Rates:

 30 yr conforming              6.125    

30 yr jumbo                      6.375 (to 600k)

7/1 jumbo ARM                  5.625

OR Vet                              5.250

State Bond FHA                   5.625

As you can see, we had an increase in rates for conventional loans. The bond market dropped over the last few days taking mortgage rates up. I mentioned a few weeks ago that ARM's were much lower than 30 year fixed. The big rate difference has changed. With our Fed commenting that they are more concerned with inflation rather than the economy, the Treasury and rate markets jumped. Especially at the short end - and that is where the 3 and 5 year ARM's are priced. This week's consensus is that rates will start a new range - from 6.00% to 6.50%. Of course, that consensus can change next week.

Underwriting guidelines are still being restricted but we are hoping that we have seen the end of the tightening. Fannie and Freddie recently announced their changes and the MI companies have already announced theirs (some of the effective dates aren't until next month). Hopefully this is the end for them as there are signs that things are stabilizing. The recent pending sales report from NAR showed an unexpected large jump and a foreclosure report showed that the rate of foreclosures has slowed two months in a row. This is leading many to think that the bottom, if we are not already there, is just around the corner. Some of our lenders, however, have placed new restrictions on their guidelines. One large national bank has just announced loan-to-value restrictions (max. 90%) for our Tri-County area and another national lender has cut their second mortgages down to a max of 85%. We will still see some tightening by individual lenders but most of us think that the big guys (Fannie, Freddie, et al) are finished.

This  installment on my Good Faith Estimate (GFE) theme deals with what I call "garbage fees". Personally, what I call garbage fees are all fees charged by a lender or broker that are not points. As you may recall from last week's discussion on the different terms used for points (origination, discount, mortgage broker fee), I consider points as part of the interest rate comparison. Garbage fees have many, many names. Some are very legit, others are ways to increase the bottom-line (for the lender, of course). Fees for credit reports, tax service and flood certs are legit. The total of these are usually about $100 or so and are charged by practically everyone. Appraisal fees are part of this too but those can range from $150 - $600 or more, depending on the type of transaction.  Title insurance, county taxes and recording fees, total escrow charges, property taxes and hazard insurance costs are from third parties. These charges often show up as different amounts when comparing GFE's but these are just estimates of what others will charge for their services. When comparing a GFE, these latter charges shouldn't be included in your analysis. When a GFE is completed, we lenders estimate what these other service providers will charge. Regardless of our estimates, those other providers will charge what they need for their services. Typically, lenders have nothing to do with those charges. So, to complete a comparison of a GFE, you review rate, lock term, points, and garbage fees.  When I review a GFE, I look for fees labeled as processing (almost all lenders have some form of processing fee), underwriting, document preparation (doc prep), warehouse, administration and review fees. Sometimes, you'll see other creative fees. It's very common to see a lender charge a processing fee and a doc prep or underwriting fee. For instance, a mortgage broker will normally charge a processing fee to package and process the loan. Once completed they will forward the file to a wholesale lender who will underwrite the file and disburse the funds. The wholesale lender will always charge an underwriting or document fee of their own. Seeing those two fees would be normal. Some lenders can and will charge excess fees. For example, I reviewed a GFE recently and the broker had charged .50% origination (which is fine), a processing fee of $595  an underwriting fee of $495, an Administrative fee of $295, and a document preparation fee of $495. When all totaled, it was on the high side. Although the .50% origination fee sounded good, when all of these other fees were added, the total cost of the loan made it uncompetitive. On a loan of $100,000, those fees added up to be almost 2%.

When talked with last week's update, a borrower should be able to make a complete and accurate comparison between two or more GFE's. As always, if you have questions just shoot me an email.

PLEASE FEEL FREE TO GIVE FEED BACK. I WOULD APPRECIATE IT.