Wednesday, June 20, 2012

Historic Jumbo Mortgage Rates: Prudent Borrowers Rewarded

Jumbo Mortgage Rates continue to hover at historic lows but we have noticed a trend among investors of extreme diligence on ensuring ultra high loan quality. This weighs heavily on a client that has a complex financial picture as the time and paperwork required is a few steps removed from an IRS audit. Especially if a client owns a few companies or has creative accountants. Here are the charts that tell the story of where mortgage and select real estate markets are currently at:

Wednesday, May 23, 2012

HARP and Other Home Refinancing Options

HARP and Other Home Refinancing Options
The housing bubble of 2008 placed many homeowners in an underwater position where mortgage balances greatly exceeded a home’s actual market value. In response to these conditions, the federal government started the Home Affordable Refinance Program, or HARP.

And while HARP provides a convenient option for homeowners stuck with underwater mortgages, some homeowners may not be eligible for the program. Fortunately, there are other refinancing options available for those who don’t qualify for the Home Affordable Refinance Program.

HARP Refinancing

Homeowners unable to obtain financing due to a drop in home value may want to consider the HARP as a refinancing option. The effects of the housing bubble and resulting drops in home value left many homeowners paying considerably more in mortgage payments than before. This happened in cases where mortgage contract terms involved interest-only payment options or balloon payment arrangements.

The Home Affordable Refinance Program is designed to make mortgage payments more affordable while setting homeowners up in stable mortgage contracts. Refinancing through HARP involves an application process and underwriting review process. Applicants must also pay refinancing fees.

In order to qualify for HARP refinancing, applicants must meet the following requirements –
· Homeowners must be current on their mortgage payments and show a 12 month history of timely payments made
· Existing mortgages must be underwritten through Fannie Mae or Freddie Mac
· Existing mortgages must have been sold no later than May 31, 2009
· HARP requires a loan-to-value (amount owed vs. actual market value) ratio of 80 percent or more.

HAMP Options

The federal government offers the Home Affordable Modification Program, or HAMP as an alternative financing option for homeowners with underwater mortgages. Homeowners who have missed payments on their mortgage due to a financial hardship may qualify for HAMP assistance. Much like with HARP requirements, a person’s current mortgage must be held by Fannie Mae, Freddie Mac or any other U. S. Treasury-sponsored lenders.

In order to qualify for HAMP refinancing, homeowners must meet the following requirements –
· Current monthly payment amounts must exceed 31 percent of the homeowners gross income
· Applicants must provide proof of financial hardship
· The home must be the primary residence
· The total amount owed on a mortgage must be less than $729,750

Lenders can offer several different modification plans depending on a person’s financial situation. In most cases, a HAMP agreement includes a 90 day trial period. After the 90 days, lenders reassess the homeowner’s’ situation to see if other long-term modification arrangements are warranted.

FHA Refinancing Options

FHA refinancing options may come in handy for homeowners who can’t qualify for HARP refinancing because they’ve built up considerable equity in their home. Homeowners with existing FHA- or VA-backed mortgages loans can easily qualify for FHA financing provided they are current on their monthly mortgage payments.

The FHA actually has a streamlining process that allows homeowners with existing FHA or VA mortgages to qualify for refinancing without going through the usual credit score checks, appraisal process or proof of employment requirement. Borrowers can qualify for FHA refinancing as long as they have remained current on their mortgage payments for the past 6 months, with a limit of one late payment within the past 12 months.

With FHA loans, homeowners can finance as much as 96.5 percent of the existing mortgage amount. Lenders also lump the mortgage insurance premium costs in with the total loan amount. So, an FHA refinance can convert a mortgage with 20 years left to pay into a new 30-year loan. By doing so, homeowners can considerably lower their existing interest rates.


When comparing HARP versus HAMP options, the terms of a HAMP mortgage agreement are actually a modification on an existing mortgage and not an actual refinancing arrangement. A HAMP loan modification lowers the monthly mortgage payment for the first five years of the loan. As of the sixth year, the mortgage interest rate increases by up to one percentage point per year. Once the mortgage interest rate reaches the market rate at the time when the agreement was prepared, the mortgage payment amount levels off for the remainder of the loan period.

Homeowners considering the FHA refinancing option may want to pay particular attention to how the upfront fees and mortgage insurance costs affect the total mortgage loan amount. In some cases, borrowers may end up paying more in interest costs by refinancing than sticking with the terms of their existing mortgage.

Provided by

Friday, February 10, 2012

Friday, February 3, 2012

Real Estate Deflation Machine Speeding Up?

Housing continues to fall in the majority of cities across the country. Here is a way back price drop in a premium community in Orange County, CA

This home was purchased in March 2001 from Lennar(builder) for $875k. It went pending this week at $899k.

Here is a financial profile of Coto De Caza, CA. Clearly this is a high earning and high networth area of Southern California. Yet prices keep falling....

The value of housing in most markets will continue to fall and this is despite absolute record low jumbo loan interest rates.

As always have a great weekend.

Monday, January 16, 2012

Costs Flying Sky high While Others Nearly Plummet

One way of measuring inflation is to gauge how prices for an assortment of goods and services have varied over time. Another approach involves looking at changes in how much things cost relative to what the average worker earns (the flaw with this latter method, of course, is that those who don't have jobs may find that many, if not most, of the things they might want or need to buy are unaffordable).

In searching for airline tickets over the last six months for an upcoming family vacation to Italy I have seen the broad impact of fuel costs on ticket prices since a trip two years ago. Obviously, ticket prices move on hundreds of factors but the most influential input is the cost of jet fuel. In the last decade jet fuel cost per gallon is up 3.5x from 0.87 cents a gallon to 3.01 on average globally last month. Up to 70% of an entire airlines operating budget is fuel costs.

Click image for source and up to date index information.

Be that as it may, if one assumes that data from the Bureau of Labor Statistics is even remotely close to the mark, it would appear that the purchasing power of the average worker has improved over the past 10 years, which is contrary to popular wisdom (see dotted line in the chart below).
There could be any number of reasons why perceptions differ from the reported data. Among other things, the composition of the basket of goods that the BLS uses to construct its index might not be realistic, especially in today's fast-changing economy. Or maybe the pricing information they rely on doesn't jibe with consumers' experience on the ground. Then again, a cynic might note that authorities have an incentive to underestimate inflation and overestimate wage growth for pollitical gain.
Regardless, I thought it interesting to highlight those categories that have become the least and most affordable for the average worker over the past decade. Not surprisingly, gasoline and other energy-related products are a lot more expensive in relative (and absolute) terms than they used to be, which goes some way towards explaining  the heightened demand for fuel efficient cars and why people are driving fewer miles than they used to. In contrast, it's easy to see why sales of flat screen TVs and other modern gadgets have jumped -- the products are much more affordable than they used to be.

Thursday, December 22, 2011

Wednesday, October 12, 2011

Jumbo and Conforming Loan Rate Update

Mortgage Delinquency continues to be a problem. It is our view that this could take several more years to run it's course. Average days till a home goes from first missed payment to getting listed as a foreclosure is roughly 1.5 to 2 full years in most states. The chart below is showing that over 10.18% of all mortgages are at least 60 days this is down from 10.58% at the March 2011 report. A modest improvement...

This is against the backdrop of an ultra-low purchase and refinance environment for conforming and jumbo mortgage loans.

Friday, August 5, 2011

Jumbo Loan Rates Never Lower As Government Loan Limits Drop

If you have been keeping up with the real estate news, you may know that the mortgage loan limits on jumbo mortgage loans set by Congress are about to change. A jumbo mortgage is one that must be eligible to sell to Fannie Mae or Freddie Mac and it exceeds the amount of a conventional conforming limit.  Depending on where you live, the upcoming lower loan limits could impact you. Beginning on October 1, 2011 the mortgage loan limits for homes across the entire country will be $625,500.
Currently, the maximum amount for jumbo mortgage loans is anywhere between $417,000 and $729,750. The maximum limit is determined by a couple factors, including the region of the country in which you live.  Major metropolitan areas, where home prices are higher, today have limits closer to $729,750.
There are many people who will be affected by the new limits. Any homeowner who owns a home valued between $417,000 and $729,750 and wants to refinance is going to be affected by these new limits. There will be tighter credit restrictions and possibly even higher mortgage rates for homes that are valued above the new $625,000 maximum.
Any home buyer who wants to buy a home priced above the new maximum is also definitely going to be affected. Currently, jumbo mortgage loan rates are often lower than traditional mortgage rates and qualified buyers can put as little as 3.25 percent down to purchase the home. But with the new caps, mortgage rates are going to increase and home buyers will need to put down a much larger payment for the home. The down payment requirements could be as high as 20 percent.
Some of the bigger cities with higher home prices will definitely feel the punch. Places like New York City, San Francisco, Miami and Los Angeles where homes are typically priced in the jumbo mortgage loan range will see some effect from the lowered maximums. According to the National Association of Home Builders, nearly 1.4 million owner-occupied homes in more than 200 counties across the county will be valued above the $625,500 jumbo loan limit.
BestJumboRate.Com said that they are reaching out to clients who will be affected to alert them of the new guidelines. Most people simply don’t know about the new limits or the October 1 deadline for imposing the new limits.
Before criticizing the reduction, though, consider this: The Federal Housing Administration, or FHA, raised the limits for a jumbo loan in 2008. This increase in limits was only supposed to be temporary. Since 2008, the higher limit caps have been renewed each year. As of right now, those limits are set to expire on September 30, 2011. It is not like the federal government with taking action to lower the limits; rather, legislative inaction would result in the current limits expiring and reversion to the old limits.
So what does this mean for you? If you are thinking of refinancing your jumbo mortgage loan or taking out a jumbo loan to purchase an upper-end home, now may be the best time to initiate the process. The opportunity to capture a government insured rate that is often .25-.50% lower than a traditional jumbo mortgage loan won't be able if you wait until after September 30. 

Thursday, July 28, 2011

Housing in For Long Road to Recovery

From San Francisco Fed President John Williams: The Outlook for the Economy and Monetary Policy

Some excerpts on housing: 
One of the most important currents holding back recovery has been housing. The collapse of the housing market touched off the financial crisis and recession. In most recessions, housing construction falls sharply, but then leads the economy back when growth resumes. As you well know, that snapback hasn’t occurred this time. Before the crisis, residential investment as a share of the economy was at its highest level since the Korean War. Today, housing construction remains moribund and residential investment as a share of the economy has fallen to its lowest level since World War II.

On one level, that’s not surprising. We simply built too many—in fact, millions too many—houses during the boom and we are still feeling the effects of this overhang. Consider housing prices. From their peak in 2006 until early 2009, home prices nationwide fell by nearly a third. When you exclude distressed sales, prices appeared to bottom out in 2009 and early 2010. New housing starts also appeared to stabilize in 2009, after plummeting some 75 percent during the housing crash. ...

The $64,000 question is when will the housing market finally recover? One daunting challenge for such a recovery is the huge number of homes in foreclosure. Almost 7 million homes have entered into foreclosure since the first quarter of 2008 and some 2 million are still in the foreclosure process. In addition, there is a shadow inventory of homes currently owned by delinquent borrowers. When you add up unsold new houses left over from the boom, homes for sale by owners, foreclosed residences for sale by lenders, and the shadow inventory of houses at risk of distressed sale, you come up with a massive supply overhang.

Over time, more reasonable prices and an improving economy ought to bring buyers off the sidelines and set the stage for recovery. But high unemployment and anemic wage gains are leaving people worried about their income prospects and cautious about buying homes. Also, the dramatic plunge in home valuations since 2006 has made some first-time homebuyers wary about entering the market because of worries that prices might fall further.
These are key points: Usually housing is a key engine of recovery, but not this time because of the massive supply overhang. And looking forward: 
It’s only a matter of time before we work off the inventory overhang and construction picks up. How much time it takes will depend in part on what happens with foreclosed properties. If we begin making progress on working down the foreclosure inventory, then single-family housing starts could plausibly rise from their current level of about 400,000 per year to an average level of perhaps 1.1 million per year in three or four years, according to research at the San Francisco Fed.4 To put this in perspective, such an increase would boost real gross domestic product, or GDP, by at least 1 percent.

4 By contrast, if we can't work down the foreclosure inventory, then a return to normal construction levels could be delayed several more years. 

Tuesday, July 26, 2011

Jumbo Loan Rates Continue Hovering Below 5%

Mortgage Delinquency continues to be a problem. It is our view that this could take several more years to run it's course. Average days till a home goes from first missed payment to getting listed as a foreclosure is roughly 1.5 to 2 full years in most states. The chart below is showing that over 10% of all mortgages are at least 60 days.
Here is your jumbo mortgage rate chart as well: