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
Filed Under denver post, mortgage, personal finance | Leave a Comment
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
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
The difference between residential and commercial
Filed Under commercial, mortgage, real estate | Leave a Comment
Residential and commercial loans are similar in many ways. However, there are some major differences in the uses for commercial loans, and the way that you qualify for them as opposed to residential loans.
The major difference between the residential mortgage and commercial mortgage is the required minimum down payment that the borrower needs to make. Since there is a higher risk for a commercial mortgage, the lender usually want to see some equity to be paid down by the borrower.
Commercial mortgages in general have higher interest rates and shorter terms than residential mortgages. This is due to the fact that there is a significantly smaller secondary market for commercial loans, whereas Fannie Mae and Freddie Mac would purchase any conforming residential mortgages from banks. Knowing that they can recoup their capital investments by selling their mortgage loans on the secondary market, banks are more willing to offer competitive interest rates on residential loans.
Commercial loans are riskier than residential loans. If someone who owns a residence and commercial property has financial difficulties, they will make sure their home mortgage is paid first and often become delinquent on their commercial property mortgage.
Jan
1
Portfolio Loan
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A mortgage loan that is held as an investment by a bank , rather than being sold on the secondary market. It is usually due to the fact that the loan does not comply with the underwriting guidelines set by the secondary market investors.
Most portfolio lenders follow Fannie Mae and Freddie Mac guidelines but can also give exceptions to your loan if they choose to do so.
Very few lenders are portfolio lenders. Very few people qualify for portfolio loans. Talk to a mortgage specialist to see if you qualify.
It gets confusing because portfolio lenders are also involved in typical mortgage banking. Portfolio lenders, are commonly known as Savings ampersand Loan institutions. They are called portfolio lenders, because they originate loans for their own portfolio, but don’t sell them to the secondary market.
If you have a loan which is difficult to fund because your scenario is outside of the standard underwriting guidelines, we can often look at portfolio lenders with you and negotiate for exceptions to the underwriting rules on your behalf.
Because the default risks associated with making Portfolio Loans, portfolio lenders always charge a higher interest rate to justify the higher risks. In addition to the intrinsic risks, portfolio loans, by definition, are mortgages that lenders will hold in their portfolio for the entire loan term, and cannot resell the loan to recoup their investment capitals, portfolio loan borrowers should expect to be charged higher fees.
The are also some lenders that are not considered rational portfolio lenders, but do have some programs that are portfolio programs only. These lenders are lending money from their own portfolios and hold onto the mortgage. A couple examples would be Washington Mutual and Bank United.
World Savings is an example of a portfolio lender. They do not sell their loans to other investors or lenders.
The underwriting guidelines for a portfolio product can be far more flexible than for a loan which is being sold to a secondary investor. This flexibility can often mean that the underwriter of the portfolio program can use a much more common sense approach when evaluating things such as past credit problems, prior bankruptcies, lack of cash reserves, etc. In some portfolio programs there is no minimum credit score requirement although the borrowers use of other credit and past credit history is a determining factor in any loan program.
There are lenders available that will keep a portion of their loans as portfolio loans and sell the rest to recoup money and continue to lend. The percentage of the loans they keep depends on the investor involved and how much funding they have.
Thee really is no benefit to the consumer to stay with a portfolio lender other then never having to change where you send your payment. In today’s modern world you can pay your bill online even if the mortgage is sold to a loan servicer. So do not be afraid of you mortgage being sold and do not let a local bank use this as a scare tactic to keep you away from mortgage brokers.