TODAY’S RATES & HOUSING NEWS

Average Mortgage Interest Rates across the country ticked up about .7% for most scenarios over the past 7 days.

We are now going to include a Green Home Loans Rate Sheet as well as the average interest rates across the country from Mortgage News Daily.

Below are average interest rates across the country.

Overall interest rates have been relatively stable, but slowly moving up over the past few weeks.

OUTRAGE OVER LOAN LEVEL PRICE ADJUSTMENTS

The mortgage industry was on fire last week as Major News Outlets reported that new Fannie Mae changes going into effect May 1^st, were charging people with higher credit scores to pay for people with lower credit scores.

“I should stop paying my bills so I can get a better mortgage rate” was something I heard multiple times.

Let’s dig into the changes. 

Here is what you need to know:

IS IT TRUE THAT CLIENTS WITH LOWER CREDIT SCORES ARE GETTING BETTER DEALS THAN CLIENTS WITH HIGHER CREDIT SCORES?

NO

There is no situation where clients with lower credit scores are getting a better deal than clients with higher credit scores with the same down payment.

See chart below:

The higher the number, the more the borrower gets penalized with higher rate pricing.

You will see that there is no area where a lower credit score client has a lower number than a higher credit score client with the same loan to value.

Your credit score is also important to qualify for the loan and highly affect mortgage insurance premiums.

Any client should do their best to have the highest credit scores possible to help qualify for home financing as well as get the best deal. 

IS IT TRUE THAT CHANGES TO THE LOAN LEVEL PRICE ADJUSTMENT MATRIX BENEFITED LOWER CREDIT SCORE BORROWERS AND PENALIZED HIGHER CREDIT SCORE BORROWERS?

YES.

The adjustment for lower credit score borrowers went down (they get better rate pricing) and the adjustment for higher credit score borrowers went up (they get worse rate pricing).  There was a wider gap before with rate pricing for lower credit score borrowers.  The changes shrunk that gap.

Here is where the outrage lies.  Essentially, FHFA subsidized lower credit score borrowers with benefits that higher credit score borrowers are paying for.  The irony of the whole situation is that lower credit score borrowers typically will go FHA, especially with the lower FHA Mortgage Insurance Premiums that went into effect in 2023.  Most clients with a credit score below 680 will get a lower payment with an FHA Product.

As is often the case, this change was ill-conceived in my opinion and won’t do what it intended to do.

I disagree with the change, but I also don’t think it’s the death of the housing market that many are making it out to be.

News is manipulated to get more views and spark more reaction. 

Clients with lower credit scores still get worse pricing.

These changes have been in effect for weeks and we have locked a ton of loans with this updated pricing without client complaints.

I also find if funny how this news went viral last week when this change was announced in January.  I discussed these changes many times in this newsletter months ago.

See chart below comparing OLD LLPAs vs. NEW LLPAs. 

Lastly, FHFA has now built credit score matrixes for 740-759, 760-779, and 780+.

Before these changes went into effect, 740+ credit score was the highest qualification level.

Now clients over 760 and 780 with down payments less than 40% are getting better rate pricing than 740-759 credit score clients.

FORECLOSURE HEADLINES VS. DATA

Foreclosure activity is another instance of the News reporting correct information but in a context that causes fear and reaction.

See headlines. 

What they didn’t headline is Foreclosures have been at record lows for 2 years and there was a Foreclosure moratorium during COVID.

Of course foreclosures are going to go up when they were at some of their lowest levels in history.

Foreclosures in 2022 were lower than every year since 2005 except 2020 and 2021. 

TODAY’S INTEREST RATES

Mortgage rates have risen another .1% over the past 7 days, currently sitting near 1 month highs.

The average client can still get in the high 5%’s to mid 6%’s depending on how they want to structure costs. 

FHA loans already start with lowering rates than conventional loans for most scenarios.

With FHA lowering their mortgage insurance premiums, an FHA loan has become often a better payment option than a conventional loan, especially for below 700 credit score borrowers. 

If you would like to check the FHA loan limit for your county, you can call me

or go here:  https://entp.hud.gov/idapp/html/hicostlook.cfm

Put in county name and the loan limit is next to FHA Forward.

REMOVING THE STIGMA OF FHA PREQUALIFICATIONS

In a conversation with a Top Realtor Group in Phoenix, the topic came up about listing agents preferring Conventional

Prequalification offers over FHA Prequalification offers.

There is often a connotation that an FHA client is not as well qualified and that the appraisal is more difficult / comes in with a lower value than a conventional appraisal.

Here is the real information:

1. With FHA offering lowering initial rates and now lower mortgage insurance premiums than before, in many cases a borrower is getting a better payment on an FHA Loan vs. a Conventional Loan.  Agents need to understand that going FHA is no longer because a client is not well qualified. I would make sure your lender (hopefully us 😊) is calling the listing agent on FHA offers and explaining this.

2. FHA has their own panel of appraisals while Fannie Mae does not.

3. FHA appraisers use the same way to determine a value.

4. FHA appraisals have more focus on the safety and security of the home.  Here are some of the main items an FHA appraiser will look at.

• No damage to the foundation, roof, or exterior
• Safe access to the premises
• Working utilities
• No exposed wiring or other electrical systems
• A permanent heating system that provides sufficient heat for the home
• No peeling or chipping lead-based paint.  Homes built before 1979 use lead based paints.
• Access to clean water
• No termites or other wood-destroying insects
• Access to, and ventilation in, attics and crawlspaces
• No soil contaminants, such as from a damaged underground storage container
• No safety hazards, such as stairs without handrails
• Compliance with local zoning regulations

If the home is in good working condition, an agent/seller should not worry about taking an FHA Prequalification over a Conventional Prequalification.

TODAY’S INTEREST RATES

https://m.bixel1.net/5lb4am

Mortgage rates had some nice improvement last week until Friday’s Jobs Report. 

After that, the gains were taken back and interest rates are about .1% higher today than last week.

See green trend up and then red trend down on right of chart. 

Per the Jobs report, 236,000 jobs were created in March and estimates were 240,000.

Unemployment fell from 3.6% to 3.5%.

MBS Highway pointed out an interesting figure with average hours worked for Americans. 

Average hours worked went down .1 to 34.4 hours.

While this figure looks insignificant, it’s quite significant when you look at 161 million workers in the U.S.

This .1 hour less worked is like losing 468,000 full time jobs. 

On Wednesday, the Consumer Price Index will be released which measures inflation.
We expect a volatile market. 

MBS highway expects inflation to drop from 6% to 5.2%, but core inflation (taking out food and energy costs) to go up 5.5% to 5.6%. 

HOME PRICES MOVING BACK UP

Per the Zillow Home Value Index, home prices rose .9% in March 2023.

Home prices are still up 3% year over year, but down 3% from their peak in June of 2022.

A bunch of other indexes also showed positive signs in home values.

FHFA reported home values up .2% in January.

Black Knight up .2% in February.

CoreLogic up .8% in February. 

MBS Highway’s April 2023 survey is also showing increased buyer activity and upward home pricing pressure. 

Inventory is still low across the country.  If buyer demand increase, prices will rise.

See breakdown by region below: 

KCM’S APRIL MARKET UPDATE

Keeping Current Matters April 2023 Market Update was just released.

Here is the audio:

Below are my favorite slides from the report.

INTRODUCING GREEN HOME LOANS

After 6 great years at Fairway, we have decided to open up our own company –

GREEN HOME LOANS 🎉🎉

What does this mean for our Agent Partners:

* More Opportunities to Form True Partnerships

* Wholesale Rates

* $0 Lender Fees

* Every Product on the Market

* With the Same Great Service

If you don’t think your client is getting a great deal, we created an easy form they can fill out so we can compete for their business.

www.freemortgagequote.biz

Also, check out our updated Realtors Tools Menu including our Realtor Infinity Partnerships here:

https://greenhomeloans.lpages.co/realtor-tools/

We are grateful to get to work for a great company like Fairway for 6 years,

But also excited for this change for us and our partners.

Below is my updated contact info.

🏡 Reggie Green

🐸 Owner / Green Home Loans

🐢 480-206-5577

🌴 reggie@mygreenhomeloans.com

TODAY’S INTEREST RATES

Mortgage rates finally settled down after major volatility in the prior weeks.

Average interest rates across America went down about .1%.

Mortgage Interest Rates are hovering around 2 month lows which is fantastic for spring homebuyers. 

The average rate for a conventional client across America is 6.44%. 

This week, all eyes will be on Friday’s Jobs Report.  More job creation than expected in February, caused rates to jump up throughout the month.

THE MAJOR BENEFIT OF BUYER PAID HOME LOANS

As a mortgage broker we can take any client as buyer paid.

In Layman’s terms, this means we take all the profit out of the loan and then can charge the client origination fees for our compensation.

The great part about this is our origination fees can be counterbalanced by a lender credit towards other fees such as appraisal, title, and prepaid items.

See real rate sheet below taken on 4/4.   

The above rate sheet pulls out our compensation and we can start offering much lower rates.

We do need to charge origination fees to make a profit.

On the above example for a $300,000 Loan Amount – let’s say I charged 1.75 origination points or $5,250.

At 5.625%, I’m charging $5,250 but I’m also giving a lender credit towards other fees – essentially making lender fees:  $4,362

At 5.875%, I’m charging $5,250 but I’m also giving a lender credit towards other fees – essentially making lender fees:  $2,328

That is a rate in the 5%’s, while essentially charging the client less than 1% in points. 

This is a major benefit of brokering – complete control over pricing and the ability to go low for well-qualified clients.

Game changer as we can compete and win practically any deal we want to.

HOME APPRECIATION AT 3.8% ANNUALLY

January’s S&P CoreLogic Case-Shiller U.S. NATIONAL Home Price NSA Index (say that 5 times as fast as you can) has annual home prices up 3.8% nationally. 

The report covers the period from November 2022 to January of 2023 – so there is some lag to the data.

Home prices declined in many market from May of 2022 to December of 2022, but the substantial rise in early 2022 is still outpacing some of the

value drop after May of 2022.  Many markets are also seeing a positive uptick in 2023, which will not be reflected in this data yet.

Here is how major cities are fairing with annual home appreciation. 

1. Miami +13.8%
2. Tampa +10.5%
3. Atlanta +8.4%
4. Charlotte +8.1%
5. New York +5.2%
6. Dallas +5.0%
7. Cleveland +4.8%
8. Chicago +4.8%
9. Boston +4.2%
10. Detroit +3.2%
11. Washington +2.4%
12. Minneapolis +1.7%
13. Denver +1.0%
14. Los Angeles +0.9%
15. Las Vegas +0.4%
16. Phoenix +0.0%
17. Portland -0.5%
18. San Diego -1.4%
19. Seattle -5.1%
20. San Francisco -7.6%

I think with all the negative media about housing, the below graphic say a lot.

Reminder that fear gets clicks and eyeballs.