Mortgage Blog

I finished my first 2012 10k run today.
The chip-time is: 50:41.13. Though it's a little bit
above my goal this year, I am still pretty happy about.

I used to have 10k race when I was young at college.
And the best result was 47:45:00. 

Each year I have a theme for myself. I remembered
in 2009, it was "Double the Sales"; 2010 was :"Slow down
and enjoy the life". And for 2012, the theme is: "Keep
the Running", both for the business and 10k run.

And for the mortgage origination, I completed 14% of
last year's volume. It is a very good start, since
I have to spend a lot of time on running each week(
20 miles per week, so at least 4 hours).

I am so happy to share this with you guys, I am back
to track again after 23 years.

Persoanlly I think the confirming ARM rate
will be above 2.75% after April 1, 2012.

I know some lenders still quote low rates
as 2.375%. So please grab those rates
if you can. Otherwise, the low ARM rates will
be gone forever.

Have a good weekend.

and we will lose one good lender for
good ARM rental rates.

Hpefully other lneders can pick up the
ARM programs.

And also this is the lender for more than 4
financed properties. We have 1 lender left
for more than 4 loans.

We are glad that one borrower signed the loans
with LTV 100% for the rate of 3.875% today.
Their original loan is with Freddie Mac.
This loan will be closed next week.

And I locked another loan for LTV 102%
with 15yr fixed for the rate of 3%.
All above loans are for no closing cost
loans.

And I am working another one with LTV
105% and credit score is only 640.
Can you believe it, this HARP program
does not care about the credit csore
if the loan is from Freddit Mac?

And I am so happy for those who really
needs the help the most.

Yesterday we talked about the trading coupons for MBS.
And yes, we have 2.75% trading coupon today for 15 yr fixed,
you need to pay some points for this rate.

As for 30 yr fixed, It still did not break the last low of
3.625% yet.

When the 15 yr fixed rates hit 3% since last Wednesday,
there are lots of request for 15 yr fixed, conforming or
high balance. On one day Thursday, I had 5 borrowers
interested in 15 yr fixed with loan amount around 500k
and 600k.

And someone started to switch from ARM to 15 yr fixed
as well, especially those with 7/1ARM.

I do have borrowers asked when we can get 15yr fixed 2.75%
to 2.875% yet. My answer is: the market is not ready.
There is no such trading coupon for corresponding bonds.

I will let you know once we have it.

I do have 2.75% for 5/1ARM. But it does mean ARM rate
have a trend of lower rate.

Today's 1 yr LIBOR index is 1.099%. And 1 Yera LIBOR index
was 0.77% on 08/09/2011. And the ARM rates are tied with
this LIBOR index. Now you know why the ARM rate trend was
actually higher.

Then why we have low 2.75% 5/1ARM rate. Actually this
is not a wholesale rate. The lender will not sell the
loan to Fannie Mae or Freedit Mac. The lender will
keep the loan. And they have the promotion recently
for loans over 417k to 2 million.

I was so surprised that my prediction of this rate did come true.

And someone might change from 5/1ARM or 7/1ARM to this
program since this program has low rates, and also fixed.

We got a phone call from a Real Estate Agent and shopping
around for his buyer to get the best rates. And according
to him, he wants to do the best to "take good care of"
the clients.

It sounds interesting. Isn't it? From my understanding,
it's his job to do get the best deal for the client, not
shopping around for the best rates. It's easy for the
buyer to save a couple of thousand dollars on a good deal,
but it is very hard to save interest on the loan for
teh same amount.

And also for the privacy reasons, We could not deal with
the realtor for the client's interesting rate. I don't
we can provide a GFE to a realtor?

Also as a buyer/borrower, if you ask the agent to check
the rates for you, you lost the opportunity to learn
how the purchase loan(refinance too) works. It's part
of the homework you should do when deciding to purchase
a new dream house.

Some clients asked me why I can do loans so well
in such a short period of time? I told them that
I learnt from the experts.

During the earlier years, I did pay some fees to
talk to mortgage coaches, did learn some stuff
from some big organized mortgage brokers and learnt
a lot about the marketing and difference mortgage
channels, like correspondent, etc.

I exchanged emails with a marathon runners last a few
days. She started about 6 months ago with no experience
of running over 6 miles, and she finished marathon with
very amazing results(just one or two minutes shy of
qualification for Boston Marathon).

I asked her how she can do that within such a short period
of time? She said that she runs with a lot of experts
and learns a lot from them.

And we hope we can do the same for our career. The mentors
can help us reach a different level.

What is happening and why? To put it bluntly, the passage of the
payroll tax cut extension is being funded via a mandate to Fannie
Mae and Freddie Mac (the nation's largest providers of mortgage money)
to increase their guarantee fees or "g-fee's" by at least
10 basis points on the rate. So rather than giving a par rate of
4.00%, for example, the par rate is now increased by at least
10 basis points, or approximately 4.10%. But as you probably
know home loan rates are priced and offered in .125% increments,
so this will most likely impact the consumer by .125% in rate.
It was estimated that the increase will ultimately pay for about
$35.7 Billion of the cost of the payroll tax extension.

What exactly is this "g-fee"? The guarantee fee or "g-fee" is
an amount charged by mortgage-backed securities (MBS) providers,
like Freddie Mac and Fannie Mae, to help protect against
credit-related losses in the overall mortgage portfolio.
In other words, it acts a lot like insurance and helps
lower the overall risk which means home loans can be offered at
terrific interest rates to borrowers that have good - but not
perfect - credit.

What exactly is the impact of the rate increase? For example, for
a $200,000 home loan, the increased g-fee (assuming a .125% increase in rate)
would equate to $250 more per year in interest, or $7,500 more over 30 years.

Who will this impact? The change will impact all new borrowers of Fannie Mae
and Freddie Mac loans. The bill will also impact Federal Housing Administration
(FHA) loans by increasing the annual mortgage insurance premium that borrowers
pay by one-tenth of a percent.

When will it start? Officially, the increase to guarantee fees will
begin on April 1, 2012. However, the increase is already starting to
be seen in rate sheets right now, since home loans being originated
now will likely not be closed, pooled and securitized until April
and therefore will need the increased g-fee priced in earlier.

How long will this be in effect? The increase will be effective
through October 1, 2021.

I was surprised that I did write a blog for
about a week. Shame on me.

Too much stiff going on now. First, most of the
lenders are implementing the G-Fees. Some lenders
will charge 0.1% to 0.5% fees to the loans
so the loan rate will be 0.125% higher than regular
rates.

Other new, BOFA exit cash-out refis temporarily.
The reason is that they were too "busy" for the
refinance. I know. Since a lot of top loan originartors
left the company. But I do like their earnings.
Anyway, they make the money now. And besides,
motley said that BAC could be one of the biggest
winners this year. Let's check the end of this year.

Then the big news, we will have possible QE III next week.
Not sure how this will imppact the mortgage rates.
It depends on the package it will propose. Like, how
many mortgage backed security it will purchase, etc.
But one thing is sure, it will keep the interest rates
at the history level for some time.

I did predict 3.5% for 30 yr fixed. And revised to 3.625%
because of the G-fees. And the rate did go up slightly
for the last a few days. Let's check the market reaction
after next week's FOMC meeting.

Happy Chinese New Year amd enjoy the good weekend.
And yes, finally we have the rain and snow. Not only
farmers will be happy.

I did invest a lot on financial stocks. Lots of people
asked which stock to own, BAC or WFC.

Basically those are two different kind of investment.
WFC should survive with good performance, this will
be a long term hold. If you want to invest in BAC,
you should understand that there are lots of uncertainty
for this stock, so much risk, but as long as this
bank can survive, the return will be better than WFC.
So it dedends on your investment strategy and your long
term goal.

This reminds me the questions my clients asked me all the
time: should I choose 5/1 ARM or 30 yr fixed?
If this client has lots of properties, sometime I can advise
them to have some ARM, some fixed. But for most other
people, I could not recommend much because I don't know
their goal and the risk tolerance levels.

And I told them that I am a conservative guy, so that's why
I choose longer term program myself.

Since last year, I started to have blogs mention that the
rates near the bottoms, especially with the recent G-Fees
from the Fannie Mae and Freddie Mac. But overall, the rates
is still not bad at all.

I was a little bit surprised that there are still
someone out there who needs help for HARPII.

I thought that there are not many people qualifies.
But after I locked the rates for one client
this week, a few more application coming.

And indeed that they will save lots of money.

First, I have very good 10/1 ARM rates. Since 30 yr fixed rates will not go much lower after the government annouced the hike of G-fees from Fannie Mae and Freddie Mac. So this will be a not bad option.

Just locked a loan from Freddie Mac with LTV 95%(up to 105%) for the rate of 3.875% for 30 yr fixed with no closing cost at all. Not bad rate for this kind of loans without mortgage insurance(This is Freddie to Freddie loan). Fannie Mae loan should be easier. But the qualifictaion is still very strict: loan originated before May 31st, 2009. No Harp Refi before. Current loan from Fannie or Freddie, etc. The rate not bad. 

They told me that they will increase the interest rate
by 0.125% starting Tuesday Jan 10th(I don't know why this
lender likes 10th. They made all major changes starting
10th).

So because of this change, I will temporary adjust the bottom
of the interest rate to 3.625% for 30 yr fixed; 3.125% for 15
yr fixed.

And you can get those rates now for some special cases(not
all loans qualify).

We got 30 yr fixed 3.625% for most of 30 yr fixed
loans, some needs impound, some does not.

15 Yr fixed lowest around 3.19%. Not bad either.
For the high-balance loans, the lender "hold"
the extra profit gains. We can see lower
rates once the lender lower the margin.

I locked only one loan for 15 yr fixed
for 3.25% for high balance. No better rates
for this program.

If any of you wants to have better rates,
please work closely with your agent.
We are very close to my target.

And if it hits my target, it will be the
bottom of the rates.

Here are some of my randon thoughts of the interest rates for 2012:

1)The Interest rate will high bottom.
I know someone will interpret it as "lower" rates,
but it also means that teh rate will start going up
after 2013.

2)ARM will slightly go up. It will be above 3%
for 5/1ARM after the end of 2012.

3)Some borrowers will change the 5/1ARM to 15 yr fixed
lower rates(someone already changed to 15 yr fixed &
30 yr fixed).

4)As I alwasy said, planning is more important.
When we look back in a few years, the interest rate
of 3.75% or 3.625% is not that important to us.
For any of all the other plannings, if can do one
more thing corretly, the life might be signicantly
different.

Hope everything enjoy the long weekend
and had a good time for the new year
parties.

I know lots of people will have the
new year resolution. I will change
my investment style for the year of 2012.
I will invest in myself.

My goal for this year will be:
1)Join the running groups all year around.
2)Run 20 miles per week.
3)Participate two 10k runs and one half-marathon
(if the training is good).
4)Lose 15 lbs to 20 lbs(My wife asked me not be
that specific)
5)Will have monthly hikings.
6)Read 20 to 50 books

What's your new year resolution, my friends?

A few borrowers sent me emails concerning the interest
rates might go higher in 2012.

1)I believe that the interest rate will stay low the
1st half of 2012. But it will be bottom out this year.

2)Some people interpreted the higher interest rates
based on some of the policy changes. It was related
to the higher G-fees from Fannie Mae and Freddie Mac.
But the fee is 0.1 base points.(Usually 0.375 to 0.5
base points is equal to 0.125% rates).

So the rate will be slightly higher, but not that
significant. Don't worry too much. Everyone should
have the chance to refi at the lowest level.

Sorry, still no time to complete the year-end rate
analysis and the newsletter.

Here are the news:

Loan officers will have some unpleasant news for their customers in 2012: the cost to obtain a new government-backed mortgage will be rising.In late December Congress passed a short-term extension of the payroll tax cut, financing it with a 10 basis point hike in Fannie Mae and Freddie Mac guarantee fees.

Those fees will be charged to mortgage firms, which in turn are expected to pass the cost onto homebuyers and mortgagors seeking to refinance.

Though treasury is up today.

Best 30 yr fixed rate 3.625%. LTV 60% or less needed.

15 Yr fixed High-balance 3.25% can be done either LTV 60% or impound account.

I will prepare a news letter next week.

Personally I think 30 yr fixed 3.5% will be the bottom, though we did see 3.625% for a few hours. 15 yr fixed bottom will be 3.0%.

The bottom will last for sometime, so you will not miss anything. We should catch the best rate when the lender has "promotion".

Still continue doing the refi if you started. Prediction is nothing, until we really see it happening, like 5/1ARM bottom I predicted this summer.

There is one lender offering 3.625% with LTV less than 60% with impound account.

Another lender offers 15 yr fixed rates around 3.15%.

I talked to a few clients recently. And they were amazed about my prediction.

I don't know the reaction if I "call" the bottom of the interest rates sometime next year?

I started running a few weeks ago, and I can not
decide whether I need to start the program of
5k and 10k. And the coach helped me to make the
decision and also provided a lot of advice about
the exercise before nad after the running, the nutrition
and how to prevent the injury, etc. That's why
we need the professional service.

It reminds me the same about the mortgage.
1)First, we should have a long term goal(
For me, half marathon, not sure whether I can
do it).

2)But most important thing is the short term goal.

3)Then adjust the long term goal if the financial
status changes.

Different people have different financial goal.
One of my best friends do not touch RE at all.
He think it is time-consuming. And since he
is good at stocks, commodity trading, he knows
how to hedge again the inflation, pretection
against loss risk, etc.

I have some clients having the goal of 4-5
REOs; some have the goal of 10 REOs. I did
have a few clients already reached that goal.

For any of the goals, we need to do due diligence
homework, to find out your risk tolerance level,
and what kind of investment you are interested.

It's a long way to go, and we are learning
everyday. But still we are trying. Like running,
after we finished one more mile, we are one mile
closer to the finish line.

But this is only for 10 yr fixed 400k loan.
300k loan can get 3.125% for 10 yr fixed now.

And I think 15 yr fixed rate is on the way to
3.0% soon.

I am so glad that it's closer for my prediction
(3.0% for 15 yr fixed; 3.5% for 30 yr fixed)
I made 2 months ago.

I do have really really good rates for ARM
rentals. Contact with me if you have any help
with rental Rates.