with strong job growth, with the unemployment rate dropping to 6.1%. After the dust settled, the take away from this is still the same. The jobs being created are not great jobs, many of which are part time, and the labor participation rate remains low at 62.8%. Employment is increasing but the dollars earned in many of the jobs are not enough to increase discretionary spending. At the same time businesses are doing well and stock indexes are setting new all time highs. The fact is that businesses are able to do more with less people thanks to new technologies. Eventually this is going to have to sink in. If you’re curios what the founders of Google think about the future of the job market check this out.

So what does this all mean? Both the stock market and interest rates have been improving along side each other, something we don’t usually see. Add to the mix International concerns in the Middle East and you get Interest rates hovering around 12 month lows. We’ll take that. This is great news for the housing market if you need a loan, but what we really need is better jobs for the next generation of home owners, the 20 somethings where the labor participation rate is at record lows. This group is having trouble finding work and deciding to stay in school longer and taking on massive student debt instead. It will be interesting to see what happens in the housing market once this group can get meaningful employment and become buyers. If you are in the market to buy now we have been gifted another round of low interest rates and decent home inventory, so sellers should be more willing to deal. This could be a great time to be a buyer.

2014-07-07_1018

 

Follow our mid week Market Updates on Facebook

Posted in Weekly Update | Tagged , , , , | Leave a comment

My Thoughts for the Week of May 19, 2014

Mike Thomas

Mike Thomas

Not much on the economic calendar this week but what is there will draw a lot of attention. Both existing and new home sales for April, and the minutes from the last FOMC meeting (4/30) are the keys this week. The bond and mortgage markets continue to take their lead by how the stock market trades; traders are moving back and forth between stocks and bonds in the last month. There is an increasing concern now that the economy isn’t as robust as recently thought and the outlook for increased growth has been lowered in the minds of many investors. This year is not going to grow at the 3.0% rate that was the expectation a month ago. Q1 GDP will likely end negative and Q2 outlook is being reduced. This has helped lower interest rates back to around 8 month lows. If this economic trend continues we could see low rates linger around longer than previously expected, perhaps through the end of the year. Keep in mind though any sign of economic strength again in our economy will cause a reversal in rates and move them higher much quicker.

2014-05-19_0941

Follow our mid week Market Updates on Facebook

Posted in Weekly Update | Tagged , , , , | Leave a comment