Below is a quoted article written by Chris Kissell of BankRate.com that discusses what is going on in the mortgage market right now relative to the Fed Rate Cuts....
"When the Federal Reserve meets and changes rates, we all have questions: What does it mean to me? Will my mortgage rate go up or down? Is this a good time to refinance? Bankrate is here to help. We've looked at five categories -- mortgages, home equity loans, auto loans, credit cards and certificates of deposit -- to determine if the Fed's moves made you a winner or a loser. Here's a look at mortgages:
Instead, mortgage rates actually rose significantly, reminding everyone that changes in the federal funds rate do not directly control the direction of mortgage rates.
Now that the Fed has cut rates by 75 basis points, it's anyone's guess where mortgage rates will go. But Richard DeKaser, chief economist for National City Corp., is betting the cost of carrying a mortgage won't be going down substantially any time soon.
"We've seen the lowest for mortgage rates," he says. "We're going to be in the range of 6 percent for the balance of the year."
Time may prove DeKaser right. If so, consider yourself a winner if you locked into a mortgage before January's rate cut, when mortgage rates were near historic lows.
This will be a boon for countless Americans with subprime mortgages who fear their next reset could leave them facing foreclosure.
"The Fed's actions in their own right are going to reduce the burden of mortgage resets," DeKaser says. "So that will help directly."
Of course, not everything was rosy. The U.S. credit crunch and falling home values made it difficult for some borrowers to take advantage of sinking rates. Nonetheless, many homeowners and homebuyers had a window of opportunity to lock into historically low borrowing costs for many years to come.
For now, it appears that window has slammed shut, leaving those who failed to act earlier feeling like losers.
The moral of the story is simple: Don't make mortgage decisions based on Fed actions, such as this week's rate cut. Instead, take the appropriate action given your individual circumstances.
"Trying to time the market is historically a fruitless exercise," says Bob Walters, chief economist at Quicken Loans. "If it saves you money to convert your ARM or to lower your fixed rate, then by all means do so." "
The original article can be viewed here.
Being that I complete agree with Chris on how this is all playing out, I thought it would be best to simply let you read it in his words. Please feel free to email or call me if you would like to dialogue about this at all!
For more reading on this topic, see a post I made back on January 22nd, 2008 at 2:59 PM.
For years, Lenders have been programming you and I to pay our loans they way they want us to. They want our debts to be paid over the maximum term because the Lenders want to make the most amount of money possible off you, the debtor. This debt is the result of purchasing such things as a new home, car, boat or school loan. Yes, First Omni Mortgage Lending is a Lender, but we also want you to win; to us, the solution below is a win-win for the both of us.
The solution to this issue is an Equity Building System (EBS) offered through one of our business partners. The EBS is based on the sound financial concept of making one extra payment, per year, to principal. This is accomplished by systematically collecting ½ of your monthly loan payment every other week. Since there are 52 weeks in the year, this totals 26 half-payments. The 26 half-payments are the equivalent of 13 full-payments, with the extra payment being applied directly to principal. This simple concept can save tens of thousands of dollars over the course of your loans and it's not very hard on the budget either. The best thing is that our business partner does all of this work for you; they combine state of the art technology and great customer service to make these savings a reality. The name of our business partner is GemCap Equity Management.
Check out the most commonly asked questions and then contact me to get the ball rolling on this for your loan:
Do I have to close a mortgage with First Omni to take advantage of this service?
How does the EBS Work?
How much will my total interest savings be with the EBS?
What happens with "Escrow" payments?
How will my funds be collected?
When will my loan payments be made?
What if I change bank accounts?
What if I sell or refinance my property?
What types of loans can I use the EBS program for?
No, our business partner works with EVERY mortgage servicer. I simply collect data from you specific to your mortgage (payment address, amount, etc) and we take it from there.
[BACK TO QUESTION SUMMARY]
How does the EBS Work?The Equity Building System (EBS) is based on the simple concept of making one extra payment, per year, to principal. This, in turn, will reduce the total amount of interest paid over the course of the loan. We accomplish this by systematically collecting ½ of a loan payment every other week. Since there are 52 weeks in a calendar year, this totals 26 half payments. The 26 half payments are the equivalent of 13 full payments, with the "extra payment" being applied directly to principal. This simple concept significantly reduces the total amount of interest paid over the course of the loan.
How much will my total interest savings be with the EBS?The amount of interest savings varies, depending on the terms of the loan. You can get a customized savings analysis sheet by contacting me directly. The following is a typical example of the interest savings:
Regular Loan Terms
Loan Amount:
$150,000
Interest Rate:
6%
Loan Payoff:
30 years
Monthly P&I Payment:
$899.33
Interest Saved:
$0
Payments Saved:
0
EBS Payment Program
24.7 years
Bi-weekly Payment:
$460.62
$33,983
64
For more details on this analysis, view this Adobe PDF.
All calculations are for illustration purposes only. GemCap Equity Management, Inc. does not guarantee these exact savings and is not liable for Lender inaccuracies. These calculations do not include standard processing fees.
What happens with "Escrow" payments?It is common practice to send money above the normal loan payment to your lender for the purpose of paying taxes and insurance premiums. These funds are deposited into an escrow account, from which the taxes and insurance are paid when due. With the EBS program, this extra amount will also be applied to principal once per year. This extra amount enhances the interest savings, equity buildup, and reduction of the loan term. It is very important for you to keep GemCap Equity Management, Inc. informed of changes in your escrow payments.
It's common for your taxes and insurances premiums to increase from time to time. If we are not informed of changes, the required monthly payment may become deficient and create avoidable problems.
How will my funds be collected?The EBS electronically debits your bank account through the Automated Clearing House (ACH) system. This ensures the prompt and precise transfer of client funds. The Client enrollment form authorizes GemCap Equity Management, Inc. to debit your specified account. We monitor each client's account to make sure that the fund transfer was successful. These funds are deposited in an FDIC insured bank. GemCap then draws upon this depository account to make your loan payment.
When will my loan payments be made?Your loan payments will be made by the due date each month. One of the great benefits of our program is that you'll never have to be concerned with coupons or monthly billings. It's all automated! You must ensure that there are sufficient funds in your account on the scheduled debit dates of our plan.
If the transfer of funds did not occur because of insufficient funds, there will be a charge of $29 incurred on this same account. It is recommended that you have overdraft protection on your debited account to ensure that this charge is avoided. Once per year, the successfully collected "extra payment" is sent directly to your Lender and applied to principal. This "extra payment" occurs after the 12th month following the initiation of the plan. It is made in the same time frame in each subsequent year.
If you have requested applying extra amounts to your normal monthly payment, these funds are applied to principal at the end of the month in which they are collected.
What if I change bank accounts?If you want to change the account from which GemCap Equity Management, Inc. is debiting, you simply need to notify us of this change. We will request a new voided check or deposit slip to ensure accurate account numbers. It is imperative that this information is communicated from the client to us. We would always like to avoid insufficient funds charges in all cases. Also, failure to notify us could cause loan payments to be misdirected or late.
What if I sell or refinance my property?The great thing about our EBS program is that it is transferable for life. If you are planning to refinance or sell your property, you must notify GemCap of any change of loan terms or Lender. This is very IMPORTANT! In addition, loans are sometimes sold from one Lender to another.
If you receive any notice of change of Lender, please notify GemCap IMMEDIATELY. The EBS program is transferable to new loans at no additional cost. This benefit does not apply to clients who cancel the program.
What types of loans can I use the EBS program for?The EBS program works with almost all types of loans or lines of credit. New home purchases, second mortgages, investment properties, RV's, cars, boats, and credit cards are some of the common types. If you are not sure about your particular situation, contact our Customer Service Center.
Additional Tools
Bi-Weekly Mortgage Payment Calculator
Detailed Adobe PDF of the Bi-Weekly Payment Analysis
Take Action!
Contact me to sign up for this service to to learn more about it.
As you probably already know, there have been numerous changes within the Mortgage Industry over the last 12 months. More recently, we have seen drastic changes in the Mortgage Insurance guidelines. These guidelines are continuing to change with all MI companies and the majority of changes tend to be uniform with all companies - although not everyone has implemented them at the same time.
Mortgage Insurance, often referred to as PMI, is typically necessary when a borrower is looking to borrow more than 80% of the value of their home (refinance) or 80% of the lesser of the appraised value or purchase price (purchase). A loan can be insured by a private insurer (PMI) or through the Federal Government either through the VA or FHA programs.
Effective March 31, 2008, a huge player in the Private Mortgage Insurance Industry, MGIC, will no longer issue mortgage insurance on any 100% loan to value (LTV) programs; the new LTV cap will be 97%. Another big player, RMIC is also following-suit on the same day. There has been no mention of grandfathering in the current pipeline of pre-approvals.
There is another critical change that takes effect on March 31, 2008 concerning credit scores and mortgage insurance; a minimum 680 credit score will be required for PMI on all cash-out transactions.
At the bottom of this article, I have included a list of general changes that have been announced.
What does this mean to you the homebuyer? If you are pre-approved for 100% financing, you may want to talk to me about your pre-approval because you may be eligible for some of the other programs out there that will allow for pseudo-100% financing, or you may need to consider making a down payment for your home purchase. Each person’s situation is different and we will have to evaluate yours together.
What does this mean if you are a Realtor? If your buyers are currently working under the premise that they have 100% conventional financing available to them, you may want to ask them to revisit their pre-approval with their loan officer. Please have them give me a call to explore their options.
Bottom Line: There are other options available to achieve this 100% financing but they will not be as easy or as fast-closing as they used to be.
My contact information is located here if you would like to talk about this further.
General Eligibility Changes that were Announced – this is a compilation of changes we are seeing industry-wide:
- Loans over 97% LTV/CLTV are ineligible for PMI coverage (effective 03/31/08)
- Loans over 95% LTV/CLTV with FICO scores under 680 are ineligible for PMI coverage
- All loans with loan representative FICO scores below 620 are ineligible for PMI coverage
- Cash-out refinances with loan representative FICO scores below 680 are ineligible for PMI coverage
- Investment Properties with loan representative FICO scores below 680 are ineligible for PMI coverage
- Loans which have potential negative amortization features (including pay option ARMs) are ineligible for PMI coverage
- Cash-out refinances on second homes and investment properties are ineligible for PMI coverage
- Rate & term refinance loans are limited to a maximum loan to value ratio (LTV/CLTV) of 95%
- Streamlined refinances are typically allowed with a maximum LTV/CLTV of 100% when all of the following are true:
o The property is a one-unit primary residence;
o The principal and interest (P&I) payment on the new loan is equal to or less than the P&I payment on the existing loan;
o There is no increase in the LTV category; and
o Disbursement of cash to the borrower or any other payee does not exceed the lesser of $2,000 or 2% of the new loan amount.
NOTE: This does not affect FHA mortgages, as they are not insured by Private Insurers. See this FAQ for more information on the difference between a conventional mortgage and the FHA mortgage.
Our nation’s economy lost more than 63,000 non-farm-related jobs in February, according to a report released last week by the Labor Department. That news alone is not good. When combined with the fact that unemployment claims also went down – as opposed to up as one would expect – the news gets worse. The fact that the unemployment rate went from 4.9% (Jan) to 4.8% (Feb) is an indication that some people have given up looking for work and it is telltale sign that we are in a recession.
Typically, a poor unemployment rate will result in falling mortgage rates; the times, however, are atypical. Over the past few weeks mortgage rates have been rising and falling (but rising more) in an extremely volatile fashion; earlier this week, I saw over 0.5% swings in intra-day mortgages rates! This is happening, even though we are staring a recession in the face because lenders and their investors are worried that foreclosures will continue to clime and, as a byproduct of the over-supply of homes on the market due to foreclosures, house prices will continue to decline. It surely is possible that these trends will continue when we consider job losses and given-up job searches.
At the moment, the market has two strong pressures that are pushing in opposite directions. Interest rates historically fall in a recession but the mortgage market isn’t following this trend because we as lenders – and our investors – are concerned about the quality of the credit we are extending; we are concerned that even more people will lose their income, won’t be able to pay their mortgage, and in-turn, more losses for us and our investors. Clearly, that concern would be the upward pressure on the mortgage rates that is counteracting the downward pressure of the recession.
Bottom line: If you are floating a rate and hear from me with the news that now is the time to lock, I would highly recommend you do so because that means we are in one of the many valleys we have been seeing in recent weeks!
If you want to talk about your loan options, please email me or call me at any time!
Neglecting major house maintenance not only affects your enjoyment of your home, it affects the overall value if and when you put your house on the market for sale. Here are eight common household problems you should be sure to clear up as soon as you notice them so that you are able to keep home repair costs down. Next to each problem is the damage that can occur if the problem is not corrected early.
Faulty Roof Flashing - Roof leaks and possible structural and cosmetic damage.
Malfunctioning Gutters - Water damage inside house.
Poor Foundation Grading - Dampness or water inside the house.
Poor Tub/Shower Caulking and Grouting - A water leak can spread virtually anywhere, but mainly to the rooms below the fixture.
Damaged Bathroom Tile - Loose fixtures and/or water leakage to the floor below.
Not Enough Electrical Outlets - Overloading of existing outlets and a potential fire hazard.
Poor Attic Ventilation - Roof sheathing rot from excess moisture.
Poor Mechanical Systems Upkeep - Systems will not work efficiently or live up to their expected life spans (particularly true for heating and cooling systems). Case in point: Neglecting annual gas furnace inspections could create soot buildup in the flue and result in a chimney fire.
Want to learn more about selling your home? Check out these other posts on my blog:
Don’t Count On Buyers To Overlook "Minor" Imperfections
10 Energy-Smart Home Improvements
Cheerful, Well-Placed Props in the Kitchen
How to Sell in a Sluggish Market
Pleasecall or email me if you would like to dialogue about this further. Have a great day!
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