Mortgage Blog

Starting Today, I will post the subjects on this blog, and then work on it.

It's not easy to write blogs. We have to collect information you  guys are interested.

The next two blogs I will have :

1)A Good System That works.

2)How reported rental income affects the loan qualification.

I posted this article following on wenxuecity.com. I think it's better to share with you. I copy it here as well:

Here are some of the thoughts:
1)The lowest rates may be behind us.
At least in the short term.

2)The mortgage rate is still driven by the economic 
news. The rate is higher with better news, and lower
with bad news.

3)What's the possibility of 4% interest rate for 30 yr fixed? The mortgage industry talked about this rate about one month ago. And the market is preparing for it. The bond market started trading 3.5% coupons for the lower rates. But so far there is some possibility for lower rates, but still it depends on 
whether we will have a double dip.

4)The long term bond still over-bought. 
???posted similar articles before(I could not find the link). It's normal for the current interest rate inched up.


5)Will the mortgage go higher in the short/long term?
With the Fed purchasing the treasury/MBS, and the clouds about the economy recovery. I don't see higher rates for at least another 6 months.

6)The trading range is very narrow for the mortgage rates. It's still within 0.125% to 0.25% range. Sometimes, the locking period will make a little bit difference for the rates. The best strategy is still locking at the valley and floating at the top. For today's market, it's pretty safe to float.

There are two different opinions about the  mortgage rates:
1)The short term rate should go up. The reason is that
the MBS and treasury were over bought. The rate will
go up on any good news.

2)Anoth kind of opinion is that the rate will go down
to the previous low level because the job market is no
good and the housing market is still bad. And the economy
recovery is not as good as expected.

Both of them are right. One is short term rate expection
and another is the long term prediction. For the borrowers,
just try to get a rate that you are comfortable with.

And also, the current lender loan processing time is around 45
days to 60 days. Be patient if your loan is in the pipeline.

Usually we thought that remodelling house is NOT ok to refi.

But today I got an exception from the lender that they are ok for the remodel. And they did not even ask for escrow withhold.

That's cool. But still it's case by case sceanrio. We still can not gurantee all those loans can be approved. But we are just lucky today. 

Q: We have Annual income of 180k.  And want to purchase
a property of 700k with 20% down. We have another underwater
house with mortgage payment of $2755. Can I qualify to
purchase this property? I have another auto loan of
monthly payment $700.

A: The answer for this question is yes or/and no.
There are a lot of difficulties to get the loans.
First, we can not use your rental income since its LTV
is over 70%(most lenders allow you to use if you have
30% or equity in the house); Second, with the mortgage payment
for both houses and your high auto payment, your Debt to Income
Ratio is way over 45%(required by Fannie Mae).
So, you can not qualify for a primary loan.

But if you can have 25% down payment, you can purchase as a
rental. And since we can use the market rental as your income
for rental purchase, you can at least have this transaction closed.
Then a few months after the close, after you move in this property,
you can refi back as primary, with rental income from the current house.

I just got this from the Mortgage Magazine report Friday:

Treasury tried to have the GSE(Fannie Mae and Freddie Mac) automatically
reduce the interest rate on all outstading GSE loans to a market rate of
around 4%. This idea is crazy and interesting.

We are waiting to see how they can do it?
1)How they can compensate those investors who holds those loans.
2)What they are going to do with those non-30 yr fixed loans?
How abour ARM loans?
3)How about those loans not owned by GSEs?

I already have some clients told me to get Fannie Mae loans to them.
The only thing I can say is "This lender will sell most of the loans
to Fannie Mae".

Seems like there are a lot of benefits to get a GSE loan. So broker's
business should stay good since our originated loans all should be sold
to GSEs.

This morning I got an email from Alameda County that their link for the property taxes site changed to http://www.acgov.org/propertytax/. And they asked me to update it on my website.

I was so surprised that they can catch it and send me the email back. Maybe they have someone ready my website as well.

Also, I recently find one feather from gmail account. If you use chrome browser, you can actually drop/drag the attached file, very similar to microsoft outlook. It makes my job easier when I sent a lot of attachments or download a lot of files from the email.

I love new technologies.

The interest rate went up again today. The market is very crazy.
The rate was up Friday & today. The bond market sell off on any good news.
The main reason is that the over-bought of the bonds. And any good
economic news will scare the bond investors and caused the selloff.

A few news today:
1)Investors are willing betting on risk assets. That means they
may not purchase bonds as crazy as before. So the mortgage rate
may not go down that much from here.
2)The market gained confidence on the good news from China
and Australia. So recovery is possible, though bumpy ahead.

Then let's back to our subject topic. Will the withdraw from Iraq
affect the mortgage rate. Personally I think it may. If the general
public feel more confidence in the economy(because of the withdraw),
the current mortgage rates may be the bottom.

Let's wait and see for the rates of this winter.

Everytime when we have huge volumes, I have to post this in the blog:

The best way to communicate with me is email. I will usually reply within 24 hours.
You can remind me if you want me to reply earlier.

You can still call me if you like to leave the voice mail. But I only check
it once every hour or once every 4 hours.

Other brokers will not check vm all the time as well.

For the last a few years, some lenders allow us to submit anything
to them and they will review the files and then ask the broker
to provide the missing files.

And they changed the game, they need the complete pacakge before
reviewing the file.

Since the lender is very very slow now(we can not close a loan
within 30 days now), we are going to change the requirement from
our borrowers as well.

1)We will not lock the rate until I have the income docs:
w2, paystub, bank statements, 4506t, loan disclosure

2)Borrower and agents will work closely to get the appraisal
ordered, scheduled and inspected.

3)If the borrower wants to get better rates, we may need to float the
files a few days.

4)For some lenders, they may need to have some "unusual" documents
requirement, other than tax returns. We will have to work with them
in order to get better rates.

Q: I have a 400k renal with the rate of 4.875% for 30 Yr fixed.
Is it a good idea to change it 5/1ARM? what's the rate for 5/1ARM.

A: The rate for 5/1ARM is around 3.75% to 4% now for 5/1ARM rental
with no closing cost all. You an think about if you plan to keep
it for a few years.

Though the rental 5/1ARM rate is higher, after 5 years at the rate
reset time, the rate will be the same as primray(reset).

You can choose 5/1ARM if you think you can handle the risk.

Q: I am doing a cash-out loan with agent agent, but the loan
was denied. I have more than 4 properties. But I read your blog,
I rememeber you said it was ok. Could you please explain.

A: For the mortgage industry, if the loan will be sold to
GSEs(Fannie Mae or Freddie Mac), then those loans will
have to follow Fannie Mae guideline(Freddie Mac similar).
Sometimes, we call those guideline as seller's guide.
We will have to follow those guidelines in order to sell
the loan to the investors in the future.

So according to the guideline, if you have more than 4
financed properties, you can not do a cash-out on the
rental property. But you are ok to cash-out on the primary.

So in order to cash-out your loan, you have to find a lender,
a portfolio lender who is going to keep your loan. And I refer
my clients to those banks, they got those loans refinanced, and with no closing cost for those rentals.

Some lenders now require the whole complete package before underwriting
the file. This happens when they are very busy and they don't want to
waste time on those files they may think may not be delivered.

So don't be surprised that the agent will ask a lot of files ahead of time now.

Please click the links on my website for the above two topics.

I agree that it's not easy to write blogs with so different topics. I will try to write someting like "My Blog is not about Mortgages" or "Refinance is not just about rate, It's an Experience", or "All rates are stories", etc. I may share with you later
when I have more time. We are story-tellers or salespersons anyway.

I do have one of the best mortgage sites from the mortgage originators and I do spend a lot of time on it. I have the best work flow system designed by myself. I read one book per week(on average, most of them business relalted, if not auto-biographies).
I do recommend "168 Hours" by Laura Vanderkam. This is the book about how to manage your time when you have only 168 hours per week.

I will keep you updated with more next week. Have a good weekend. Enjoy.

I have one borrower wants to have 5/1ARM today, and when I provided the GFE,
he was not happy about the GFE since it said that the rate will change
in 60 months. And he thinks that the right terminalogy about this
rate term change should be "after" 60 months for 5/1ARM.

This form is regulated and provided by HUD. And we generate those
forms by the origination software we are using. Basically we can not
change anything. And this form is only a good faith "estimate" and will be
overwritten by the NOTE. The final note will specify when the rate
will reset.

Hope this will help those who has similar questions

We just learned from someone who got a letter
from the bank that they lender will charge them fraud to finance a
property as 2nd home when it is a real rental.

Though the rental rate is higher than 2nd home.
We still need to qualify it as rental unless
it's indeed a second home. And even though the home
is occupied by your parents or relative,
and if does not meet the defition of the 2nd
home, it's a rental.

There is only one lender increased the rate after 2pm PCT
yesterday. They may know something we did not know and indeed
the rate is up a little bit higher today.

Though the trend of the interest rate will inch lower, but the
short term rate may go higher. The lenders did not have the
pipeline problems until recently when the interest rate
hits record low. But still, we did not see the volume of the
last year when the lenders offered "free rate extension" for
all loans because of the volume.

I did subscribe a bond trade magazine. And though there were
not accurate, but they did not mention that the short term rate
trend may go a little bit higher because the bonds were over-bought.
They analyzed the bonds market by the technical analyze.

My recommendation is still locking the rate at the current level and
refi a few months later if the rate is lower.

One thing needs to be noticed is that the financial reform related
to the mortgage industry. We are required to pass both State and National
license test this year; and there are more reforms regarding YSP
and other related issues in the coming months. Obama did need
A New Model for the two GSEs.I will keep you updated on those news on this month newsltter.
Sorry for not being able to delivery more updates recently.
I am trying my best to close all the loans and help my clients to
get the best rates(My volume is about 60%-70% higher than last year,
and I am surprised that I can stillhandle that volume).

Even though the rate will go lower, we still recommend to lock
the rate. The reason is very simple. Human beings will not
like uncertainty. When you did not lock the rate, you will
feel uneasy when the rate goes up(like today). And people
will regret that they did not lock the rate earlier.

Also, even if the rate may go lower, it will not go overnight.
It will go slowly. So even if you lock the rate, secure one
of the best rates, and you don't lose anything(you can refi
4 months later).

There was an article from wall street journal yesterday suggesting
the Fed to increase the rate a little bit. Their reason is that
very cheap money for the mega banks and the big companies will
discourage them to take risks to create jobs and make some
investment. They would rather to investment in government debts
to secure low risk returns. I don't know whether Mr Ben will listen.

In the previous blogs, I mentioned that most of my clients
are very good clients. I have one customer who did refi
with me about three months ago with the rate of 5.25% for
30 yr fixed for the high-balance conforming loan. At that
time, the rate dropped to around 5%; and her friends
asked her to switched brokers to get lower rate.
But she did not and she wanted to commit the closing on time and indeed that she can start the refi again the end of this week.

If she chose to switch another broker, she would pay extra
appraisal, and the 5% rate is nothing compared to the current
market rate and she will have to wait for one more month until
the next refi. Thanks, Mei.

And I also did have another client switched to another broker
for 0.125% better rate. Still the rate he got not the best
rate. Unless that broker cover the appraisal fee, otherwise,
he did not save month at all by switching the brokers.

And when we think the rate is very low, and tempted to
break the commitment and try to get a lower rate; the rate
may go lower after the switch. There are something we can not control, though we will try to.

That's part of the life, is not it? And the rate will go lower.
4% of 30 yr fixed is not a dream any more. We will get this rate
this winter.

As my favorite mortgage reporter predicted 3.x rate about two
weeks ago. I will share with you in the next a few issues.

Last Friday, after the job report release, the Bonds rallied and the
stock indexes unchanged. That means the bond traders and stock trader have different opinion about theeconomy. The bond traders are more pessimistic about the weak economy.

Goldman Sachs lowest the Treasury Yeilds to the target of 2.5% for the next 12 months. And according the weekend WSJ, the fund Hoisington Investment Mangement still bets on the bonds(This fund's only holding is bond and cash). And Hoisington Investment started purchasing of bonds since 1990s. If the above forecast is correct, we will see lower rates.

Though we all agree the rates are lower, do we still just wait or continue refinance? Yes. A few reasons. 1)You can save money earlier if you refinance now. Especially if your rate is high. 2)The value could be lower. It is possible that you can not refi even when the rate is low, but the value does not support. 3)If we will see lower rates, it will be 4 months away, you will not lose anything. 4)Usually we don't bet on the lowest rates, so you can still focus on whatever you are doing and have a peaceful mind to refi when the rate is lower(You don't have to watch the rate all the time, it's not fun).

Just FYI, the fed lend the money to IBM for the interest rate of 1% to hope those big companies to create jobs. Will it work or not? Let's wait and see.

There are more and more interests of doing refi for the rental property. And this rental was the previous primary, and you got the heloc when it was primary, then be careful when you try to do refi.

Most lenders will ask you to close it. Only a few lenders will allow the re-subordination. Please consider that when you work with your agent to refi the rental.

Most fund managers are preparing for the deflation and they invested a lot on the treasury.  They suggested the treasuary bonds and divident stocks, like MCD, etc.

This month will be quiet month for the fund managers and trades. So the rate will expected stay at this level this summer. Will head south this winter.

The WSJ published a story today implying the Federal Reserve was considering the idea of reinvesting MBS prepays back into new production TBA MBS. Read "reinvesting" as the Fed resuming their large scale asset purchase program. Quotes from the story lead us to believe the "leak" originates from someone inside the St.Louis Fed....

So yes, 4% of 30 yr fixed rates seems like possible to me.

I got the following from a Mortgage News Reporter:

Perhaps, Lew Ranieri's recent prediction that the yield on the 10-year Treasury could hit 2.5% this year will actually come true. Predicting where rates are headed is a tough game — but fun. But one thing seems certain at this time: as long as inflation doesn’t flare up (except for maybe oil prices) rates, mortgage rates in particular, aren't headed anywhere, which should be good news for homebuyers except that they're scared about losing their jobs or finding a new one. Several housing economists anticipate a further decline in home prices this year which should prompt us all to ask this question: what if rates rise? Does that mean prices will fall even more given the mental state of nervous consumers?

And I got another report last wednesday -- 30 yr fixed rates may go as low as 4%.

Yes, I tookd the California State Mortgage Loan Origitaror test and passed again(Passed the national test last weekend). And I had to focus on those tests since those test were reuired
for all loan originators to pass this year.

And I am glad to pass them all in the month of July.

As for the rates, I got a report last Wednesday that the rate will go lower this year. It may go 0.25% lower from the current level. But there are some IFs for this happen. One thing I know is that the rate will not go up in the short term.

I will do the following in the correspnodence with my clients starting today:

 I just want to confirm that once we lock the rate, it's very hard to lower the rate with the same lender again. So the best way to get better rate is to do another refi again 4 months later if we have the opportunity.