Atlanta Loan Source

Mortgage Rates Are Not Dropping - CNBC Explains

The Federal Reserve dropped their short term Federal Funds Rate an additional .25% yesterday which brings their total adjustment of 3% since the fall of 2007.  The questions remains, why are mortgage rates not dropping in sync with the Federal Funds Rate?

click on the link below to watch a CNBC video which includes an easy to understand explanation.  Enjoy. Video title: Assessing Mortgage Rates - Making sense of mortgage rates, with CNBC's Steve Liessman.

If you have questions or comments, just ask.

Jim Hogan, The LoanSource

Federal Reserve Press Release Commentary

Included are a few exerts from the Press Release by the Federal Reserve yesterday, April 30, 2008 concerning their action to lower the Federal Funds rate by an addition .25%. If you want to read the entire press release, just click here.

• "Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters". 

My translation:  Yes, we are in a recession and have been for a while.

• "Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months".

My translation: This recession is reaching deep into everyone's pockets.

• "Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully".

My translation: The Fed is as confused as we are. 

• "The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability".

My translation:  Just reminding everyone that it is our job to monitor economic and financial developments.  Duh!

If you have comments or questions, just let me know.

Jim Hogan, The LoanSource

Risk Based Pricing/Rates Surprises Customers as they Search for the Lowest Possible Rate

Changes to the mortgage industry continue to create confusion for those shopping for the best mortgages in the market place.  Most of the changes are coming from the largest money center banks that end up servicing the lion’s share of the nation’s mortgages through tightening underwriting guidelines.  In addition, Governments from all levels feel compelled to “do something about it” in order to protect their citizens by creating legislation that may or may not help in the long run.

What is risk based pricing?

As the true cost of the mortgage meltdown is exposed, mortgage rates are now based on the varying levels of risk to the lender.  I feel that mortgages, now more than ever have become a custom product for each specific client.  The rate offered will depend on credit scores, down payment, debt-to-income ratios, mortgage program, etc.  Just a year ago, the spread between the rates being offered to the most qualified clients and the clients with less down payment, lower credit scores and higher debt-to-income ratio’s is widening.  Your credit score can drastically affect the mortgage rate that you are offered. 

What is your credit score?

Conforming Loan adjustments:

• 720+ allows the most flexible programs and best rates with no pricing adjustments
• 680 – 719 requires up to .50 additional points that may affect the rate being offered.
• 660 – 679 required up to 1.25 additional points that will affect the rate being offered.
• 640 – 659 requires up to 1.75 additional points that will affect the rate being offered.
• 620 – 639 required up to 2.50 additional points that will affect the rate being offered. 

FHA Loan Adjustments:

• 600 +  No pricing adjustments
• 580 – 599 require .50 additional points that may affect the rate being offered
• 530 – 579 require 1.50 additional points that will affect the rate being offered
• Bellow 530 requires 3.00 additional points that will affect the rate being offered and this adjustment applies to borrowers with no credit score.

The lending game has changed and prudent planning will help secure the best possible loan in any given situation.  Create a good mortgage plan that will guarantee success.  Do not wait until the last minute. 

Jim Hogan is the LOANSOURCE and available to address your questions or concerns and extends this service offer to anyone you know that need to create a mortgage plan.  Call direct at 404-870-2348.

Increased FNMA & FHLMC Loan Limits Will Solve the Mortgage Loan Crisis…or Will It?

Let’s take a look at the effects of the economic stimulus package on the mortgage industry and how it may filter down to the consumer.

 

The US Senate has passed the Economic Stimulus Package and the President is scheduled to sign it into Law which means that we are one step closer to the implementation of higher FNMA/FHLMC loan limit. As is with most laws, the written word does not dictate to the “market” how to apply these changes.

 

Uncertainties remain:

Will the entire country be allowed to move to the higher loan limits?  The method for determining which geographic area will move to the higher loan limits has not been determined.  Most consumers believe that the loan limits will be applied across the board to the entire country.  FNMA/FHLMC however are not setup to apply loan limits in that fashion.  Will they do it by state or by Metropolitan Statistical Area (MSA)?

 

Product and Program Variety:

It has not been determined which products and/or programs will be available for the increased loan amounts.  Will it be for 30 year and 15 year fixed rates loans only?  Will investor properties be included?  Can “Expanded Approval” or “Flex” product loans become eligible even though they carry higher risk?

 

Pricing and Delivery:

Pricing and delivery is another missing piece of the puzzle.…(Warning, behind the scenes mortgage content included here)  In the mortgage industry, the loan pricing dictates the wholesale rates and the delivery refers to the method that the Mortgage Backed Securities (MBS) are pooled and sold on Wall Street to the public. 

 

The Securities Industry and Financial Markets Association (SIFMA), not HUD or FNMA/FHLMC, decides which loans are eligible to go into the FNMA MBS’s.  Blending the old and the new models will create a great deal of uncertainty in the marketplace and this alone will affect pricing and rates.  Even though we do not know how much of a premium will be applied to the new loans, it should be a significant improvement over the current 30-year jumbo rates. 

 

Stay tuned as our free market economy figures out how to adjust to the new FNMA & FHLMC Loan limits and what effect it will have at the consumer level.

 

Deceptive Mortgage Ads: The Federal Government Is On The Hunt!

Have ever watched the movie “Hunt for Red October” or any other naval war movie as the good guy put a shot across the bow of the bad guy’s vessel?  The warning shot send a very clear message and can not be ignored. 

Well, consider the Press Release on September 11, 2007 by the Federal Trade Commission (FTC) concerning Deceptive Mortgage Ads, as the warning shot by the Federal Government to all mortgage bankers and brokers.   The entire mortgage industry is currently in the cross hairs of Congress and that is a really bad thing.

Every time I hear one of those incessant radio ads, receive a fax offer or open a junk e-mail that touts some mortgage offer that is too good to be true or leave out the most important piece of information, I want to tell the world “Don’t believe it”.   These types of ads and offers are the driver behind the current mortgage meltdown.
 

The September 11^th press release states that “many mortgage advertisers are making potentially deceptive claims about incredibly low rates and payments without telling consumers the whole story’.  The FTC works for the consumers to prevent deceptive and unfair practices in the marketplace and to provide information to help consumers spot, stop and avoid them.  They have brought 21 actions against companies in the mortgage lending industry which has resulted in collectively returning more than $320 million to consumers.
 

The FTC Consumer Alert titled “Deceptive Mortgage Ads: What They Say; What They Leave Out” is available on their website.  The FTC can be contacted toll free at
1-877-FTC-HELP (1-877-382-4357).
 

We can all learn from the Sub-Prime Mortgage Melt Down and must be more available to our customers to guide and advise them through these turbulent and confusing times.