Kevin's Blog

NH Refinancing in the Age of Bailouts

Bedrock Mortgage — Wed, 15 Apr 2009 03:10:38 -0500

NH home owners should take note,

this past week we marked the official start of the Making Home Affordable Refinance Program. We expect that this may help thousands of NH homeowners! The Making Home Affordable program turns a blind eye with respect to falling home values, approving mortgage applications based on borrower payment history and benefit to the NH homeowner. NH mortgage applicants have to meet a few basic qualifications to take advantage of the Making Home Affordable refinance program.

First, your existing NH mortgage must be with either Freddie Mac (Freddie) or Fannie Mae (Fannie). Fortunately, both of these agencies provide a way to check online. It's best to start with Fannie since she's the bigger sister (has more of our NH loans) and because Freddie's online tool requires your ss # (It's okay to enter, I've checked it out and site is secure!).

Next, you must have a perfect mortgage payment history over the last 12 months. Even one payment made 30 days late disqualifies you from participating in the Making Home Affordable program. It is okay, however, if you were 20 days late on your payment and incurred late fees.

And lastly, the balance on your mortgage cannot exceed your home's value by more than 5%. The math formula is (Mortgage Balance) / (Home Value). If the quotient is greater than 1.05 then your loan-to-value exceeds 105% and you are not eligible for Making Home Affordable.

Now, assuming you meet the criteria, there are some noteworthy details of the Making Home Affordable program:

If your current NH mortgage doesn't have mortgage insurance, you won't have to pay it after refinancing -- even if your new loan-to-value is greater than 80%. If you do have mortgage insurance presenlty on your loan, there's a plan for that, too ... we're just not sure yet what that plan is! That part of the plan is still in the works but we expect more details shortly. For the most current info on this program head over to our NH mortgage blog and subscribe to our newsletter!
All NH mortgage refinances under this program (and pretty much every other program available) require income verification -- even if the original mortgage was a stated income loan.
Second mortgages cannot be paid off through this program. They have to be subordinated. That can be some heavy lifting so make sure that, if you've come this far, you're working with someone who knows what they're doing!

Fannie and Freddie each of other guidelines that need to be followed as well. (Links to their sites can be found at www.NHLoanInfo.com)And, of course, their guidelines are different from each other! Like most government programs, their guidleines are created by the pound and all of us are learning as we go.

My recommendation would be to give their guidelines a brief review before talking with a local NH mortgage lender (like me!) so that you have a general understanding. If you have a NH mortgage and you have specific questions about the Making Home Affordable program and your own eligibility, first check to see if Fannie or Freddie is backing your loan. If they are, pick up the phone and call me to plan the next steps. While, the program doesn't end until June 10, 2010 , low NH mortgage rates probably won't last that long.

NH House Ready to Be A First Home

Bedrock Mortgage — Mon, 19 Jan 2009 17:06:26 -0600

Found this home and did a bit of calculating on the payment side and, sure enogh, home values are definately in the affordable range again. With "right pricing" of homes, interest rates at historic lows and everybody and their brother Senator lined up to make the housing market right again, I think we may be in for a bit of competition this Spring. Get a jump and take a look at this property, our latest "Featured Home".

If you're a home buyer interested in specific, current and plain English help in reviewing financing options on this or other affordable homes, let me know. I'd love to help.

If you're selling your home or represent a Seller and would like to be a featured home on our sites, please contact Judy@BestNHLoan.com and she'll take it from there!

NH Real Estate Values Discussed

Bedrock Mortgage — Wed, 31 Dec 2008 09:49:39 -0600

I have posted a great interview I recorded with Brian Larrabee of Estate of Mind, Inc. We discussed NH home vales and NH mortgage financing but the points raised are applicable in most parts of the country.

To hear the interview head over to our NH real estate and mortgage blog.

If you would like to hear more of our interviews, or would like to be featurd in our 2009 interview series, just drop me a line through our NH mortgage site and Happy New Year to one and all!

NH Home Values: What It Means When More Than Half Of The Delinquent Homeowners Go Delinquent Again

Bedrock Mortgage — Tue, 23 Dec 2008 11:01:53 -0600

Earlier this year and under pressure from the government, mortgage lenders made more than 200,000 loan modifications to delinquent homeowners.

The modifications came in one of three forms, or a combination:

Interest rate reduction
Loan term extension
Principal forgiveness

But despite the modifications, as of October 1, more than half of the homeowners that received assistance were already two months behind on their modified monthly payments.

This late-pay statistic was a focal point on Capitol Hill yesterday as the government admitted delinquencies "were larger than [they] thought they'd be". Loan modifications are proving inadequate at slowing foreclosures and yesterday's session opened the door to more effective foreclosure prevention measures.

However, of all of the statistics published, there was one of particular interest.

Based on its loan modifications to-date, the FDIC has found that modified borrowers default far less when new monthly payments are less than 38 percent of monthly household income. This is important because Freddie Mac guidelines for ordinary mortgage applicants currently cap that rate at 45 percent.

If the 38 percent figure holds up long-term, it may lead mortgage lenders to permenantly reduce maximum debt-to-income allowances. Already, mortgage insurers have taken this step so it's not out of the question for lenders. Tighter guidelines mean fewer mortgage approvals.

If you're unsure of whether now is a good time to buy a home, consider that mortgage rates are low, mortgage guidelines are tightening, and foreclosure prevention efforts reduce the supply of available homes.

Prices may not have bottomed, but the market is giving everyone a lot of reasons to consider buying now.

(Image courtesy: The Wall Street Journal)

Visit my site to find out all the current info on NH mortgage rates and programs and for post attributions visit here.

NH Mortgage Markets In Review : December 22, 2008

Bedrock Mortgage — Mon, 22 Dec 2008 11:28:37 -0600

Mortgage markets improved last week for the second week in row. After the Federal Reserve said it would use "all available tools" to stimulate the economy, traders responded by driving mortgage rates to 50-year lows.

It didn't last long, however.

After bottoming out early-Wednesday morning, mortgage rates trended higher all the way into Friday's closing. It was the third time in 2008 that a sharp mortgage rate drop lasted less than one full day of trading.

Many Americans took advantage of the historically-low mortgage rates, locking in new home loans below 5 percent. And, in general, these homeowners shared 4 characteristics:

Credit scores of at least 720
At least 20 percent equity
Relatively low debt versus household income
Ongoing relationship with a loan officer

Now, the first 3 bullet points are easy-to-understand but it's the fourth one that really mattered -- it's the trait that got people "real-time access" to low rates the moment they published.

After all, it wasn't until Thursday morning that the press ran its stories about "4.5 percent mortgage rates" and, by that time, mortgage rates had already retreated -- by as much as a full percentage point in some cases. Thursday morning's news was a half-day too late.

Still, mortgage rates do remain low.

This week is trade-shortened and thick with data. In addition to two pieces of housing news and a consumer sentiment survey, we'll get a look at the Federal Reserve's preferred Cost of Living index. All four data points are expected to validate the recession, so don't expect mortgage rates to move much.

Instead, the biggest threat to mortgage rates this week is momentum. If mortgage rates tick higher Monday and Tuesday, expect that to continue Wednesday into the 2:00 P.M. market close and then to resume again Friday.

Markets are closed Thursday for the federal holiday.

(Image courtesy: The Wall Street Journal Online)

Visit my site to find our more about NH mortgage rates and programs and for post attributions visit here.

You'll Get The Best Mortgage Rates If You Watch Certain Patterns

Bedrock Mortgage — Thu, 18 Dec 2008 11:33:14 -0600

When it comes to mortgage rates, sometimes it's better to "act now".

On Tuesday, mortgage rates fell to their lowest levels in 4 years. It happened because the Fed said it would "employ all available tools" to resuscitate the economy.

On Wednesday, however, the markets had second thoughts.

After considering the long-term implications of a near-zero percent Fed Funds Rate and the cumulative cost of government intervention to-date, suddenly, traders grew fearful that U.S. government action would devalue the dollar and lead to inflation -- the enemy of low mortgage rates.

As a result, mortgage markets unwound.

At first, the exit was a slow and orderly. Then, without warning, investors began a full-on sprint for the exits. By the end of the day, mortgage rates were higher by as much as a half-percent. Nearly all of Tuesday's big gains were erased.

In hindsight, the reversal Wednesday wasn't all that surprising -- it's the same trading pattern we've seen twice already this year. The first time was after the Fed's "surprise" rate cut in January, and the second time was after the federal takeover of Fannie Mae and Freddie Mac in September.

Sharp rate drops tend to be followed by immediate bounce-backs, it seems.

But, unfortunately, not every would-be refinancing homeowner saw the increase coming. While those that locked at the first opportunity to save money are sitting pretty today, the rest that "waited for rates to go lower" are likely kicking themselves about it.

Going forward, mortgage rates may fall, or they may not. We can't possibly know. But we've now seen the pattern 3 times now -- when mortgage rates plunge like they did Tuesday, they rarely stay that low for long. When you find a rate you like, get in and get locked as soon as possible.

Sleeping on it for even one night may end up costing you dearly.

For more information on this post or mortgage financing in general, check us out at NH Mortgage Experts

(Image courtesy: The New York Times)

Why Home Values May Rise When Home Building Falls To A 17-Year Low

Bedrock Mortgage — Wed, 18 Jun 2008 12:55:56 -0500

A "Housing Start" is a new home on which construction has commenced and in May, Housing Starts fell to a 17-year low nationally.

At first glance, this may seem like a negative for the already-battered U.S. housing market.

It's not.

Falling Housing Starts reflects the broader real estate market and shows us that builders are working hard to get their already-built homes "off the books".

It would be foolish for them to build new homes now -- each new unit makes selling the existing ones tougher.

So, when we look at the figure objectively, we can see that Housing Starts reaching a 17-year low is actually good news -- real estate prices are based on Supply and Demand, after all.

With Housing Starts touching new lows, we can infer that there will be fewer new homes coming on the market in the coming months and that should help support higher home values nationwide for everyone.

(Image courtesy: The Wall Street Journal Online)

To read more of my blog entries and find out more about the financial world around us, click here!

Looking Back And Looking Ahead : June 9, 2008

Bedrock Mortgage — Mon, 09 Jun 2008 11:29:54 -0500

There was no rest for the mortgage-rate weary last week.

As mortgage bonds sold off early in the week, sharp rate hikes followed. A steady stream of better-than-expected economic reports had re-ignited inflation fears, drawing money from the bond market.

On Friday, however, the money flow reversed on a triple threat to the U.S. economy:

The Unemployment Rate took its biggest one-month jump in 22 years
Oil made its biggest one-day gain
The U.S. dollar lost a lot of value

By themselves, each of these events normally would be bad for mortgage rates but the Friday combination of all three led to a huge stock sell-off and renewed demand for bonds -- including the mortgage-backed kind.

Despite Friday's reversal, mortgage rates were higher on the week, overall.

This week, there won't be much economic data this week but there will be six Federal Reserve members making speeches to the public.

The most anticipated of the set is Fed Chairman Ben Bernanke's address Monday evening on the topic of "inflation". Markets will be closed when Bernanke speaks so expect a delayed market reaction Tuesday morning.

Throughout the week, markets should continue their long-standing battle between the fears of inflation and the fear of recession. It's the same back-and-forth that we've seen since late-2007.

It's also the primary reason why mortgage rates rarely stay still anymore.

(Image courtesy: The Wall Street Journal Online)

To read more of my blog entries and find out more about the financial world around us, click here!

What Happens When Bernanke Says "Inflation" 55 Times In 5 Pages Of Text

Bedrock Mortgage — Thu, 05 Jun 2008 09:52:16 -0500

Mortgage rates are a big deal when you're buying a home.

With even the slighest uptick in rates, 30 years of mortgage payments can get substantially more expensive and one of the most substantial threats to mortgage rates is an economic event called inflation.

Inflation's influence on mortgage rates is so large that markets can get jarred on just the mention of it and that's exactly what happened Wednesday when Fed Chairman Ben Bernanke uttered "inflation" 55 times in a 5-page speech at Harvard.

The speech started at 2:45 P.M. ET and by 2:53 P.M., the damage was done.

Market players interpreted Bernanke's remarks to mean that inflation may be worse that previously expected and mortgage rates moved up by 0.125 percent, or $8 per $100,000 borrowed.

This equates to $2,880 in extra payments over 30 years.

If you're actively shopping for a home loan and rapid rate movements make you nervous, consider locking in your mortgage rate today; rates have been especially jumpy all year and don't look to smooth out anytime soon.

(Image courtesy: ABC News)

To read more of my blog entries and find out more about the financial world around us, click here!

Agents Share with Your Buying Clients: Why It Will Be Easier To Get A Mortgage Approval Today Than Monday

Bedrock Mortgage — Thu, 29 May 2008 12:10:43 -0500

If you are a potential home buyer or an agent working with buyers, please take note:

Mortgage financier Fannie Mae is toughening its mortgage application decision-making process effective Monday, June 2, 2008.

The new guidelines will force many Americans to face higher mortgage rates, higher loan fees, or to be shut out from "prime" mortgage rates altogether.

The new "mortgage rules" include the following changes:

Higher income levels required for basic approvals
Interest only loans are now considered high-risk
Condos are now considered high-risk
60-day mortgage lates within 6 months are a major red flag

Not all of the changes are for the worse, though.

In the new guidelines, self-employed borrowers will no longer be viewed as more risky than a W-2 employee. This will help small business owners and commission salespeople get more mortgage approvals than in the past.

Fannie Mae agreed to honor all mortgage approvals granted prior to its changes, so if you've been putting off that pre-approval, consider talking to your loan officer before the weekend starts.

Your mortgage approval will be much more lenient today than if you wait until Monday.

To read more of my blog entries and find out more about the financial world around us, click here!

18 of 20 Real Estate Markets Show Signs Of Improvement

Bedrock Mortgage — Wed, 28 May 2008 09:31:11 -0500

The monthly S&P/Case-Shiller Housing Price Index is a popular and often-quoted measurement of the housing market's health. The chart above is sourced from its report published yesterday.

In 18 of the 20 largest metropolitan areas, home values declined at a slower pace than in the previously measured month. The report also showed that national home prices are down 14.4 percent from March 2007.

Unfortunately, it's the more sensation "14.4" figure that newspapers chose to report this morning. If you never went further than the headline, you'd miss a key piece of analysis.

Comparing today's market to last year's market is a lot less valuable than comparing it to last month's market. That's a better way to analyze the market's health.

If we look beyond the headline and examine the data behind it, we see that housing may still be sagging in some areas, but it's not sagging nearly as much as it used to. And, of course, next month could reverse this. The bottom line is that if you're considering a home purchase you need to ask yourself "How long will I be living here?" before you make the move.

(Image courtesy: Standard & Poor's)

To read more of my blog entries and find out more about the financial world around us, click here!

Looking Back And Looking Ahead : May 27, 2008

Bedrock Mortgage — Tue, 27 May 2008 14:25:08 -0500

The market optimism that had pushed mortgage rates lower since late-March reversed last week on ever-rising oil prices and a bleak outlook from the Federal Reserve.

When gas prices reached $3.93 Friday, it re-ignited inflation concerns and inflation, you'll remember, is the enemy of mortgage rates.

As expected, mortgage rates spiked into Friday's market close.

Markets were closed for Memorial Day but re-open this morning with traders feeling apprehensive about mortgage market investments. There are many reasons to park money elsewhere, after all.

The U.S. dollar is trolling near all-time lows against the Euro
Oil markets are returning incredibly high rates of return
Big banks are still writing off large mortgage losses

All three of these reasons reduce demand for mortgage bonds and -- because mortgage rates move in the opposite direction of mortgage bond prices -- mortgage rates rise.

This week, a few inflation-related data points will cross the wires including the Fed's preferred inflation gauge -- PCE.

PCE stands for Personal Consumption Expenditures and it measures the cost of living for ordinary people. It's the Fed's preferred measurement because PCE accounts for Americans buying more chicken when meat gets expensive, or buying more fruits when vegetables get expensive, et cetera.

PCE is different from the Consumer Price Index because CPI is a "fixed" basket of products.

If PCE is running high, expect the exodus from mortgage bonds to continue and rates to run higher. If PCE is flat or lower, mortgage rates should fall.

(Image courtesy: Gasbuddy.com)

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How Spiking Oil Prices Have Mortgage Rates In Tow

Bedrock Mortgage — Fri, 23 May 2008 12:15:58 -0500

High oil prices are derailing the mortgage market this week, taking an almost-vertical path higher.

Since mid-February, prices are up by 50 percent.

Rising oil prices can be a threat the U.S. economy because with every extra dollar that Americans pay to energy companies, there is less money available for every other company that makes up our national economy.

Strangely, it comes at a time when the "other" companies need it the most -- their costs of operating are rising, too.

So, businesses are faced with a tough choice and both option prove poor for mortgage rates.

Keep prices level and suffer smaller margins (and profits)
Pass higher costs onto consumers in the form of higher prices

If profits suffer, job cuts and a weak corporate spending can undermine an economic recovery. If higher costs are passed on, it leads to inflation and that devalues the U.S. dollar and mortgage bonds.

This is why mortgage rates have spiked along with oil prices this week. And, when oil prices level off a bit, we can expect that mortgage rates will, too.

Crude oil is up 1.8 percent this morning.

(Image courtesy: Wall Street Journal Online)

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You're Not Immune -- No Matter What Your Credit Profile Looks Like

Bedrock Mortgage — Wed, 21 May 2008 15:47:46 -0500

Four times annually, the Federal Reserve surveys 84 different banks about general banking conditions.

One of the survey questions asks about current mortgage lending standards and whether they are loosening or tightening.

The chart at right is from the April 2008 survey and it illustrates what we already know: It's getting tougher and tougher to get approved for a home loan.

Some of the areas in which mortgage guidelines are tightening are well-known:

More thorough income documentation
Higher credit score requirements
More "money in the bank" post-closing

Some areas are less well-known:

More scrutiny of prior delinquencies
Strict review of appraised values

Overall, getting a mortgage approval from a bank is more difficult than in months past and the tightening trend is expected to continue throughout the rest of the credit cycle.

No "class" of buyers is immune, either -- not even the "prime" ones.

Home prices may fall going forward but stricter mortgage guidelines means that fewer home buyers will be able to take advantage. If you're unsure about your credit profile, check with your loan officer to see how additional restrictions could impact your ability to purchase (and finance!) a home.

(Image courtesy: Federal Reserve)

To read more of my blog entries and find out more about the financial world around us, click here!

Did You Ask: "Has There Been A Mortgage Rate Reprice In The Last Hour?"

Bedrock Mortgage — Tue, 20 May 2008 11:30:32 -0500

Yesterday, several mortgage lenders issued three separate "rate sheets" in response to the changing mortgage market.

It was the fourth time in the last 6 trading days that mortgage lenders issued multiple rate sheets in a day, and continued the trend that started in mid-January.

The yo-yo nature of mortgage rates underscores the importance of making mortgage rate comparisons within a limited time frame.

Multiple quotes should be gathered with an hour of each other and, even then, it's prudent to ask your lender: "Has there been a mortgage rate reprice in the last hour?"

The current market volatility is in contrast to the "normal" environment of one-rate-sheet-per-day to which mortgage rate shoppers have been accustomed. But with the changing economy, we all have to adapt.

Mortgage rate quotes from this morning won't necessarily be valid this afternoon so if you're in the market for a home loan, be sure to do your shopping in a limited timeframe and don't forget to ask about the reprice.

(Image courtesy: City of Peterborough)

To read more of my blog entries and find out more about the financial world around us, click here!

Looking Back And Looking Ahead : May 19, 2008

Bedrock Mortgage — Mon, 19 May 2008 11:44:16 -0500

Optimism ruled the markets last week -- optimism about employment, optimism about housing, and optimism about inflation.

Mortgage rates edged lower overall.

Despite the positive sentiment from Wall Street, consumer confidence in the economy reached a 28-year low.

This is a normal divergence because investors live in the "future" of markets while Americans live in the "right now" of life where food prices are high, gas prices are still rising, and job prospects are somewhat weak.

Consumer confidence surveys have to be taken at face value, though. Yes, Americans are nervous about the economy and their household budgets, but that rarely deters them from spending.

In April, for example, Retail Sales (excluded autos) were up 0.5 percent -- more than double analyst expectations. And this was before economic stimulus checks showed up in tax-filers' mailboxes.

Perhaps this is one more reason why markets were so pleased last week.

This week, there isn't much economic information to sway markets. On Tuesday, we'll see the Producer Price Index which is like a Cost of Living for Business measurement and on Friday we'll see the Existing Home Sales report.

Strength in either will be good for economy and should benefit both stocks and bonds, and should lower mortgage rates. Weakness will have the opposite impact.

(Image courtesy: The Wall Street Journal Online)

To read more of my blog entries and find out more about the financial world around us, click here!

Smart Money Magazine Says Renters Have Lame Excuses

Bedrock Mortgage — Fri, 16 May 2008 14:32:21 -0500

It's not often that a mainstream media publication taunts renters into buying homes, but that's exactly what Smart Money does in its latest issue.

The Smart Money Web site "lead-in" reads 5 (Lame) Excuses for Not Buying a Home. That's a forceful title!

It's unfortunate that renters could feel antagonized by the author's tone because the article raises very good counter-points to the more popular reasons why renters avoid homeownership.

Owning a home is a serious responsibility and does require commitment. However, a renter should not feel bullied or hurried into buying because for as much as personal economics are at play, personal emotions are at play, too. Both deserve respect.

So, renters: Put your blinders on and give the Smart Money article a read. There's good advice in there once you get past the author's bias.

To read more of my blog entries and find out more about the financial world around us, click here!

The Counties In Which Home Prices Are Rising

Bedrock Mortgage — Thu, 15 May 2008 09:15:08 -0500

When real estate news is reported on television or in the papers, it's usually told as a national story. Unfortunately, stories like these aren't helpful for everyday Americans because real estate is not a national market.

Real estate is local.

The graph above was used by Fed Chairman Ben Bernanke in a speech to Columbia Business School earlier this week. Using data from conforming mortgage fundings, it shows the change in home prices from year-to-year on a county level.

Any county not in red increased in value.

In other words, contrary to what reporters tell us, real estate is retaining its value just fine nationwide. Aside from a few counties and states, most areas appreciated.

Graphics like this put important real estate issues in perspective. Home values may falling precipitously in some areas, but those neighborhoods represent just a fraction of the country overall.

In most regions, home values are up.

To read more of my blog entries and find out more about the financial world around us, click here!

Looking Back And Looking Ahead : May 12, 2008

Bedrock Mortgage — Mon, 12 May 2008 11:50:36 -0500

With little economic news to influence trading and despite a late-Friday afternoon spike, mortgage rates edged lower last week.

Two weeks ago, when it lowered the Fed Funds Rate by a quarter-percent, the Federal Reserve noted two things:

The economy was stabilizing
High energy costs threatened inflation

In the days that followed, though, the U.S. dollar strengthened and crude oil prices fell.

This positive reinforcement of the Fed's outlook spurred the stock market at the expense of the bond market.

Mortgage rates rose during that period.

But, starting last Monday, the dollar started to soften and oil touched another all-time high. At $126 per barrel, crude oil is now close to double its May 12, 2007 price of $69.

High oil prices are inflationary and speak directly to the Federal Reserve's concerns: Too much inflation can derail a fragile, recovering economy.

The stock market gave up its prior gains last week and that is why we saw mortgage rates improve -- it was the unwinding of the economic optimism.

This week, optimism (or pessimism) about the economy will be swayed by a number of factors including Tuesday's Retail Sales report and Friday's Consumer Sentiment survey.

The most important data point to watch, though, will be Wednesday's Consumer Price Index report. We know we should watch it Ben Bernanke told us to watch it. Keeping inflation in check, remember, is one of the Fed's major focal points for the economy.

In addition, this week will feature 14 public speaking appearances by Federal Reserve members. Expect each speaker to speak plainly about the economy, its future and the Fed's current rate-cutting cycle.

When Fed speakers stump, markets listen closely so expect mortgage rates to be jumpy all week long.

(Image courtesy: The New York Times)

To read more of my blog entries and find out more about the financial world around us, click here!

Why Free Credit Reports Are Worth What They Cost

Bedrock Mortgage — Tue, 06 May 2008 14:17:13 -0500

The ubiquity of "free" credit reporting services like FreeCreditReport.com, TrueCredit.com, and AnnualCreditReport.com have helped breed a new generation of credit-aware Americans.

Because credit ratings have more importance to everyday life than in years past, this is a welcome development. For example:

Lenders use credit ratings to determine borrowing rates
Insurers use credit ratings to determine premiums
Employers use credit ratings to make hiring decision

Unfortunately for Americans, though, not all credit reports are created equal. And when it comes to actually applying for credit in the form of a new credit card or mortgage, the free reports are worth precisely what they cost.

This is one reason why home buyers should have their credit reviewed by a mortgage lender as soon as possible in the home buying process -- the free reports offered by the major credit bureaus may be misleading and incomplete.

Free credit reports are useful for identifying identity theft and reviewing active accounts but do very little to help a potential creditor gauge your creditworthiness.

As the chart shows us, each industry's creditors has a way they like to do business and that way is the "standard" way.

(Image courtesy: The Wall Street Journal)

To read more of my blog entries and find out more about the financial world around us, click here!

Why Mortgage Rates Aren't Falling Even Though The Economy Is Shedding Jobs

Bedrock Mortgage — Fri, 02 May 2008 10:10:24 -0500

According to the Bureau of Labor Statistics, the U.S. economy shed 20,000 jobs in April 2008. The labor force now counts at 146 million people as employed.

Normally, a loss of jobs would foretell economic weakness and would be a good thing for mortgage rate shoppers. Today, though, traders had been expecting a larger loss of 70,000 jobs.

In other words, today's jobs report looks surprisingly strong.

The stock market is now rallying on optimism that "the worst is over" for the U.S. economy and evidence supporting the Federal Reserve's remarks that its rate cuts were starting to take hold.

The stock market's gains are the bond market's losses.

Mortgage rates are up today because the cash that is fueling the stock market is coming from the sale of all types of bonds -- including mortgage bonds.

This is unwelcome news for people doing mortgage comparisons today, or buying a home this weekend.

In general, interest rates on adjustable-rate mortgages are increasing more than on fixed-rate mortgages.

(Image courtesy: Wall Street Journal Online)

To read more of my blog entries and find out more about the financial world around us, click here!

Looking Back And Looking Ahead : April 28, 2008

Bedrock Mortgage — Mon, 28 Apr 2008 10:28:56 -0500

Mortgage markets lost ground last week on inflation concerns and a general feeling that "the worst may be over" on Wall Street.

As investors moved money into the stock market, mortgage rates ticked higher for the second straight week.

The biggest story from last week was the rising cost of gasoline.

Rising energy costs combined with rising food prices are creating worries about the American consumer's ability to spur the economy forward.

That sets up the biggest story of this week -- the Federal Open Market Committee meeting.

The FOMC starts a 2-day meeting Tuesday and is widely expected to lower the Fed Funds Rate by 0.250 percent at its adjournment.

Cuts to the Fed Funds Rate are meant to promote growth in the economy by decreasing borrowing costs for businesses and consumers. For example, credit card rates are tied to the Fed Funds Rate so when the Fed Funds Rate falls, American households pay less interest and (theoretically) have more money to spend on "things".

But the FOMC meeting is not the only big news to watch for.

On Thursday, the Personal Consumption Expenditures data is released. PCE is the Federal Reserve's favorite inflation gauge because it's a smarter version of the "Cost of Living" index. If PCE rises more than expected, it's an indication of inflation and inflation tends to make mortgage rates rise.

Then, on Friday, it's the jobs report. The economy is expected to post the fourth consecutive month of negative job growth. Markets have been highly sensitive to the jobs data lately so expect wild swings in mortgage rates in its wake.

And lastly, sprinkled throughout the week, more than 100 influential members of the S&P 500 will report their earnings. If earnings and outtlooks are strong, mortgage rates should rise. If earnings are weak, mortgage rates should fall.

To read more of my blog entries and find out more about the financial world around us, click here!

New Home Sales : How The Newspaper Headlines Mislead You

Bedrock Mortgage — Fri, 25 Apr 2008 11:29:31 -0500

Newspaper headlines rarely tell the full story and today's papers provide a terrific example.

From the Baltimore Sun (and others):

New-home sales lowest since 1991
8.5% March decline exceeds forecasts; prices also tumble

As always, there's more to the story than the headline.

The Census Bureau reported a 8.5 percent decline in New Home Sales last month, but in the "fine print" of the report, the Census Bureau cites a margin of error of 16.1 percent.

By including a margin of error, the Census Bureau is acknowledging that the "headline number" is not precise and that the actual change in New Home Sales data lies somewhere between the values -24.6% and +7.6%.

Notice that the range of possible reading includes positive numbers.

This means that New Home Sales could have just as easily shown growth in March -- if only the Census Bureau had interviewed a different set of home builders.

The Census Bureau acknowledges this possibility, adding that it "does not have sufficient statistical evidence to conclude that the actual change is different from zero." The data, therefore, is worthless.

The housing market may be strong or the housing market may be weak. Most likely, it is both of these things. It all depends on your street in your neighborhood because all of real estate is local.

Either way, look deeper than the headlines. They're a good source of information, but the real analysis requires a deeper look.

Source
New Residential Sales In March 2008
Census.gov
April 24, 2008
https://www.census.gov/const/newressales.pdf

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Your Credit Score Doesn't Cost You Today, But It Could Cost You Plenty Tomorrow

Bedrock Mortgage — Thu, 06 Dec 2007 07:28:55 -0600

Credit scores are the best predictor of how a homeowner will pay on a mortgage, so it's no surprise that credit scores will play a bigger role in mortgage financing in 2008.

Actually "that date" is more clearly defined. It's March 1, 2008.

Beginning March 1, 2008, Fannie Mae and Freddie Mac will subject the bulk of their mortgage products to the interest rate adjustments when the loan-to-value exceeds 70%.

Credit scores will determine the amount of the rate adjustment.

Credit scores between 660-679: 0.750% of loan size in fees
Credit scores between 640-659: 1.250% of loan size in fees
Credit scores between 620-639: 1.750% of loan size in fees
Credit scores below 620: 2.000% of loan size in fees

For example, a person with a $250,000 mortgage rate would face a "credit-based fee" of $3,125 just because they carry a 650 credit score. It would jump to $4,375 for a 635 credit score.

Alternatively, this fee can be "financed" into the mortgage instead of paid as cash. The general rule is that for every 1.000% in fees, you can exchange it for a 0.250% increase to rate. This is just a guideline, of course -- every mortgage lender has its own pricing scheme.

Because the credit score adjustment does not go into effect until March 1, 2008, there may still be time to be proactive if you think you'll trigger the rate increase.

If you are planning to purchase a home after the first of the New Year, it would be prudent to have your credit scores checked as soon as possible. If your scores are below 680, or teetering on the edge, take ownership of your credit and start working to improve your score.

It is also important to note that this change in credit score requirements does not affect FHA or VA financing guidelines and may not affect state housing programs (it does not affect the program in New Hampshire, where I live).

A terrific source of non-biased credit scoring information is myFICO.com.

This post is reprinted from my regular blog.

Your Credit Score Doesn't Cost You Today, But In Three Months It Could Cost You Plenty

Bedrock Mortgage — Thu, 06 Dec 2007 07:26:44 -0600

Credit scores are the best predictor of how a homeowner will pay on a mortgage, so it's no surprise that credit scores will play a bigger role in mortgage financing in 2008.

Actually "that date" is more clearly defined. It's March 1, 2008.

Beginning March 1, 2008, Fannie Mae and Freddie Mac will subject the bulk of their mortgage products to the interest rate adjustments when the loan-to-value exceeds 70%.

Credit scores will determine the amount of the rate adjustment.

Credit scores between 660-679: 0.750% increase to rate
Credit scores between 640-659: 1.250% increase to rate
Credit scores between 620-639: 1.750% increase to rate
Credit scores below 620: 2.000% increase to rate

For example, a person with a 6.250% mortgage rate would see their rate increase to 7.500% just because they carry a 650 credit score. It would jump to 8.000% for a 635 credit score.

Because the credit score adjustment does not go into effect until March 1, 2008, there is plenty of time to be proactive if you think you'll trigger the rate increase.

If you are planning to purchase a home on or after March 1, 2008, it would be prudent to have your credit scores checked as soon as possible. If your scores are below 680, or teetering on the edge, take ownership of your credit and start working to improve your score.

A terrific source of non-biased credit scoring information is myFICO.com.

This post is reprinted from my regular blog.