Feb
10
File under small victory: Colorado cracks down on mortgage brokers
File under mortgage + home equity loan + checking account : Aussie ARM can pay off
File under conforming loan limits: It’s still $417,000 in Denver and Colorado. California is a different story.
File under money from the Feds: Rebates, What you need to know
File under 16th & Court makeover: Adam’s Mark sale done
File under not a lopsided trade after all: Manning for Rivers
File under an interesting experiment: Due to Top Five Fridays I rank well for Mailman Newman
Dec
11
Denver’s relationship with Fannie Mae and Freddie Mac hits the rocks:
The chief executives of Fannie Mae and Freddie Mac on Tuesday warned that their ailing mortgage-finance companies will suffer further in 2008 because of a weakening housing market and rising home-loan defaults.
Read the full article: Freddie and Fannie: More woes in 2008
Metro Denver’s designation as a “declining market” could delay any recovery in the area’s long-suffering residential real-estate market, local housing experts said Tuesday.
Read the full article: Fannie label on Denver ominous
What does this all mean: Putting 5% down is the norm to get a Fannie Mae or Freddie Mac loan. They do have several high risk 100% loans but these loans have higher rates with higher levels of mortgage insurance.
FHA only requires 3% down.
Some companies will have 100% down programs it just remains to be seen who.
Oct
4
Just recently Fannie Mae and Freddie Mac had their fare share of accounting scandals. Now they’re seen as the cover to the mortgage cesspool.
Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, would be allowed to expand their $1.5 trillion mortgage portfolio to buy subprime loans under a Democratic plan to help struggling borrowers.
Read the full article: Dems seek subprime help from Fannie and Freddie
Sep
20
Fannie, Freddie mortgage caps rise
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Mortgage article from the Denver Post:
The government on Wednesday nudged higher the investment caps for home-loan finance companies Fannie Mae and Freddie Mac in an effort to alleviate strain in the mortgage market.
Read the full article: Fannie, Freddie mortgage caps rise
Aug
21
Here’s a mortgage primer on which loans are no longer the flavor of the month on Wall Street. They’re the Michael Vick’s of the mortgage world, they were once very popular on but now nobody wants to be associated with them. Okay, that’s a little bit too harsh since these loans didn’t kill dogs. Then again, these loans have put families in dire straits so lets keep the Michael Vick analogy.
Loans the Wall Street doesn’t like:
- THE LOANS WITH THE REALLY REALLY REALLY LOW RATE AND LOW MONTHLY PAYMENT
- THE LOANS FOR BORROWERS WITH REALLY REALLY REALLY BAD CREDIT HISTORIES
- THE LOANS FOR BORROWERS WHO HAVE GOOD CREDIT BUT WHOSE OVERALL LOAN APPLICATION DOESN’T MEET FANNIE MAE OR FREDDIE MAC’S STANDARDS
- THE LOANS FOR BORROWERS WHO CAN’T REALLY REALLY REALLY SHOW HOW MUCH MONEY THEY’VE MADE OR HOW MUCH THEY HAVE SAVED UP
- THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY DON’T WANT TO PUT ANY MONEY DOWN
- THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY DON’T WANT TO PAY AN AMORTIZED PAYMENT
- THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY WANT TO BUY A HOME THEY HAVE NO INTENTION OF LIVING IN
- THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY MAKE A LOT OF DOUGH
- THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY HAVE NO INTENTION OF LIVING IN THEIR HOMES FOR 15 to 30 YEARS
- THE LOANS WITH REALLY REALLY REALLY NO RISK
Also called: 1%, NEGATIVE AMORTIZATION, NEG AM, OPTION ARMS, PAY OPTION ARMS or
“A CAN OF WHOOP ASS WAITING TO HAPPEN”
Also called: SUBPRIME, NON PRIME, POOR CREDIT, 2/28s, 3/27s, or
“I GUESS THIS IS WHAT I GET FOR NOT PAYING MY BILLS”
Also called: ALT-A or
“SO I’VE GOT GOOD CREDIT AND A GOOD JOB BUT I’M PENALIZED FOR NOT SAVING ANY MONEY”
Also called: STATED INCOME, STATEDSIVA, SISA, NO DOC, or
“DON’T THEY HAVE LOANS FOR PEOPLE WHO DON’T HAVE JOBS?”
Are called: 80/20, 100% Financing, NO MONEY DOWN, 103%, 107% or
“I WANT A LOAN WHERE I GET TO KEEP MY MONEY IN CASE MY JOB GETS OUTSOURCED TO INDIA”
Also called: INTEREST ONLY, IO, or
“IF I LIKE PAYING DOWN PRINCIPAL MY PAYMENT GETS RECAST TO A LOWER PAYMENT EVERY MONTH”
Also called: INVESTMENT PROPERTY LOANS, NON OWNER OCCUPANCY, NOO or
“I’M GOING TO BE THE NEXT DONALD TRUMP”
Also called: JUMBO, NON CONFORMING, SUPER JUMBO, MILLION DOLLAR LOANS, ANYTHING OVER $417,000 or
“THAT’S PRETTY LOW FOR A RATE OF RETURN AND PRETTY HIGH FOR A MORTGAGE INTEREST RATE”
It remains to be seen if Wall Street still likes:
Also called: ADJUSTABLE RATE MORTGAGES, ARMS, 3/1, 5/1, 7/1, 10/1, TEASER RATE LOANS, HYBRID LOANS, BALLOONS or
“THE AVERAGE PERSON MOVES EVERY 5 to 7 YEARS, SO WHY SHOULD I GET A LOAN FOR 30 YEARS?”
Wall Street will always like:
Also called: FHA, VA, CONFORMING, FANNIE MAE, FREDDIE MAC or
“THE LOANS THAT MAKE UP THE MAJORITY OF THE AMERICAN MORTGAGE LANDSCAPE”
Aug
10
Protect Us from the W
Filed Under mortgage | Leave a Comment
Here’s a transcript from today’s press conference with George W Bush. He answers a question on sub-prime mortgage.
Q Sir, getting back to the credit crunch caused by defaults in sub-prime mortgages, should Fannie Mae and Freddie Mac be allowed to buy mortgages beyond their current limits, or play any additional role that could help revive mortgage finance?
THE PRESIDENT: As you know, we put up a robust reform package for these two institutions, a reform package that will cause them to focus on their core mission, first and foremost; a reform package that says like other lending institutions, there ought to be regulatory oversight. And therefore, first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.
A simple YES or NO would’ve worked for me.
Jan
31
Links: Going broke on medical bills
Filed Under mortgage, personal finance, real estate | Leave a Comment
Here are some interesting articles from across the web:
- After seeing numerous potential clients who’ve filed bankruptcy to stave off the medical bill collectors, this statement/article is extremely true: “Scholars say medical debt is the No. 1 cause of bankruptcy.”
- Higher rates, less house explores how rate increases reduces the property amounts people qualify.
- Dan Green of the Mortgage Reports has a keen mind when it comes to the market. Here are his thoughts on why rates are rising:
- Mortgage-backed securities lost 84 basis points over 5 days
- Fed Futures currently price a greater chance that the Fed will raise the FFR in May than it will lower it
- Since January 5, the Fannie Mae 30-Year 5.5% bond closed worse on 81% of trading days and has worsened in pricing by 146 basis points
- Since December 5, the same bond has been down on 23 of 36 days, or 63.89% of the time
- Federal Reserve Chairman Ben Bernacke did well in his first year. Meanwhile his predecessor, Alan Greenspan, is writing a book called “The Age of Turbulence”.
Jan
1
Why are second mortgage rates higher?
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Mortgage rates are all based on risk. The lower of a risk the loan is the lower the rate will be. Second mortgages are riskier loans. In the unfortunate event of a foreclosure the second mortgage holder gets paid second, not first. If threes not enough money to payoff the second mortgage often they take a loss. Since they are higher risk loans to investors the carry higher rates of return (so investors will purchase them).
A mortgage is considered a lien on your property. A first mortgage is in the first lien position and is the least amount of risk because they are the first to get paid should the borrower default and the home be sold through sheriff’s auction or through some other type of sale. A second mortgage is in the second lien position and is at a considerably higher risk than the first so a 2nd mortgage usually has more strict lending guidelines and credit requirements and will also charge a higher interest rate to make up the difference of this greater risk. If you also had a third lien on your property, they would have the greatest risk and even much worse terms than the first and 2nd liens.
If a homeowner files for BK the second mortgage is not guaranteed to be paid off. So the lender who makes a loan in the form of a second mortgage vs. a first mortgage assumes a higher risk. The lender offsets that risk by charging a higher rate.
Most second mortgages are also held in the lenders own loan portfolio rather than being sold to Fannie Mae, etc. Given that, there is considerable variation in rates, terms, qualification criteria, etc. from lender to lender.
When you take out a 100% one loan you will pay for private mortgage insurance (PMI). When a loan is sold on the secondary market to Fannie Mae or Freddie Mac they will only insure 80% of the value of the home. This insurance covers the other 20% of your loan in the event that you don’t’ pay and the property goes to foreclosure. Second mortgages, when used on an 80/20 combo loan program are self insured and for this reason carry a higher rate. Meaning you don’t have to carry PMI.
Rates on second mortgages will always be higher because the risk to the lender is higher. The rates will vary as with a first mortgage, depending on your credit worthiness, ability to pay and combined loan to value ratio. Combined loan to value ratio is the combination of the first and second mortgage compared to the sale value of your home. The lower the ratio is, the better rate you will get.
Jan
1
What Moves Mortgage Rates?
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What makes them rise? What makes them fall? Is it the Fed? The Economy? Inflation? Banks? The President? Fannie Mae? Freddie Mac? The answer is sometimes complex, but rates are moved by a number of related factors, and believe it or not you are one of those factors!
As interest rates (yields) decline, investment customers can become more or less interested, depending on the direction of economic growth, inflation, appetite for the product and several other factors. Typically, though, the lower those rates get, fewer investors are interested in putting them on their books.
Of course, it’s not always as easy or simple as that. Mortgage market makers serve not one client, but two. They serve the folks who want the highest possible return on their investments and the homeowner / homebuyer who wants the lowest possible interest rate. Simultaneously, rates need to be high enough to attract investors and low enough to attract borrowers. Confused? It can be a complex and confusing dance to understand.
In order to attract investors, sellers of bonds must compete with one another to get their money. They do this by offering a variety of instruments (also called products) with differing structures of risk and return over given periods of time. These offerings compete with other investments which are similar in performance, such as US Treasuries, corporate bonds, foreign bonds, and others.
Investor demand for a given kind of investment plays a considerable role in moving market yields, because investors literally have hundreds of places to put their money. It’s a crowded marketplace with many sellers of various products competing for those investor dollars. Investor demand for specific product rises and falls with changes in investment strategies. If demand falls enough a change must be made to attract investors again. How to attract them again you say? The answer usually comes as a raise in interest rates.
The Federal Reserve Board known as the FED in the industry actually controls interest rate movements to control the economy and inflation. Before 1913 when the FED was created the markets were actually very unstable. They play a crucial role in the economy. If rates are left low for too long then inflation can run out of control so the FED raises rates to counteract this from happening.
Mortgage money can come from many sources, including deposits at banks and brokerages, but most comes from investors through what is collectively known as the “Capital Markets”. This is where investors interested in purchasing certain kinds of debt instruments — bonds, in this case — come to buy those items.
Who are these investors, and why are they so fickle? Mostly, they are people like you and I. They want two opposing things; low payments on your debt, especially your mortgage, and high returns on your investments. You (the investor) will only buy so many low-yielding bonds (mortgage or otherwise) because you will take you money elsewhere if the returns are too low.
Bond prices and bond yields always move in opposite directions. When economic indicators, such as the gross domestic product and unemployment rate, forecast a strong economy, long term interest rates move up. When these indicators predict a slower economic growth, long term interest rates usually decrease. Mortgage rates and long term rates often move in tandem.
Jan
1
What is Alternative Documentation
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Editors Note: Due to the mortgage and credit crunch, Alternative Documentation loans are no longer be available. If you’re in need of a refinancing your mortgage in Denver, CO contact us to discuss your mortgage options.
Alternative Documentation is expedited and simpler documentation requirements designed to speed up the loan approval process. Instead of verifying employment with the applicants employer and bank deposits with the applicants bank, the lender will accept paycheck stubs, W-2s, and the borrowers original bank statements.
Alternative Documentation (Alt Doc) loans differ from Full Documentation (Full Doc) loans in that Alt Doc loan programs do not require the usual income and assets verifications from a third party (the applicant’s employer or the depository bank where the loan applicant keeps the down payment funds). Full Doc loans often require such third party verifications and therefore the underwriting process takes longer.
It is now possible to obtain an alternative credit report accredited by the National Credit Reporting Association (NCRA).
Fannie Mae’s “My Community” program was designed for first time home buyers with limited credit depth. This program will allow up to 100% financing with little or no credit. You will still have to show at least 4 alternative tradelines but your interest rate is much better than going with a subprime lender.
The usefulness of this documentation type is obvious; it allows the borrower to speed up the process for underwriting. While you may ask your loan agent for this type of documentation, certain restrictions may apply in order to qualify.
Alternative documentation types can allow borrowers with non traditional sources of income to qualify for loans.
A good example of a borrower who would need to use alternative documentation would be a plumber who works a regular 40 hour per week job but also works after hours and weekends doing “side” jobs. Many such folks earn a significant portion of their overall income this way and would have a difficult time proving this income with traditional methods.
Another option to consider if it is difficult or impossible to verify your income, employment and assets is to No-Doc. A No-Doc loan requires No Documentation of income, employment or assets. You do need a good credit score to go No-Doc and will pay a slightly higher interest rate in some cases but if verification of income, assets and employment is a problem, consider going No-Doc.
Any alternative credit accounts you use must have a good payment history and be open for a minimum of 12 months. Canceled rent checks can also be used for an alternative credit account.
Alt A and subprime lenders also allow other documentation types such as bank statements, business bank statements, and/or verification of employment to satisfy income documentation requirements. Check with your broker to see what programs will work best for you.
Only in recent years have we as mortgage professionals been able to work with alt doc type loans. In the past you had to put down 20%, provide proof of everything and have great credit to buy a home. Now we have to ability to pick from multiple loans programs that fit just about anyone’s profile.