MetLife finally announced it's Jumbo loan product this week. Here are some of the details:
-Loan amounts up to $2,000,000
-30 yr & 15 yr Fixed with Full Amortization Payments
-10/1, 7/1, and 5/1 ARM with Full Amort or Interest Only payments
-No prepayment penalties
-Pricing runs in the mid-6's with a point for a 5/1 ARM to mid 7's with a point for 30yr fixed
-No pre-pay fees
The program requires a pretty big down payment for buyers in the Puget Sound area (35% down), but this is in line with most lenders in this segment. Here are two HUGE advantages to MetLife for Jumbo loans:
1) Our in-house product is totally under our own, local control-- This means that Jumbo loans will get the same local Seattle processing, underwriting, and document preparation that allows MetLife CLOSE LOANS QUICKLY! We're not likely to second guess our appraiser's work, or fumble around with conditions and more conditions. My ex-Wamu pals who are now at Wells Fargo are complaining that it's impossible to get a loan through there because multiple underwriters scan every file looking for flaws to deny the loan. Plus, they don't have decent Jumbo rates to begin with!
2) We can broker-out if need be-- There are a few lenders with rate structures better than the MetLife loan, and there are a few lenders with a higher LTV limit. WE CAN BROKER TO THOSE LENDERS! If a borrower has plenty of time and tolerance for slow processing, and understand that some of the low-rate or high LTV lenders have lots of other quirks, NO PROBLEM, we'll broker to those lenders.
Now, if we can "form a bottom" (I love that phrase; Michelangelo chiseling David's cheeks comes to mind) to this housing market! If jumbo buyers can get into action, we've got the loan products for them.
I predict MetLife is going to be "kind of a big thing" in the jumbo financing world, and in the mortgage industry in general. We've got all the tools to be successful: products, service, a recognizable name, and good people. All we need now are clients ready to buy or refinance!
See the news lately? It's ugly! Wamu is for sale. AIG is in trouble. Fannie and Freddie are under government control.
I'd actually like to point to some things that are going RIGHT in the current mortgage environment.
Conforming Loans are going RIGHT In the Seattle area pretty much any loan at or under $567,500 will run through on rails. Fannie Mae and Freddie Mac loan rates have improved some since the government takeover, and my company and put a conforming loan together in minutes. So rates are good, service is hot, let's do some business!
MetLife Merger went RIGHT I was an employee of First Horizon in August, but the name on the door changed to MetLife on September 1, 2008. Already, I have the sense of working for a more established, more stable entity with a solid financial footing. MetLife took on the whole First Horizon organization. It wasn't really a merger, because MetLife had no infrastructure with which to merge. MetLife took on the people, the management, the systems, and most importantly, the ideals of First Horizon. One the ideals I hold dear is LOCAL PROCESSING, UNDERWRITING, and service. I can eat lunch with my processor. I see my underwriter face-to-face often. It makes a big difference to have decisions and actions taking place right here. The loan officer GETS great service so the loan officer can DELIVER great service!
In-House Jumbo Product is On-The-Way MetLife should have industry beating programs and products available shortly. Philosophically, home loans are a potentially perfect place to put MetLife's capital to work. I'll be thrilled when MetLife announces its suite of portfolio loan products.
Back in my Wamu days (a tad over a year ago), the playing field for mortgages was pretty level. Washington Mutual had programs for almost every situation, and Wamu rates were about the same as the rates offered by Wells Fargo, Chase, First Horizon, and most loan brokers. I was happy to offer the best value for my clients by mixing a competitive rate with great service.
Once in a while a customer would call and say, "Bob, another lender quoted me a rate much lower than yours."
My usual response back then was, "Well, check it out if you'd like, but all lenders offer roughly the same pricing because we all sell to the same secondary market buyers. I'll bet the other lender just didn't explain their loan fee or closing costs." Usually, the customer would call back after getting the whole story and they'd agree - all lenders in the past offered very similar rates and very similar products.
Not any more.
A funny thing happened along the way to credit crisis - it's every lenderfor itself. Most lenders are severely constrained by an essentially empty vault; if the lender can't sell the loan to Fannie Mae or Freddie Mac, many simply don't have the extra capital to offer a "portfolio" loan at a competitive rate.
There are lenders that play the game differently. Some banks make up their own rules, lend their own money, and offer rates that may slaughter the competition.
Guess what? I keep an "omniscient eye" on these lenders, and can find the perfect match for you!
Here's an example. As I write this, I can broker a $750,000 purchase loan to Wells Fargo on either a 30 year fixed or a 5/1 ARM, or I can source the loan through a portfolio lender with a healthy appetite for jumbo loans. Look at the difference:
First Horizon brokerage source - 5/1 ARM: 5.375%, ZERO loan fee
You read correctly! A Wells Fargo jumbo loan will be in the high 7's or 8's with high loan fees, and our lender may give the same buyer a 5.375% rate with no fee! Rates are subject to change without notice, and the example above is neither an offer nor a loan approval.
What's the catch? The requirements for this low-rate example are tight. Full income documentation is required along with a large down payment, high cash reserves, a 700 point or higher Fico score, and other restrictions. In short, it's tough to qualify, but if you do qualify, the savings may add up to hundreds of thousands of dollars!
Don't assume one lender has all the answers! In the past, a borrower could reasonably rely on one big-bank loan officer for almost any home loan need, and could trust him or her to offer a competitive rate. Now, it's vital to get a second opinion or find a lender with multiple lending resources. I'm happy to be the latter, and I'll be happy if you shop around, too. Because if there is an even better source out there, I want to know about it!
The current mortgage world is truly a stormy sea. Rates rise and fall in nauseating waves. Loan programs crash and splinter like wayward boats crushed against rocks. Promising policy announcements turn out to be like false sightings of land after queasy months in the open ocean. As a home buyer, a potential refinancer, or as a realtor helping a seasick shopper, who can help you find a safe harbor?
I can!
Why? Because as rough and as shark-ridden the home loan waters may become, I have the resources to guide you safely to a great loan product. First Horizon has given me two big advantages: 1) Great rates and great service on the loans we do well, and 2) Broker-out ability to find the right lender with the lowest rate for out-of-the-box transactions.
Here are some observations from my "crow's nest" at First Horizon:
-Conforming Fixed Rates, while violently unpredictable are really quite good right now! First Horizon's in-house safe haven takes the form of fixed rate loans under $417,000. Our rates are great, our service is superior, and in this part of the mortgage world our local processing and closing gives us a great edge over our competitors.
-LOCK YOUR RATE!This is the advice I'd give to anyone. If you're buying or refinancing and a see a rate that works, don't even try to second guess this volatile rate environment.
-Rate Watcher Tool is my way to keep an eye on rates for you. Let's analyze your situation and I'll use an Excel spreadsheet to keep track of daily rate movements. When (if) we get to the rate you need, I'll contact you, or better yet, we'll make a pre-determined plan to take action. Call for details.
-5/1 and 7/1 ARMs have temporarily disappeared like ships in the fog. For reasons beyond my comprehension, the secondary market recently collapsed around "intermediate" ARM loans. My research shows that almost all major lenders recently charged a higher rate for a 5/1 ARM than they charged for a 30-year fixed, effectively eliminating the intermediate ARM as a viable program. But stay tuned, these ships could re-emerge at any time!
-Jumbo Rates are high, qualifying guidelines are tight, but several lenders offer unique and very competitive solutions for the customer needing a loan over $417,000. Again, things may change by the time you read this article. Call for the latest news.
-Rising "Conforming" Limit thus far appears to be mostly a false hope. We've been waiting eagerly for Fannie Mae to raise the bar for "Conforming" loans to $567,500 in King County. Instead, they've created an intermediate tier of loans in King County from $417,000 to $567,500 and it appears that these loans will be priced significantly higher than loans under $417,000. If you fit in this category, we'll find the lender offering the best terms for you.
-Fed Action to lower short term rates almost always causes fixed mortgage rates to RISE! It seems crazy, but long-term mortgage rates rejoice in bad news, the type of stuff that causes inflation to go lower. When the Fed lowers short-term rates, the stock market usually cheers, but bond investors fear inflation and often bid the mortgage rates UP rather than down.
If you find yourself sailing in the waters of a new home purchase, or are lost trying to navigate your refinance, don your survival suit and give me a call. I'm glad to throw you a life ring, and will put First Horizon's in-house and broker-out resources to work for you!
Robert Bergeron
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