Is the 2.25% Fed Rate helping the Mortgage Market?

Today I ordered wholesale rate sheets from couple lenders and turns out that the rates vary a lot between lenders and states. In state of CA you'll have same 30 year fixed rate range from 5.875% - 6.5%. State of FL had 30 year fixed rate range from 5.625% - 6.375% and northeast states 30 year fixed rate ranged from 5.50% - 6.75%. Turns out that lenders who use their own money offer better rates and terms. I've found some offering as low as 5.25% 30 year fixed no points. All loans were based on $200,000 loan amount. No point loans.
I suggest all borrowers shopping around before locking into anything. The chances are there are better rates out there than the one you've been offered right now.

Can You Stop Foreclosure Before It's Too Late?

Millions of homes in foreclosure and financial institutions breaking 52 weeks lows is the headline in today's world. Why so many foreclosures? What went wrong? Who's to blame? Who to sue? Those are the questions people ask themselves and nobody has a clear picture of how bad it really is out there. First, I blame all those greedy brokers who acted unprofessional and irresponsible when it came to borrowers. It was all about selling the best rates and programs that were going to make them a lot of money and not what was good for their borrowers.
Second, I blame the lenders for causing such a disaster in the financial market. I remember few years ago a program that was offered by Washington Mutual which had a start rate of 1.25% and it was called Option ARM. That was one of the worst programs I received to advertise, don’t get me wrong there were many others but this one stood out to me. Brokers were all over it and tried to put as many borrowers as they could into it. Why? Because it paid 2% of loan amount to brokers if they sold it. The ugly parts about that program were that it had a 3 year pre-payment penalty, up to 90% LTV, Negative Amortization, 5-year recast, No minimum credit scores, and pretty much anyone could qualify (self employed, retirees, etc). This had an adjustable full indexed rate of about 6.25% but you could pay the minimum payment which had a start rate of 1.25%. A borrower who could only a afford a $200,000 home could now afford a $350,000 home with this program. It gave borrower four different monthly payment options (Minimum payment, Interest only, 30 year amortization, 15 year amortization). Now imagine all those 90% LTV loans that were paying minimum payment for 5 years and now that LTV is not 90% but more like 110% and that full interest rate is 10%+ and not 6.25%. I’m surprised Washington Mutual didn’t bankrupt yet. Now imagine hundred more lenders like this offering this type of financing few years ago. Can you see why everything is falling apart? I feel very bad for all those people who bought these programs.

If you’re still in a program like this I suggest you refinance right now and get out of it. Before you refinance your should check your credit scores and then request free quotes and only get a fixed rate.

Subprime Borrowers & Those With Adjustable Rates
-If you have a subprime loan and your rate is over 7% you could probably qualify for a low rate loan now because your credit scores improved. If you made your loan payments on time and all other loan payments your credit scores may be up 50 to 100 points. You should check your credit history and find out what your scores are.
-If you have adjustable rate you should refinance now while the rates are in the 5%-6% range and loan limits are much higher and will be until Jan 2009. This is your chance to refinance a loan that was previously jumbo.

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Fed Rate 3.0% But Is It Time To Refinance?

Federal Reserve has cut the Fed rate down to 3.0% so you would think that mortgage rates are lower but I found some interesting things. Today I ordered a wholesale broker rate sheet from Wells Fargo and found out that mortgage rates on conventional conforming loans are much lower than on non-conforming loans.
As of Jan, 2008 the loan limits on conforming loans are:
Units - Loan Limit
1 - $417,000
2 - $533,850
3 - $645,300
4 - $801,950

Wells Fargo rates on 30 year fixed were 6.125% no points. A 30 year fixed over $417,000 on a single family home was 8.375% 30 year fixed no points. That is over 2% higher!

But there is good news! I found that lenders who use their own money to close loans have much better rates on both conforming and non-conforming loans. Their rates on confirming loans are 5.25%-6.0% and non-confirming rates are 5.75% - 6.75. Anyone looking to refinance or purchase a home should shop around and see who offers the best rates. Many websites offer free loan quotes from up to 5 lenders ( Loan Web ).

Conventional loans are secured by government sponsored entities or GSEs such as Fannie Mae and Freddie Mac.

Fed Cuts Rate 0.75% to 3.50%!

After an ugly start in the stock market the Federal Reserve came out shortly after 8AM and announce a Fed rate cut of 0.75%. This rate cut will help the housing and mortgage market. This morning a 30 year fixed mortgage rate was 5.125% no Points. This is great news! It's great time to refinance right now to a 30 year fixed mortgage and also buy a new home. The rates are very low and the home prices in many areas are down 5% or more.

A Closer Look at The Mortgage Industry

Foreclosures at rise and more people falling behind on their mortgage payments is the headline everywhere. The reason for this is that many borrowers have adjustable mortgages and they don't get out of a bad deal before it's too late. Yes, the Federal Reserve has lowered the Fed Rate and Discount Rate but that is not enough to stop foreclosures or help people who are already late one mortgage payment.

Many borrowers bought a property they can't afford with negative amortization loans which have the options to pay 1%-2% rate instead of the real rate which is 7% or 8%. The difference of 5% or 6% they are not paying is added to their mortgage balance and decreases their equity in the home. Then it becomes hard to refinance that loan because there's no equity left. There are brokers who prey on inexperienced borrowers and sell them these teaser rates on which they make a huge commission. Brokers don’t care what will happen to you within 6 months. All they care about is making money and you need to watch out!

What you need to know?
1. Credit Scores: Know your credit scores
(Even if you were told your credit is not good you should get a report yourself).

2. Rates/Term: Apply for free rate quotes only from high rated companies



3. YSP: Look out for YSP (yield spread premium) on the Good Faith Estimate. YSP is the fee the lender will pay to the broker for selling a certain rate. If it shows more than 2%+ you're getting a really bad deal! Also, look out for origination fees and discount fees. If you're being charged more than 1.5% you should get out of that deal and find another broker or lender.

4. RATE LOCK: When you find a good offer and you like the rates you should request a "rate lock" and ask the loan officer to send you a copy of the rate lock immediately. A lot of loan officers will quote you a rate and tell you they locked it, but they didn't. Other things borrowers need to look out for is prepayment penalties.

5. PREPAYMENT PENALTIES: Always ask if there are any prepayment penalties. When you have prepayment penalty in your loan agreement you can not pay off or refinance the loan within couple years, if you do you will pay fees.

At closing look at the Settlement sheet which has all the fees associated with closing the deal and see if terms and fees have changed from the Good Faith Estimate you signed. Look for the paper that states "Note". This shows exactly what your interest and term is going to be.

MBA Fights Two Percent Mortgage Interest Rate "Tax"

WASHINGTON, DC – David G. Kittle, CMB, Chairman-elect of the Mortgage Bankers Association testified today before the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law.
In his testimony, Kittle told the committee that proposed legislation to reform the bankruptcy code and allow judges to “cramdown” debt on primary residential mortgages will impose significant costs on consumers by restricting the flow of capital into the mortgage market and increasing the price tag on all mortgages.
“If you chip away at the security created on home mortgages–and this bill is not a small chip, it is a sledgehammer attack—you chip away at the entire core of the mortgage finance system,” said Kittle. “In order to account for the added risk you will add significant costs to obtaining a mortgage. If this bill becomes law, we believe mortgage rates would jump significantly, going up 1½ to 2 points for everyone taking out a loan.”
Today’s hearing focused on H.R. 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007. H.R. 3609 would allow judges under Chapter 13 bankruptcy proceedings to unilaterally mark down the value of a primary mortgage from its full amount down to the fair market value of the home. The bill would also give judges free reign to change the other terms of the loan, including the interest rate or the length of the loan.
“What does that mean?” asked Kittle. “Assume you take out a 30 year fixed rate mortgage loan for $300,000 in today’s market. If you are a prime borrower you will receive a rate of about 6% with no points, giving you a principal and interest payment of about $1800 per month.”
“If you pass this bill we estimate that the same loan with the same terms could cost as much as 8%,” continued Kittle. “That increases your payment to about $2,200 per month. This will be an increase of $400 per month, $4,800 per year, for a total of over $144,000 over the life of the loan. This is a massive back-door tax increase on homeowners.”

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More info:
Truth About Mortgage Industry
New Changes to the Mortgage Lending System
Federal Reserve Injects $41 Billion into U.S financial system