The Mortgage Porter

How Did Our State House Members Vote on the $700B?

This from the Seattle PI:

Yes: Jim McDermott. Norm Dicks. Adam Smith. Rick Larsen. Brian Baird (All Democrats).

No: Dave Reichert. Cathy McMorris Rodgers. Doc Hastings (All Republicans). Jay Inslee (Democrat).

Elections are just weeks away.  NBC is reporting that House members in close races tended to vote no on this bailout.   For the record, here are the results from the 2006 elections:

District 1: Jay Inslee elected with 67.8% of the vote

District 2:  Rick Larsen ~ 64.16%

District 3: Brian Baird ~ 63.15%

District 4: Doc Hastings ~ 59.88%

District 5: Cathy McMorris Rodgers ~ 56.11%

District 6:  Norm Dicks ~ 70.6%

District 7: Jim McDermott ~ 79.16%

District 8: Dave Reichert ~ 51.46%

District 9: Adam Smith ~ 65.72%

House members who voted no to the bailout were elected by an average percentage of 58.81% (take out Inslee and the average drops to a narrow 55.8%).

Washington State House members supporting this bailout were elected by an average 68.5% by their constituents.

By the way, you have just a couple days left to become a registered voter, if you are not all ready, for the upcoming election.

Got Keiki?

I had no idea that I did until my neighbor spied the starts on one of my orchids.  "Keiki" is Hawiian for baby.  I feel so lucky!  I'm new to growing orchids...so we'll see how this all turns out. 

Remember these?

First, a commercial from Washington Mutual...where even Paul can get a home loan thanks to their flexible underwriting. 

Then...don't worry, you can sleep knowing you have AIG...I won't miss this annoying kid...but I did enjoy the laughing baby ads.

Wachovia currently is dancing around in talks with various banks right now hoping for a merger.  I wish I could have found the ad where the lady was talking about making her option ARM and how she liked to make her deferred interest payment when her dog was having puppies!  All I could find was this promo on a "fixed rate mortgage with payment options for wiggle room".

For my puppy-fix, here's one more from WaMU.

Mortgage Rates and WaWho?

It was one week ago today that the historic plans were unveiled by Treasury Secretary Hank Paulson that Congress is still working on...this Friday is also very significant, especially to Washington State residents.  Our largest bank, Washington Mutual was seized by the Office of Thrift Supervision and sold to JP Morgan Chase.  

This is the largest bank failure in US history. 

Update Sept. 26, 2008 @ 1:00 pm: updated afternoon rates have been posted at Rain City Guide.

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.  Rates are priced based on a low-mid credit score from 720-739. This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with no origination or discount points (for your personal rate quote with or without points, please contact me) and there are no prepayment penalties on any of the rates quoted below. 

30 Year Fixed @ 0 Pts: 6.250% (APR 6.314) ~ Priced w/1 Pt:  5.875% (APR 6.029%). 

30 Year Fixed with 10 Year Interest Only @ 0 Priced at 6.750% (APR 6.810) ~ Priced @ 1 Pt:  6.375% (APR 6.520%).

15 Year Fixed @ 0 Pts: 6.000% (APR 6.101%) ~ Priced @ 1 Pt: 5.500% (APR 5.753%).

5/1 ARM priced @ 1 Pt:  5.750% (APR 7.099%)

Conforming Jumbo Rates. Pricing is based on the same criteria above (including zero points) 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 @ 0 Pt:  6.500% (APR 6.557%) ~ Priced @ 1 Pt: 6.125% (APR 6.275%).

30 Year Fixed with 10 Year Interest Only ~ Priced @ 1 Pt: 6.625% (APR 6.814%).

JUMBO (Non-Conforming) Rates. Pricing is based on the same criteria above (zero points), 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 @ 1 Pt:  7.500% (APR 7.664%)

FHA.  Pricing based on credit score of 620 or better and loan amount of $362,790 for FHA in King, Snohomish and Pierce Counties with 1 discount/origination point.

30 Year Fixed @ 1 Pt:  6.250% (APR 6.933%). 

FHA-Jumbo. Pricing based on 1 discount/origination point and loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  For other loan limits in Washington State, click here.   After December 31, 2008, loan limits for FHA Jumbo loans will be reduced to $522,100. 

30 Year Fixed @ 1 Pt: 7.000% (APR 7.691%).

VA. Pricing based on credit scores of 620 or better based on loan amount of $417,000.   For VA loan amounts over $417,000, please contact me.

30 Year Fixed @ 1 Pt:  6.375% (APR 6.497%).

Prime Rate (what HELOCs are based on):  5.000%.  This is just a small sample available of rates and products.  Rates are as of Friday, September 26, 2008 at 8:00 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. 

Mortgage rates continue to be very volatile.  Stay tuned with what's going on in the market by subscribing to Mortgage Porter (upper left corner) and Mortgage Porter Twitter for live rate updates (click Follow). 

Tips for homebuyers and sellers

Yesterday I was interviewed by Melinda Fulmer for a MSN Real Estate article.   Here were a few of my pointers (with some clarification) for buyers:

1.  Plan on having a down payment.  FHA will allow as little as 3.5% for your down payment which can be gifted or loaned by family members.  However I do like to see those shy on savings practice making mortgage payments to a savings account until they have at least 6 months of mortgage payments "in reserves".   This account is not to be used for your down payment--it's in case of an emergency.

2. Be picky when selecting your loan originator.  I do believe in getting referrals from people you financially respect.  You can also try "googling" their names to learn more about the loan originator and their qualifications. 

Borrowers may be better off working with loan originators who have are able to provide FHA loans--even if they're not considering FHA financing.  Many conventional loans are having to switch to FHA financing as the underwriting is more forgiving and rates may be better depending on mid-credit scores. 

3. Get prequalified as soon as possible.  This is a good way to get to select your loan originator (this is not the same as a preapproval).  During this stage, you'll be able to see how detailed oriented the LO is what their personality is like--what type of programs do they recommend.  A LO should provide you a Good Faith Estimate without any commitment from you.

4. Rate lock strategy.  Ask your LO what they can do if rates improve after you lock.  Right now, with the turbulent markets, many lenders are offering free rate float downs as long as the lock meets specific criteria.  This provides borrowers with the assurance that the rate will not be higher than the current rate lock and that should rates improve, they may have the opportunity to "float down" to that rate.  Do make sure to obtain a written lock confirmation.

For sellers, I suggest that they insist on a preapproval letter to be included with their offer.  They should also carefully read the letter, it should address the buyer's credit, income/employment and where the down payment is coming from along with the type of loan they're approved for. Preapproval letters are sadly not worth more than the paper they're written on, however they can provide you with some clues about the lender the buyer is working with.  If a seller has two identical offers, the buyer's lender can make a huge difference in whether or not the transaction closes smoothly.

What takes place between signing and closing?

What happens between signing documents and closing? Watch this video featuring The Talon Group's Chief Title Officer, Tim Daniels as he explains what happens with your loan documents after you finish signing at the escrow company.

A Solution for FHA Buyers Searching for a Down Payment

DPA's, such as Nehemiah, will no longer be allowed with FHA mortgages as of October 1, 2008 with the passage of HR 3221.  Congress currently has legislation in the works to bring DPA's back to life for those with better credit scores...but until that is successfully passed, DPAs are soon to be gone.   

Buyers who are shy on down payment (or wish not to tap out their savings) can ask intermediate family members for a loan.  Here are some of the FHA guidelines:

• The loan can be secured or unsecured against the subject property.  No third parties.
• The loan must only be with immediate family (parent, stepparent, grandparent, child, adopted or foster child, etc.)
• The family member can borrower the funds for the loan--however, the loan must be between the family member (again, no third parties allowed).
• No balloon payments can be due within 5 years.
• Borrower must qualify for both loans (FHA mortgage and the family loan).   Terms of the family must be submitted to underwriting.
• The combined loan to value (when you factor both loans) may exceed 100% of the sales price however, no cash back to the borrower is allowed (except for the earnest money deposit).

Sellers can still contribute up to 6% of the sales price towards actual closing costs and prepaids AFTER the borrower has met their 3.5% contribution towards down payment (this is where the family loan comes in).  If the home buyer has not owned a home for the past 36 months, they may qualify for the First Time Homebuyer Tax Credit which could give them up to $7500 to pay back the family loan once they receive their tax refund. 

Family members can still provide "gift" funds towards the down payment and closing costs as long as they do not expect repayment.  Currently, the IRS permits up to $12,000 per person for an annual gift before gift taxes are to be paid without tax.

Mortgage Interest Rates on a Historic Day

This week is one for the record books.  We've had huge swings in the stock market and mortgage rates have also been on a roller coaster.  This morning, we've had three major announcements from the government that are impacting financial markets:

• Treasury Secretary Hank Paulson announced that the US government will temporarily guarantee money market funds.  Click here to read Paulson's statement.
• The Federal Reserve is taking action to buy bad mortgage debt which will restore much needed liquidity.
• The SEC has placed a ban on the short selling certain financial stocks.

These actions are causing a huge rally with stocks, causing bonds to fall.  Mortgage interest rates are slightly higher than last week--at this moment. 

I will be posting rates this afternoon at Rain City Guide.  I purposely post rates later at RCG since rates often change during the day.  Once I post later this afternoon, I'll provide a link here.  Update: 12:15 mortgage rates have improved slightly.

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.  Rates are priced based on a low-mid credit score from 720-739. This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with no origination or discount points (for your personal rate quote with or without points, please contact me) and there are no prepayment penalties on any of the rates quoted below. 

30 Year Fixed @ 0 Pts: 6.250% (APR 6.314) ~ Priced w/1 Pt:  5.875% (APR 6.029%). 

30 Year Fixed with 10 Year Interest Only @ 0 Pts: 6.750%  (APR 6.810%) ~ Priced @ 1 Pt:  6.375% (APR 6.520%).

15 Year Fixed @ 0 Pts: 6.000% (APR 6.101%) ~ Priced @ 1 Pt: 5.500% (APR 5.753%).

5/1 ARM priced @ 1 Pt:  5.750% (APR 7.099%)

Conforming Jumbo Rates. Pricing is based on the same criteria above (including zero points) 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 @ 0 Pt:  6.375% (APR 6.468%) ~ Priced @ 1 Pt: 6.000% (APR 6.248%).

30 Year Fixed with 10 Year Interest Only @ 0 Pts:  7.000% (APR 7.056%) ~ Priced @ 1 Pt: 6.625% (APR 6.814%).

JUMBO (Non-Conforming) Rates. Pricing is based on the same criteria above (zero points), 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 @ 1 Pt:  7.625% (APR 7.789%)

FHA.  Pricing based on credit score of 620 or better and loan amount of $362,790 for FHA in King, Snohomish and Pierce Counties with 1 discount/origination point.

30 Year Fixed @ 1 Pt:  6.250% (APR 6.933%). 

FHA-Jumbo. Pricing based on 1 discount/origination point and loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  For other loan limits in Washington State, click here.   After December 31, 2008, loan limits for FHA Jumbo loans will be reduced to $522,100. 

30 Year Fixed @ 1 Pt: 6.500% (APR 7.182%).

VA. Pricing based on credit scores of 620 or better based on loan amount of $417,000.   For VA loan amounts over $417,000, please contact me.

30 Year Fixed @ 1 Pt:  6.250% (APR 6.371%).

Prime Rate (what HELOCs are based on):  5.000%.  This is just a small sample available of rates and products.  Rates are as of Friday, September 19, 2008 at 7:55 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. 

Mortgage rates continue to be very volatile.  Stay tuned with what's going on in the market by subscribing to Mortgage Porter (upper left corner) and Mortgage Porter Twitter for live rate updates (click Follow). 

That's Not Me: Numerous Matters and ID Affidavits from the Title Company

If you have a common popular name, like Smith, Jones or Hernandez;  you may be asked to complete a form from the title insurance company.  This is so that instead of listing many judgments that are against the same name as yours on the preliminary title commitment, the Title Department and use the ID Affidavit to determine whether or not the items shown are against you.  Tim Daniels, Chief Title Officer with The Talon Group, explains more in this video.

Declining Home Values: Good for Buyers - Bad for Refi's

Last Wednesday's Seattle PI featured a front page article by Aubrey Cohen: Home values drop by double digits.   According to data by the NWMLS, the median sales price for houses in August 2008 for Seattle was $464,800; a 7.8% drop from July 2008 of $428,500 and 14.5% drop when compared to the median sales price from August 2007 of $501,000.   King County also dealing with a double digit drop.   The median sales price for houses in King County in August 2008 was $423,950; a 4.7% drop in one month with July 2008 at $445,000 and a 11.2% drop compared to August 2007 at $447,345.

If you're a home buyer in this market, you're in the drivers seat...and sitting pretty at that.  Listings are up 18.3% in King County (condos and houses) as compared to August of 2007; giving you plenty of choices.  Sellers are more likely to contribute towards your closing costs and prices are more attractive than recent years.

What if you all ready own a home and you're considering refinancing?  Even though your home is your castle, the appraiser must use 3 recent sales (over the last 6 months is preferred) of homes similar to yours to come up with an appraised value.  This can be a little tricky with fewer sales AND lower sales prices.   Using the King County figures above and rates I've quoted at Mortgage Porter, this is how a refinance could be impacted:

Joe and Suzy purchased their home in King County for $447,345 in August 2007 utilizing a 30 year fixed mortgage at 6.625% with a loan amount of $357,900 (20% down payment).  They are now interested in taking advantage of our lower rates and decide to refinance since rates are close to a full 1% lower with zero points and they're going to stay in their home for at least the next five years.   They have not paid additional towards their principal and their current balance is now around $354,250 with a principal and interest payment of $2,291.67.

An appraisal reveals that their home, based on what others like theirs have recently sold for, is now worth $423,950.  The best priced rate/term refinance (assuming perfect credit) is an 80% loan to value.  80% of $423,950 is $339,160.  If Joe and Suzy want to drop their rate by one point, they would need to bring in $15,000, not including closing costs if they want to avoid private mortgage insurance.  (Second mortgages are now pretty tough to come by these days).

Joe and Suzy's home may be worth more than average.  Loan originators do not know what the value will be until we receive the appraisal.  I do have some resources available (such as researching comps via the title company) however, it's just a rough idea.  Be wary of any loan originator who promises you that your home value will be perfect for a refinance.

Joe and Suzy's options (if they want to refi) are:

1. Bring in $15,000 plus closing costs (approx. $2600) to closing to pay down principal to 80% of present value.  Principal and interest payment = $2,033.44 - based on 30 yr at 6.00% at 0 pts (apr 6.063).   A savings of $258 per month, at a cost of $17,600, Joe and Suzy really need to decide if this is the best use of their money.  Based on their monthly savings, they'll break even in approx. 5 and a half years.   
2. Private mortgage insurance.  Paying off the entire mortgage balance plus closing costs provides a loan to value of approx. 85%.  Principal, interest and mortgage insurance based on 5.875% at 0.75% pts (apr 6.005) = 2,227.70.  This is a monthly savings of $63.97.  Suzy and Joe do not have to bring in $15,000 to pay down their principal, however it will take almost 7 years to break even on the cost of this refinance. 
3. Rates with LPMI (lender paid mortgage insurance) are not competitive for this scenario. 
4. FHA has monthly and upfront mortgage insurance.  Unless their motivations are other than reducing their rate, this is not a valid option for this scenario.

Even if our local market has hit bottom, appraised values will be impacted for several months until home values begin to appreciate.   Appraised values are a reflection of what has sold in the past.  Appraised values may continue to trend lower for refinances. 

Glenn Crellin, director of Washington Center for Real Estate Research at Washington State University states (from Aubrey Cohen's article) regarding the recent drop in rates from the Fannie/Freddie takeover his expectation is:

"those decline in rates are going to be relatively short term." 

And to those who are trying to get the "bottom" of the market for home prices, he says it's "nearly impossible".  Let's face it, we really won't know where the bottom is until prices are heading back up.

If you are considering refinancing, I do recommend that you contact your mortgage professional soon and "be real" about your home value.  I don't encourage waiting with median sales price declines at 4.7 (King County) to 7.8 (Seattle) per month as it's eating away at your equity and refi options. 

If you are considering buying a home, proceed with getting preapproved so you're ready to make an offer should you find the home you're looking for.

Related Post:

When Appraisals Come in Low for a Refi