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This recent clip comes from my local paper's business section. It exemplifies why researching mortgages can be confusing (and annoying). We look to our newspapers to tell us the truth; to provide indisputable facts.
In this case, the paper misses the mark.
Aside from the spelling mistake in the headline (!), it looks like the local editors pulled irrelevant, stock copy written several years ago. As we've shown here and here, the 10-year treasury note and mortgage bonds move to the beat of their own drum.
Rates for the 10-year treasury do not correlate to mortgage rates from day-to-day.
There's a reason why everyone from first-time home buyers to bona fide investors hate the mortgage process -- the media tells them one thing about mortgage rates, and in-the-game loan officers tell them something else.
The reason this happens is because mortgage rates and guidelines are fluid -- too fluid for even most loan officers to keep up. It's why you should to question the mortgage news you read in the papers -- beat writers just can't keep up with the pace of change these days.
The best way to get your mortgage market news, therefore, is to go to the source. Talk to loan officers and ask good questions. Read blogs, follow twitterstreams, or whatever -- just make sure your source is someone in the business. And, if you need some follow up, you can always call or .
I answer my own emails and would be happy to help.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
I gave a television interview with Beejal Patel of First Business this week and we covered a lot of ground topics like housing, mortgage rates, and the FHA.
In this 5-minute spot, I answer:
What will happen to mortgage rates after the Fed's market withdrawal?
How will rising mortgage rates impact the housing market?
What will happen to home prices after the tax credit expires?
How does the jobs report relate to mortgage rates?
What changes are coming down the pipe from the FHA?
What are investor overlays and why do they matter to home buyers?
Like I said, we cover a lot of ground. Thankfully, it's easy to digest.
If after watching the piece, you have some follow-up questions for me, and I'll reply back to you.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific for Cincinnati or Chicago mortgage rates.
On the first Friday of every month, at 8:30 AM ET, the U.S. government releases the Non-Farm Payrolls report, except most people don't call it that. They call it "the jobs report". Tomorrow is the first Friday of the month.
The jobs report has always been influential with respect to mortgage rates but, lately, it's of larger import. This is because Wall Street believes that jobs growth is the way forward for the economy. No jobs, no growth.
The jobs-to-growth connection is pretty straight-forward. Versus an unemployed person, an employed person is:
More likely to spend free cash
More likely to feel confident about his economic future
More likely to make on-time mortgage payments
Each of these points promotes economic growth and stock markets tend to improve when jobs data is strong. This happens at the expense of bonds, of course, and mortgage rates rise.
But there's another angle, too.
Because jobs are a lagging economic indicator, net job gains imply that U.S. businesses are feeling better about their prospects for 2010 and 2011. This, too, excites stock markets, creating even more bond market damage. That's why a blowout job number would be awful for mortgage rates Friday.
Thankfully, it won't happen.
Even though markets are officially calling for 13,000 new jobs, whispers numbers are moving the target even higher. Therefore, the number of net new jobs would have to exceed the original estimate and then some, plus, prior revisions would have to revise higher, too.
Reviewing recent trading patterns -- over the next week -- mortgage rates have more room to fall than to rise. Longer-term, this isn't the case, but for now, you can float safely.
That said, locking mortgages is a game of timing and to play, you'll want some help.
If you don't have a loan officer you can call up for advice, know that you can always call me. Or, , whichever is easier. I handle all of my own email and I would happy to get your mortgage rate lock ready for you. The key is to make a plan that works, pick a rate that fits the plan, then wait to execute.
It's what I do best. Plus, my bank has good, low mortgage rates. Just ask me about it.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
Mortgage guidelines are in constant flux. Or at least it seems that way. And too often, rumors of "what's coming" take on a life of their own, spilling over into media coverage and into the minds of the homebuying public.
A classic example of this was the fabled "$15,000 homebuyer tax credit" from 2008. It was an idea that passed the Senate and got good headlines but, ultimately, died in Congress. Not before the news went mainstream, however.
The most recent rumor involves FHA mortgage insurance premiums.
The image above is a snippet from page 348 of the Special Topics sub-section in the Budget of the United States Government, Fiscal Year 2011. Among other things, the text recaps the FHA's recent response to its own dwindling reserves and rising risk levels.
Now, when the FHA passed its new guidelines (13 days ago), it said that it would petition Congress for the right to raise its mortgage insurance premiums because, by statute, the FHA doesn't have that authority. According to the highlighted text, the FHA wants to make two changes:
Lower the Upfront Mortgage Insurance Premium from 2.250% to 1.000%
Raise the Monthly Mortgage Insurance Premium to 0.85% on most mortgages
This is where the rumors starts. Just because the FHA asks for control over its own mortgage insurance doesn't mean that Congress will grant it. Nor does it mean that the FHA won't deviate from its original plan should Congress accede to the FHA's request.
In other words, the MIP changes are just a wish list. Reality is much different.
For now, starting April 5, 2010, the FHA increases its upfront mortgage insurance premiums to 2.25%, raises its minimum FICO score requirements to 620, and reduces its allowable seller concessions to 3 percent.
These are the facts. Homebuyers, loan officers and real estate agents should plan accordingly.
If you're buying a home and thinking of going FHA, be sure to talk to your loan officer about your personal timeline and how the new FHA guidelines may affect you. Or, if you don't have a loan officer, and we can talk about your situation. My bank underwrites FHA-backed mortgage in-house and our rates are low.
Mortgage rates regained a sense of calm last month as markets recovered from a tumultuous December. After shedding 300 basis points to close out 2009 -- that's 3 discount points per loan, by the way -- January's pricing recovered by nearly two-thirds.
Rates eased lower day by day in the first month of 2010 and, more importantly to rate shoppers, rates were mostly steady.
On average, mortgage lenders issued just 1.4 rate sheets per day in January, or 7 per week. Mortgage rates haven't been that stable on day-to-day basis in 10 months.
But first, a definition: What is a rate sheet? A rate sheet is a mortgage lender's pricing menu. Rate sheets lists the rate-and-fee combinations for every mortgage products under the sun, including:
30-year, 20-year and 15-year fixed rate mortgages
5-year, 7-year and 10-year adjustable rate mortgages
All variations of jumbo and super jumbo mortgages
The complete line of FHA and VA mortgages
Loans for condotels and non-warrantable condos
If a lender offers it, it's on a rate sheet.
The very nature of mortgage markets means that rate sheets are in constant flux. It's why a mortgage rate is rarely good for more than a few hours. Similar to beef or lobster, "market price" changes all the time. You can't rely on last night's menu.
New day, new costs and if your current Good Faith Estimate and/or rate quote is older than 5-and-a-half hours, it's officially outdated. Lenders won't honor it. It's time to start again.
Now, the good news is that rates are relatively tame. Getting 5 hours-plus to lock a rate is a gift from the Mortgage Gods. Unfortunately, though,the last time rates settled in like this, it was just a brief calm in a turbulent time. Sort of like the eye of a hurricane.
From last March, you can see the "V" shape in the chart above. I suspect we're in a similar situation now.
The economy is recovering quickly, corporate earnings are booming, and the Fed is withdrawing its support for the mortgage market. Sooner or later, mortgage markets are going to sell off. It hasn't happened yet because demand for U.S debt has been high.
But, as the global economy emerges from this generation's worst recession, investment dollars will even out between the U.S. and elsewhere and, when that does happens, it's yet one more reason for rates to jump.
You'd best be ready for it.
As a loan officer, I watch real-time mortgage market data that's not published to the papers or on TV. If you need to know what rates are doing, you need to be watching my Twitter stream, or following me on Facebook. I post regular updates and tend to alert before rate sheets change.
If you need to lock a mortgage rate, make sure you're getting my updates.
Furthermore, if you're actively rate shopping for a home in Cincinnati, Chicago, or somewhere else that I lend, make sure you ask me for a rate quote. Because I work for a self-funded bank, my rates and fees are often less than my broker peers and especially better than the correspondents.
Be sure to ask me for . I love to work with my readers.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago.
for a real-time rate quote.
Here's the group's mortgage rates predictions:
50% predict mortgage rates will increase
29% predict mortgage rates will decrease
21% predict mortgage rates will remain unchanged
I expect mortgage rates to increase.
My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent learning how to suck at Facebook than reading my analysis.
Either way, here's what I told Bankrate.com:
"The reality of the Fed's mortgage market withdrawal sets in this week."
This is going to read like a recap from last week, but let's review the highlights.
When the economy hit the skids in September 2008, the government made a massive intervention. In addition to formal stimulus from Congress, the Federal Reserve did what it could to loosen up the credit markets.
One of the Fed's most well-known programs was its commitment to buy $1.25 trillion in mortgage-backed bonds in the open market. Internal studies from the Fed say the program lowered rates by 1 percent last year.
The program ends March 31, 2010.
Now, logic dictates that if the Fed's presence had rates down 1.000 percent in 2009 -- all things equal -- the Fed's absence will have rates up by the same 1.000 percent in 2010. The question remains, "how soon until it happens?"
The Fed has been weaning markets off the program, dropping purchases to just one-third of its March 2009 peak purchase levels. And while it's been doing that, there's been fewer originations to create new supply.
For this reason, some analysts think fears of a Fed pullout are overblown; that rates won't rise by a full percent. And that viewpoint may ultimately be proved correct.
For now, though, the prudent thing to do is to treat the situation like NFL referees treat an instant replay request -- stick with the original call until you've got sufficient evidence to overturn it. Right now, that evidence doesn't exist. It won't exist until April.
Naturally, you don't have until April. You need to know what to do right now so here it is.
Get locked.
Mortgage rates have receded from December's highs and have been sitting in a pocket for about a week. At some point, Wall Street will start pricing bond for the Fed's MBS exit and you don't want to be on the wrong side of that window.
Locking mortgages is a game of timing and, for that, you may need some help.
If you don't have a loan officer you can call up for advice, know that you can always call me. Or, , whichever is easier. I handle all of my own email and I would happy to get your mortgage rate lock ready for you. The key is to be ready before the market changes and that's what I do best.
Also, my bank has good, low rates. Just ask me about it.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
A fair number of my readers are mortgage- and/or real estate-related businesses. Consider this a public service announcement.
REtechSouth is March 25-26, 2010 in Atlanta -- 8 weeks away. It's an industry conference with hands-on learning, practical pointers, and seminar-style sessions from the brightest minds in the country.
REtechSouth draws raves because it's not a series of Glorified Sales Pitches. It's the exact opposite, in fact. REtechSouth focuses on the technologies we use in business, and how we can all get more from them.
It's not just blogging, either.
Speakers cover topics like: RPR, Web Design, IDX, WordPress, MLS Tools, Email Marketing, Facebook, Twitter, LinkedIn, Blogging, Community Building, Lead Capture, Social Capital, iPhone, Blackberry, Digital Photography, Video Marketing, Broker Tools, and Association Management Technologies.
Clearly, there's something for everybody.
Content comes in 4 forms, too. The format is ground-breaking:
REtechCamp: Targeted content offered over a span of 2-plus hours to a niche audience
REtechLab: Hands-on environment with tables, power-strips, and WIFI for mobile learning. Free-form format with less presentation and more conversation.
REtechKnowledge: Group presentations meant to inspire and challenge. A peak into the minds of industry leaders and innovators.
REtechTraining: Group presentations meant to educate using real-life examples fro industry leaders and innovators.
When you leave Atlanta, you'll have business ideas you can implement right away, and the skillset to actually do it.
My blog-for-you company, Bring the Blog, is pleased to be a REtechSouth sponsor.
As a Spotlight Sponsor, Bring the Blog gets an exclusive discount to share with our friends. Use the code "bringtheblog" when you register online and REtechSouth will drop your prices 10 percent. It's kind of a sweet deal.
Last year, REtechSouth sold out. This year, it's expected to do the same. Once sales reach 750 tickets, the event will close. That's expected to happen within the next 4 weeks.
Atlanta is a surprisingly easy city to which to commute and the conference is held at the world-class Gwinnett Center. Please join me there March 25-26, 2010.
It'll be among the best mortgage and real estate technology conferences you attend all year.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
The Federal Reserve begins a scheduled 2-day meeting today during which it which it will vote to leave the Fed Funds Rate unchanged near zero percent. The press will report this tomorrow as "Fed Holds Rates Steady".
But, don't confuse this to mean that the Fed held mortgage rates near zero. The Fed doesn't set mortgage rates. The Fed sets the Fed Funds Rate. The former is a long-term rate and the latter is a short-term rate.
The Fed Funds Rate and the 30-year fixed mortgage are two different animals.
The Fed Funds Rate is set by the Federal Reserve to accelerate or retard economic growth. Mortgage rates are set by price of mortgage-backed securities at any given moment plus any applicable loan-level pricing adjustments. If the two were directly related, the chart above would be linear.
Since 1990, the spread between the Fed Funds Rate and the 30-year fixed rate mortgage has been as narrow as 1 percent and as wide as 5 percent. Going back even further, to 1973-74 and then again to 1980-81, there's been instances of the interest rate spread going negative; mortgage rates were below the Fed Funds Rate.
Hopefully it's clear now. Mortgage rates and the Fed Funds Rate move independently. The Fed doesn't set mortgage rates.
However, it does influence them.
As the nation's central banker, the Federal Reserve sets policies that change the U.S. economy's direction and changes in the economic happen to make a huge impact on mortgage rates. It's one reason why mortgage rates were so volatile in 2009 -- the future of the economy was a giant glob of murk and as Wall Street did its bidding, rate shoppers got tossed along for the ride.
So, let's ignore what the Fed will or won't do tomorrow and focus instead on what the Fed says.
See, when the Fed adjourns, it issues a statement in which Bernanke & Co address the nation's economic strengths, weaknesses and threats. If the Fed's statement shows optimism for the economy in its statement, mortgage rates will rise as money flows away from the safety of the mortgage-bond market.
If the Fed's statement show pessimism, on the other hand, mortgage rates will fall.
Either way, be on alert. The Fed statement hits at 2:15 PM ET Wednesday.
For Cincinnati home buyers and homeowners shopping for low mortgage rates, you must understand the difference between the Fed Funds Rate and a long-term mortgage rate. When you do, you're more likely to lock a mortgage rate on time as opposed to locking a mortgage rate too late.
If you've never been on the wrong side of that gamble, just ask a friend -- it stinks.
So, to get help with your rate lock, including timing it for the lowest possible rates in your local market, with your details and I'll do my best to help get you started. I answer all my own emails and my mortgage rates are very good.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
If you want to know where mortgage rates are headed in the future, you may be better off ignoring the experts.
I conducted a 50-week study of the popular Bankrate.com Mortgage Rate Trend Index and it showed that the "expert consensus" on mortgage rates is wrong 3 times more often than it's right.
I am a regular Rate Trend survey participant and have been since 2006.
If you've never seen Bankrate.com's weekly Mortgage Rate Trend Index, it's an informal "future of mortgage rates" poll of loan officers around the country. It's meant to give interest rate guidance to active home buyers and would-be refinancers.
Many survey participants are high-profile and the mortgage rate question posed by Bankrate.com is a basic one:
In your opinion, will mortgage rates move up, down, or remain unchanged 35 to 45 days from now?
Well, mapping the Bankrate survey's majority opinion against Freddie Mac's published mortgage rates 35 days hence, it turns out that the experts guessed right on rates just 23.4% of the time last year.
That's seriously awful. It's less than 1 out of 4. And they're experts.
Now, to be fair, some of the participants fared better than the average including Bankrate.com host Holden Lewis and yours truly. However, predicting mortgage rates remains a huge challenge. Especially 35-45 days into the future.
A lot can change in 6 weeks and last year, a lot did. As the economy dipped and surged, Wall Street tried to come to terms with the future of the economy while Congress and the Fed made new policies to stimulate and/or retard growth, as needed.
Intervention messes with markets and mortgage rates were extremely volatile during the sample period. This is because the mortgage rate that homebuyers see is the result of literally hundreds of factors.
Lenders averaged 1 middle-of-the-day rate change per day last year. That's a lot.
Despite these caveats, though, none of it changes the fact the Bankrate.com survey was actually de-helpful to its readers last year. Homebuyers that relied on the survey for rate lock advice, in hindsight, would have been better off flipping a coin.
According to Bankrate.com, the Mortgage Rate Trend survey is among its most viewed pages on its site. Plus, the survey is syndicated to sites like Yahoo! Business and Fidelity Investments. Clearly, a lot of Americans are using this thing for rate-locking advice.
It's too bad, really, because the advice they're getting is hardly ever right.
When you need to lock a rate, remember that predicting mortgage rates is a challenge for anybody and the farther out an expert goes on the time line, the more likely his logic will be proved wrong. Markets and makeup change way too fast.
As a consumer, therefore, the best thing you can do is work with a loan officer that understands howmarkets move and whythey move. You may not get the best prediction for a rate 2 months into the future, but you'll get an excellent take on what's driving mortgage rates today -- an equally important set of information.
Then, when you can get a heads-up on when rates are rising before it actually happens, that's when you can save yourself some money. The key is to work with a loan officer that tracks real-time mortgage market data and, more importantly, knows what to do with it.
If you're working with a Call Center-type lender, or just aren't sure whether your loan officer is up to snuff, call or . I track mortgage rates in real-time for all of my clients and I love to work with my blog readers.
Plus, my rates are really good (even if I can't predict them 45 days into the future).
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.
The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago.
for a real-time rate quote.
Here's the group's 30-day prediction for mortgage rates:
27% predict mortgage rates will increase
13% predict mortgage rates will decrease
60% predict mortgage rates will remain unchanged
I expect mortgage rates to increase.
My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent on everyone's favorite movie game show than reading my analysis.
Either way, here's what I told Bankrate.com:
"The first effects of the Fed's market withdrawal are coming. "
Mortgage rates have been low for a very long time. You probably can't remember back this far, but in August 2008, when gas prices were crossing $4 and inflation was all the rage, rate shoppers were snapping up 6.500 percent mortgage like they were deals at Sofa King.
Then, the dam leaked. Banking fell apart, the economy went to the brink, and the Federal Reserve stepped in to clean up the mess.
The Fed made many moves to heal the economy, but one of its most important ones was its backstopping of the mortgage-backed securities market to the tune of $1,250,000,000,000.
Visualize that for a minute. It's a huge number. And the Fed used it to become a big-time buyer of mortgage bonds. The goal? Use the extra demand to lead bond prices higher which, in turn, would lead bond yields lower. And this is exactly what happened.
In other words, we've been getting low rates because the mortgage-backed market is "artificial". The Fed is a non-natural buyer. Starting April 1, 2010, though, life goes back to normal. The Fed is ending its support and the market will be left to its own.
It's simple, folks. If the Fed's presence dropped rates 1 percent in 2009, its absence will cause rates to rise in 2010. Mortgage rates are going up. The question is "how soon until markets react?"
For now, rates look good and low. Economic data is soft and inflation is tame. Plus, the dollar is rallying. These are all conducive to low mortgage rates. However, at some point, Wall Street will start pricing bond for the Fed's MBS exit.
It could get ugly. The move will likely be swift.
Rate shoppers should really have a plan in place. Be patient, but not too patient. Locking mortgages is a game of timing and, for that, you may need some help.
If you don't have a loan officer you can call up for advice, know that you can always call me. Or, , whichever is easier. I handle all of my own email and I would happy to help you get your mortgage rate lock ready. The key is to be ready for the changes before they come and that's what I do best.
Also, my bank has good, low rates. Just ask me about it.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
In an effort to shore up its flailing balance sheet and dwindling capital reserves, the Federal Housing Authority rolled out sweeping financial changes this morning. FHA borrowers must now look better on paper and have more cash at closing.
Mortgage insurance premiums are rising, too.
In its official announcement, the FHA said its trying to "better position the FHA to manage its risk while continuing to support the nation’s housing market".
The changes are effective with case numbers assigned starting April 5, 2010.
One widely speculated change wasn't made -- the increase of the FHA minimum downpayment. Homebuyers in Cincinnati, Chicago and elsewhere can still buy with just 3.5 percent down. However, the FHA did roll out a number of other changes, including:
An increase in Upfront MIP from 1.75 percent to 2.25 percent
A reduction in maximum seller contributions from 6 percent to 3 percent
A Congressional request to increase monthly mortgage insurance premiums
Furthermore, the FHA's new guidelines institute a minimum FICO requirement of 580 to make the minimum 3.5% downpayment, requiring 10 percent for any applicant whose credit score falls below that level.
But, just because the FHA allows a 580 FICO, it doesn't mean that banks will approve it.
The official term here is "investor overlay". It's when that banks use FHA guidelines as a starting point for their own set of underwriting rules which are often more strict.
And banks have a good reason for making investor overlays.
Last week, the FHA subpoenaed 15 lenders -- including the well-respected 1st Advantage Mortgage in Lombard, Illinois -- because of abnormally-high FHA default rates. The act was a shot across the bow, it seems, because in today's FHA statement, the group established an official benchmark for FHA loan performance.
If a bank's defaults exceed the mean by a certain number of sigmas, the FHA terminates the bank. Period.
For this reason, FHA investor overlays will be a running theme of 2010.
Guidelines will vary from bank-to-bank as lenders take a more active role in managing their originated mortgages. What gets FHA-approved Bank of America, for example, may not be FHA-approved at Wells Fargo.
A lot of FHA loans will be denied in 2010 simply because the applicant applied at the wrong bank.
If your FHA mortgage has been denied or you just want to have the best chance of being approved possible, call or with some notes on your situation. I work for Waterstone Bank -- a HUD-approved lender. We underwrite and fund FHA mortgages from our own accounts, and work with the nation's largest FHA lenders as an approved conduit.
In other words, apply once and you'll be automatically aligned with the bank with the best pricing plus least amount of overlays. That's what I do for you as your loan officer.
The FHA changes go into effect this Spring. The exact date will be announced tomorrow.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
At the risk of appearing obsessed with foreclosure data, I want to run another chart of the country's Top 10 Foreclosure States. Thank you to my friends at RealtyTrac for running this report special for me.
Foreclosures have always been an issue for banks, but since 2005, the percentage of foreclosure filings coming from the top 10 foreclosure-filing states has moved markedly higher.
Q1 2005 : 64.3 percent
Q4 2009 : 72.4 percent
The U.S. foreclosure problem is concentrating by geography.
And meanwhile, the 10 states included in the list -- California, Florida, Illinois, Arizona, Michigan, Texas, Georgia, Nevada, Ohio and Nevada -- account for just 45% of the nation's population.
Distilled, 45 percent of states represent 72 percent of foreclosure filings.
Clearly, some states are more foreclosure-heavy than others. We must use cautioun when interpreting national housing statistics. A few states can distort the bigger picture.
For example, when RealtyTrac says annual foreclosures reached 2.8 million last year and that foreclosures are up by one-fifth, that's a national story. On a local level, however, the story's much different.
10 states showed year-over-year improvement in 2009 -- including Ohio and Indiana. Both states had been hard-hit by losses in manufacturing.
And even when we examine states like Florida and Arizona -- two of the most foreclosure-heavy states in the nation -- we can find areas in which foreclosure filings are down and the housing market is thriving.
Miami is a terrific example of this.
All real estate is local. Period. We can't compare states any more than we can compare Dayton to Cincinnati. Heck, we can't even put Montgomery and Blue Ash in the same conversation. Even though both towns feed into Sycamore schools, each has unique characteristics that drive its home values.
Big picture data is important, but it's what happens on the streets that matters, pardon the pun.
Buying foreclosures is big business so if you're searching foreclosed homes in Cincinnati, start with this link to RealtyTrac. There's a 7-day free pass to the database and that should be enough time to help you gauge the market and identify some homes. The local market won't be as big as the national news stories would have you believe, but it's still there.
Then, when you've found a home and need a prequalification letter to accompany your offer, and I'll get you handled.
Working with foreclosures -- especially jumbo ones -- is among my strong suits.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
As reported by RealtyTrac.com, the Buckeye State is the only state among the Top 10 in 2009 Foreclosure Activity to post fewer filings versus 2008.
It's a nice boost for a state that's been beaten down by high unemployment and the New York Jets. Foreclosures are slowing statewide, helping both home values and homeowner morale. The market is turning.
The RealtyTrac 2009 Foreclosure Report included some other noteworthy nuggets, too.
46 states account for just 49% of 2009's foreclosures. California, Florida, Arizona and Illinois account for the rest.
The nation averaged 1 foreclosure filing per 46 households. 80% of states fell below the national average.
The pace of foreclosure filings fell in 10 states (including Ohio).
For as thorough as the RealtyTrac report is, though, it's easily skewed by factors from the outside, the biggest of which is political. Many states have enacted some form of foreclosure prevention law that slows, delays, or halts the foreclosure process. Another factor is a lender's ability to process large numbers of foreclosures at one time.
There could be many more in-trouble homeowners than the data has us believe.
It's not stopping foreclosures from being big business, however. Distressed homes account for one-third of home resale activity, according to the National Association of REALTORS™. The key to getting a "deal" is to find the cheap home before the next guy.
The good news is that you don't need a real estate agent to get started on your search. A host of websites aggregate and collate foreclosure information, presenting it like a listing sheet. You can search for homes using an innumerable number of traits.
If you're considering foreclosed homes as a first-time or move-up, or even as an experienced investor, register with all 3 sites -- each pulls from a slightly different data set so you'll see different homes from one site to the next. You'll be able to quickly narrow your search to the viable homes and get on with the business of buying.
Even in Ohio, foreclosure opportunities are still out there. Search online and see what you find. Then, when you're ready for your pre-approval letter, call or . I'm experienced with foreclosures for first-time buyers and can also do mortgages for people that own more than 4 properties.
Oh, and my rates are really good.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.
The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago.
for a real-time rate quote.
Here's the group's 30-day prediction for mortgage rates:
36% predict mortgage rates will increase
18% predict mortgage rates will decrease
46% predict mortgage rates will remain unchanged
I expect mortgage rates to remain unchanged.
My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent on learning that George Washington invented instant coffee than reading my analysis.
Either way, here's what I told Bankrate.com:
"Markets move into wait-and-see mode on the economy and the Fed. "
It's been a wild few weeks in the mortgage markets. December was a shoot-out that left every "floater" dead. Since the New Year, though, markets have been easing and rates have been falling.
Today, mortgage rates are at their best levels of the year.
In an it-won't-sound-so-strange-once-you-understand-how-mortgage-rates-work kind of way, rates are down for the same reason they were up -- expectations on the economy.
See, when December started, the jobs report showed net job growth very close to flat. Wall Street got very excited about it. Plus, housing showed more growth and Retail Sales punched in way bigger than projections.
At the same time, members of the Fed were stumping for a raise in the Fed Funds Rate and a need to be wary of runaway growth. This, too, got Wall Street excited and as of December 31, 2009, the economy hinted at recovering and expanding at ludicrous speed.
Because of this, mortgage rates made their biggest 1-month jump of the year in December. Since then, however, it's been a mixed bag.
January's job report and retail sales report both went negative, and Pending Home Sales failed to impress. Furthermore, there's been a general softness about the economy and Fed members have gone silent on Fed Funds Rate matters.
It's a reversal from December and expectations for 2010 are dialed back a bit. Mortgage rates are falling, but have likely bottomed out for now.
We're witnessing a stasis. The economic forces of expansion and contraction seem balanced. Data is contradictory and difficult to interpret. Wall Street is unsure of what's next.
Mortgage rates should stay in a tight range between now and the Super Bowl. There will be days when rates are down, and days when rates are up. The key is picking the right day to make your rate lock.
Be patient, but not too patient. Locking mortgages has always been a game of timing. And for that, you may need some help.
If you don't have a loan officer you can call up for advice, know that you can always call me. Or, , whichever is easier. I handle all of my own email and I would happy to help you lock your mortgage rate.
My bank has good, low rates. Just ask me about it.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
Mortgage rates are low but maybe not for you, specifically.
If you've ever wondered why loan officers can't give you the best "advertised rate", it's not because of a bait-and-switch scheme or something worse. Most likely, you're being quoted higher mortgage rates because of a government mandate called Loan-Level Pricing Adjustments.
LLPAs are changes in loan costs based on your personal risk traits.
Fannie Mae and Freddie Mac first introduced loan-level pricing adjustments in April 2008 and they've been a constant cause of consternation among conforming borrowers since.
The problem is loan-level pricing adjustments aren't exactly Prime Time news and so the first time most people hear about them is at the point of application. LLPAs can raise a person's mortgage rate by a full percentage point or more.
To understand what LLPAs are and how they work, let's talk about auto insurance.
For all of us, there is some base insurance rate for which we all qualify. It's based on our age, our credit and the ZIP code in which we park the car. From there, however, adjustments are made -- drive a riskier car, pay a higher premium. Have a history of accidents, pay a higher premium. Things like that.
The same goes for mortgage loans. The more the risk, the higher the rate.
A few of the risk factors that can change a person's mortgage rate include:
Living in a condo with less than 25% equity in the home
Having a credit score of less than 740
Living in a 2-unit, 3-unit or 4-unit home
Using a home as an investment property
Doing a "cash out" refinance with less than 40% equity in the home
Having a second mortgage to subordinate
Each of these traits -- historically -- increases the likelihood of your default. Therefore, to hedge, Fannie Mae and Freddie Mac charge flat fees to offset potential future losses.
LLPAs are not discretionary fees; sources of profit or padding. Nor are they junk fees. LLPAs are mandatory costs triggered by specific loan characteristics. There's no flexibility, either. If you trigger the guidelines, you pay the fees.
LLPAs can be paid as a traditional "closing cost", due at closing.
LLPAs can be built into an interest rate. In general, interest rates increase 0.250% for each 1 percent of loan-level pricing adjustment.
It doesn't take much to trigger the risk-based pricing of Fannie Mae and Freddie Mac; a lot of conforming mortgage applicants do it.
If you've triggered the LLPA chart and want to know your options, call or . Depending on your loan traits, there may be non-government programs that can give the same great rates as Fannie and Freddie, but without the risk fees.
Be sure to ask me about it. I answer all my own emails and would be happy to help you however I can.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
December's jobs report was released this morning. It showed 85,000 jobs lost last month and no change in the Unemployment Rate.
For stock markets and out-for-work Americans, the figures are disappointing. Net job loss slows economic recovery and creates an uncertain business climate.
Domestic growth is tempered until the jobs market returns.
But December's weak jobs data isn't universally awful. With the bad there comes some good. See, prior to the release this morning, the Non-Farm Payrolls numbers were steadily improving.
6 months ago, 463,000 jobs were lost
3 months ago, 219,000 jobs were lost
Last month, 4,000 jobs were created
Furthermore, there's been signals from the market that the economy has turned the corner. Retail Sales are up and consumer confidence is returning. Heck, even the Federal Reserve gave an optimistic outlook for 2010.
These stories played a big part in pushing the Dow to its 2009 high-point in December. They also explain why mortgage rates went to crap. A soft economy kept mortgage rates low in 2009. Therefore, it should only follow that a firming economy causes them to rise.
That's exactly what happened in December.
Mortgage pricing worsened by 300 basis points with the biggest market losses coming in the last 10 days. It happened because Wall Street expected 2010 to come out of the gates at full speed towards full recovery. Investors made their bets accordingly. Many chased risk, few wanted bonds.
And then today happened. The December jobs report is anything but "full speed". It's more of a trot. The negative print is forcing Wall Street to adjust.
Rate shoppers and Cincinnati home buyers are ecstatic.
Conforming mortgage rates are already 1/8 better today. FHA mortgages are improved, too.
Now, as a layperson, it's tough for you to keep track of the (literally) hundreds of things that make mortgage rates move. You don't have the time and you don't pay for the tools. But I do. And I share what I know with my clients.
If you know you'll need a mortgage in February, March or April 2010, know that rates will be volatile while Wall Street comes to terms on the economy. When it comes time to lock a rate, you can be pretty sure you'll get better terms by working with me that if you're working with your current lender's 800-number Call Center or some generic "web company".
Believe it or not, those people don't pay for good data. They just watch the tickers on TV. And they rarely advise.
To get a better rate on your mortgage, call or to introduce yourself. I answer all of my own emails and like working with my readers. Plus, I'm licensed in most states.
December's jobs report shows that the economy isn't 100% recovered yet. Until it is, mortgage rates will be bumpy. Knowing the precise moment to lock would save you interest rate and money.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.
The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago.
for a real-time rate quote.
Here's the group's 30-day prediction for mortgage rates:
"Be patient. The market is in Correction Mode after December's awful results."
Now, if you were lucky enough to lock a 30-year fixed mortgage rate sometime between Thanksgiving and December 1, you got an awesome rate, really. You're probably sub-5 percent and maybe didn't pay any closing costs to get there.
Pat yourself on the back if you got that rate because after the first of the month, December turned into a veritable mortgage market nightmare. Between December 1 and December 31, 2009, mortgage pricing deteriorated by more than 300 basis points.
100 basis points equals 1 percent so the math looks like this:
December 1: You could lock a 4.750 percent, 30-year fixed with 0 points
December 31: You could lock a 4.750 percent, 30-year fixed at a cost of 3 points
Owie. Having to 3 points to get the same rate 30 days later is a lot of points.
And, the thing is, there really wasn't much reason for mortgage rates to get so bad, so quickly. Sure, jobs data got stronger and the housing market showed more improvement, but there wasn't much else.
In fact, you could argue the opposite side and say that rates should have fallen.
During December, the U.S. dollar improved, retail sales were weak, and key inflation figures was tame. Even the Federal Reserve gave the economy Even Steven report after its December 16 meeting.
Instead of responding to this type of data, mortgage markets suffered at the hands of momentum plays combining with low trading volume. The markets fell farther than they should have. They're going to correct this month.
We've had 3 trading days so far this year. Rates -- along with volume -- have been improving. It's a correction. Markets are returning to normal, whatever that means. But, as they do, rates should settle in a little lower than what we've seeing right now.
If you can afford to be patient with a pending conforming mortgage rate locks, try it. You'll be rewarded. The key, though, is knowing when to stop being patient.
For that, you may need some help.
If you don't have a loan officer you can call up for advice, know that you can always call me. Or, , whichever is easier. I handle all of my own email and I would happy to help you lock your mortgage rate.
My bank has good, low rates and we're very responsive to our clients.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
November 6, 2009, Congress modified the $8,000 First-Time Home Buyer Tax Credit program, turning it from a "first-time" buyer program into an "everyone" Home Buyer Tax Credit program.
Under the program's new terms, first-time buyers are eligible for up to $8,000 in federal tax credits and long-time homeowners get up to $6,500. A "long-time" homeowner, according to the IRS, is someone who has used a home as a primary residence for at least 5 consecutive years dating back to 2002.
This is an important qualifier for existing homeowners.
If you plan to claim the Home Buyer Tax Credit in 2010, here's what you need to know.
First, you need to know that the tax credit is federal. Therefore, it doesn't matter whether you live in Cincinnati, Chicago, or anywhere else -- if you file U.S. taxes, you've cleared the first eligibility hurdle. All you have to do is file.
Second, you need to know your deadlines.
In order to claim the Home Buyer Tax Credit, you must be under contract for your new home no later than April 30, 2010 and you must be closed on your new home between the dates of November 7, 2009 and June 30, 2010.
So long as you meet these dates, you've cleared the second eligibility hurdle.
Third, you need to know what types of home buys are specifically excluded by the IRS.
The home may not be acquired from a mother, father, spouse, or child
The home may not be acquired from an entity in which you're a majority owner
The home may not be acquired by gift or inheritance
The home's primary buyer must be at least 18 years of age
The home's purchase price may not exceed $800,000
The home must be meant for use as a primary residence
These rules ensnare just a small percentage of home deals so if you meet the eligibility requirements as shown above, you're probably going to be in the clear. It's at this point, though, that you should double-check just how much of the credit you're eligible to claim.
The maximum tax credit as authorized by Congress is for up to $8,000 for first-time home buyers and for up to $6,500 for long-time homeowners. Not everyone will get access to the full amount.
For one, the tax credit is limited to 10% of the home's purchase price.
A $300,000 home is eligible for up to $8,000 in credits to first-timer home buyers and up to $6,500 to long-time homeowners
A $50,000 home is eligible for up to $5,000 in credits to first-time home buyers and up to $5,000 for long-time homeowners
And secondly, the tax credit is tied to the home buyer's income levels.
If you are a single-filer with the IRS and your income is less than $125,000, you will receive the maximum credit. Same for joint-filers with income below $225,500. In households where income exceeds those limits, however, the home buyer(s) is subject to a tax credit haircut.
The credit reduction is 5% for each additional $1,000 in claimed income.
Single-filer earning $125,000 : 100% of the tax credit
Single-filer earning $126,000 : 95% of the tax credit
Single-filer earning $127,000 : 90% of the tax credit
Single-filer earning $145,000 : 0% of the tax credit (i.e. no credit)
The math is the same for joint-filers:
Joint-filers earning $225,500 : 100% of the tax credit
Joint-filers earning $226,500 : 95% of the tax credit
Joint-filers earning $227,500 : 90% of the tax credit
Joint-filers earning $245,500 : 0% of the tax credit (i.e. no credit)
At this point, you know your own eligibility, and the size of your credit. However, you may still have questions. Thankfully, the IRS thought of that with their Bizarre Scenario FAQ. It's worth a look. The FAQ includes scenarios for couples getting married, divorced and separated, plus "flipping" and various "renting homeowner" scenarios.
Here's how to claim the your Home Buyer Tax Credit. There's just 2 very basic steps:
Review the eligibility requirements above -- just in case!
Or, if you want to receive your tax credit faster, consider filing an amended 2009 return. This is especially helpful for self-employed home buyers and other folks that typically file between April 15 and the October 15 deadline.
That's it! Just be sure that you'll use your new home as your "main home" for at least 3 years. Otherwise, the IRS will reclaim your refund.
Lastly, please remember that I am a loan officer -- not an accountant. Consult a tax professional for tax matters, mmmm-kay? You can also use me for rate quotes. anytime.
Dan Green is an active loan officer. Reach Dan via email at or call toll-free to 877-DAN-GREEN.
Waterstone Mortgage. Equal Opportunity Lender. Illinois Residential Mortgage Licensee, 031.0005658. Ohio Residential Mortgage Licensee LO.034597.000, 10979 Reed Hartman Hwy, Suite 118A Cincinnati, OH 45242. This is not a commitment to lend. Restrictions apply. All rights reserved.
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