As appraisal requirements become more detailed typically resulting in substantially lower appraised values, mortgage refinance deals are falling by the wayside. I have never witnessed such a huge difference in clients perceived value and actual appraised value. Up to 400K spreads just this week.
So what does this mean to me?? – Let’s say you have some equity left in your house and you have a need for cash out – (college, home improvement, bill consolidation whatever…) the true motivation in refinancing would be cash, NOT interest rate alone. Rates are higher – that is a fact, but there is still cash available with acceptable appraised value…. that is the problem… as values continue to fall, consumers are facing less available cash when refinancing.
Don’t let interest rates determine your refinance if cash is a big factor. You may lose the opportunity to achieve your goals. We are still lending money!
Why would I ever want to refinance my 2.5% line of credit???
Were you one of the ones who took out a monster line of credit a few years back, because you could? Well there were plenty of you that did. And what a brilliant decision you made huh? Where else could you get a payment that low for that amount of money borrowed? Why would you want to refinance a 100K loan at 2.5% to a fixed rate that is higher?
Let’s assume the prime rate (the tool used in adjusting your line of credit) remains low for a bit longer. Eventually, when government debt must be repaid and inflation hits – (all the experts say it’s coming) mortgage rates will hit double digits. It’s a fact. History repeats itself. To see in black and white what that could mean to you, look at a few examples below, based on the prime rate historical index.
Let’s assume your rate today is set at prime (3.25%) - .75 which would be a rate of 2.5%
Purchase activity appears to be attempting to shake off the cob webs…..
By no means does any so called expert have enough facts to call an end to this recession/depression. Many key indicators signal things will get worse. I can add this as a fact. We are receiving many more calls every day regarding purchase money. Refinance still far outweigh purchases but we are finding activity is increasing ever so slightly, with most of the inquiries coming from first time home buyers.
*** If you do not currently own your home, you pay your bills on time and you have a couple bucks saved up -------
There may never, ever, ever - ( i am not kidding about this!! ) - in the history of the world be a better time to buy a house again!
You are what is known as a seller’s dream – a non contingent borrower. Side by side with an experienced real estate agent and a strong commitment letter you are driving the bus and calling all the shots. Many contracts these days are based on the sale of a purchaser’s current residence. Well guess what, houses are not selling.
Find out what you qualify for today. Money is available to lend!
The general rule of thumb when watching mortgage interest rates is as follows –
Good news for the economy causes the stock market to rise and interest rates to rise.
In the most simplistic of analogies - Bad news for the economy causes investors to pull money out of the stock market and into the safe haven of treasuries, causing mortgage interest rates to fall.
This is how it always used to be. In this economic climate no rules seem to apply but trends still remain typically somewhat the same. The stock market rally of the past few weeks has caused rates to increase. Loan level price hits for cash out, high loan to value, lower credit scores and other factors have moved some borrowers qualifying rates from the 4’s to the 5’s this past week. The lower rates are still available but they now come with a steeper cost in the form of discount points.
Earnings reports are expected out on Wall St soon. Many suggest the recent stock market rally was just mere profit taking. Others are calling for another huge drop in the stock market. Using the theory above, this could mean interest rates may possibly drop again. We have witnessed three or four rate drops in the past few months. Every rate dropped stopped at the same level. If you have been sitting on the sidelines waiting for rates to return to the level of recent weeks, pull the trigger when they return and stop speculating on further declines. I have had way too many clients who waited too long only to have rates return to the lower levels and were not ready to make a move.
Through all the years of taking loan applications I have heard many stories. It is not my business why people refinance but usually is to lower their monthly payment by consolidating debt. Regardless of why, I hear the stories during the loan application process. The story below from last week points the gun at why Banks must be Regulated. This is not a bashing. This is a true story that can be backed up with true proof.
We bail them out, but Banks continue to rape consumers.
I had a client last week that called about a loan. His name was Ben Dover. Hang with me, the names have been changed but this is a 100% real story and it is happening every day to millions of us. Mr Dover explained to me that he has somehow survived through this economic mess, paying all his bills on time and supporting his wife and kids, at the same time working endless days running his own business.
He is very proud he chooses not to bail on all his debt, his mortgages, his car payments and other obligations as he watches the growing number of Americans who have given up. He is a fighter! But something happened last week that prompted him to call me.
How does the Government allow this?
My client has clearly battled through adversity and has paid all the BS fees only to get his credit limit cut. Now if I remember correctly President Obama and friends claim that Bank of America is too big to let fail. So the government rescued them several times to the tune of billions of taxpayer dollars. And who is going to have to pay for these financial rescues? But the banks whose own clients have lend to rescue continue with these excessive charges and third world country interest rates. Maybe the movement in America should be to charge up all the available credit possible and then never pay the banks back. After all, what is good for the goose………….
You are one of our most valuable customers Mr Dover…
My client banks with one of the big boys – Bank of America. Matter of fact, he has several business accounts, personal accounts, a few credit cards and even a car loan with B of A. He went on to tell me how tight financially it became last year. Many bills were paid by credit card. Before long his debt accumulated. Surprisingly his business started generating more revenue. Ben Dover began paying down his debt.
Those Bank of America credit cards saved Ben Dover’s financial life. Sure he would call the bank when hit with $39 late fees and $39 over the limit fees. He argued the fact that the credit bureaus regard anything over 30 days as past due yet B of A states in their fine print that any payment received 1 day past the due date would trigger interest rate increases up to 31% APR. But Mr Dover took it like a man. Besides, he had no choice. He was on track to pay off all his debt even if it included hefty fees and unscrupulous interest rates.
Those rotten bastards – they should be shut down
As the story went on, Ben Dover became more enraged by the second. He told me that as he paid his credit cards with Bank of America down, the bank would cut his credit limit as well. That action not only eliminates any future life line he may need but it also lowers his credit score. And they did it in such a sneaky fashion. Bank of America cuts the credit limit to just dollars above the new balance. The new billing cycle comes and boom - $39 late fee and a $39 over the limit fee.
Corruption and greed within the banking system must be stopped!
Want that coveted fixed rate in the 4’s? Oh yeah – it’s still here, never really went away. But toss in any cash out pricing adjustments and loan to value adjustments and mix in a subpar by today’s lending standard credit score and you may find a refinance is counterproductive. Not many months ago a 580 credit score would qualify for a 100% stated income programs. Now the pricing hits start at – get this – scores under 740.
By the way, what's it like to suck on a hose connected to a toilet? How many more billions can we give and let this mess continue. Talk about 1 step forward and three steps backward.
Wait a minute; didn’t we all hear President Obama tell us loans were going to be plentiful? Fannie and Freddie, you know the guys the government had to take over and whose stocks are trading in the 30 cent range are stating that tighter credit standards are leading to better performing loans. No damn kidding! Loans today are underwritten to such tight standards every deal is odds on favorites to perform and not default.
The way I see it, Obama, the Fed and whoever else has a say in this mess are sending the message to refinance and buy houses to stimulate the economy. But they must be living with blinders on as every new guideline change makes it that much more difficult to qualify for a loan. Timing is everything if you are contemplating refinancing – especially if cash out is on your agenda.
Look at the program change Countrywide is rolling out. Typically others will follow. This will take refinancing options away from a big majority of consumers who are currently eligible but have yet to jump on the bandwagon.....
Effective 8:00 pm (PT), Thursday, March 5, 2009, the Conforming, Non-Conforming and Soft Market guidelines for LTVs > 80% have changed based on restrictions imposed by the Mortgage Insurance (MI) companies.
Stable Market Changes: Conforming Loans:
Maximum LTV lowered from 97% to 90%
LTVs > 80%:
Minimum Credit Score: Increased from 620 to 700
Max DTI: Maximum DTI of 41%, regardless of AUS decision
Tradelines: Minimum 3 tradelines required
Payment History: Minimum payment history 0 x 30 x 12 required
Reserves: Minimum 2 months reserves required, regardless of AUS decision
Pay off of Subordinate Liens: All payoffs, including purchase-money seconds, will now be considered cash-out and will not be allowed for LTVs > 80%
Second Home: Maximum LTV lowered from 90% to 80%
Cash-Out: Maximum LTV lowered from 85% to 80%
Non-conforming Loans:
Maximum LTV lowered from 90% to 80%
Conforming Soft Market Changes:
LTVs > 80%:
Minimum Credit Score: Increased from 680 to 720
Condos: Maximum LTV lowered from 95% to 85%
Interest-Only: Maximum LTV lowered from 90% to 80%
Impact to Pipeline The following pipeline protection rules apply:
Loans currently in the pipeline are eligible under the "previous" guidelines only if credit approved in the Wholesale Loan Center and locked by 8:00 p.m. (PT) Monday, March 9, 2009.
Only loans underwritten in the center with a communicated credit disposition of Approved or Approved with Conditions are eligible for pipeline protection.
Loans in the pipeline must fund on or before Monday, March 23, 2009.
Loans NOT able to lock and fund by the dates above must be recommitted to an allowable program such as FHA, VA or Rural Housing.
Loans requiring Manual MI per existing guidelines must have a valid MI Certification in the loan file prior to closing. Due to MI volatility, it is highly suggested that loans requiring Manual MI per existing guidelines obtain the manual MI immediately.
Loans eligible for CMI per existing guidelines may continue to utilize CMI but must meet above approved, lock and fund by dates.
Lock extensions are not allowed.
Re-locks will be subject to current guidelines.
Reminder: Loan submissions received after 8:00 pm (PT), Thursday, March 5, 2009, that fall outside of these new guidelines that receive an e-Approve "Accept" decision through CWBC will not be honored.
If you have any questions about these changes, please call your Countrywide account executive.
Below is a link to a post that after reading is downright frightening. It is a must read not just for all AR members but for everyone. Are you aware of what is happening in the world at this moment?
I have been an Active Rain member for a long time and many of you people even know me.
Do not skip over this link. You do not want to miss this information, regardless if you agree, it is a thought provoking and eye opening view on what is going on in the world right now! Below is a synopsis of what this message is all about. I personally know the author and the majority of the time he is dead on with his predictions. enjoy.............. please bring any comments back to this post as well.
I have just posted an article that is long, especially by blog standards, but important. I think we are about to see the global economic crisis morph into a global social/cultural/political crisis.This is not so much about my opinion but an objective analysis – in virtually every section of the world there are protests that are often growing into riots. The protests, regardless of the nation where they occur, share a single common denominator: it is the middle/working class protesting against governments they see as corrupt and an upper class they see as having exploited them – both are blamed for the economic situation. In this post, I assemble an iteration of events, along with pictures and videos that establish a clear pattern. The mainstream media, especially in the US, have missed this story almost entirely. But I do not think they will miss it for long – it’s becoming too loud and the protests that have been happening regularly elsewhere are starting in the US. There is more to come, as I also report in this post: a multi-city “March on Wall Street” scheduled for early April. London police are prepared for “a summer of rage.” Putin has warned Russians that he will react strongly if people use the economy as a reason to stage a “people’s revolution.” It’s chronicled country-by-country in my blog, from Latvia to China to Guadeloupe – it’s remarkable.
If my analysis is correct, I think the world is about to face a much bigger challenge than just an economic meltdown. I have allowed the facts to speak for themselves. If this is news to you and you think that it should be news to others, please forward the link to others, or post it on line, recommend it on facebook, link it on twitter, etc. Are we in denial about just how bad things are? See for yourself.
President Obama went on TV the other day and told Americans to jump back in the stock market. It seems as if he is on TV just about every day lately. And like clockwork when Obama tells the country things will be ok the stock market gains as if to jump with joy. Well guess what happened this time. The chairman of the Federal Reserve went on TV that same afternoon and stated, “Without a reasonable degree of financial stability, a sustainable recovery will not occur,” Bernanke further commented, “Although progress has been made on the financial front since last fall, more needs to be done.” He also added policy makers would have “preferred to avoid” what is likely to be the largest ratio of federal debt compared with gross domestic product since the end of World War II, and he urged lawmakers not to lose sight of fiscal discipline.
After multiple bailouts to AIG, Citi, Bank of America and others, I ask you in all seriousness – Ya think it’s gonna work? Even kids see what is going on and are asking why? Enough said……………
High Quality Advice - seek it now….
Leave the lowest rate to Lending Tree. In today’s mortgage market, you better know what you are doing. Will a program you qualify for now, a program that puts you in a better financial position, a program that makes sense even be available next week? Talk with an expert who fully understands today’s mortgage lending environment. Have your credit report reviewed once a year. Understand your options. And never forget – Cash is King! If you have to, hide some under your mattress.
Our sincere prayers and thoughts….
As a 15+ year mortgage vet, I have seen a few up and downs. But this time, the percentage of mortgage professionals that have left the business is staggering. Many hung on as long as they could, some too long. Many had great credit and families to support and are now in dire financial straits. Some of these people were my friends for the past 15+ years. As I have told colleagues over and over the past few months, we are not competitors any more - we are all in this together. We should be holding hands. Unfortunately, too many were victims of the industry. We are thinking of you guys and wishing you the best.
I have a question for everyone out there. This question is not just directed at consumers who own a house and are upside down, or people who are overextended on credit because that was what they had to do to survive, or anyone who's job has been terminated. Yeah - they need help. We all need help.
But this question is also directed at the small businees owners who supposedly are the backbone of what America is all about. --- 4.5% interest rates, tax credits and everything else you poiliticians are squawking about are just fine.... but what happened to the money for small business? i am telling business owners in my community every day, owners i hvae respected for years, i am sorry - i cannot approve this loan for you. These business owners need a loan to stay alive because the banks have shut down their lines of credit.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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