0 Jumbo Loan Rates Never Lower As Government Loan Limits Drop

If you have been keeping up with the real estate news, you may know that the mortgage loan limits on jumbo mortgage loans set by Congress are about to change. A jumbo mortgage is one that must be eligible to sell to Fannie Mae or Freddie Mac and it exceeds the amount of a conventional conforming limit.  Depending on where you live, the upcoming lower loan limits could impact you. Beginning on October 1, 2011 the mortgage loan limits for homes across the entire country will be $625,500.

Currently, the maximum amount for jumbo mortgage loans is anywhere between $417,000 and $729,750. The maximum limit is determined by a couple factors, including the region of the country in which you live.  Major metropolitan areas, where home prices are higher, today have limits closer to $729,750.

There are many people who will be affected by the new limits. Any homeowner who owns a home valued between $417,000 and $729,750 and wants to refinance is going to be affected by these new limits. There will be tighter credit restrictions and possibly even higher mortgage rates for homes that are valued above the new $625,000 maximum.

Any home buyer who wants to buy a home priced above the new maximum is also definitely going to be affected. Currently, jumbo mortgage loan rates are often lower than traditional mortgage rates and qualified buyers can put as little as 3.25 percent down to purchase the home. But with the new caps, mortgage rates are going to increase and home buyers will need to put down a much larger payment for the home. The down payment requirements could be as high as 20 percent.

Some of the bigger cities with higher home prices will definitely feel the punch. Places like New York City, San Francisco, Miami and Los Angeles where homes are typically priced in the jumbo mortgage loan range will see some effect from the lowered maximums. According to the National Association of Home Builders, nearly 1.4 million owner-occupied homes in more than 200 counties across the county will be valued above the $625,500 jumbo loan limit.

BestJumboRate.Com said that they are reaching out to clients who will be affected to alert them of the new guidelines. Most people simply don’t know about the new limits or the October 1 deadline for imposing the new limits.

Before criticizing the reduction, though, consider this: The Federal Housing Administration, or FHA, raised the limits for a jumbo loan in 2008. This increase in limits was only supposed to be temporary. Since 2008, the higher limit caps have been renewed each year. As of right now, those limits are set to expire on September 30, 2011. It is not like the federal government with taking action to lower the limits; rather, legislative inaction would result in the current limits expiring and reversion to the old limits.

So what does this mean for you? If you are thinking of refinancing your jumbo mortgage loan or taking out a jumbo loan to purchase an upper-end home, now may be the best time to initiate the process. The opportunity to capture a government insured rate that is often .25-.50% lower than a traditional jumbo mortgage loan won't be able if you wait until after September 30. 

Detail: Jumbo Loan Rates Never Lower As Government Loan Limits Drop

0 Fix it & Forget It!

Grandma's miracle product for her dentures should lend their slogan to Fannie Mae and Freddie Mac. Today's announcement from the Mortgage Bankers Association that 90%+ percent of loan applicants are applying for fixed mortgage rates on refinances and purchases has renewed my faith that people get it! These rates are unreal and can't last. NOTE:CLICK CHARTS FOR FULL SCREEN.

www.thegreatloan.com

Boring Mortgage Banker Talk Below:

Wed, 2009-12-23 10:39 — NationalMortgag...

The Mortgage Bankers Association (MBA) has released its Weekly Mortgage Applications Survey for the week ending Dec. 18, 2009. The Market Composite Index, a measure of mortgage loan application volume decreased 10.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 10.9 percent compared with the previous week.
 The Refinance Index decreased 10.1 percent from the previous week and the seasonally adjusted Purchase Index decreased 11.6 percent from one week earlier. The unadjusted Purchase Index decreased 13.4 percent compared with the previous week and was 32.7 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is down 0.2 percent. The four week moving average is down 1.0 percent for the seasonally adjusted Purchase Index, while this average is up 0.6 percent for the Refinance Index.

The refinance share of mortgage activity increased to 75.9 percent of total applications from 75.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.8 percent from 4.1 percent of total applications the previous week. The average contract interest rate for 30-year fixed-rate mortgages remained flat at 4.92 percent, with points increasing to 1.23 from 1.08 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.34 percent from 4.33 percent, with points increasing to 1.03 from 0.91 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs remained flat at 6.52 percent, with points remaining unchanged at 0.39 (including the origination fee) for 80 percent LTV loans.

For more information, visit www.mortgagebankers.org.

Detail: Fix it & Forget It!

0 Rock Bottom Conforming and the Lowest Jumbo Loan Rates In History

click to enlarge

From the NYT:

“Mortgage rates in the United States have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government. Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out.
The scarcity of credit not only hurts homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.”

Sure, jumbo mortgage refinancing could save home-owners lotsof money they could then plow back into the economy — or even avoid foreclosure. But not if bank lending standards are too tight.

That is the problem with an abdication of lending standards — as we saw from 2002 – to 2007. After the collapse, the over-reaction sends the pendulum swinging too far the other way. Lending standards become too tight.
If only we monkeys could learn anything from history . . .

Detail: Rock Bottom Conforming and the Lowest Jumbo Loan Rates In History

0 How are Mortgages So Low and Can it Continue?

Detail: How are Mortgages So Low and Can it Continue?

0 Now Everyone Is Crying. Even Richie Rich.

Hamptons Home Prices Drop 23% on Wall Street Firings

Home prices in the Hamptons, the oceanside getaway of celebrities and Wall Street financiers, plummeted in the first quarter as the financial crisis cut demand for vacation properties.
The median price fell 23 percent from a year earlier to $675,000. Sellers offered average discounts of 11 percent off their asking price, up from 9.6 percent in the year-earlier quarter, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today in a report.
“The primary reason is linkage to Wall Street,” said Miller Samuel President Jonathan Miller. “You’ve got job loss, anticipated job loss, as well as lower compensation and anticipated lower compensation. There’s less of an urgency for people who aren’t affected by that to buy.”
About 23,300 Wall Street employees lost their jobs in the year through February as banks worldwide posted losses and mortgage-related asset writedowns of $1.3 trillion. The credit crisis that claimed Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Bear Stearns Cos. also pushed bonuses down 44 percent in 2008, state Comptroller Thomas DiNapoli said.
The number of homes for sale in the Hamptons, about 100 miles east of New York City, rose 15 percent to 1,673 properties in the first quarter, the largest year-over-year increase since Miller Samuel began keeping records in 2004.

Cutting Prices

The Hamptons are known for multimillion-dollar beachfront estates and homeowners there have included comedian Jerry Seinfeld, real estate developer and publisher Mortimer Zuckerman and billionaire Ronald Perelman. The area is comprised of more than a dozen towns and villages including Amagansett, Water Mill, Bridgehampton and Sag Harbor.
Damon Liss, a Manhattan interior designer and real estate broker for the New York-based Corcoran Group, has been trying to sell a three-bedroom East Hampton cottage since January.
Liss renovated the house, added a swimming pool and new oak floors and then listed it for $1.33 million. In April, he cut the price almost 10 percent to 1.2 million.
“The lower the price the more likelihood it’s going to sell,” he said.
Motivated sellers will follow, Dottie Herman, chief executive officer of Prudential Douglas Elliman, said in an interview.
Dead Market
“In January and February there was basically nothing going on,” Herman said. “There are probably people in the financial sector that really have to cut back.”
In the three months ended March 31, transactions declined 54 percent to 145 properties in the Hamptons. Prudential’s data covers the South Fork of Long Island from Westhampton to Montauk.
In neighborhoods that are close to the ocean where properties sell at a premium, the median home price dropped 45 percent to $637,500 from the year earlier quarter, Miller Samuel said. That’s the biggest decline among all Hamptons neighborhoods and is known as “south of the highway.”
Homes north of Route 27 declined 8.7 percent to $685,000. The median price of homes east of the Shinnecock Canal declined 37.6 percent to $760,000.
Not Happy
The overall drop in sales is the biggest decline since at least 1992, said George Simpson, owner of real estate data company Suffolk Research Service Inc.
“It’s not a very happy place out here,” Simpson said in an interview.
The dollar value of all Hamptons transactions in the first quarter plunged 62 percent form a year earlier to $298 million, according Suffolk Research.
In the luxury market, the top 10 percent of all sales, the median price slid 25 percent to $4.09 million. The number of sales fell to 20 from 40 in the prior year and there were 470 luxury properties on the market in the first quarter.
In a separate report issued today, Miller Samuel and Prudential said the median sales price in New York’s Nassau and Suffolk counties fell 13 percent to $355,000.
The number of sales declined 18 percent to 2,872 and homes stood on the market 134 days before being sold. The data excludes the Hamptons. In Nassau county alone, the median price fell 12 percent to $396,000 and in Suffolk it declined 13 percent to $315,000. To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net.

Detail: Now Everyone Is Crying. Even Richie Rich.

0 Finally Some Good News Out Of The Golden State

Calif. approves nation's 1st low-carbon fuel rule
By SAMANTHA YOUNG

California air regulators on Thursday adopted a first-in-the-nation mandate requiring low-carbon fuels, part of the state's wider effort to reduce greenhouse gas emissions.
The California Air Resources Board voted 9-1 to approve the standards, which are expected to create a new market for alternative fuels and could serve as a template for a national policy that has been advocated by President Barack Obama and Democrats in Congress.
Gov. Arnold Schwarzenegger said the rule would "reward innovation, expand consumer choice and encourage the private investment we need to transform our energy infrastructure."
"I think we're creating the framework for a new way of looking at automotive fuels where no longer will gasoline derived by petroleum be the only game in town," board chairwoman Mary Nichols said.
The rules call for reducing the carbon content of fuels sold in the state by 10 percent by 2020, a plan that includes counting all the emissions required to deliver gasoline and diesel to California consumers -- from drilling a new oil well or planting corn to transporting it to gas stations.
Transportation accounts for 40 percent of greenhouse gas emissions in the state.
"The emissions from this sector have traditionally grown in California at a rate that exceeds even our growth in population," Nichols said before the vote. "It has led to a host of environmental problems."
Representatives of the ethanol industry have criticized the rule, saying state regulators overstated the environmental effects of corn-based ethanol. They also have criticized the board's intention to tie global deforestation and other land conversions to biofuel production in the United States.
The board has said Brazil converted rainforest into soybean plantations as a result of the growth in corn-based ethanol in the U.S. A formula being considered by the board would take into account the destruction of forests and grasslands elsewhere to grow fuel crops for U.S. demand.
The ethanol industry also said it was unfair to penalize it for agricultural land changes abroad.
"We are not convinced expansion of ethanol in the U.S. has caused or will cause land use changes," said Geoff Cooper, vice president of research at the Renewable Fuels Association.
John Telles, the dissenting board member, said before the vote that he had a "hard time accepting the fact that we're going to ignore the comments of 125 scientists" who questioned the agency's decision to estimate the emissions tied to land-use changes.
"They said the model was not good enough," he said.
Representatives for BP PLC and Chevron Corp. said their companies supported the new standards, with the caveat that the board periodically review the standards. The air board agreed to ensure that the most up-to-date science is incorporated into the rule and that the alternative fuels have become available as expected.
Under the low-carbon fuel standard, petroleum refiners, companies that blend fuel and distributors must increase the cleanliness of the fuels they sell in California beginning in 2011.
The petroleum industry warned that the state was moving too quickly without assurances that the alternative fuels they will be required to sell would be available for the market. Representatives asked the board to delay a decision until next year.
"It's frankly unclear to us how we will comply with this regulation," said Catherine Reheis-Boyd, chief operating officer of the Western States Petroleum Association.
The statewide efforts come two years after Schwarzenegger directed air regulators to develop a rule that would boost the amount of renewable fuels sold in the state.
Nichols said Thursday that a low-carbon mandate would reduce California's dependency on petroleum by 20 percent and account for one-tenth of the state's goal to cut greenhouse gas emissions by 2020. From Businessweek.

I am not an environmental nut job but I have gotten out of the BAD habit of using plastic bottles and no longer us my private jet to fly to China for good food. Seriously, this vote and policy is a great move forward for clean energy. Take care and make it a great day.

Detail: Finally Some Good News Out Of The Golden State

0 Bailout Line Gets Longer

The endless bailout line gets longer -- and why we're going about this the wrong way

The seemingly endless line of companies looking for taxpayer-funded bailouts just keeps getting longer, and the folks in Washington show no sign of forcing anyone out of it. This morning, we've learned that life insurance firms will receive aid from the TARP.

From the Wall Street Journal:

"The Treasury Department has decided to extend bailout funds to a number of struggling life-insurance companies, helping an industry that is a lynch pin of the U.S. financial system, people familiar with the matter said.

"The department is expected to announce the expansion of the Troubled Asset Relief Program to aid the ailing industry within the next several days, these people said.

"The news will come as a relief to a number of iconic American companies that have suffered big losses made worse by generous promises to buyers of some investment products. Shares of life insurers have fallen more than 40% this year. Their troubles led to a string of rating-agency downgrades that, in a vicious cycle, made it more difficult for some insurers to raise funds.

"The life-insurance industry is an important piece of the U.S. financial system. Millions of Americans have entrusted their families' financial safety to these companies, so keeping them on solid footing is crucial to maintaining confidence. If massive numbers of customers sought to redeem their policies, it could cause a cash crunch for some companies. And because insurers invest the premiums they receive from customers into bonds, real estate and other investments, they are major holders of securities. If they needed to sell off holdings to raise cash, it could cause markets to tumble.

"The decision by the Treasury Department adds a third industry to the banks and auto companies that have already received bailouts from the government. While American International Group Inc. is a major insurer and is the biggest recipient of government money, its problems weren't caused by its life-insurance operations, but derivative bets that went bad."

You know what my biggest problem with all these bailouts is? No one seems to be denied! Money is given to almost anyone and everyone. What we SHOULD be doing is what nurses and doctors do in the ER -- triage. Figure out which institutions are too weak to survive and euthanize them. Deny them bailout money. Let them fail. Then let their stronger competitors pick over their carcasses. Bolster those stronger companies with aid if need be.

Washington isn't doing that, though. Take the banking industry "stress test." Policymakers have already said that if any institution fails the test, they'll get time to raise money or will be injected with government capital. Huh? What's the sense in that? Why aren't we weeding out the weak, allowing them to fail and parcelling up their businesses to their stronger, surviving brethren?

It's like having two people showing up to get their driver's license -- one of whom gets a 100% on the computer-based test and passes the driving portion with flying colors ... and another who shows up drunk, crashes into the curb twice, and spends the rest of the time hitting on his instructor. Should both people really be given a license? Wouldn't it make more sense to pass the good guy and fail the other -- or send him off to jail? I just don't get this attitude where every institution is above average (or treated that way). By the way,(cue:shameless promo music) the line to get a jumbo mortgage is long but folks are locking in low 5% on 5Y and 7Y ARMS and mid 5% 30Y Fixed jumbo mortgage rates. Have a great weekend.

Detail: Bailout Line Gets Longer

0 Why can't I get a 5% 30Y Fixed Jumbo?

The Current Recession/Depression Impacts All Borrowers

Jumbo mortgages, typically loan amounts above $417,000, are defaulting at a rapid pace as the economic crisis affects borrowers at all income levels. Bloomberg is reporting that jumbo mortgages, typically associated with higher income home owners, are becoming the next black hole for the banking and housing industry echoing concerns we have seen in our segment of the 1m+ jumbo market.

(Bloomberg) — Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis that began with the poorest Americans has reached the wealthiest. About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent, according to LPS Applied Analytics, a mortgage data service in Jacksonville, Florida. They got to that level within 10 months, almost twice as quickly as 2007 borrowers and the fastest rate since at least 1992, when LPS Applied Analytics began tracking the market.

The jump in late payments on jumbo loans, while still lower than the 20 percent delinquencies in subprime mortgages, signals that the borrowers with the most money and the best credit are hurting as the U.S. recession deepens in its second year. It also means these loans will be even more difficult to obtain and more expensive to pay off. Most of the mortgage defaults do not appear to be caused by poor loan underwriting but rather by growing job losses among high income earners. Due to the higher level of defaults, investors are becoming very reluctant to make jumbo mortgages for either purchases or refinances. Since Fannie Mae and Freddie Mac will not buy or insure jumbo loans, the lending bank must assume all the risk, keep the loan on their books and set aside additional reserves for possible losses. All of these additional risk factors are reflected in the higher jumbo rates and strict loan underwriting guidelines.

The difference in interest rates between jumbo loans and prime conforming mortgages, or mortgages eligible for sale to Fannie Mae and Freddie Mac and available to borrowers with top credit scores, had been about 40 basis points for several decades. The difference between the jumbo interest rate and the prime conforming rate was 150 basis points on Feb. 27, according to Bloomberg data.

Conforming Loans At 7%?

An interesting point to note is that the size of a mortgage loan is not the determining factor for the interest rate. Mortgage rates are based on many factors but the primary reason for higher rates on jumbo mortgages is the lack of a government agency guarantee. This implies that without price support from the government, conforming mortgages would also be in the 7% range to reflect the actual risk of mortgage lending in today’s environment.

No Relief In Sight For Jumbo Mortgage Homeowners

Given the higher risk on jumbo mortgages due to the factors cited above, homeowners who have high rate jumbo mortgages are unable to refinance to lower rates. In addition, the proposed mortgage plans meant to help distressed homeowners provides no assistance for jumbo mortgage homeowners.

While total mortgage originations fell by 17% in the fourth quarter from the previous quarter, jumbo originations fell by 42% to $11 billion, according to Inside Mortgage Finance. That’s the lowest volume ever tracked by the trade publication, which has figures dating to 1990.
We have a few dozen investors that are now boosting originations, though they require a minimum 25% equity/down payment in the most expensive housing markets, up from 15-20% earlier last year. For condos, requirements can be as high as 45% equity/down payment.
If you have been able to … save for a down payment, that to us speaks volumes about your character.

Equity and cash is KING in this enviroment. FICO scores and income are great but they don't protect the investor in the unfortunate event of a default.

Some excellent 30 year fixed jumbo rates are available in the mid to low 6% range but they require a minimum of 25% equity and we find about 50% of the people that apply don't have any equity because they are in very distressed housing markets.

Real-estate professionals say that the lack of financing for high-income consumers is putting extra pressure on affluent communities and causing prices to fall even further. “The million-dollar-and-above market is sinking like a lead weight,” Pasadena Luxury Homes guru Mr. Rivas says of Coldwell Banker.

Jumbo Mortgage Rates Reflect Lending Risks

Jumbo borrowers are discovering the meaning of “pricing for risk”. Mortgage lending has become a very high risk business due to the continuing decline of real estate values, the high risk of default due to economic conditions, principal impairment and/or rate reductions from loan modifications, the risk of bankruptcy court cram downs and government supported foreclosure moratoriums. Some may incorrectly believe they are entitled to a low rate mortgage regardless of risk factors. This peculiar belief by both banks and borrowers helped to create the destructive credit crisis we are now experiencing. The banks/investors are doing what they need to do with jumbo mortgages- setting rates to properly reflect risk.

Detail: Why can't I get a 5% 30Y Fixed Jumbo?

0 Underwater Homeowners: You Have Company

Tough couple of weeks in the world of jumbo loans as prospects expect excellent rates in the 5-6% range but find out they don't qualify because they don't have the required equity anymore in their homes. We have seen this consistently now throughout the country. About half the people we talk to don't have the 20% equity to qualify for the best rates or worse they don't have any equity at all because they bought between 04-06 or they used their home as an ATM. Recent stats from Data Quick and Fannie Mae believe that 20% of home owners are currently underwater(home is worth less than the mortgage(s)).

Values appear to be rewinding across the country to 02-03. Of course they are not alone with the massive deflation of real estate prices:

Few deals better exemplify the excesses of the commercial real estate boom than
the dismemberment of the Equity Office empire, and fewer still better underscore
their bitter consequences.

Buyers purchased buildings at what, in retrospect, were vastly inflated prices. Lenders provided lavish, even excessive, financing based on unrealistic expectations of rising rents. And now that values are tumbling, vacancy rates are rising and credit has become impossibly tight, many on both sides are struggling against default, foreclosure or bankruptcy.

The impact could ripple beyond the companies that bought Equity Office buildings and the investment banks that financed them. If the owners cannot make their loan
payments, it could create a financial crisis for the pension funds, hedge funds
and insurance companies that hold securities based on Equity Office
mortgages.

The list of Equity Office buyers reads like a Who’s Who in American real estate. In Stamford, Conn., RFR Properties, a partnership headed by Michael Fuchs and Aby Rosen, who owns Manhattan landmarks like Lever House and the Seagram Building, spent $850 million to buy seven Equity Office buildings that analysts say are now worth less than their mortgages.

In Los Angeles, the founder of Maguire Properties, one of the largest commercial
landlords in Southern California, was forced to step down last year as the
company struggled with crushing debt from buying 24 Equity Office buildings.
And in New York, the real estate mogul Harry B. Macklowe lost seven Equity Office towers he bought from Blackstone, along with much of his empire, after he was unable to refinance the $7 billion in short-term, high-interest debt he used to buy them.

“Those who bought from Blackstone have not fared well at all,” said Michael Knott, a real estate analyst at Green Street Advisors. “Blackstone was a huge winner at the time, although the value of what they still hold has fallen probably 20 percent.”

From: NY Times

Detail: Underwater Homeowners: You Have Company

0 Mortgage Rates: Gamble As You Shop.

Mortgage Rate Volatility slowed a bit in December after record-breaking changes in October and November. The slowing pace of change is good news for homeowners that joined the Refi Boom that closed out 2008. It was much easier to shop for a mortgage rate in the absence of 4- and 5-Rate Sheet days.

A "rate sheet" is a mortgage lender's active, available-to-the-public mortgage rates for all of its products. This includes 30-year fixed rate mortgages, 5-year ARMs, and the like.

However, rate shopping is not like shopping for a flatscreen TV to watch the BIG game. Mortgage markets are still moving with tremendous velocity, historically. Over the last two months, mortgage rates changed 2.15 times per day, on average -- nearly 11 rate changes per week.

In December, mortgage rate quotes "expired" every 3 hours, 39 minutes.

This rapid pace of change is one reason why "sleeping on it" can be dangerous. Mortgage rates may be low in the morning, but by the afternoon, they could absolutely be not-so-low.

Look, I've heard it from enough homeowner's by now that I can safely tell you -- unless you're prepared to accept a higher rate, you may not want to gamble on getting the lower one. A good question to ask yourself is this: "Is it worth a 1/8 percent rate increase to gamble that I'll find an 1/8 percent lower rate tomorrow?"

Mortgage shopping wasn't always complicated, but it is now.

In addition to a volatile rate environment, external factors are muddying up the mortgage waters, too:

1. Guidelines continue to tighten high income households.
   
2. Falling home values are making refinances very difficult. Your area is not immune. Trust us.
   
3. Rising defaults are pushing private mortgage insurance premiums higher.
   

In fact, there are very good reasons to consider taking the first low-rate mortgage you find that fits your long- and short-term financial goals. The most important one, of course, is that it's as likely that mortgage rates will rise in 2009 as they will fall. Forget what the experts tell you -- they're paid to make guesses and they're often wrong.

In markets like this, a sound piece of mortgage advice is to make friends with a "good lender". They're good mortgage lenders for a reason. They're fair with clients and they provide extra support that you won't get from a call center. And, most times, they're cheaper, too.

So, shop for mortgage rates every 3 hours, 39 minutes, or save yourself the trouble and work with a reputable jumbo mortgage lender who's both fair and knowledgeable. If you ever want a speedy rate quote, call or email me. We lend in all 50 states.

Detail: Mortgage Rates: Gamble As You Shop.

0 How High-Income Clients Can Prepare For Lending's Next Big Wave

Four times annually, the Federal Reserve surveys 84 banks around the country regarding their general lending standards.

One of the survey questions asks about current mortgage lending standards and whether it's getting harder, or easier, to get approved for a home loan.

In the most recent survey, 75 percent of the banks said they're making it harder for "prime" borrowers to get a home loan.

That means you, Mr. Lawyer. And, Dr.Doctor.

A six-figure income with A-plus credit won't get you carte blanche with the bank anymore. Lenders stopped fighting over the right to collect your interest payments months ago.

Today, they're more worried about you defaulting. Something about 250k bank and finance jobs toasted in the last year and the deep recession makes investors a little worried. No ONE is immune from the big waves sweeping over the credit markets.

The first wave of lender tightening eased into the books earlier this year. Most changes were focused on the borrower's individual credit characteristics including income, assets, and credit score.

The second wave of tightened, however, has been completely out of the mortgage applicant's hands. It's collateral -- the fancy bank term for "what your home is worth". Banks are very concerned about collateral.

Mortgage lenders read the papers, too, and they know that home values are falling or are flat in most neighborhoods. There's a recovery underway, but it's not going to be immediate.

Therefore, many banks assume that the 80 percent home loan made today will be a 85 percent home loan sometime in 2009 and having less than 20% equity in a home is not where the banks want you to be -- especially with joblessness on the rise and a loads of unanswered questions about the economy.

For homeowners with jumbo or super-jumbo mortgages, this loan-to-value change will resonate deeply. Just this morning, for example, one of the country's largest niche lenders dramatically lowered its maximum LTV ratios for prime borrowers.

Look at how it changes the borrowing landscape for a condo buyer in Chicago with strong income and excellent credit:

• Yesterday: 20% downpayment required, second mortgage permissable for 5%


• Today : 25-30% downpayment required, no second mortgage permissable
• Sure we have investors willing to gamble a little and do 10-15% down but who really wants a 8% mortgage!? BTW, these are the same guys you see playing 50k a hand blackjack at the Venitian.

In other markets, where home values are more dubious, like California, downpayment requirements can be even higher.

Now, this isn't to say that prime borrowers won't get approved for home loans -- it's just meant to tell the street-level story of what's going on. There are a lot of people in cities like Chicago or Cincinnati that were first-time home buyers between 2002-2006. For those homeowners, the only mortgage approval system of which they know is one that's based on them -- their FICO, income and ability to fog a mirror.

Today, it's The Triangle + Rock Solid Appraised Value.

This is why prime borrowers are finding it harder to get a mortgage -- it doesn't matter what you look like on paper, it's what you and your home look like on paper.

The market will likely to tighten further in the near-term so the best way to prepare for is to ask good questions in advance of your actual needs. A proactive plan always works better than a reactive one.

If buying a home or refinancing one is in your plans for December 2008, or January-March 2009, reach out to your loan officer to find out how changing guidelines for prime borrowers can impact you. Especially if you're a jumbo or super-jumbo borrower. Also, we are very excited to have added a niche portfolio lender that can do a 30Y Fixed Jumbo throughout the country in the low 6% range for the solid "money good" credit client. Contact our office to check out our jumbo mortgage rates for your home purchase or refinance. As always, no pressue and no obligation beyond a short chat.

Detail: How High-Income Clients Can Prepare For Lending's Next Big Wave

0 Credit Crunch: Now with Extra Crunch

Over the summer we experienced a restriction in lending guidelines that moved most jumbo mortgages to a minimum of 20% equity requirement. Now the dominoes have really started to fall and within the last week we have seen many of our investors move to a minimum of 25-30% equity either for a refinance or a purchase loan in most major markets.

Remember these are for true jumbo mortgage borrowers above the conforming loan limit with stellar credit, ample savings and substantial provable income. What's the impact? I would expect to see continued price pressure on the luxury market as buyers wake up to an even more restrictive lending environment. It will continue to tighten or rates will increase(to compensate for risk) until the loans perform and the foreclosures slow. We still have lower down payment niche programs available within various markets but we fear that major moves by national investors will force others to tighten as well in their regional market. If you are considering refinancing I especially encourage you to evaluate your options now.

Detail: Credit Crunch: Now with Extra Crunch

0 LIBOR: The Driver of Jumbo Rates.

With the London Interbank Offered Rate (Libor) at record levels, thus hurting short-term borrowing, as well as blowing up many jumbo mortgages linked to the floating rate that have begun to adjust, it's useful to remind yourself how exactly Libor works. Click image to enlarge.

Detail: LIBOR: The Driver of Jumbo Rates.

0 Financial Crisis Has Hit Main Street

Jumbo Mortgage rates moved up sharply over the past week as the credit markets ground to a halt. Borrowers with good credit and a 20% down payment today could qualify for a 30-year fixed-rate mortgage at 7.625% with a one-point fee. That's up from 7.25% on Friday of last week.The rate has been trending upward from 7% since the financial meltdown gained full speed in the last few weeks. Investors are pricing in the increased default risk and the national decline in home prices. No area is immune as noted by the latest Case-Shiller numbers. The move by the US government to pass the mother of all bailouts has been awaited anxiously by the entire credit industry. If you can't save housing you can't save the financial system nor the economy from a financial meltdown/great depression scenario.

However, the worst development is adjustable rates have dramatically increased. Bloomberg reports that the international rate banks charge each other for one year loans, known as the London Interbank Offered Rate or LIBOR, moved LIBOR rates to 4.08% as markets were locked up with the meltdown in credit markets. LIBOR was in the mid to low 3% range throughout the summer. If we move to LIBOR rates of 5% range that would push ARMs to about 8%. The meltdown of household names is the best opportunity for people to refinance or purchase as investors want something safe/secure. Nothing is safer in this market than solid credit client's looking for a phenomenal jumbo mortgage rate. Now is the time to refinance as rates are likely to get worse over the next two years and guidelines to get more restrictive. The best rates in a generation are behind us as banks recapitalize and governments work to save a financial system on the edge of complete panic.

About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to LIBOR, according to First American CoreLogic, Bloomberg reported.

Detail: Financial Crisis Has Hit Main Street

0 Mortgage Rates Falling

With jumbo mortgage rates moving faster than anytime in recent history, let's take a few minutes to recap what's going on, and what's causing rates to be so volatile.

First, the bailout.

Late Sunday, Congress drafted the Emergency Economic Stabilization Act of 2008 bill and it goes to vote sometime today. The key provision in the bill that's helping mortgage rates is on Page 110.

The passage reads, summarized:

• The U.S. Treasury gets access to $250 billion immediately



• The U.S. Treasury has to ask the President for its next $100 billion



• The U.S. Treasury has to ask Congress for its next $350 billion

Because of how the bill is worded, the U.S. Treasury can't go spending taxpayer money willy-nilly, lessening the likelihood of inflation nationwide. This is good because anytime inflation pressures ease, mortgage rates stand to benefit and this is one of the catalysts for today's rate drop.

Another reason why rates are falling is death of banking giants Washington Mutual and Wachovia.

It's no coincidence that these two institutions shut down within 3 days of each other. Both were heavy pushers of the now-famous Negatively Amortizaing Mortgage, the time-bomb assets of which clogged the banks' respective balance sheets.

Consider: When Washington Mutual was rescued bought by JP Morgan Chase & Co. and the buyer devalued WAMU's portfolio by a massive $31 billion, it forced investors to reassess Wachovia's mortgage portfolio, too.

Within minutes, Charlotte-based Wachovia lost a quarter of its value and was a Dead Man Walking. Then, before even a weekend could pass, Wachovia had been packaged and sold to Citigroup with the help of the U.S. government, leading to another $42 billion in mortgage portfolio writedowns.

That's $73 billion in mortgage losses practically overnight.

Surprisingly, this is good news for mortgage borrowers because each time a bank acknowledges losses like this, the mortgage market as a whole gets one step closer to discovering what an individual home loan is really worth on Wall Street.

In fact, it's this exact conundrum that defines the mortgage market domino chain, dating back to July 2007. If markets could just accurately answer "What is a mortgage worth?", this little credit mix-up thing would be over.

WAMU and Wachovia hitting the showers brings us one step closer, and at least for today, brings mortgage rates down.

(Image courtesy: The Wall Street Journal Online)

Detail: Mortgage Rates Falling

0 Avoiding the Jumbo Mortgage Man

How do you avoid paying jumbo mortgage rates on a jumbo-sized mortgage?

You avoid taking your mortgage to a Wall Street lender, that's how.

It's pretty simple when we break it down.

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The word "jumbo" is a Wall Street-specific term for home loans larger than $417,000. In certain "high-cost" areas, the number is $729,750.

Lately, rates on jumbo mortgages have been terrible compared to its cousin, the conforming mortgage. Plus, jumbo mortgages carry higher loan fees.

The price disparity is even worse for so-called "Super Jumbo" mortgages. A super jumbo mortgage is similar to a jumbo mortgage, but bigger.

But the thing is, the terms "jumbo mortgage" and "super jumbo mortgage" -- these are conventions of a Wall Street-bound loan. Just because your loan size is over $417,000 doesn't mean that you have be subject to the jumbo and super-jumbo rules.

To avoid them, just make a choice avoid Wall Street mortgage lenders when your loan size exceeds your local conforming loan limits. This means bypassing your neighborhood Big Bank retail branches in favor of a niche banks that harbor no allegiance to Fannie Mae or Freddie Mac.

Finding banks like this isn't always easy, but it's worth the effort. This is because when a lender makes its own rules, its mortgage rates tend to be lower, its downpayment requirements tend to be smaller, and its underwriting process tends to be smoother.

These are all good things when your mortgage is greater than $417,000.

Consider these mortgage scenarios from a sampling of local banks. Each example carries a corresponding mortgage rate in the low-to-mid 6-percent range:

• $700,000 mortgage with 20 percent down, primary residence


• $1.5 million mortgage with 30 percent down, vacation home


• $2.5 million mortgage with 30 percent down, primary residence

Now, compared to what Wall Street lenders are offering, not only are the small bank rates up to 2 percent lower, but they're not accompanied by discount points, either. And that's even giving Wall Street the benefit of the doubt -- most Big Bank lenders won't hardly touch a jumbo or super jumbo mortgage with a 10-foot pole anymore.

The irony here is that wealthiest Americans often have private banking relationships with firms like Chase, Bank of America, and Citi among others but their private banking relationship is ill-equipped to handle the mortgage needs of a high net worth client anymore.

In 2005, the banks performed admirably for their wealthy clients. Today, not so much.

So, the best way to avoid paying jumbo mortgage rates on a jumbo-sized loan is to get out from Big Bank mentality and get your mortgage funded from somewhere other than Wall Street.

Jumbo mortgage rates are expensive. Niche, local bank mortgage rates are not. If you're a jumbo homeowner and you have a local banking relationship, it may be wise to call your branch to get a better rate quote.

And, if you don't have a local bank to call, know that you can always call or email me. I lend in 42 states and have niche banking relationships in all of them. If you can't find low rates for yourself, I'm happy to find them for you.

Detail: Avoiding the Jumbo Mortgage Man

0 Looking Back and Looking Ahead

On the wave of a two-day rally, mortgage rates improved last week overall. This despite a Friday reversal that had caused rates to tick higher just before weekend house-hunting began.
And, like so many other weeks this year, last week's mortgage market activity was defined by its quick-moving interest rates. At least one major mortgage lender issued 11 separate rates sheets between -- an average of more than 2 per day. Now, as an active mortgage rate shopper, you can't predict mortgage rate volatility but you can be prepared for it.
Start by knowing which mortgage product is the best fit for your long- and short-term financial goals and then be ready to pounce on a "good rate" because the rates expire as soon as that next rate sheet gets issued.

Another effective way to prepare for shopping is to watch for data that can influence the market's opinion of the U.S. economy. This week, there's a lot of it --starting with Tuesday's Consumer Confidence report. When confidence levels are high, economists expect Americans to spend more, propelling the economy forward towards inflation. Inflation makes mortgage rates rise.

Then, on Thursday, the Employment Cost Index data is released. This will be a closely-watched figure this month because it should show if American workers are pressuring employers for raises in light of higher gas and food prices. If wages are up, it will be considered inflationary because businesses eventually pass that cost back to consumers.

Again, bad for mortgage rates. And lastly, on Friday, the jobs report will be released. American businesses have shed jobs in each of the last 6 months, and June is expected to show the same. The jobs report's influence on mortgage rates is enormous so expect big rate swings Friday, either up or down.

Overall this week, considering the weight of the data, it may be prudent to finish-up rate shopping as soon as possible and get locked in with your lender. As the week progresses and the data's import grows, the markets should get less and less stable.

Jumbo Mortgage rates for July 29, 2008. Loan amounts up to $2,000,000:
3/1 ARM 5.875%
5/1 ARM 6.25%
7/1 ARM 6.50%
10/1 ARM 7.75%
30 Yr Fixed 7.875%

All rates offered to the borrower with 1 point cost. Rate quotes assume an owner occupied purchase transaction with a 25% down payment, 720 credit score, full income qualification and 12 months of verified reserves. Rates are subject to fluctuation. Custom jumbo loan rate quotes and rate lock advice are available by visiting www.thegreatloan.com

MORTGAGE RATE TREND:
Next 7 days: Slightly Lower
Next 30 days: Flat
Next 3 months: Higher

Detail: Looking Back and Looking Ahead

0 Fannie and Freddie Baked in the Cake

Jumbo Mortgage markets have turned their attention back to the U.S. economy this morning, causing yesterday's rate improvements to unwind a bit.
Rates had fallen Monday after the Federal Reserve and U.S. Treasury's joint announcement in support of Fannie Mae and Freddie Mac. Today, it's the data that is taking center stage.
Most notably, the U.S. Dollar is trading at an all-time low versus the Euro and other currencies.
This is a negative for active home buyers because American homeowners repay their mortgage interest in U.S. dollars. When the dollar loses value, so does the value of those interest payments so mortgage rates end up increasing in order to attract new investors.
Another reason why mortgage rates are higher this morning is that June's Producer Price Index registered much higher than was expected, posting its largest one-month gain since November 2007.
PPI is a lot like the Cost of Living index, except that it measures operating costs for businesses instead. When business costs are increasing, they are often passed onto consumers and this is why rising PPI is thought to be inflationary and inflation -- like a weakening dollar -- pressures mortgage rates to rise.
So, while Monday's rate improvements haven't completely erased, today's action reminds us that mortgage markets wait for no one and yesterday's mortgage rates rarely carry forward.
Especially when inflation is in the mix. Did you buy bread or gas this week? I did. Inflation is alive and killing our purchasing power.

Detail: Fannie and Freddie Baked in the Cake

0 Why is your jumbo mortgage more expensive now?

If you wonder why jumbo mortgage rates for all borrowers have increased in recent months at major banks it's because we are in a real deal Holyfield CREDIT CRUNCH. No fooling around, every major financial institution around the world has had to go cap in hand to shareholders or international wealth funds for money. All the money that went into bad loans needs to be replenished and the cost of capital is going up for everyone. Classic supply and demand. As a mortgage banker we saw this meltdown coming years ago and created relationships with insurance companies, pension funds and small banks in order to provide jumbo mortgage financing outside the Wall St blood bath. After you call your bank give us a call you will be impressed if you have solid credit, income and have equity in your property.
from Marketwatch
Citi originally said Tuesday that it would raise $3 billion in a stock offering, but increased that amount by $1.5 billion after demand for the new shares exceeded its original offer. The banking giant said the offering priced at $25.27 per share, with the transaction totaling more than 178 million shares.
Citi shares fell 3.5% in pre-market trading Wednesday.
Citi said that the offering of new common stock, combined with the $6 billion it raised earlier this year selling preferred shares, would have left the company with a Tier 1 capital ratio of 8.6% at the end of March.
"We were pleased to increase the offering size to $4.5 billion in response to strong demand from a broad base of investors," Citi Chief Financial Officer Gary Crittenden said in a statement. "This optimizes our capital structure and further strengthens our balance sheet."

Citi has lost billions of dollars as the global credit crunch hammered the value of risky mortgage-related securities and leveraged loans held by the company. It tapped former hedge-fund manager Vikram Pandit to replace Charles Prince as chief executive last year and is selling some assets and businesses to cut leverage.
Citi also got a $7.5 billion investment from Abu Dhabi in November and said in January that it was raising $14.5 billion more from Singapore, Kuwait and other governments.
Analysts reacted coolly to the newest push to raise capital, saying Wednesday before the announcement of the increased offering, that they remain concerned that Citigroup did not go far enough with its $3 billion target.
"The fact that the company raised such a small amount of capital at this time confounds us," Oppenheimer analyst Meredith Whitney wrote in a research note Wednesday. "By our estimates, we believe Citi needs to raise an additional $10-$15 billion or sell several hundreds of billions worth of assets in order to truly shore up its capital position."
She cited "seriously constrained" earnings power and pressure on four of Citi's 10 core businesses as continuing problems for the bank.
Analysts said Citi may have come under the watchful eye of ratings agencies that are worried it does not have sufficient capital to weather future market disruptions. This means the banking giant will need to increase its reserves significantly over the next few months.
"It is our belief that one or more of the rating agencies did not feel comfortable with the firm's current capital mix and that is why the company offered the $3 billion in common stock," said William Tanona, an analyst for Goldman Sachs, in a note to investors.
"If our assumption is correct, it suggests that additional capital raises will likely also be in the form of common equity, which is most dilutive to shareholders [and] conversely, we view this as a positive for debt holders," Tanona said.
Concern remains on Wall Street that the company may still have large exposure to mortgage-related securities and other vulnerable assets.
Citi reported a $5.1 billion net loss earlier in April as it wrote down the value of soured mortgage investments and other credit-related positions by roughly $12 billion.

Detail: Why is your jumbo mortgage more expensive now?