Archive for March, 2010

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The Federal Reserve Statement Explained in Plain English (March 16, 2010)

Wednesday, March 17th, 2010

Putting the FOMC statement in plain EnglishYesterday, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”.  It also said that business spending has “has risen significantly”.

This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.

It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism. This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.

The economy is not without threats, however, and the Fed pointed out several:

  1. High unemployment threatens consumer spending
  2. Housing starts are at a “depressed level”
  3. Consumer credit remains tight

The message’s overall tone, however, remained positive and inflation was within tolerance limits. We all know that inflation is “mortgage rates’ worst enemy”, so that was a very big sigh of relief for the mortgage bond market.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to end its $1.25 trillion commitment to the mortgage market by March 31, 2010 (yup, a couple weeks away). Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start, and after the exit, you should definitely expect mortgage rates to start creeping up.

Why?

Think of it in terms of selling a product. When you have a guaranteed buyer, you’re willing to let your product go for a little less of a markup (wholesale); however, when you MAY get a buyer here or there and nothing is set in stone, you’re going to try and make up for it by marking up the price.

Well, that’s exactly what’s going to happen to mortgage rates when the Fed goes bye-bye and private investors start crawling in wanting more profits.

Mortgage market reaction to yesterday’s Fed press release was, in general, hesitant to make a move and Texas mortgage rates went unchanged. Personally, I floated all clients’ transaction into the meeting, but was standing by to lock ‘n load in case things went south.

Keep an eye out for the FOMC’s next scheduled meeting that’s on April 27-28, 2010 – this puppy’s going to be a 2-day affair, and I think its going to set the pace for where mortgage rates are going to be headed this year.

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Tommy is a senior mortgage consultant with Envoy Mortgage. For a free mortgage consultation, you can email him at
tommy@tr-mg.com. You can also find him on Twitter at @RightMtgGuy.

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Posted in FOMC, The Fed | No Comments »

A Rate-Locking Strategy For Today's Fed Meeting

Tuesday, March 16th, 2010

Fed Funds Rate (Feb 2007 - March 2010)The Federal Open Market Committee adjourns from a scheduled 1-day meeting today, its second of the year.

The FOMC has held the Fed Funds Rate in a target range of 0.000-0.250 percent since December 16, 2008, and the voting members of the Fed are expected to vote “no change” again today.

However, no change in the Fed Funds Rate doesn’t necessarily mean no change in mortgage rates.  This is because the Fed Funds Rate is a different interest rate from the rates home buyers get from a loan officer.

  • Fed Funds Rate : Short-term rate at which banks borrow from each other
  • Mortgage Rate : Long-term rate of interest a homeowner pays on a mortgage

Mortgage rates are more responsive to what the Fed says as compared to what the Fed does.

After each FOMC meeting, Fed Chairman Ben Bernanke & Co issue a formal press release to the markets. At roughly 400 words, the statement is a brief commentary on the strengths, weaknesses, and threats for the U.S. economy.

Wall Street watches the statement with great interest and this is why mortgage rates are often volatile on the days of an FOMC adjournment. One mention of a word like “inflation” and traders rush to dump their mortgage bond positions.

Inflation is the enemy of mortgage rates.

After the Fed’s last meeting in January, it told us that the economy had “weakened further”, led by steep declines both in housing and employment. Global demand was off, too.  The negative tone of the Fed’s statement caused mortgage rates to fall to near an all-time low.

This month, expect a less gloomy message.

Since January, there’s been a modest rebound in housing, employment appears more stable, and Retail Sales just posted huge gains.  If the Fed alludes to improvement in any or all three, mortgage rates will likely reverse and zoom higher.

Keep in mind that there’s no way to know know what the Fed will say after its meeting, so if you’re wanting to play it safe, lock you mortgage rates before 2:15 PM ET.

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Posted in FOMC, Interest Rates | No Comments »

What's Ahead For Mortgage Rates This Week | March 15, 2010

Monday, March 15th, 2010

The FOMC meets this week -- mortgage rates will be volatileWe have been having a pretty nice run as of lately, I’ll have to admit:

Mortgage rates are super low, home prices are stabilizing, free $$$ from the government is going in our back pockets, and best of all, spring’s right around the corner.

Now that the economy is headed a bit more in the right direction, “mortgage-rate-reality” is going to start setting in for a lot of folks.

“Damn, Tommy – That 5% sounded really good last month. I wish we would of locked it in.”

“Yes, Mr. Johnson, I was telling you this, but remember you were telling ME that you were expecting that 3% , as well as the return of Growing Pains? Well look at us now. No Kirk and no 3%.”

Just last week, mortgage markets worsened with the  little economic news that came out. It just wasn’t enough to push markets in either direction and the momentum trading and re-balancing of portfolios drove mortgage rates higher, on average.

FHA and conventional mortgage rates in Texas rose last week, marking the first time that’s happened this month.

Like I said before, mortgage rates have been on impressive streak and are priced far better than what most experts predicted.

Weaker-than-expected economic data is one reason why.  Lack of economic data may be another.

This week, however, data returns.

  • Monday : Industrial Production and Home Builder Index
  • Tuesday : Housing Starts and Building Permits
  • Wednesday: Consumer Confidence
  • Thursday : Producer Price Index and Initial Jobless Claims
  • Friday : Consumer Price Index and Continuing Jobless Claims

And, as if all that weren’t enough to spook you, the Federal Open Market Committee meets for a scheduled, 1-day event Tuesday (tomorrow).

The Federal Reserve is expected to vote to hold the Fed Funds Rate in its current target range near 0.000%, but that doesn’t mean mortgage rates won’t change. Markets are responsive to the FOMC’s post-meeting press release and any clear talk of economic strengthening can easily drive rates higher.

A friendly reminder: The Fed does NOT control short-term mortgage rates, only the Fed Funds Rate. This is the overnight lending rate that banks charge each other.

So basically,  this week Wall Street is in Wait-and-See Mode with plenty to look at.

If you’re floating a mortgage rate, or waiting to lock, be prepared for wild swings – especially leading up to Tuesday afternoon’s FOMC adjournment.

Now’s the time to work with a mortgage professional that understands all this mumbo-jumbo and can get you a great deal, especially with all this volatility going on.

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Tommy is a senior mortgage consultant with Envoy Mortgage. For a free mortgage consultation, you can email him at
tommy@tr-mg.com. You can also find him on Twitter at @RightMtgGuy.

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Posted in Weekly Review | No Comments »

How To Refinance When Your Home Is Underwater

Friday, March 12th, 2010

Making Home Affordable logoIf you’ve been running into issues refinancing your mortgage the “conventional” way, here’s some good news – The Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months.

HARP’s new end date is June 30, 2011.

Originally known as Making Home Affordable (MHA), HARP aims to help Texas homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

I have written about MHA before, and think its a great tool to have if you (or someone you know) is just “stuck”.

Here are the 4 basic HARP criteria every borrower must meet:

  1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
  2. Your home must be a 1- to 4-unit property
  3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
  4. Your first mortgage balance must be 125% or less of your home’s market value

If you’re not sure whether Fannie Mae or Freddie Mac holds your mortgage, you can easily look it up on their website (http://www.fanniemae.com/loanlookup); Freddie’s is http://freddiemac.com/mymortgage.  If you don’t find your mortgage loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Lien holders other than first position must agree to remain in their  junior lien position, regardless of combined loan-to-value, so no subordinations.

There is a really good and thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer.

HARP is not the easiest thing in the world, so before diving head first into this, make sure to get with your loan officer…or with me.

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Tommy is a senior mortgage consultant with Envoy Mortgage. For a free mortgage consultation, you can email him at
tommy@tr-mg.com. You can also find him on Twitter at @RightMtgGuy.

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Posted in Foreclosures, HARP | No Comments »

Buying an REO? Pay Attention to Foreclosures Per Capita

Thursday, March 11th, 2010

Foreclsoures Per Capita February 2010

Foreclosure filings topped 300,000 for the 12th straight month last month as 1 in every 418 U.S. homes received a foreclosure filing, Nevada being the worst and Vermont the best.

It’s a small improvement from January and just a 6 percent increase over February 2009.

On a per-capita basis, foreclosure density varies by state, and here are the top 4:

  • Nevada : 1 foreclosure filing per 102 homes
  • Florida : 1 foreclosure filing per 163 homes
  • Arizona : 1 foreclosure filing per 163 homes
  • California : 1 foreclosure filing per 195 homes

Also, as in January 2010, foreclosures across the country were concentrated. 10 states beat the national Foreclosure Per Capita average and 40 states fell below.

Like everything else is real estate, it seems, foreclosures are local and that is what you should pay attention to.

While statistics are important, what’s going on in Idaho doesn’t matter if you live in Houston, so try not to pay too much attention to all those over-exaggerated and worry-some reports on TV. Stay local and get with a good Realtor that keeps up with this stuff.

For today’s Texas home buyers, foreclosures represent an interesting opportunity.

Homes bought in various stages of foreclosure are often less expensive than other, non-foreclosure homes. It’s one reason why distressed home sales account for 38 percent of all resales. However, less expensive doesn’t always mean less costly.  A foreclosed home may be in various stages of disrepair and they’re often sold as-is, as policy.

Buying new or used can be cheaper than buying broken-down.

Therefore, if you’re in the market for a bank-owned home, make sure you know what you’re buying before you sign a contract. Have qualified professionals review and inspect the property, as needed. Damage to plumbing, electric, or the property’s structure, for example, may not be so obvious on a walk-though and you’ll want to know about it before you buy as these repairs can definitely add up quick!

Also, a question that I get asked is if foreclosed homes are eligible for the federal tax credit and the answer is YES. All rules apply as if it were a new home so, as long as you are under contract by April 30, 2010 and closed by June 30, 2010, and qualify with the rest of the guidelines, you will get your money!

I’m experienced with REO’s and can take care of your mortgage if you are looking for a good loan officer.

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Tommy is a senior mortgage consultant with Envoy Mortgage. For a free mortgage consultation, you can email him at
tommy@tr-mg.com. You can also find him on Twitter at @RightMtgGuy.

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Posted in Foreclosures | No Comments »

Don't Rush To Refinance That ARM – It May Be Adjusting To Under 3 Percent

Wednesday, March 10th, 2010

Pending ARM Adjustment March 2010

If your mortgage is set to adjust this year, the smart move may be to let it. Today’s conforming mortgages are adjusting lower than ever before — as low as 3 percent.  It may not be what you expected when you signed for your ARM several years ago.

The reason why ARMs are adjusting lower is because of how they’re made.

When conforming adjustable-rate mortgages adjust, they adjust according to a pre-determined formula. The formula is the sum of a constant and a variable and it pretty easy.  The constant is usually 2.25 percent and the variable is a daily-changing interest rate called LIBOR.

The formula looks like this:

New Mortgage Rate = LIBOR + 2.250 percent

LIBOR is an acronym for London Interbank Offered Rate.  It’s an interest rate at which banks borrow money from each other. In Fall 2008, when Lehman Brothers fell and sparked a global banking fear, LIBOR spiked as the risk of inter-bank borrowing jumped.

Since then, however, LIBOR is down.

Normalcy is returning to banking and the timing couldn’t be better for Austin homeowners with ARMs. 15 months ago, a homeowner’s ARM may have adjusted to 6 1/2 percent.  Today, that same ARM falls to just above 3.

As a strategy play, it might make sense to let your ARM adjust. Or, because fixed rates are still near 5 percent, converting that ARM to a long-term fixed-rate product might make sense, too.  The decision is a balance between how low do you want your payment, and how long might you live in your home.

The longer you stay, the more it might make sense to switch to fixed-rate, even though ARM rates are so low.

If you’ve got an adjusting ARM, feel free to contact me about your choices. Once March ends and the Fed withdraws its mortgage market support, mortgage rates may rise and the fixed-rate option may be gone.

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Check Tommy out on Twitter @RightMtgGuy for the latest and greatest mortgage advice

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Posted in Adjustable Rate Mortgages | No Comments »

Choosing the RIGHT Realtor Before the Tax Credit Ends

Tuesday, March 9th, 2010

As the First Time Home Buyer tax credit comes to an end, it seems as though home buyers are taking longer to find a home that suits their needs. One may call it an issue of supply and demand, however, most are calling it “My Realtor sucks!”

Just like early 2007, real estate was booming at an astronomical pace. Mortgage and real estate firms were opening their doors faster than they could imagine because there was an oversupply of qualified buyers (via SubPrime) and  an oversupply of sellers cashing out on their home’s appreciation. This “oversupply” basically gave any Realtor enough business to make it a full time career, however, do you remember what happened after the market collapsed? Yup, ghost town baby!

So with the extended tax credit enticing more buyers to buy and more sellers to sell, we are having more Realtors enter the market like before.

What to Look For

If you are in the market to buy a home, or any product for that matter, it is very important to interview who you are hiring to represent your best interests. Here’s a couple of good questions to ask the Realtor you are wanting to help you find your dream home:

  • How long have you been a Realtor?
  • Are you full time or part-time?
  • How is your current work load?
  • What are you specialized in? (if they say everything, not a good sign)
  • How long are you seeing homes on the market in “x” area?
  • What’s your best and worst attribute?

These are just a couple things to ask, but remember, its an interview, so feel free to fire away! It is crucial that you work with someone that is good at what they do. You would think this goes without saying, but so many people work with “Uncle Bobs sister’s uncle’s FedEx guy” just because a family or a friend referred them.

A referral is great because it usually means they have done a great job for someone, but that doesn’t necessarily mean they will do a good job for you and your specific situation. Just like people shop loan officers, you should shop Realtors as well. Would you hire a Foreclosure Expert to find you a luxury home? Most likely not.

An Added Cost You May Not Be Aware Of

Choosing the wrong Realtor can definitely cost your more than you expect if you’re not careful. Finding a home is one thing, but determining your needs and negotiating the terms is where these folks earn their money. Anyone can plug away at a sales price, area, and send you a list of homes (whoop-dee-freakin-doo), however narrowing that search down to what’s specifically in YOUR interests, and getting it to you at the price you want to pay is where a rookie Realtor will fail, and an expert will excel.

Most buyers see the $8,000 Tax Credit at the end of the tunnel, but it blinds them way too soon. They don’t take into consideration what they can LOSE if they are not working with an experienced Real Estate Team (Realtor and loan officer).

You have:

  • Earnest Money
  • Option Fees
  • Appraisals
  • Inspections
  • Termite Reports

This stuff can add up really quick, and if there’s a glitch in negotiations, time lines, or financing, you might as well put some rosy red lipstick on and kiss that money goodbye!

Remember, there’s no reason to settle for less than the best when you have more than enough selection out there right now!

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Texas VA Loans – The Best Kept Secret

Thursday, March 4th, 2010

If you are a Veteran and looking into purchasing a home in Texas, then a VA loan is perfect for you.

Because VA Home Loans are guaranteed by the Veterans Administration, they are easier to qualify for, require no down payment (yes 100% financing is still here), and most importantly don’t require perfect credit.

VA Purchase Loans
I specialize in servicing first time home buyers utilize their VA benefits each and every day. A VA mortgage offers many advantages, as it is very popular with first time homeowners. Because a VA Loan is guaranteed by the Veterans Administration, you should expect lower interest rates and less down payment in relation to a conventional residential home loan.

VA Refinance Loans
The Veterans Administration offers Texas Veterans several different VA Home Loan Refinance Programs. I understand and appreciate those Veterans that have served our great nation, and am here to provide you with a variety of options in order to accomplish your VA refinance goals. If you are considering  refinancing of your current loan to lower your interest rate, or restructuring your payment and equity objectives, I can present you the most viable and beneficial options in the marketplace.

Exciting things are happening with VA home financing – VA is only 1 of only a few options left for true 100% financing and it’s important to stay up-to-date with changes in loan limit increases, and VA Mortgage news, so feel free to subscribe to my blog or follow me on Twitter at @RightMtgGuy.

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Posted in VA Mortgages | No Comments »

Texas FHA Guideline Changes April 5 2010

Thursday, March 4th, 2010

A quick word to the wise, and home buyers.

We all know the tax credit is ending soon, and the “target date” for the majority of folks is April 30th.

Well, set those clocks back because if you are thinking of going to go with an FHA loan, mark April 5th down and circle it!

Here are the 2 big changes that are taking place on that date that are going to affect Texas FHA homeowners:

1) Seller Contributions are going from 6% down to 3%.

2) Up Front Mortgage Insurance Premiums are being increased from 1.75% to 2.25%, and talks of the monthly mortgage insurance (currently .55%) going up as well

To qualify for the old FHA guidelines, an FHA case number must be ordered prior to that date, so if you want to save some money in the FHA UFMIP and are a little low on cash, now is the time to get cracking.

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Check Tommy out on Twitter @RightMtgGuy for the latest and greatest mortgage advice

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Posted in FHA Guidelines, FHA Mortgages | No Comments »

Texas Mortgage Rates Going Up

Monday, March 1st, 2010

The Fed Purchase Program is ending in March and the MBS (mortgage backed securities) market will be an open canvas to new investors.

At the moment, the Fed is 92% complete with their program, and when they back out of it, this is going to attract investors that are going to require more yield. Well more yield for them means higher rates for you (and me).

Be on the lookout here in the next month or so as things progress and wind down.

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Posted in Mortgage Insights | No Comments »

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