The Mortgage Porter

Fed's 0.25% Cut All Ready Baked in the Cake

Today the FOMC cut the Fed Funds Rate by 0.25% to 2.00% and the Discount Rate by  0.25% to 2.25%.  These rate cuts do not directly  impact mortgage interest rates. 

Mortgage interest rates are based on mortgage backed securities (bonds).  How bond traders react to the Fed Rate cuts and the Fed Statements that correspond to this cut, will impact mortgage interest rates.  To read today's FOMC statement, 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....

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity."

The markets have been anticipating the 0.25% cut to the Fed Funds Rate and therefore, this cut all ready was baked in the cake.   Had the FOMC not cut or cut deeper, we would see much more dramatic results with mortgage interest rates as bond traders would be trying to decipher if the Fed was reacting to higher inflation or a recovering economy.   

Currently bonds are actually reacting positively as the market are anticipating that the FOMC is done with the rate cuts.   Will mortgage rates improve?  The proof will be in the pudding cake.

Don't Throw Your Loan Officer Mama from the Train

I had an amazing experience which I just have to share...the positive point is that  the buyer did wind up with her home but it was under the brunt of stress that was unnecessary.   You see, sometimes when things begin to go wrong in a transaction, fingers will waive and point vigorously undeservedly.   People will want to remain shiny, positive and virtuous to their referral provider and will therefor, throw someone "under a bus" or "into a train".  I was recently almost thrown and I spared myself fighting all the way.

We had loan documents to the escrow company just over a week prior to closing (still pretty darn good)...no HUD-1 from the escrow company until a day before the buyer was signing (after many request for an estimated HUD-1.  I want to review them to make sure my closing costs from the Good Faith Estimate are in line with the Estimated HUD-1 Settlement Statement).   

The client signs two days before closing and I assume all is well until I receive a panicked call from the home buyer on closing day stating that we are not closing.  She's very upset because she has learned from the Listing Agent and the Escrow Company that her purchase is not funding because my company released it too late.  This is a total surprise to me since our office did fund on the transaction.

My first step, after calling my client to let her know that I'm "on it" and that this is news to me (because escrow NEVER called me) is to call escrow and find out "what's up".  At this point, it's 4ish in the afternoon and there are no more new recordings taking place at the county. 

The Escrow Officer is schmoozy and tells me that we (the mortgage company) released the recording a little late which made it difficult for the title company to get documents to the county.  I let the EO know that previous to lending, I was in the title industry where my career began with recording documents and ended with managing an escrow branch.  The EO had days (a week) to sign the client and provide documents to the title company for recording...yet she's still trying to pin the blame on the mortgage company.  We, in fact, have emails to the escrow officer confirming she has our wire and she's okay at proceed with recording. 

Although this EO returns our funding package two days before closing (thanks to how many days in advance we provided the loan package to her) yet waits until the day of closing to send the loan documents to the title company.   She tried to tell me that we released too late at 2pm when I know that the county courthouse will take recordings until 3:30.  I've done many "walk on's" myself way back "in the day".  Regardless, she and/or the title company could have had the documents to the court house MUCH earlier.

I only learned about the recording mishap only because my client called me ready to rip my face off since she was told this was the fault of lender when it was anything but the case. 

The escrow officer and title company are lucky that I'm not naming them.  I'm not one to bash (although check back if this happens again)!   As someone who was in the title and escrow industry for so many years, there is no way that I would have unjustly thrown someone "under the train" and I find it extremely concerning that the only way we learned about recording/closing issues was from the buyer.  If the buyer had not called us late in the day, we would have had NO idea that the loan we funded on did not record.  Why didn't the Escrow Officer contact us?  A short staff is no excuse for not contacting the mortgage company (when the EO did communicate with the buyer and agents).  In fact, there is no excuse.

How did this wind up?  The title and escrow company have both since admitted fault.  The title company is going to indemnify the transaction as if it had closed on the day it should have.  And the buyer did get her keys to her new home.

What happened to working together?  I don't remember throwing Mortgage Professionals under the train or bus like I've witnessed recently--are EO's so afraid of losing business they'll make a sacrifice play to impress their agents?

NOTE: My preferred title and escrow company contacted me concerned this could appear as if it where one of their Escrow Officers that "threw me off the train".  Without naming names, this was a different company. 

 

Calling All Washington State Correspondent Lenders

Did you receive the notice from DFI last Thursday regarding new licensing requirements impacting Correspondent Lenders?  Here's a portion of the email I received from Deborah Bortner, Director of the Division of Consumer Services.

"Senate Bill 6471 (chapter 78, Laws of 2008), passed by legislature, and signed by the Governor on March 19, 2008, requires that all lenders doing business in Washington be licensed by the Department of Financial Institutions under the Consumer Loan ACT (CLA), chapter 31.04 RCW.  The law becomes effective June 12, 2008."

I'm still digesting all of this...it's my understanding that if lenders wish to retain their status as a Correspondent Lender in Washington State, they will need to apply for (an expensive) Consumer Loan License.   Gee, I guess that means we can all do loans with double digit interest rates now--how is this helping the consumer?  It certainly doesn't help lenders...it IS more money for the Evergreen State.

WAMB responded the following day via email:

Many of you received an email from the Department of Financial Institutions on Thursday regarding new licensing requirements for Washington State Lenders.  This email was a result of the passage of Senate Bill 6471 concerning consumer finance companies.  Please know we were not aware of this issue until we also received the notification by email from DFI yesterday.

During the legislation session we were made aware of Senate Bill 6471 and were told that the intent of this legislation was to require that all Consumer Finance Companies who were operating as Mortgage Brokers become licensed.  We were advised that it was not a mortgage broker concern.

Apparently the passage of this legislation has created some unintended consequences for brokers.  The legislation would require any mortgage broker with a correspondent line to also become licensed as a consumer finance company.  We know that if this legislation is put into effect on June 12, it will have an impact on a large segment of WAMB's membership.   WAMB is working with the Mortgage Broker Commission to minimize these consequences through the Rules Process...."

Well my lending Brothers and Sisters, I highly recommend that you attend the next Mortgage Broker Commission Meeting...it's sure to be a doozy and we, few and proud, Correspondents must be heard.

Mortgage Brokers Commission Meeting:  Tuesday, May 13, 2008 beginning at 9:00 a.m. - 11:00 a.m. at Bellevue City Hall's Council Chambers.  Bellevue City Hall, 450 110th Avenue NE, Bellevue, WA 98009.   DFI wants you to fax your RSVP's with your name, company name, address, phone & fax number to Elizabeth Stancil at 360-586-5068.  Here is a form you can use to RSVP: Download MortgageBrokersCommissionMeetingMay13.pdf

I hope to see you there.  RSVPs are needed by May 9, 2008.

Morning photos from my garden

I love gardening and photography...so taking pictures of my garden is just something I enjoy doing!  These photos are from this morning.

Mortgage Interest Rates including Conforming-Jumbo and FHA-Jumbo

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied, "full doc" purchase with a sales price of $500,000 and a loan amount of $400,000.  This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with 1 point and there are no prepayment penalties on any of the rates quoted below. 

30 Year Fixed:  5.875% (APR 6.023%)

30 Year Fixed with 10 Year Interest Only:  6.250%  (APR 6.388%)

15 Year Fixed: 5.500% (APR 5.743%)

5/1 ARM - LIBOR:  5.375% (APR 6.945%)

5/1 ARM with 10 Year Interest Only - LIBOR:  5.500% (APR 7.035%)

Conforming-Jumbo Rates.   Pricing is based on the same criteria above except where the loan amount is $417,001 - $567,500 for properties in King, Snohomish or Pierce Counties.  (For other conforming-jumbo loan limits in Washington state, click here); specifically priced for a sales price of $650,000 and a $520,000 loan amount.

30 Year Fixed:  6.375% (APR 6.524%) 

30 Year Fixed with 10 Year Interest Only:  6.875% (APR 7.018%)

JUMBO (Non-Conforming) Rates.   Pricing is based on the same criteria above, with the exception that the loan amount is $417,001-$650,000 (20% down).   The specific scenario used to price the rates below is a sales price of $850,000 with a loan amount of $680,000.

30 Year Fixed priced with 1.5% points: 7.625% (APR 7.841%)

30 Year Fixed priced with 1 point:  8.000% (APR 8.169%)

FHA.  Pricing based on credit score of 620 or better and loan amounts up to $362,790 for FHA in King, Snohomish and Pierce Counties.

30 Year Fixed:  6.125% (APR 6.910%). 

FHA-Jumbo. Pricing based on loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  For other loan limits in Washington State, click here.

30 Year Fixed: 6.375% (APR 7.158%)

VA.  Pricing based on credit scores of 620 or better based on loan amounts up to $417,000.

30 Year Fixed:  6.25% (APR 6.572%)

Prime Rate (what HELOCs are based on):  5.250%

Please do not select your Mortgage Professional by interest rates alone and do not shop rates by APR.  These programs all have the same closing costs so you can see APR is not a valuable tool.   

This is just a small sample available of rates and products.  Rates are as of Friday, April 25, 2008 at 9:00 a.m. and may change at any time.  Available programs may change at anytime as well.   This is not a guarantee nor is it a commitment of interest rate.  For your personal rate quote for your Washington State property, please contact me.

Is it a Primary Residence, a Second Home or Investment Property?

Every so often, someone will be interested in financing for a home they will not be living in 100% of the time...they want the best rate which is "owner occupied".   It's crucial to know the difference in your lenders eyes and to be completely upfront so you avoid committing fraud.  Bottom line, the property and situation needs to make sense to the underwriter.   Here are some basic definitions:

Principal/Primary Residence.   When a property is classified as "owner occupied" it receives a better interest rate than an investment property.   It's very straight forward:

• The owner lives in the property for a majority of the year.
• The property is in a location that make sense in relation to their employment and contains characteristics that suits the needs of their immediate family.
• The borrower acknowledges (on several loan documents) they intend to occupy the property.   Note: "intend" does not mean, "oops...I financed this believing I would live here and now I've decided to buy another property near by that I'll occupy".   Typically the lender wants the buyer to occupy the property within 30 days of closing.

Second Home.  A second or vacation home must be a reasonable distance away from a principal residence.  Typically lenders like to see a minimum of 50 miles for distance from the borrowers home.  The owner must occupy the property for some portion of the year and the property must be suitable for year round occupancy. Second home definitions can vary from lender to lender.  Some will insist that a second home be in a resort area.  It's generally a little tougher to qualify for a second home--borrowers are often qualifying with mortgage payments on two properties: their primary and the proposed second mortgage.

Investment Property.  This is a property that the borrower does not occupy.  It can also be a "second home" or vacation home that is too close to a primary residence or that the underwriter does feel strong enough that it is indeed a vacation home.  As there is a higher risk to banks with investment properties, the interest rate reflects the risk (the higher the loan-to-value, the higher the rate).   

Recently, I was working with a woman who currently owns a one bedroom/one bathroom condo.  A larger two bedroom unit became available and she decided she wanted to purchase that and to rent out her one bedroom.   Where this could be potentially classified as an "investment property" since the units are obviously closer than 50 miles to each other, it makes sense to the underwriter that she is moving to a larger unit.   As long as the buyer moves into the two bedroom within 30 days of closing, she qualifies for owner occupied on her two bedroom.  If she were to refinance her one bedroom, it would be considered "non-owner occupied".

Another common scenario is if a parent is helping their adult child (or other family member) buy a home.  If that home is located too closely to the parents home and they are buying it without their child being a co-signer, it may also be treated as an investment property.  However if the property is for housing the child while in college or if the child is disabled, the borrower may qualify for an "owner occupied mortgage" rate with the Family Opportunity Mortgage.    The Family Opportunity Mortgage does make exceptions with occupancy for family members who are buying homes for:

• Elderly Parents
• College-bound Child
• Disabled Adult Child

Lenders will do post closing investigations to make sure that borrowers are actually residing in the property.  If they find that the borrower is not, they may call the Note (mortgage) due...and that may be just the beginning of that person's troubles.    Mortgage fraud is a very serious issue and falsely stating that one intends to occupy a property tops the list.   Knowingly providing false information on a loan application is a federal crime.

From Fannie Mae and Freddie Mac's Uniform Deed of Trust:

Borrower shall occupy, establish, and use the Property as Borrower’s principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower’s control.... 

Borrower shall be in default if, during the Loan application process, Borrower or any persons or entities acting at the direction of Borrower or with Borrower’s knowledge or consent gave materially false, misleading, or inaccurate information or statements to Lender (or failed to provide Lender with material information) in connection with the Loan.  Material representations include, but are not limited to, representations concerning Borrower’s occupancy of the Property as Borrower’s principal residence.

In defense of most borrowers, sometimes it may seem unclear as to what type of occupancy a property qualifies for. Borrowers simply need to be upfront with their Loan Originator with the use and intentions of the property to make sure they do not commit mortgage fraud, even if it is not intentional.

New Mortgage Porter Feature: Economic Calendar

I just added an economic calendar to the left side of Mortgage Porter.  This intended to give readers a quick glance of what ecomonic events that may impact mortgage rates (mortgage backed securities) in the near future.   

You can also get this information (and more) by clicking on the green Mortgage Market Update button above the calendar.

Of course these days, mortgage bonds are reacting to just about anything, including fears of a rice shortage--so take this calendar with a grain of rice salt.

So You've Just Become a Home Owner...Feeling Popular?

You will soon feel quite popular if you've just bought a home or at least your mail box will be with tons of junk mail.  Over the weekend I received an email from one of my clients who closed on their new home last month:

"As I’m sure is typical, we’re being deluged with mortgage junk mail.  I see you have several highlights of particularly bad ones you’ve seen, but is there any way to stop the flood?  I know there’s a marker you can put on your credit report that stops credit card offers – is there anything similar for mortgages?"

In a nutshell, your Deed and Deed of Trust are recorded at the county which become "public record".  There are companies that research, buy and resale this information to those wanting to reach out to new homeowners.  You're more popular than you've ever wanted to be...it's the welcome wagon of junk mail.   What's worse is that some companies will present the information as if they are a part of or teamed up with your lender.   

Please check back with your original lender before taking up some of these offers to verify if they are indeed from your mortgage company--the trickery they will resort is amazing and sickening.

Here's a great article that I read another local blog, A Generous People regarding getting rid of junk mail.  I hope it helps!  In the meantime, I recommend opening your mail over your recycle bin. 

Remember Last Weekend?

Just a week ago, we were soaking in blue skies and warm sunny 70 plus degrees.  This photo is probably the last of my cherry blossoms.   It was so nice out that we move the last surviving plant (an Angel Trumpet) out of the garage and I pruned my roses. 

My husband and I decided to finally get rid of some shrubs that I was never a big fan of.  I have no idea what they are--except they have to be pruned back every year and they don't bloom or change color.   I'm sure one of my readers will tell me these are terrific plants and I just didn't show it the right love.  Alas, they're gone now (we did keep one)!

Our home older and the garden is a little over crowded. We replaced the four "green shrubs" with a variegated hydrangea and two black lace elderberries. A week earlier Gardening with Cisco raved about black lace elderberries and so I was thrilled to find a few at our local nursery.   I'll follow up with an "after" post assuming our new plants made it through our bizarre freezing weather this weekend. 

Mortgage Interest Rates for Friday Morning

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied, "full doc" purchase with a sales price of $500,000 and a loan amount of $400,000.  This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with 1 point and there are no prepayment penalties on any of the rates quoted below. 

30 Year Fixed:  6.00% (APR 6.149%)

30 Year Fixed with 10 Year Interest Only:  6.375%  (APR 6.514%)

15 Year Fixed: 5.625% (APR 5.870%)

5/1 ARM - LIBOR:  5.250% (APR 6.895%)

5/1 ARM with 10 Year Interest Only - LIBOR:  5.375% (APR 6.989%)

Conforming-Jumbo Rates.   Pricing is based on the same criteria above except where the loan amount is $417,001 - $567,500 for properties in King, Snohomish or Pierce Counties.  (For other conforming-jumbo loan limits in Washington state, click here); specifically priced for a sales price of $650,000 and a $520,000 loan amount.

30 Year Fixed:  6.375% (APR 6.524%) 

JUMBO (Non-Conforming) Rates.   Pricing is based on the same criteria above, with the exception that the loan amount is $417,001-$650,000 (20% down).

30 Year Fixed: 7.375% (APR 7.536%)

FHA.  Pricing based on credit score of 620 or better and loan amounts up to $362,790 for FHA in King, Snohomish and Pierce Counties.

30 Year Fixed:  6.125% (APR 6.910%). 

FHA-Jumbo. Pricing based on loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  For other loan limits in Washington State, click here.

30 Year Fixed: 6.375% (APR 7.158%)

VA.  Pricing based on credit scores of 620 or better based on loan amounts under $417,000.

30 Year Fixed:  6.25% (APR 6.572%)

VA-Jumbo.  Loan amounts over $417,001 - $950,000.

30 Year Fixed: 6.375% (APR 6.700%)

Prime Rate (what HELOCs are based on):  5.250%

Please do not select your Mortgage Professional by interest rates alone and do not shop rates by APR.  These programs all have the same closing costs so you can see APR is not a valuable tool.   

This is just a small sample available of rates and products.  Rates are as of Friday, April 18, 2008 at 8:30 a.m. and may change at any time.  Available programs may change at anytime as well.   This is not a guarantee nor is it a commitment of interest rate.  For your personal rate quote for your Washington State property, please contact me.