Wednesday, October 8, 2008

FED Lowers Rates

Global Banks Unite in Unprecedented Rate Cuts

Ben Bernanke and the Fed brought financial aid to the streets, lowering the Federal Funds Rate and Discount Rate by 0.50%. In an unprecedented emergency move, central banks across the globe joined in lowering interest rates.

This move follows Washington's passing of the $700 billion Rescue Plan. From Wall Street to Main Street, a common concern has been heard by Washington. "We need money... no, let me rephrase that...we need cheap money."

Rates Could Rise From Here
Home loan rates have benefited from the weakness in the financial markets. Fixed rate mortgages remain very attractive. However, the Fed lowers short term interest rates to shore up financial markets. This could cause home loan rates to rise in the coming weeks and months if confidence returns to the stock markets.

ARM Holders Take Notice!
Anyone that has an Adjustable Rate Mortgage (ARM), take note. The London Interbank Offered Rate (LIBOR) has soared from uncertainty in financial companies...And six million home loans in the United States are tied to LIBOR which determines the interest rate at the time of adjustment.

If you know someone with an ARM, let them know potential trouble lies ahead and the time to act is now.

What Should You Do Now?
Call me. We can go over your situation to determine how you can benefit from the actions. I look forward to hearing from you.

Tuesday, September 23, 2008

FHA Important Changes

Recently Fannie Mae & Freddie Mac issued guidelines with the intent to stop buyers from conducting a "buy and bail" strategy, which applied to ALL Conventional loans. A "buy and bail" strategy is when a buyer purchases a new home using their current residence as a "rental property" to qualify for the new mortgage, with the intent of never leasing out their home and letting it go into foreclosure. Up until Thursday 9/18, FHA had not adopted any of the policies issued by Fannie Mae & Freddie Mac. But as of Friday September 19th, HUD issued new guidelines regarding these transactions and has provided a Mortgagee Letter with some of the changes to FHA loans.

There are only two exceptions in order for the borrower to defray the payments on their primary residence if it is being converted into a rental property. The two ways the rental income can be used is if the borrower meets one of the following two requirements; the borrower is relocating or the current primary residence has at least 25% equity. Attached you will find a copy of the Mortgagee Letter for you to reference.

Although this will limit the ability of some potential buyers, it will hopefully bring some much needed stability to the declining housing markets. Please feel free to contact us at Integrity Home Finance if you have any questions, comments or concerns about how this and other industry related news affects you.

(909) 945-8621 Office

Friday, May 16, 2008

Conventional loan with 3% down

Fannie Mae announced today new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee. Starting June 1, 2008, Fannie Mae will accept up to 97% LTV ratios for conventional, conforming mortgages processed through DU, and 95% LTV ratios for loans underwritten outside of DU, in all geographic locations in the United States.

“The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy. ‘We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely.””

Tuesday, April 15, 2008

Why Refinance Back into a 30-Year Loan?

Refinance Your Mortgage for Rate
and Payment Reductions
By: Jorge Merlos, Mortgage Planner
Integrity Home Finance

Rancho Cucamonga, CA – One of the biggest reasons homeowners refinance their mortgage is to obtain a lower interest rate and lower monthly payments. By refinancing, the borrower pays off their existing mortgage and replaces it with a new one. This can often be accomplished with a no-points no-fees loan program, which essentially means at “no cost” to the borrower.

In the no-points no-fees scenario, the mortgage consultant uses rebate monies paid by the lender to pay off non-recurring closing costs for the borrower. These are “one time” fees such as escrow or attorney fees, title insurance, document preparation, tax service, flood certification, processing and underwriting fees, etc. The borrower is still responsible for recurring fees such as interim insurance, property taxes or insurance policy payments.

Refinancing typically occurs when mortgage interest rates drop significantly, but borrowers with recently improved credit scores (from paying off credit card debt, making mortgage payments on time, etc.) are often candidates for better interest rates as well. If you haven’t checked your credit score in a while, it’s a good time to call a mortgage consultant.

The question most asked is, “But why should I go back into a 30-year loan?”

There are two schools of thought on this subject, and the mortgage consultant should work hand-in-hand with the borrower’s financial planner to determine what works best for their mutual client.

One option is to take the route of the “same payment” refinance, and actually pay off the loan faster and save money on interest fees in the long-run. If refinancing results in a lower monthly payment, the borrower can still continue making the same payment they made in the original loan, and the extra money will be applied to the principal balance.

For example: Let’s say you have 25 years remaining in your current loan, and you refinance back to a 30-year loan with a slightly lower interest rate, resulting in a payment reduction of $200 per month. (Note: This is just an example. The actual amount could vary.) You could then take that extra $200 per month and apply it toward the principal on the new loan. At this rate, the loan will be paid off in 22 years and 4 months, which is 2 years and 8 months less than the original loan.

On the other hand, if the borrower’s financial planner is a proponent of best-selling author and investment guru Douglas Andrew’s philosophies (see Missed Fortune), he or she may suggest investing the extra money in a side-fund that could earn a better rate of return and grow to the amount of the mortgage (and beyond) in even less time. This method provides excellent liquidity, but having more direct access to this money may be too tempting for some homeowners.

Regardless of the reason for the refinance, the mortgage consultant will need to know what the existing loan scenario entails, review the homeowner’s long-term goals, and provide a comprehensive spreadsheet that compares and contrasts the various loan programs available.
Bear in mind, refinancing to obtain a lower interest payment could also result in a lower deduction at tax time. The homeowner’s mortgage consultant and financial planner should work hand-in-hand with their mutual client’s best interest in mind.

Friday, March 14, 2008

Exclusive Update

Understanding the Higher Loan Limits

We have seen a whirlwind of legislative activity these past few weeks! There is much confusion surrounding the recently passed Economic Stimulus Package and higher loan limits. Unfortunately, the new law can be confusing to decipher, and not everyone will benefit. For this reason, we have provided an outline below that clarifies what this new law means for you and how you can benefit from the higher loan limits.

Description and Overview:
An economic stimulus package just passed Congress on February 7, 2008 and was signed into law by the President on February 13, 2008. This new law is effective immediately and includes a temporary increase in both the FHA and conforming loan limits to as high as $729,750 in high cost areas. This means that the interest rates on many mortgages will go down because these loans are now eligible to be purchased by Fannie Mae and Freddie Mac or insured by the Federal Housing Administration (FHA). Previously, the FHA was only allowed to insure loans with balances lower than $200,160 - $362,790, depending on the county where the property was located. Also, Fannie Mae and Freddie Mac were only allowed to purchase loans with balances at or below $417,000. This resulted in limited options and higher financing costs for those with loan balances above these limits. The new law substantially increases these limits in high cost areas and opens up new options and lower financing costs for many people.

How to Determine "High Cost" Areas

There are two things you must know in order to determine if you are in a high cost area:
1. Understanding the Formula

  • If 125% of the local area median home price exceeds $417,000, the temporary loan limit would be that 125% of the median home price with a cap of $729,750. Here are three examples to illustrate this concept:

  • If the median home price in your area is $225,000, 125% of that number is $281,250. This is below the current $417k conforming loan limit. Therefore, the conforming loan limit in your area will not change. However, if $281,250 is greater than the FHA limit in your county, your FHA limit will go up to $281,250.

  • If the median home price in your area is $375,000, 125% of that number is$468,750. This is above the current $417k conforming loan limit. Therefore, the conforming loan limit in your area WILL change and go up to $468,750. This number is also higher than the highest FHA loan limits, so therefore your FHA loan limit will also go up to $468,750.

  • If the median home price in your area is $650,000, 125% of that number is $812,500. This number is greater than the maximum cap of $729,250. Therefore, the conforming loan limit in your area will increase to highest allowable amount under this new law which is $729,250.

2. Determining the Median Home Price in Your Area

As required by law, on March 6, 2008, the Secretary of Housing and Urban Development (HUD) published the median house prices and new loan limits for the various areas across the country. Contact me today and I'll research your info and let you know exactly what the median home price and loan limits are in your area and how you can benefit from this information.

What do all the dates mean?

There is some confusion because the bill has a provision that says the higher limits are only effective for loans originated between July 1, 2007 and December 31, 2008. In short, the reason it is effective beginning July 1, 2007, is because the credit crisis started to unfold in July and August of 2007. Mortgage market conditions rapidly deteriorated almost overnight. Many secondary market investors suddenly refused to purchase loans that couldn't be sold to Fannie Mae and Freddie Mac. (For more info on how this process works, please see the article entitled Saga of the US Mortgage Industry.)

Unfortunately, many mortgage banks had already funded these loans in their own portfolio or through their warehouse lines of credit. Their intention was obviously to sell these loans on the secondary market after the loans were funded. However, the credit crisis prevented them from doing so, and they were stuck holding these loans in their portfolio. The July 1, 2007 date in the bill is designed to allow these lenders to unload these mortgages and sell them on the secondary market to Fannie Mae and Freddie Mac.

However, the July 1, 2007 date has no bearing whatsoever on new refinance transactions! In other words, it doesn't matter when the loan you are refinancing was originated. The old loan could have been originated in 2005, 2006 or anytime before or after July 1, 2007 and it would have no effect whatsoever on your current purchase or refinance transaction. If you are financing a new loan today, whether it is a purchase or refinance transaction, that loan is subject to the new limits set forth in the bill.

The other date of December 31, 2008 means that the old limits will go back into effect after this year. In other words, now is the perfect time to buy a new home or refinance your mortgage because after this year, your costs will be higher and your options more limited again.

When does this all go into effect?
Immediately! However, Fannie Mae, Freddie Mac and various lenders have different policies as to how these loans are priced and underwritten. That is why it is imperative that you work with a Certified Mortgage Planning Specialist who is committed, qualified and equipped to give you timely information and expert guidance every step of the way.

Jorge Merlos, CMPS®
Integrity Home Finance
10601 Civic Center Dr. Ste. 140
Rancho Cucamonga, CA 91730
(909)945-8621 direct(909) 945-8778 fax

Wednesday, January 30, 2008

FED Lowers Rates

It's Fed Day! Hot on the heels of its surprise inter-session rate cut of 75 basis points last week, the Federal Reserve Open Market Committee (FOMC) cut key interest rates again, the fifth straight cut since September 2007. In its statement last week, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth." In other words, economic data suggests a slowdown in the US economy, and the Fed is acting accordingly.

Although we had some Economic Reports released this morning showing a mixed view on the economy, the Fed decided to cut the fed funds rate another .50 basis point in their scheduled FOMC meeting.

Certain verbiage within statement about inflation, “it will be necessary to continue to monitor inflation developments carefully,” gives us much to think about on whether or not they will continue on this easing cycle. Right now inflation is out of the FEDs comfort rage between 1-2% but, “Financial markets remain under considerable stress, and credit has tightened further for some businesses and households.” It is not the job of the Fed to support the stock or bond markets. It is the job of the Fed to provide price stability (control inflation) and help maintain moderate growth.

The thought on every ones mind is, when the Fed cuts rates, aren’t rates supposed to go down? And what about the stock market? The answer to that question is that rate cuts will directly help Home Equity Lines of Credit, as well as Adjustable Rate Mortgages. However, it will not have a direct impact on Fixed Mortgage rates. In fact, after each of the last four Fed cuts, home loan rates actually moved higher. The reason is that a rate cut is inflationary and Bond Markets investors don’t find this favorable.

We hope you find this information useful and informative.
Below are some FAQ’s as well as the Official Press Release from the FED.

Who benefits from this cut?
If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.

What does this mean for long-term rates?
Long-term mortgage rates, the lowest we've experienced in years, could actually increase after today's cut, based on historical performance and recent trends. So if you're waiting for long-term rates to fall further, don't count on it. Your best chance to lock in the lowest rates since 2005 is now. Getting your application in process now will allow you to capture a great rate before it's too late.

What REALLY moves mortgage rates?
Fixed-rate mortgage rates aren't directly tied to Fed interest rate moves. Instead, they tend to follow in the direction of other long-term government bond yields, such as the 10-year Treasury, which historically moves in accordance with the economic outlook and in advance of Fed actions. The performance of Mortgage Backed Securities, issued by Fannie Mae and Freddie Mac, is what really determines long-term mortgage rates.

How does the economic stimulus package fit into the picture?The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates. On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in 20 high-cost areas across the country.

What should you do next?
If you're unsure how the rate-cut or the proposed legislation affects your mortgage, don't worry, you're not alone. There's no one-size-fits-all answer. Give us a call right away. We'll review your mortgage and see what, if anything, can or should be done to make the most of your individual financial goals and needs.

Official Press Release
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 3-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco.

Friday, January 18, 2008

Realtors Seek Loan-Limit Hike With Stimulus

There is mounting pressure for increased limits from a number of groups for California. We will see if this will finally carry the day, or California becomes a permanent high cost state, like Hawaii and Alaska.

Raising the Fannie Mae and Freddie Mac loan limit to $625,000 as part of a stimulus package could help 140,000 to 210,000 families escape foreclosure, increase home sales, and boost economic activity by $42 billion, according to the National Association of Realtors. "We believe that any stimulus package must address housing issues and increasing the conforming loan limits for these two government-sponsored enterprises," NAR president Dick Gaylord said. Congress and the Bush administration are trying to put together a $100-150 billion stimulus package that features mainly tax rebates for consumers and accelerated writeoffs for businesses. President Bush called for quick passage of a Federal Housing Administration reform bill on Friday in discussing his approach to a stimulus package. But he did not mention the GSEs. The Realtors want the GSE loan limit raised from $417,000 to $625,000 to address the lack of liquidity and the high interest rates in the jumbo mortgage market. "This is the quickest way to help the hurting housing market," Mr. Gaylord said.

Thursday, January 17, 2008

How to Determine Whether Your Loan Officer is Reputable

In slower markets, some loan officers may feel pressured to close deals that aren't in the homeowner's best interest. In order to avoid getting into difficult and financially compromised positions with their mortgages, borrowers are well advised to be acutely aware of the signs of a responsible loan officer when selecting a mortgage professional.

First, look for a Mortgage Planner whose values are focused on helping individuals to achieve their financial goals in both the fastest and the safest way possible. A reputable Mortgage Planner will show you the numbers associated with the proposed loan and provide you with concrete information that backs up his or her claims. Review all of the numbers. If they don't add up, ask for clarification. If your loan officer can't or won't answer your questions, move on--without the loan.

Secondly, a responsible Mortgage Planner will present you with financial information that goes beyond the point of the transaction, and will illustrate the total cost of the loan over time. If your loan officer is focusing only on rates and fees, you may be working with someone who's looking out for his or her own best interests, not yours.

Responsible Mortgage Planners will also tailor their strategies to fit your unique situation. In other words, they always take your personal financial goals into account. No one should try to place you into a loan without knowing the intricacies of your personal financial situation.

Finally, if your loan officer is advising you on issues other than mortgages, you could be working with someone who is compromising your best interests. Issues like investment rates of return and real estate appreciation aren't the areas of expertise for the vast majority of mortgage professionals and should be left to the professionals who have training and direct experience in those areas.

When seeking a loan officer, look for someone who specializes in mortgage planning, which is the process of evaluating a borrower's unique financial situation and advising the borrower on a loan that best suits his or her individual needs and goals. If your loan officer is trying to put you into a loan without evaluating how that loan will effect your entire financial situation--including debt management, tax benefits, investment goals and net worth--it's quite possible that you're only getting half of the picture.

The bottom line is that your mortgage representative should always be looking out for your best interests, regardless of market conditions.

Click on the image on the right and find out additional reason's why you should consult with a Certified Mortgage Planning Specialist®