- Consumer sentiment comes in higher than expected. Durable
goods orders come in higher than expected. NEW HOME SALES come in
better than expected. - Today is a victory for low expectations, much more than a sign of
recovering economy, but still, stocks are benefitting and bonds getting
beat up. We had had a little rally, but we're losing ground today. - Of note: FHA conventional-to-FHA refinances have been put into
the FHA Secure program, which was originally designed to allow
delinquent homeowners to get out of their ARMs before they lose their
homes. Obviously - OBVIOUSLY - lumping these two kinds of loans
together is silly, as it takes good loans from responsible homeowners
and prices them the same as risky loans to those missing payments.
This costs good borrowers, no matter how good their credit, about .5%
to their rate when refinancing to FHA.
- There is, however, an exception, and it comes from Countrywide,
of all people. That company has decided that it will not buy FHA
Secure loans except when the homeowner has never been delinquent.
Therefore they do not have to lump risky and good loans together,
therefore they can offer better pricing, and it is that pricing that is
reflected in the chart above. - Never thought I'd say it, but Countrywide is acting very smart. And it's a good thing for us.
Friday, July 25, 2008
End of a Wild Week
Tuesday, July 22, 2008
At Least Oil Is Down Too
- Bonds rallied yesterday a little, but have given back all that
momentum and more today, so we're back to where we were Friday on
rates. At least oil is falling - we're more than $18 off the high and
still going.
- There is a proposal out there being put together by a
private/public consortium of mortgage people and government regulators
that actually has some merit. It will be a couple of months before we
get the full details, but right now it appears that what we're looking
at is a plan to increase transparency in the packaging of mortgage
loans so they can be purchased. This would add confidence to the
secondary mortgage market, increase liquidity, and probably drive down
rates, especially for good borrowers. - This is the technical part, so skip it if you don't care:
mortgages are packaged in large groups for sale on the secondary
market. Primary lenders have used this packaging to shed loans from
the books and obtain new lending capital. However, up to the moment,
the packages of loans have been fairly opaque; that is, the secondary
financiers were never quite sure what it is they were buying. The
packages of securitized loans were often significantly heterogeneous,
and as the market has melted down, that has contributed to the
distress, because the lending institutions that purchased these
packages couldn't really tell what they were worth - they didn't know.
- Some of the loans were fine, most of them, even, but many were
not. How many? Nobody knew. Was this package better or worse than
that one? Nobody knew. How much real exposure did the financier have
to market downturn? Nobody knew. - To a large extent, nobody knows now, either, which is why the
recent spate of better-than expected earnings from servicing banks has
been such welcome news. At least we're pretty sure the entire
portfolio isn't going to self-destruct. - This opacity does two things: one, it increases risk-based
pricing for good loans (20%+ equity, 720 credit, full income
documentation) while significantly decreasing pricing for bad loans,
and two, it allows lenders to make riskier loans, because they can then
package them with good ones and sell the whole shooting match as "A"
credit mortgages. - You're right, this is stupid.
- What this proposal would do, then, is make it much easier for an
investor to tell what he was buying, because all the loans in any given
package would share characteristics. This will increase liquidity,
especially for good borrowers, and get some money moving in the
mortgage market again. Rates will fall for less risky loans. - Rates will, of course, rise for more risky ones, which will
emphasize things that need emphasizing, like having a job and some
money in the bank, and a history of paying bills on time. That will be
painful for some, but better on the whole for everyone. - Congress will then step in and prohibit risk-based pricing as
being discriminatory, and the entire market will collapse. But we will
have made a good try, and that's important.
Tuesday, July 15, 2008
FHA Guideline Changes
Rates today are the same as yesterday.
What I want to take a minute to do is acquaint you with some of the new
rules for FHA loans that will be effective August 1. These are
critical to many borrowers, as FHA loans are currently substantially
better both in interest rate and in underwriting flexibility than
conventional financing.
Previously:
No loans approved less than 2 years from bankruptcy.
As of August 1:
No loans approved less than 4 years from bankruptcy, unless significant extenuating circumstances can be proved.
Previously:
No loans approved less than 3 years from foreclosure
As of August 1:
No loans approved less than 7 years from foreclosure
Previously:
Rental income allowed to offset liability for residence being converted to investment property (when purchasing a new home)
As of August 1:
Rental income disallowed on conversion to investment, unless 30% equity in the property.
There are more in the same vein. Please be aware of these changes.
Additionally, FHA is changing LTV requirements, cashout requirements
and reserve requirements for most loans, and altering the up-front
mortgage insurance premium required, although in this case, it is true
that many borrowers will now pay less than they otherwise would have.
So it's not all bad news.
Stay tuned for more. And as always, call with questions (801-310-3407)
or hit reply and we can get you the information you need.
Cj
What I want to take a minute to do is acquaint you with some of the new
rules for FHA loans that will be effective August 1. These are
critical to many borrowers, as FHA loans are currently substantially
better both in interest rate and in underwriting flexibility than
conventional financing.
Previously:
No loans approved less than 2 years from bankruptcy.
As of August 1:
No loans approved less than 4 years from bankruptcy, unless significant extenuating circumstances can be proved.
Previously:
No loans approved less than 3 years from foreclosure
As of August 1:
No loans approved less than 7 years from foreclosure
Previously:
Rental income allowed to offset liability for residence being converted to investment property (when purchasing a new home)
As of August 1:
Rental income disallowed on conversion to investment, unless 30% equity in the property.
There are more in the same vein. Please be aware of these changes.
Additionally, FHA is changing LTV requirements, cashout requirements
and reserve requirements for most loans, and altering the up-front
mortgage insurance premium required, although in this case, it is true
that many borrowers will now pay less than they otherwise would have.
So it's not all bad news.
Stay tuned for more. And as always, call with questions (801-310-3407)
or hit reply and we can get you the information you need.
Cj
Tuesday, July 8, 2008
Extra! Extra!
You Read It Here First
Cj
www.thechrisjonesgroup.com
- Oil has lost over $8 the last two days. If the runup in crude
oil prices is, as has been contended often, mostly driven by
speculators and hysteria, let's all remember that hysteria works in
both directions. On the upside, it's called "irrational exuberance".
On the downside, it's called panic. - All commodities, actually, are down rather significantly from
their highs, including precious metals and even corn and wheat. It
appears that our capacity to grow things, find things, and innovate out
of needing things is, in fact, expanding. Shocker. - Bonds are up, the stock market is down, and despite FNMA and
FHLMC writing off another $42 billion in bad debt yesterday, both those
stocks are up this morning and there isn't any apparent worry that the
backbone of the mortgage system will collapse any time soon. - Fact is, the vast majority of homeowners will pay their bills on
time and repay their mortgages on schedule. There's a lot of hysteria
out there in the credit markets, but there are still good loans to be
had, and lots of good people that need them. Lenders need to add
really good loans to their portfolios, and are keeping rates relatively
low to attract them. - Here's the prediction: the sky is not falling. Oil will not hit
$150 a barrel this year. Gas will not reach $5 a gallon this year, or
next year. Mortgage rates will not hit 7% this year or next year. By
spring of next year there will be a significant, noticeable rally in
real estate. The world financial system will not collapse. Innovation
will explode. - You read it here first.
Cj
www.thechrisjonesgroup.com
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