4 DAYS UNTIL NEW REGULATION Z GOES INTO EFFECT: If you want to start a new loan and not be affected by the new regulations, you must have your credit pulled and your loan registered with a lender before April 1st. The new rule states that a loan officer can not be compensated by the terms of the loan – this means less options and fixed revenue for every loan regardless of the borrower situation.
RATES RISE: Right after the Japan tragedy, rates went down a lot. Since then, we have seen a rebound in the stock market and rates have worsened 7 days straight. You could get a 4.75% 10 days ago with 0 points, now you have to pay discount fees and origination fees to get that rate. 4.875% is the new par rate on 30 year fixed. Below is some informatiom from www.tbwsratealert.com that explains the situation:
More selling in the rate markets this morning; as we have noted recently interest rates are headed higher after all the safety moves triggered by Japan’s problems. The stock market took a heavy hit on panic selling over Japan but is now trading better than prior to the earthquakes and tsunami. Interest rates also higher than prior to the issues.
ARMS: I still suggest people trying to lower their payment with good existing 30 year fixed rates look at ARM loans. There are 5/1 ARMs , 7/1 ARMS and 10/1 ARMS – all with substantially lower rates than a 30 year fixed. Even if you plan on staying in your home for the long haul, you can save 15-20,000 over a 5-10 year span with these type of loans. 7 to 10 years is a long time – if you are still in your home you can always refinance to a 15 or 20 year fixed.
EXPECT A WILD WEEK WITH INTEREST RATE FLUCTUATIONS: There are a lot of events going on in the world (Japan and Libya) that are going to affect interest rates this week. Remember when the stock market goes down, interest rates usually follow. Here is a good article going over some of the the events that will move markets this week: http://www.msnbc.msn.com/id/42180200/ns/business-eye_on_the_economy/. If you are not prone to risk, I would suggest to lock. Right now 30 year fixed rates start at 4.75% ; 15 year fixed rates are still pricing better on an FHA Loan – 3.75% right now. 5/1 ARMS start at 3.125%.
MORE CONGRESS MEMBERS COME OUT TO DELAY LOAN OFFICER COMPENSATION REGULATION: Here is a great article explaining the anxiety of the industry about the new loan officer compensation scheduled to go into effect April 1st, 2011 : http://www.mortgagenewsdaily.com/03152011_regulation_z.asp. More and more lawmakers are asking for this rule to be delayed.
Now I know most consumers may not care about how loan officers get paid on writing a loan. But the fact is that this law affects the pricing a consumer will get on a new loan. A rule going into effect in less than 2 weeks that will have consequences on every loan going forward still has no written or communicated guidelines on how to implement the rule. The bank I work for and many of my associates that work for bigger banks still have not implemented their plan of action. It will be an interesting two weeks.
In two weeks, as a borrower you will be able to choose borrower paid loans – where you are paying a decent amount of costs to do a loan or lender paid loans, where you will not be charged origination fees and may get a credit towards third party title fees.
RATES LOWER: The tragedy in Japan has caused a drop in the stock market. This drop has caused investors to take money out of stocks and into safer treasury securities. When this happens, mortgage rates improve. Right now 30 year fixed rates are at 4.75% – you can typically get that rate for .5 to 0 points now depending on idividual situations. Pricing on rates on all other products have also improved – please look at the picture below for par rates on the product you are most interested in.
INTEREST ONLY LOANS ARE MAKING A COME BACK – Interest Only loans have been making a strong comeback. I have been doing a lot of these loans for customers who plan on eventually selling their home – but want to wait until the market improves. These are great loans for the customer that never plans on paying off their mortgage and wants to keep more money in their pocket now.
The most popular interest only products are the 30 year fixed / 10 year interest only loan. The rate is fixed for 30 years and an interest only payment is all that is needed for the first 10 years. These start at 5-5.125% right now. Also the 5/1 Interest Only ARM is very popular. Those start off at 3.25%.
ONLY 2 WEEKS UNTIL NEW LOAN OFFICER COMPENSATION REGULATION GOES INTO EFFECT: You never know, this may not go into effect. There are so many lawsuits against this new regulation and even Congress has opinioned that the law should not go into effect on Aprils 1st as there is still confusion on how to implement the new rules. If you are planning on doing a loan – I would get it started before April 1st – there will be confusion and less options for you as a consumer.
RATES REMAIN THE SAME: The bond market finished last week 6 points down – not a huge difference, rates have basically stayed the same. 30 year fixed rates are still at 4.75%. I still feel the best loan on the market is a 15 year fixed at 4.25% with 0 costs – availabe for most customers.
FHA STEAMLINES WITH NO INCOME OR CREDIT – Borrowers can now qualify for an FHA streamline (lowering rate with no appraisal), without proving income – but you must prove you have a job for 12 months. Also, no credit requirements will be looked at besides the mortgage history – a customer must not have had a mortgage late in the past 12 months.
PRICING IMPROVES: The bond market finished this week 97 points up – improving every single day. This has pushed 30 year fixed par rates down to 4.75% , and you can usually get a 4.875% with 0 points. 15 Year Fixed are still pricing better on an FHA product than a conforming product. I can get an FHA 15 year fixed starting at 3.75%, though the 4.25% with 0 costs I feel is the best deal. Great rates right now!!
APPRAISAL WAIVER: If your current loan is backed by Fannie Mae (you can check here: http://www.fanniemae.com/loanlookup/) and you have a decent amount of equity , we are often able to do your loan with no appraisal and no out of pocket costs. Check it out!!
LOAN OFFICER COMPENSATION: Remember that new federally regulated loan officer compensation rule is going into effect April 1st, 2011. You may feel this will not affect you, but I assure you it will. Less options will be available once this comes down – you will most likely have 2 options – pay a large amount of closing costs to do a loan, or take a much higher rate and pay nothing. There will not be a lot of in between options.