Mortgage Loans

Mortgage Loans

Financial News Update – August 24th

John Thomas August 24, 2007 Tags:

Durable Goods Orders soared in July, rising by a far greater than expected rate of 5.9% and scoring their largest gain in about a year.  Transportation goods such as airplanes, autos, and trucks led the surge, but other long-lasting goods like machinery, computers, and steel products also showed strong demand.  When excluding vehicles, Durable Goods increased by a still-strong 3.7%. This report is volatile from month to month, so Bonds didn’t react much on the strong economic news.

Sub-prime news abroad – The Bank of China (BOC) revealed a far greater exposure to US sub-prime mortgage investments than expected.  The BOC disclosed about 10% of their US Dollar denominated assets consisted of sub-prime mortgage investments valued at $10 billion. This story will continue to develop. Keep Reading...

Four Major US Banks Borrowed $500 Million Each from Federal Reserve

John Thomas August 23, 2007 Tags:

Yesterday August 23, 2007, four major US banks stepped up to the Fed’s Discount Window and each borrowed $500 Million. Analysts believe the Discount Window borrowing by these huge banks was largely symbolic and designed to help calm all the nervousness in the credit and financial markets.

Now, remember that the Fed just cut the Discount Window Rate last week, and many expect them, in turn, to cut the Fed Funds Rate at the upcoming September 18, 2007, Fed Meeting.

Here’s an interesting tie-in…today’s Initial Jobless Claims number showed a little softening in the labor market, and since Fed Chairman Ben Bernanke has been so concerned about a strong labor market leading to wage based inflation, this is another indicator that the Fed will more than likely make a cut to the Fed Funds Rate at that next meeting on September 18th. Keep Reading...

Liquidity and Its Importance in the Mortgage Bond Market

John Thomas August 22, 2007 Tags: ,
In years past a borrower would visit their local Savings & Loan to obtain a mortgage. The Loan Officer at the bank would approve the mortgage and fund it with cash reserves from the vault. This system worked well until the bank ran out of money to lend. Borrowers came to the S&L looking for a loan and were told to come back when a current mortgage was paid off. What the bank needed was a way to sell the loans it made, freeing up the capital to lend to new borrowers. This way they could lend the same money over and over, earning an income from servicing the loans and assisting the community by offering a near limitless pool of money.

 

To address this issue, FNMA and GNMA were established. The goal was to provide cheap mortgage money to prospective homeowners and a high-quality bond for the investment community. The bond or Mortgage-Backed Security (MBS) takes mortgages with similar risk characteristics and pools them together. Investors in the MBSs know ahead of time the return they are going to receive, much like a Certificate of Deposit. To ensure the performance of the bond, each mortgage is underwritten to specific guidelines. By ensuring the borrower is both capable (VOE), willing to repay (credit report) the debt, has the cash to close (VOD), and the value is in the property (appraisal), the loans and thus the bond will perform as expected.

 During the recent real estate boom underwriting guidelines were relaxed giving way to a whole new menu of products such as the 100% N/O/O with credit scores below 600. In addition, to streamline the influx of applications, income and asset verification took a back seat to a borrower with strong credit. With housing prices rising rapidly, the basis for the mortgage, the property, could be sold to cover the note and foreclosure costs if this occurred. This cycle worked well until the price of houses moderated in 2006. Keep Reading...

Shopping Around for a Delaware Mortgage Loan?

John Thomas August 22, 2007 Tags: ,

HERE’S THE INSIDE SCOOP ON HOW TO DO IT RIGHT!

First:  make sure you are working with an experienced, professional loan officer.  The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way.  But how can you tell?

Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY.  IF THEY DO NOT KNOW THE ANSWERS, RUN DON’T WALK, RUN TO A LENDER THAT DOES!

1) What are mortgage interest rates based on?  (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.  DO NOT work with a lender who has their eyes on the wrong indicators.)
 
2) What is the next Economic Report or event that could cause interest rate movement?  (A professional lender will have this at their fingertips.  For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, send me an e-mail (jthomas@primeres.com) to be signed up for a copy of my  weekly newsletter, let us know if you want to be added to my weekly distribution list)
 
3) When Bernanke and the Fed change rates, what does this mean and what impact does this have on mortgage interest rates?  (The answer may surprise you.  When the Fed makes a move, they can change a rate called the Fed Funds Rate or Discount Rate.  These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like.  On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change.  This is due to the dynamics within the financial markets in response to inflation.  For more information and explanation, just give us a call).
 
4) Do you have access to live, real-time, mortgage bond quotes?  (If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing.  Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!)

Be smart…  Ask questions and Get answers!

More than likely, this is one of the largest and most important financial transactions you will ever make.  You might do this only four or five times in your entire life but we do this every single day.  It’s your home and your future. It’s our profession and our passion. We’re ready to work for your best interest. Keep Reading...

Current State of Mortgage Financing…What’s Going On?

John Thomas August 20, 2007

Anyone watching or reading the financial news over the last few weeks has seen a lot of angst and consternation over the state of the mortgage industry. In fact, one of the larger lenders in the US, American Home Mortgage, was forced to shut down operations recently. But why? What is happening, what does all this mean to you and most importantly… what should you be doing do right now to make sure you are protected?

Here’s the scoop.

Over the past several years, many loans were made to homeowners with somewhat non-traditional or “non-conforming” situations, be it a poor credit history, inability to document income, or any number of factors that do not fit within the traditional “box” for home loans. These loans are often called “Sub-Prime”, or “Alt-A”, meaning that they were somewhat riskier in nature than A credit, prime, or traditional loans. Another type of “non-conforming” home loan is one where the credit and income might be perfectly fine, but the loan amount is higher than $417K, which is the current maximum loan that can be done using pools of money from mortgage giants Fannie Mae (FNMA) and Freddie Mac (FHLMC). If the loan amount is higher, it can certainly be done – it’s called a “jumbo loan” – but the end money comes from private institutions, not from the large government-sponsored entities of Fannie and Freddie. Keep Reading...

Delaware Mortgage Loans – Appraisal Basics

John Thomas August 20, 2007 Tags: ,

When you are applying for a Mortgage Loan you will most likely have to get a residential real estate appraisal done by a certified appraiser.  The appraiser will come out to the property to inspect the inside and the outside of the subject property.  The appraiser will take pictures of both the inside and outside of the home.  The appraiser is required to photograph anything that is considered to be a major defect in the property to protect the lender and the borrower.

When the appraiser inspects the property he is making a detailed report of the property so that he can figure out what the fair market value of the property will be.  The property inspection is only the first part of the appraisal.  The appraiser must then go back to his office to research comparable properties to the subject property that have sold in the last 60 days.  The most recent sales are given the most weight because they typically indicate the current market value of the property. Keep Reading...

Greenpoint Mortgage Shuts Down

John Thomas August 20, 2007

I just heard the news that Capitol One has shut down their mortgage unit, Greenpoint, laying off more than 1900 employees. This is effective immediately. So here we go again; if you have any loans with this company you will need to find another lender. This is yet another casualty in this erratic market and more reason to be committed to a company like Citizens Lending Group.  This will be an unexpected shock too many.  If you need someone who will be there today, tomorrow, and in the future, give me a call at 302-703-0727. Keep Reading...

FREE Real Estate Investment Seminar – September 26, 2007

John Thomas August 19, 2007 Tags:

There will be a Free Real Estate Investment Seminar on Wednesday, September 26, 2007, from 6:30 PM till 8:30 PM at Primary Residential Mortgage’s Office in New Castle, DE.  The seminar is on Getting Started in Real Estate Investing.  The seminar will show you how to set up a plan for investing and how to get your self financially ready to invest, how to gather a power team around you, give you an action plan to buy your first rental property, how to do investing as a business, and how to analyze a property to determine if a good investment. Everybody is welcome but must register in advance because space is limited.  Each participant will receive a Free Audio CD on Real Estate Investing.  Please call 302-703-0727 and ask for John Thomas to register. Keep Reading...